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2024 (4) TMI 546 - AT - Income TaxValidity of assessment order passed u/s 144C - instead of forwarding the draft assessment order, the Assessing Officer has passed a final order, thereby not following the mandatory provisions of section 144C(1) - penalty notice u/s 274 read with section 270A and 274 r/w sec 271AAC (1) of the Act and the notice of demand under section 156 of the Act - HELD THAT:- A perusal of Section 144C of the Act shows that the AO shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the AO shall proceed by framing the final assessment order and if the objections are raised before the DRP, then, upon receipt of directions issued by the DRP, the AO shall complete the assessment. We find that while framing the said draft assessment order, the AO not only issued and served demand notice, but has also initiated the penalty proceedings. The question whether demand notice is an integral part of the assessment order has been answered in the case of CIT Vs. Purshottam Das T Patel [1993 (8) TMI 21 - GUJARAT HIGH COURT] wherein as reliying on the decision of Kalyan Kumar Ray [1991 (8) TMI 291 - SUPREME COURT] section 153 requires is that the assessment should be completed within the prescribed time-limit. The words "order of assessment" cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time. After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Assessing Officer that he approved the said calculation when the papers were put before him for signing the demand notice, and that he signed the same, the fact remains that that step was taken by him after the prescribed period was over. The Tribunal was, therefore, right in holding that the assessment in this respect was time-barred. We, therefore, answer the question in the affirmative, i.e., against the Revenue and in favour of the assessee. Whether by by-passing mandatory provisions of the Act can assessment survive? - As relying on Dipak Babaria [2015 (8) TMI 775 - SUPREME COURT] held if the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute - we are of the considered opinion that by issuing the demand notice on 31.03.2022 itself the AO has bypassed all the mandatory sub-sections of section 144C of the Act. Though the ld. DR time and again has stated that the conclusion of the Assessing Officer speaks for the order as a draft assessment order and there should not be any confusion on that point. In our considered view, the impugned order by the Assessing Officer has bypassed the relevant sub-section i.e. sub-section (3) and (13) to section 144C of the Act. Procedure laid down u/s 144C of the Act by issuing penalty notice under section 274 read with section 270A and 274 read with section 271AAC (1) - Proceedings culminated on 31.03.2022 when the demand notice was issued and served upon the assessee along with penalty notice u/s 274 of the Act and, therefore, all the subsequent proceedings and orders become non est. Before closing, on the strength of the decision of the co-ordinate bench in the case of Himalaya Drug Company [2020 (11) TMI 811 - ITAT BANGALORE] DR vehemently stated that since there are contradictory/conflicting decisions, the matter should be referred to the larger/special bench for adjudication of the quarrel. We failed to persuade ourselves to accept this contention of the ld. DR for the simple reason that the decision of the co-ordinate benchn has already been overturned by its jurisdictional High Court of Karnataka in the case of Ciscom Systems [2023 (3) TMI 416 - KARNATAKA HIGH COURT]. Accordingly, Ground Nos. 1, 2 and 3 are allowed.
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