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TMI Blog2014 (6) TMI 540X X X X Extracts X X X X X X X X Extracts X X X X ..... company had entered into international transactions during such assessment year, the case was referred to the Transfer Pricing Officer (in short 'TPO') for determination of the arm's length price (hereinafter termed as ('ALP') of all such international transactions reported in Form 3CEB filed by the petitioner company. The TPO passed an order on 30.01.2013 and pursuant to the said order, the assessment officer viz., the second respondent, instead of passing a provisional order, has passed a final assessment order dated 26.03.2013 as contemplated under Section 143 (3) of the Income Tax Act, 1961 (hereinafter called as "The Act''). This order, according to the learned senior counsel for the petitioners, is per se unsustainable under law as there is a mandatory direction enumerated under the Act that after an order was passed by the TPO, the Assessment Officer has to only pass a draft assessment order as required under Section 144C of the Act. The learned senior counsel for the petitioners would further pointed out that the Assessment Officer, after realising the folly that a final order ought not to have been passed pursuant to the order passed by the TPO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondent-assessing officer is bound to pass a final order of assessment in compliance with the directions issued by the first respondent under Section 144C3 of the Act. In the present case, without following the above mandatory procedures, the second respondent has passed the order of assessment on 26.03.2013 and subsequently issued a corrigendum on 15.04.2014 to rectify the mistake committed in passing the final order of assessment inter alia to treat it as a draft assessment order. This course of action adopted by the second respondent is contrary to the mandatory provisions contained in the Act and the corrigendum issued by the second respondent could not cure the defect. The very fact that the assessing officer has signed the order of assessment and also assessed the amount payable by the assessee has become complete and it cannot be simply treated as a draft assessment order or it can be rectified by issuing the corrigendum. In fact, pursuant to the order of assessment under Section 143C, demand was also made for payment of the amount and such demand has not been withdrawn by the second respondent even after issuing the corrigendum. Even as per the website of the department, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntext, the learned senior counsel for the petitioners relied on the decision of the Honourable Supreme Court in the case of (Deepak Agro Foods v. State of Rajasthan and others) reported in (2008) 16 VST 454 (SC) to contend that the assessment proceedings after the expiry of the period of limitation being a nullity in law, this Court has to annul such assessment and the question of fresh assessment does not arise. 8. The learned senior counsel for the petitioners further relied on the decision of the Honourable Supreme Court in the case of (Kalyankumar Ray v. Commissioner of Income Tax) reported in Volume 191, ITR SC 634 to contend that once when an order was passed by assessing the total income and also determining the tax payable thereof, such an order can only be called as a final order of assessment and it could not be termed as a draft assessment order. 9. The learned senior counsel also relied on yet another decision of the Honourable Supreme Court in the case of (Patel Narshi Thakershi and others v. Shri. Pradyumansinghji Arjunsinghji) 1971 (3) Supreme Court Cases 844 to submit that the order passed under Section 154 of the Act could not make the already invalid order passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ential order to direct the first respondent to rehear their case afresh after giving them an opportunity of hearing and pass fresh orders thereon on all the issues raised before it, including the issue as to whether the assessment officer can pass a corrigendum in his order. The petitioner company withdrew the said writ petition on 16.04.2014. By filing such writ petition, the petitioner has admitted that the order passed by the second respondent is not a final order. In the said writ petition, it was only contended that the order was passed beyond the period of limitation. In any event, the order passed by the second respondent cannot be construed to be a final order especially when the petitioner company questioned it before the first respondent and when the appeal was not heard, WP No. 1528 of 2014 was filed seeking for a direction to the first respondent to give them opportunity of hearing. In fact, to this course of action, the respondents are also amenable. 13. According to the learned standing counsel for the respondents, the order passed by the second respondent is not an illegal order, as alleged by the petitioner company. No doubt, the assessment officer has passed an or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t a party cannot be allowed to approbate and reprobate. By relying on this decision, the learned standing counsel for the respondents would contend that when once the petitioner company has approached the DRP, the first respondent herein, treating the order passed by the second respondent as a draft assessment order, the petitioner company is estopped from questioning the very same order as though it is a final order. 15. Reliance was also placed on the decision of the Supreme Court in the case of (L. Hazari Mal Kuthiala v. Income Tax Office, Special Circle, Ambala Cantt. And another) reported in Volume XLI ITR SC Page No.12 wherein it was held that the failure on the part of the Commissioner to consult the Central Board of Revenue did not render his order invalid since the provision about consultation in terms of Section 5 (3) of Patiala Act was merely directory and not mandatory. By placing reliance on this decision, the learned standing counsel for the respondents would contend that merely because the assessment officer has committed certain mistakes or quoted a wrong provision of law, it cannot be taken to the advantage of the petitioner company or that by itself will not rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reafter, according to the petitioner company, the second respondent, instead of passing a provisional order or a draft assessment order, has passed a final assessment order dated 26.03.2013 as contemplated under Section 143 (3) of the Act. Section 143 (3) and 144 (C) of the Act reads as follows:- "143 (3) On the day specified in the notice, - (i) issued under clause (i) of sub-section (2), or as soon afterwards as may be, after hearing such evidence and after taking into account such particulars as the assessee may produce, the Assessing Officer shall, by an order in writing, allow or reject the claim or claims specified in such notice and make an assessment determining the total income or loss accordingly, and determine the sum payable by the assessee on the basis of such assessment; (ii) issued under clause (ii) of sub-section (2), or as soon afterwards as may be, after hearing such evidence as the assessee may produce and such other evidence as the Assessing Officer may require on specified points, and after taking into account all relevant material which he has gathered, the Assessing Officer shall, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer:] [Provided also that notwithstanding anything contained in the first and the second provisos, no effect shall be given by the Assessing Officer to the provisions of clause (23C) of section 10 in the case of a trust or institution for a previous year, if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in such previous year, whether or not the approval granted to such trust or i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5), - (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. [Explanation. - For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns a collegium comprising of three Commissioners of Income-tax constituted by the Board54 for this purpose; (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company.] 20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required to pass only a draft assessment order on the basis of the recommendations made by the TPO after giving an opportunity to the assessee to file their objections and then the assessing officer shall pass a final order. According to the learned senior counsel for the petitioners, this procedure has not been followed by the second respondent inasmuch as a final order has been straightaway passed without passing a draft assessment order. 21. As rightly pointed out by the learned senior counsel for the petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um dated 15.04.2013, that the order dated 26.03.2013 is only a final order and it was directed to be treated as a draft assessment order. In this context, it is worthwhile to refer to the decision of the Honourable Supreme Court in the decision reported in (Deepak Agro Foods v. State of Rajasthan and others) reported in (2008) 16 VST 454 (SC) wherein in Para No.10, the Honourable Supreme Court discussed as to when an order could be construed as a final order:- "10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing counsel for the respondents cannot be made applicable to this case. 26. The learned senior counsel for the petitioners relied on the decision of the Allahabad High Court in the case of (Commissioner of Income Tax v. Shital Prasad Kharag Prasad) reported in 280 ITR 541 wherein the Division Bench of the Allahabd High Court held that a notice contemplated under Section 148 of the Income Tax Act is a jurisdictional notice and it is not curable by issuing a notice under Section 292 B of the Act, if it was not served in accordance with the provisions of the Act. 27. Similarly, the Division Bench of this Court in the decision in the case of V. Ramaiah v. Commissioner of Income Tax, Chennai reported in (356 ITR 646) Madras held that when an order is passed under Section 158BC of the Act instead of Section 158BD, it is not valid since it is not a defect curable under Section 292B of the Act. It was also held that an order passed after the period of limitation laid down in Section 158BC is not a valid order. It was further held that when there is a prescribed procedure contemplated under the Act or in a particular section and it is violated, then it cannot be cured. In the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat this clause enables the Assessing Officer, after the return is filed, to complete the assessment under Section 143 (2) by following the procedure like issue of notice under Section 143 (2)/142. This does not provide accepting the return as provided under Section 143 (1) (a). The Officer has to complete the assessment order under Section 143 (3) only. If an assessment is to be completed under Section 143 (3) read with Section 158BC, notice under Section 143 (2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing officer to issue notice under Section 143 (2) cannot be a procedural irregularity and is not curable." 30. It is evident from the above decision of the Division Bench of this Court that where there is an omission on the part of the assessing officer to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. 31. In identical case as that of the case on hand, the Division Bench of the Andhra Pradesh High Court, in an unreported decision, had an occasion to consider the scope of the validity of the demand notice issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.10.2009. Therefore, this particular provision introduced by Finance (No.2) Act, 2009, would apply if the above condition is satisfied and other provisions, in which similar contrary intention is not indicated, which were introduced by the said enactment, would apply from 01.04.2009 i.e., from the assessment year 2010-2011. It is not disputed that the memorandum explaining the Finance Bill and the Notes and clauses accompanying the Finance Bill which preceded the Finance (No.2) Act, 2009 clearly indicated that the amendments relating to S.144C would take effect from 01.10.2009. In our view, the circular No.5/2010 issued byt he CBDT stating that S.144C(1) would apply only from the assessment year 2010-2011 and subsequent years and not for the assessment year 2008-09 is contrary to the express language in S.144C(1) and the said view of the Revenue is unacceptable. The circular may represent only the understanding of the Board/Central Government of the statutory provisions, but it will not bind this Court or the Supreme Court. It cannot interfere with the jurisdiction and power of this Court to declare what the legislature says and take a view contrary to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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