TMI Blog2017 (4) TMI 660X X X X Extracts X X X X X X X X Extracts X X X X ..... be noted that even while passing the regular assessment order, if the officer proposes to make any further addition and/or disallowances, in that case also, the Assessing Officer is required to issue required notice under Section 142 of the Act and the assessee is required to be given an opportunity to raise objection against such addition and/or disallowance. Under the circumstances, considering the entire scheme of Section 144C of the Act, the Assessing Officer cannot make any addition and/or disallowance then what is proposed in the draft assessment order. The contention raised on behalf of the Revenue that the aforesaid lapse can be said to be a procedural lapse has also no substance. Such additions/disallowances other than those proposed in the draft assessment order cannot be said to be a mere procedural lapse. Under the circumstances, we are of the opinion that the learned Tribunal has not committed any error in deleting the disallowance made by the Assessing Officer with respect to the claim of the assessee under Section 10AA of the Act, as the same was not proposed by the Assessing Officer in the draft assessment order and for which, no opportunity was given to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... B to D separately and independently. 4. The facts leading to the present Tax Appeal in nutshell are as under :- 4.1 That, the assessee is engaged in manufacturing of high quality rubber parts, rubber plastic parts, rubber metal parts and liquid silicon rubber parts. The assessee company is a Joint Venture [JV] company between Woco Franz Josef Wolf Holding GmbH, Germany [Woco Holding]; Woco Industrietechnik GmbH [Woco, Germany] and Motherson Sumi Systems Limited [MSSL] India. In the assessment year under consideration ie ., A.Y 2011-2012, the assessee filed return of income declaring total income at ₹ 9,71,366/-. That thereafter, by considering the TPO's order dated 28th August 2014, a draft assessment order under Section 143 (3) read with Section 144 [C] of the Income-tax Act, 1961 was passed by determining the total income at ₹ 1,58,14,366/-; after making addition on account of adjustment to the arm's length price of ₹ 1,48,43,000/- in the business income of the assessee [the aforesaid is the subject matter with respect to Question A for which Tax Appeal is admitted ]. That, the Assessing Officer while passing the final assessment order dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of passing the final assessment order will be contrary to the scheme of Section 144 C ? 7. We have heard Shri Pranav G Desai, learned counsel appearing on behalf of the Revenue at length. 8. Shri Pranav Desai has taken us to the relevant provisions of Section 144C of the Act. It is vehemently submitted by Shri Desai, learned counsel for the Revenue that the learned Tribunal has materially erred in deducting the disallowance made by the Assessing Officer under Section 10AA of the Act solely on the ground that in the draft assessment order, such disallowance was not proposed. 8.1 It is vehemently submitted by Shri Desai, learned counsel appearing on behalf of the Revenue that there is no such restriction provided under Section 144C of the Act by which the Assessing Officer is barred and/or precluded from making any additions and/or disallowances other than those mentioned in the draft assessment order. It is submitted that after the objections were raised by the assessee with respect to the proposed variation in the income or loss return so mentioned in the draft assessment order and after considering the report of Dispute Resolution Panel [ DRP for brevity], if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... December 2014, the Assessing Officer proposed only APL adjustment of ₹ 1,48,43,000/-. It is an admitted position that no disallowances were proposed in the draft assessment order. The said draft assessment order was carried before Dispute Resolution Panel and proposed adjustment was contested by the assessee by filing detailed objections, but the assessee did not succeed before DRP. That thereafter, the matter went before the Assessing Officer for framing the final assessment order. While passing the final assessment order dated 20th October 2015, the Assessing Officer not only made addition of APL adjustment of ₹ 1,43,43,000/-, but also made disallowance under Section 10AA of the Act amounting to ₹ 7,64,15,421/-. The learned ITAT, by the impugned judgment and order has directed to delete such disallowance made by the Assessing Officer amounting ₹ 7,64,15,421/- made under Section 10AA of the Act on the ground that as in the draft assessment order, it was not proposed to make disallowance of the claim under Section 10AA of the Act, and therefore, it was not open for the Assessing Officer to make disallowance of such claim under Section 10AA of the Act, while ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ( b ) objections filed by the assessee; ( 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 the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riation; or no objections are forwarded within the period specified in sub-section [2] thereof ie. , thirty days from the date of receipt of the draft order, the Assessing Officer is required to complete the assessment on the basis of the draft order. [D] As per sub-section [4] of Section 144C, the Assessing Officer is required to pass assessment order under sub-section [3] within one month from the end of the month in which (i) the acceptance is received; or (ii) the period of filing of objections under sub-section [2] expires; notwithstanding anything contained in Section 153, or Section 153B of the Act. [E] In case objections are raised by the assessee against such proposed variation [so mentioned in the draft assessment order], in that case, the Dispute Resolution Panel is required to issue such directions, as it things fit, for the guidance of the Assessing Officer to enable him to complete the assessment. [F] As per sub-section [6] of Section 144C, the DRP is required to issue directions referred to in sub-section [5], after considering viz ., (i) draft order; (ii) objections filed by the assessee; (iii) evidence furnished by the assessee; (iv) report, if any, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... osed in the income or loss returned. Therefore, while passing the final assessment order, the Assessing Officer cannot go beyond what is proposed in the draft assessment order. If the submissions made on behalf of the Revenue are accepted that the Assessing Officer, while passing the final assessment order can also go beyond the variation proposed in the draft assessment order, then in that case, it can be said that the assessee shall not given any opportunity to raise objections against such additions or disallowances which were not even proposed in the draft assessment order. Therefore, the same can be considered to be in breach of the principles of natural justice. 13.1 At this stage, it is required to be noted that even while passing the regular assessment order, if the officer proposes to make any further addition and/or disallowances, in that case also, the Assessing Officer is required to issue required notice under Section 142 of the Act and the assessee is required to be given an opportunity to raise objection against such addition and/or disallowance. Under the circumstances, considering the entire scheme of Section 144C of the Act, the Assessing Officer cannot make an ..... X X X X Extracts X X X X X X X X Extracts X X X X
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