TMI Blog2016 (11) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... rectness of the order dated 28.01.2015, passed by the learned CIT(A), in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2009-10, on the following grounds : - 1. On the facts and in the circumstances of the case and in law, the Ld. CIT (Appeals) erred in law in deleting all the additions made by the AO, by quashing the order of assessing officer, only on the ground that the order was not legally correct as no draft order u/s 144C was framed before passing the final order u/s 143(3), without appreciating the fact that the quantum of addition is very high and the same was made by the Transfer Pricing Officer based on independent data and information available for this purpose and that too after providing sufficient time and opportunities to the assessee in this respect there was no deprival of natural justice to the assessee. 2. The Ld. CIT (Appeals) ought to have dealt with on merits the fact that the adjustments made by the TPO are appealable before the Ld. CIT(A), 3. Without prejudice to the above, the Ld. CIT(A) ought to have dealt with the issues of Disallowance of late payment of PF, Disallowance u/s 40(a)(ia) Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03. The appellant also relied upon decisions of Hon'ble Courts and has pleaded that a hearing has to be afforded by the AO before adopting the adjustments proposed by the AO which has not been done in the case of assessee. Thus, as per the appellant to this extent the order of the AO is without jurisdiction, void and liable to be struck down. As per the appellant the assessment order is passed without any draft order u/s 144C of the Act and without providing the chance to the assessee to rebut the determination of arm's length price by the TPO. As per the appellant in the light of provisions u/s 144C sub section(2) to sub section(5) and clarification issued by CBDT on January 20, 2010 the assessee has option to file variation in the draft assessment order before tne Dispute Resolution Panel (DRP) within one month of receipt of draft assessment order or to opt for normal appellate route. As per the appellant, the AO by passing the impugned order has blocked an option available to the appellant. This entire submission of the appellant is found to be acceptable. It is mentioned that the Hon'ble High Court of Andhra Pradesh in the case of M/s, Zuari Cement Ltd. Vs ACIT (wri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed facts of the case in the light of applicable legal position. 5. We have noted that the applicability of the section 144C is not in doubt in the present case. The Assessing Officer was therefore required, in term of section 144C(1) to in the first instance forward a draft of the proposed order of assessment to the eligible assessee if he proposes to make any variation in the income or loss returned which is prejudicial to the interest of such assessee . Clearly, therefore. the Assessing Officer acted contrary to the scheme of section 144C of the Act. As to what is the impact of such Assessment Order under section 143(3) being directly issued, in a situation in which the assessee is an eligible assessee who ought to have been issued a draft assessment order, we find the following guidelines from the decision of a coordinate bench in the case of Capsugel Healthcare Limited vs. ACIT (2015) 152 ITD 142 Delhi :- 7. We find that the issue is covered is now covered in favour in of the assessee by judgment of Hon ble Madras High Court, in the case of Vijay Television Pvt Ltd Vs DRP [(2014) 46 taxmann.100 (Mad)], wherein Hon ble High Court has, inter alia, observed as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pondent declined to entertain the objections raised by the petitioner company on the ground that the order passed by the second respondent is not a draft assessment order, rather it is a final order. Thus, the first respondent had treated the order dated 26.03.2013 of the second respondent as a final order and therefore it refused to entertain the objections filed on behalf of the petitioner company. 22. As mentioned supra, as per Section 144C (1) of the Act, the second respondent-assessing officer has no right to pass a final order pursuant to the recommendations made by the TPO. In fact, the second respondent-assessing officer himself has admitted by virtue of the corrigendum 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 Deepak Agro Foods (supra) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ondents, it was held that the mistake or defect 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. In the present case, the procedure that was required to be followed by the second respondent to pass a draft assessment order is mandatory and it is prescribed by the statute. Therefore, this decision relied on by the learned 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 Shital Prasad Kharag Prasad (supra) 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 (supra) Madras held that when an order is passed under Section 158BC of the Act i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k period in the manner laid down in Section 158BB and 'the provisions of Section 142, subsections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be apply. This indicates that 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. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee which is prejudicial to the assessee, after 01.10.2009. 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 by the 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or limitation. Such a defect or failure on the part of the second respondent to adhere to the statutory provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013. By issuing the corrigendum, the respondents cannot be allowed to develop their own case. Therefore, following the order passed by the Division Bench of the Andhra Pradesh High Court, which was also affirmed by the Honourable Supreme Court by dismissing the Special Leave Petition filed thereof, on 27.09.2013, the orders, which are impugned in these writ petitions are liable to be set aside. 8. Learned Departmental Representative, on the other hand, submits that this lapse on the part of the Assessing Officer is at best a procedural lapse and the matter should, therefore, be restored to the file of the Assessing Officer for adjudication de novo. 9. We are, however, unable to see any legally sustainable merits in the stand so taken by the learned Departmental Representative. Hon ble High Court s esteemed views, as extracted above, bind us and we have to respectfully follow the same. Accordingly, in due deference to this binding judicial precedent, and other binding judicial precedents referred to th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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