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Income Tax Officer, Ward – 1 (1) (1) , Baroda. Versus C-SAM (India) Pvt. Ltd.

2016 (11) TMI 1423 - ITAT AHMEDABAD

Validity of Assessment Order issued u/s 143(3) - non compliance of requirement of section 144C(1) - no draft order u/s 144C was framed before passing the final order u/s 143(3) - Held that:- Since the Assessing Officer straightaway passed final Assessment Order under section 143(3) without first forwarding a draft of the proposed order of assessment to the assessee, the order is liable to be quashed for this reason alone. - Respectfully following the esteemed views of the Hon’ble High Courts .....

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sing Officer appellant has challenged correctness 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 a .....

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t 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) & Interest on TDS on merits and ought not to have quashed the entire assessment order on technical ground. 2. To adjudicate on this appeal, only a few material facts need to be taken note of. There is no dispute about the fact that the assessee is an eligible assessee und .....

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n of Arms Length Price adjustment of ₹ 2,86,19,511/- in terms of TPO s recommendation. Aggrieved, assessee carried the matter in appeal before the learned CIT(A) and one of the point which the assessee took up before the learned CIT(A) was that since the Assessing Officer straightaway passed final Assessment Order under section 143(3) without first forwarding a draft of the proposed order of assessment to the assessee, the order is liable to be quashed for this reason alone. The plea of th .....

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aft order was framed and provided by the erstwhile AO to the appellant in respect of variation decided by the TPO before passing final order u/s 143(3) of the Act, The AO after receiving the TPO's observation and findings had directly incorporated the arm's length price determined by him in the assessment order without providing any opportunity being heard, which is gross violation of principle of natural justice and also the provisions of the Act. The appellant has referred to section 9 .....

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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 t .....

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/09/2011 and forwarded it to the Assessing Officer and to the assessee under sub-sect/on (3) thereof. The Assessing Officer accepted the variations submitted by the TPO without giving the petitioner any opportunity to object to it and pass the impugned assessment order. As this has occurred after 01/10/2009, the cut off date prescribed in sub-section (1) of section 144C, the Assessing Officer is mandate to first pass the draft assessment order, communicated it to the assessee, hear his objection .....

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sion (P) Ltd. Vs Dispute Resolution Panel, Chennai (in writ petition no.1526 and 1527 of 2014 M.P. Nos. 1 & 1 of 2014 dated 29/04/2014) has held that if the final order is passed by the AO u/s 143(3) instead of passing a draft assessment order u/s 144C, there being violation of procedure prescribed under Act, impugned order was to be set aside and in such a case even corrigendum issued by AO modifying final order of assessment to be read as a draft assessment order could not cure the defect .....

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other grounds of appeal of the appellant on merit are not dealt with. 3. Assessing Officer is aggrieved and is in appeal before us. 4. We have heard the rival contentions, perused the material on record and duly considered 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 t .....

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he 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: 20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required .....

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e petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand as also imposed penalty. Such demand has to be raised only after a final order has been passed determining the tax liability. The very fact that the taxable amount has been determined itself would show that it was passed as a final order. In fact, a notice for demand under Section 156 of the Act was issued pursuant to such order dated 26.03.2013 of the second respondent. Both the order dated 26.03.2013 a .....

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ing a corrigendum on 15.04.2013. In the corrigendum it was only stated that the order passed on 26.03.2013 under Section 143C of the Act has to be read and treated as a draft assessment order as per Section 143C read with Section 93CA (4) read with Section 143 (3) of the Act. In and by the order dated 15.04.2013, the second respondent granted thirty days time to enable the assessee to file their objections. On receipt of the corrigendum dated 15.04.2013, the petitioner company approached the fir .....

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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 .....

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f 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 h .....

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d thereafter, fresh assessment orders have been issued by anti-dating it. In those circumstances, it was held that the High Court ought not to have remanded the matter back to the assessment officer and by doing so, the statutory period prescribed for completion of assessment has been extended by conferring jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period. In that case, the Honourable Supreme Court also held that there is a distinction between a .....

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cially when it is beyond the period of limitation prescribed by the statute. When there is a statutory violation in not following the procedures prescribed, such an order cannot be cured by merely issuing a corrigendum. 25. In the decision rendered by the Honourable Supreme Court of India in the case of (L. Hazari Mal Kuthiala (supra), which was relied on by the learned standing counsel for the respondents, it was held that the mistake or defect on the part of the Commissioner to consult the Cen .....

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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 .....

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certain procedure has been contemplated under Section 144C of the Act and they have been violated by the second respondent by passing final order of assessment and therefore such order passed by the second respondent has got no jurisdiction or it can be cured by virtue of issuing a corrigendum. 28. By referring to the decision of the Division Bench of this Court dated 10.02.2014 passed in Tax Case (Appeal) No. 2412 of 2006, the learned standing counsel for the respondents sought to make a disti .....

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aiah (supra) is extracted hereunder:- "Certainly passing an order of assessment under Section 158BC instead of Section 158BD (inspite of clear terminology used in both the sections) would not amount to a mistake, a defect or an omission, much less a curable one. When different contingencies are dealt with under different sections of the Act, allowing an illegality to be perpetrated and then taking a plea by the Revenue that such an action adopted on their part would not nullify the proceedi .....

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block 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 .....

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n 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 by the assessing officer in the case of Zuari Cement Ltd. (supra), wherein it was held as .....

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s before the Dispute Resolution Panel in which event the latter can issue directions for the guidance of the Assessing Officer to enable him to complete the assessment. In the case of the petitioner, admittedly the TPO suggested an adjustment of ₹ 52.14 crores u/s.92CA of the Act on 20.09.2011 and forwarded it to the Assessing Officer and to the assessee under subsection (3) thereof. The assessing officer accepted the variation submitted by the TPO without giving the petitioner any opportu .....

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y to S.144C of the Act and is without jurisdiction, null and void. The contention of the Revenue that the circular No.5/2010 of the CBDT has clarified that the provisions of S.144C shall not apply for the assessment year 2008-09 and would apply only from the assessment year 2010-2011 and later years is not tenable in as much as the language of Sub-section (1) of Section 144C referring to the cut off date of 01.10.2009 indicates an intention of the legislature to make it applicable, if there is a .....

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e 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 Re .....

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a view by citing any authority. In this view of the matter, we are of the view that the impugned order of assessment dated 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside." 32. As against this order of the Division Bench of the Andhra .....

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respondent refused to entertain it by stating that the order passed by the second respondent is a final order and it had jurisdiction to entertain objections only if it is a draft assessment order. While so, the order dated 26.03.2013 of the second respondent can only be termed as a final order and in such event it is contrary to Section 144C of the Act. As mentioned supra, in and by the order dated 26.03.2013, the second respondent determined the taxable amount and also imposed penalty payable .....

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second respondent can only be construed as a final order passed in violation of the statutory provisions of the Act. The corrigendum dated 15.04.2013 is also beyond the period prescribed for 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 passe .....

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