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DRAFT ASSESSMENT ORDER UNDER SECTION 144C OF INCOME TAX ACT, 1961 – MANDATORY?

Income Tax - By: - Mr. M. GOVINDARAJAN - Dated:- 12-2-2018 - Section 144C Section 144 C of the Act refers to the Dispute Resolution Panel. Section 144C(1) provides that in case of an eligible assessee, the Assessing Officer shall forward a draft of the proposed order of assessment to the assessee if he proposes to make any variation in the income or loss returned which is prejudicial to the interest of the assessee; Section 144C(2) provides that the assessee shall, within thirty days of the rece .....

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re issuing directions, may make further inquiries as it thinks fit or cause any further inquiry to be made by any income tax authority and report the result of the same to it. Section 144C(8) recognizes wide powers of the Dispute Resolution Panel to confirm, reduce or enhance the variations provided in the draft order subject to the limitation that it shall not set aside any proposed variation or issue any direction for further inquiry; Section 144 C(10) provides that every direction issued by t .....

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ment order under section 143(1) of the Act would result in rendering the final assessment order without jurisdiction null and void and unenforceable . In this case the consequent demand notice was also set aside. In Vijay Television Private Limited V. DRP - 2014 (6) TMI 540 - MADRAS HIGH COURT the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently not only the final assessment order but also the corrigendum issued thereafter was .....

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ged in the business of sub-distribution of distribution rights and sale of advertisement inventory on satellite delivered channels. The petitioner filed returns for the assessment year 2007 - 08 at ₹ 10,69,43,491 and the same was revised to claim a higher TDS. For the assessment year 2008 09 the petitioner filed a return of income at ₹ 35,04,23,465/- Since there were international transactions involved a reference was made by the Assessing officer to the Transfer Pricing Officer. The .....

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etitioner nor the Transfer Pricing Officer had taken into consideration appropriate comparables and therefore the determination of arm s length price was not justifiable. The Appellate Tribunal remanded the matters for undertaking a transfer pricing study afresh and frame an assessment in accordance with law. Two separate orders were passed by the Transfer Pricing Officer proposing an upward assessment to the total income of the petitioner for each of the assessment year. The Assessing Officer c .....

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Assessing officer to pass a draft assessment order and for the petitioner to pursue the matter before the Dispute Resolution Panel. The Court did not accept the contentions of the Revenue. The failure by the Assessing officer to adhere to the mandatory requirement of section 144C(1) of the act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings. The High Court set aside the assessment orders .....

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g various additions and deletions as per the order of Transfer Pricing Officer. The assessee challenged the assessment order on the ground that the procedure laid down under section 144C of the Act was not followed by the Assessing Officer. The Revenue did not dispute the factual aspect that upward revision was made in the income of the assessee on the basis of the order of the Transfer Pricing Officer and the same was done without following the procedure laid down under section 144C of the Act. .....

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ory. Before the Assessing Officer can make variations in the returned income of an eligible assessee, section 144C(1) lays down the procedure to be followed notwithstanding anything to the contrary contained in the Act. This non obstante clause thus gives an overriding effect to the procedure. When an Assessing Officer proposes to make variations to the returned income declared by an eligible assessee, the High Court held that- The Assessing Officer has to first pass a draft order; He shall prov .....

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e to object to any additions before they are made. Further the Assessing officer is expected to pass the order of assessment in terms of such directions without giving any further hearing to the assessee. Thus at the level of Assessing Officer, the directions of the Dispute Resolution Panel would bind even the assessee. Such opportunity cannot be taken away by treating it as purely procedural in nature. The High Court dismissed the appeal. In JCB India Limited V. Deputy Commissioner of Income Ta .....

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006 - 07 - ₹ 255,45,21,520; 2007 - 08 - ₹ 426,63,86,286; 2008 - 09 - ₹ 731,93,88,090; Against the order of the Assessing Officer for all the three years, the assessee filed separate appeals before the Appellate Tribunal. The Appellate Tribunal, in all the three cases remanded the matter to the file of Dispute Resolution Panel for a fresh determination after dealing with the objections raised by the assessee. The Dispute Resolution Panel placed orders for all three cases separat .....

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manded the matter to the Assessing officer for a fresh adjudication in accordance with the law. The Assessing Officer vide his letter dated 14.02.2014 sought the comments of the Transfer Pricing officer on the issue of transfer pricing adjustment. There was no response from the Transfer Pricing Officer. Vide letter dated 04.03.2016, the Assessing Officer called upon the Transfer Pricing Officer to quantify the transfer pricing adjustments in pursuance of the remand made by the Appellate Tribunal .....

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nsfer pricing adjustment at- 2006 - 07 - ₹ 40,67,16,966; 2007 - 08 - ₹ 86,76,93,761; 2008 - 09 - ₹ 134,21,17,779 The next day the Assessing Officer passed the final assessment order. The Assessing Officer enhanced the returned income on the basis of transfer pricing adjustment as recommended by the Transfer Pricing Officer. A notice of demand was send and show cause notice as to why penalty should not be imposed to the assessee. The assessee filed writ petitions before the High .....

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assessment orders passed by the Assessing Officer; It is not mandatory on the part of the Assessing Officer to pass a draft assessment order since this was a second round before the Transfer Pricing Officer pursuant to remand by the Income Tax Appellate Tribunal; It was as if the Tribunal had set aside the entire assessment order of the Assessing Officer; The setting aside was only in respect of the transfer pricing adjustment and too with a specific direction to the Assessing Officer for determ .....

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