TMI Blog2018 (3) TMI 1298X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) r.w.s. 144C(1) of the Income-tax Act, 1961 (in short the Act ). The assessee also filed Cross Objections against the appeal of Revenue. 2. The cross appeals filed by the assessee and Revenue and also Cross Objections filed by the assessee on similar issue were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee has raised the additional grounds of appeal, which reads as under:- 1. The appellant submits that as the assessment order has been issued without following the procedure laid down in section 144C of the Income-tax Act, 1961 (the Act), the said assessment order issued be declared null and void. 2. The appellant submits that the learned Assessing Officer (Ld. AO), erred in issuing notice of demand under section 156 and notice under section 274 read with section 271(1)(c) of the Act along with the draft assessment order and hence, since the procedure laid down in section 144C was not followed by the learned AO, the assessment order issued be held invalid in law. 4. The learned Authorized Representative for the assessee pointed out that the grounds of appeal raised by the assessee in its appeal and i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d out that objections were raised against merits of addition before the DRP but no such issue was raised and the said objections were dismissed. The Assessing Officer thereafter, passed order under section 143(3) r.w.s. 144C(13) of the Act, dated 27.02.2015, wherein the said adjustment on account of arm's length price of international transactions was made in the hands of assessee. He pointed out that draft assessment order passed by the Assessing Officer, wherein the demand notice was issued along with notice for initiation of penalty proceedings is in fact assessment order passed by the Assessing Officer determining the demand payable. He stated that jurisdictional issue raised in the present appeal is squarely covered by the order of Tribunal in the case of DCIT Vs. M/s. Rehau Polymers Pvt. Ltd. in ITA No.566/PUN/2015, relating to assessment year 2010-11 with CO No.27/PUN/2017, order dated 14.06.2017. The learned Authorized Representative for the assessee further pointed out that similar issue has been decided by the Hon ble High Court of Delhi in JCB India Ltd. Vs. DCIT (2017) 85 taxmann.com 155 (Del), wherein in the remand proceedings, the Hon ble High Court had held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d further issued demand notice along ITNS-150, after charging interest under sections 234A, 234B 234C, etc. He also initiated penalty proceedings under section 271(1)(c) of the Act. Undoubtedly, the assessee on understanding that the same was draft assessment order, made objections to the DRP, who gave certain directions and thereafter, the Assessing Officer passed an order under section 143(3) r.w.s. 144C(13) of the Act. However, in order to adjudicate the issue raised, we need to make reference to the provisions of section 144C of the Act. 11. We find that similar issue of assessment to be framed under section 143(3) r.w.s. 144C of the Act arose before the Pune Bench of Tribunal in Soktas India (P) Ltd. Vs. ACIT (supra). 12. The Tribunal after noting the facts that the Assessing Officer had passed the order under section 143(3) r.w.s 92CA(3) and 144C of the Act and had also issued demand notice under section 156 of the Act and had also issued notice under section 274 r.w.s. 271(1)(c) of the Act. However, the covering letter said that it was draft assessment order, against which the assessee was either to file objections before the DRP or accept the same. The assessee file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee filed an application before the Assessing Officer for necessary action. The Assessing Officer in reply, vide letter dated 30.01.2015 stated that the DRP had clearly mentioned that the order passed on 28.02.2014 was final order and not draft order, so the Assessing Officer does not have any jurisdiction over the case. 7. In order to adjudicate the issue, reference needs to be made to the provisions of section 144C of the Act. Under the provisions of section 144C of the Act, it is provided that where the Assessing Officer proposes to make, on or after 01.10.2009, any variation in the income or loss returned, which is prejudicial to the interest of assessee, then the Assessing Officer shall in the first instance forward the draft of the proposed order of assessment to the eligible assessee. Under sub-section (2) of section 144C of the Act on receipt of the draft order, the eligible assessee shall within 30 days of the receipt, file his acceptance of the variation to the Assessing Officer or file his objections, if any, to such variation with the Dispute Resolution Panel and the Assessing Officer. Under sub-section (3) of section 144C of the Act, the Assessing Officer sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pleting the assessment on such enhanced income or variation in the loss returned by the assessee. 8. The Hon ble Madras High Court in the case of Vijay Television Writ Petition Nos.1526 and 1527 of 2014 M.P. Nos.1 and 1 of 2014, it was held that non-passing of draft assessment order after adjustment made by the TPO renders proceedings null void by observing as under:- Under Section 144C(1) of the Act, with effect from 1st October 2009, the Assessing Officer has to mandatorily issue a draft assessment order if there is a proposed variation to the return which are prejudicial to the eligible assessee. The fact that the petitioner is an eligible assessee is not in dispute. While so, under section 144C(2) of the Act, the eligible assessee has the option, either to accept the variation or to file their objections before the DRP and such option has to be exercised within 30 days. On such objections filed by the assessee, the DRP shall issue appropriate direction for the guidance of the Assessing Officer under section 144C(5) of the Act. It is only thereafter, the AO is bound to pass a final order of assessment in compliance with the directions issued by the DRP under section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the contrary contained in the Act, he shall first pass the draft assessment order, forward the same to the assessee and after assessee files his objections, if any, the Assessing Officer shall complete the assessment within one month, in view of the provisions of section 144C of the Act. It was further observed that the assessee is also given an option to file an objection before the DRP, in which the latter can issue directions for the guidance of Assessing Officer to enable him to complete assessment. Where the Assessing Officer accepted the variation submitted by the TPO without giving the petitioner any opportunity to object to it and pass the assessment order, it was held by the Hon ble High Court of A.P that the impugned order of assessment was clearly contrary to section 144C of the Act and was without jurisdiction, null and void. The objection of the Revenue that the Circular No.5/2010 of the CBDT which laid down that the provisions of section 144C of the Act shall not apply for the assessment year 2008-09 and would only apply from assessment year 2010-11 and later years was held to be not tenable where the language of sub-section (1) of section 144C of the Act referred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... By an order dated 7th October, 2015, the DRP refused to pass any direction on the objections because the objections had been filed in respect of a final order under Section 143(3) of the Act and not in respect of the draft assessment order passed under Section 144C(1) of the Act. The order dated 7th October, 2015 of the DRP holds that its jurisdiction is only to entertain objections with regard to draft assessment order passed under Section 144C(1) of the Act. 5. However, it is pertinent to note that the order dated 7th October, 2015 of the DRP in paragraph (3) thereof records that There is no dispute that the assessee is a foreign company . This position is undisputed even before us. Therefore, in view of Section 144C(15) of the Act which defines eligible assessee to whom Section 144C(1) of the Act applies to inter alia mean any foreign company. Therefore, a draft assessment order under Section 144C(1) of the Act is mandated before the Assessing Officer passes a final order under Section 143(3) of the Act in case of eligible assessee. An draft assessment order passed under Section 144C(1) of the Act bestows certain rights upon an eligible assessee such as to approach the DRP w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ued covering letter where it says that it is draft assessment order but in spirit, it had finalized the assessment, wherein the demand was crystallized and demand notice was issued to the assessee. The Assessing Officer has not followed the correct procedure as provided in the Statute and has passed final assessment order without passing draft assessment order which is against the provisions of the Act and hence, the same is invalid in law. Reliance is placed on the ratio laid down by the Hon ble Bombay High Court in International Air Transport Association Vs. DCIT (supra) and the Hon ble Madras High Court in Vijay Television Pvt. Ltd. Vs. DRP Others (supra) and the Hon ble High Court of Andhra Pradesh in M/s. Zuari Cements Ltd. Vs. ACIT (supra). We hold that the assessment order passed in the case is invalid and the same is set aside. Since we have decided the preliminary issue in favour of assessee, the other grounds of appeal against the additions made become academic and the same are dismissed. 13. The facts before us are similar to the facts before the Tribunal in Soktas India (P) Ltd. Vs. ACIT (supra). In the facts of present case also, the demand got crystallized on pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the final assessment order. The following passages from said decision are relevant for the present purposes: 11. The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of Section 144C(1) of the Act is no longer res intregra. There is a long series of decisions to which reference would be made presently. 12. In Zuari Cement Ltd. v. ACIT (decision dated 21st February, 2013 in WP(C) No.5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order without jurisdiction, null and void and unenforceable. In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013. 13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113 (Mad.), a similar question arose. There, the Revenue sought to rectify a mistake by issuing a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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