TMI Blog2018 (3) TMI 1578X X X X Extracts X X X X X X X X Extracts X X X X ..... /2014, ITA No.465/PUN/2014 - - - Dated:- 26-3-2018 - Ms. Sushma Chowla, JM And Shri D. Karunakara Rao, AM Assessee by : Shri Nikhil Pathak Revenue by : Shri Rajeev Kumar, CIT ORDER Per Sushma Chowla, JM The cross appeals filed by the Revenue and assessee are against the order of ACIT, Circle-10, Pune, dated 29.01.2014 relating to assessment year 2009-10 passed under section 143(3) r.w.s. 144C(13) of the Income-tax Act, 1961 (in short the Act ). 2. The cross appeals filed by the Revenue and assessee were heard together and are being disposed of by this consolidated order for the sake of convenience. 3. The assessee at the outset filed additional ground 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he demand payable. The learned Authorized Representative for the assessee also pointed out that the Tribunal in assessee s own case relating to assessment year 2010-11 had decided similar additional grounds of appeal and held the draft assessment order passed to be null and void, wherein the demand was raised under section 156 of the Act and notice was issued under section 274 of the Act for initiating penalty under section 271(1)(c) of the Act. The learned Authorized Representative for the assessee also filed demand notice dated 28.03.2013 and penalty notice issued under section 274 of the Act, dated 28.03.2013. 7. The learned Departmental Representative for the Revenue on the other hand, placed reliance on the orders of authorities below. 8. We have heard the rival contentions and perused the record. The additional grounds of appeal raised by the assessee do not require any investigation of facts and hence, the same are admitted. The issue which is raised in the present appeal is whether the draft assessment order passed in the case along with issue of demand notice is correct start of proceedings against the assessee. The requirement of the Act is that in the draft assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 filed the objections before the DRP, who dismissed the same on the surmise that the order passed by the Assessing Officer was final assessment order, since the Assessing Officer had also issued the demand notice and had also issued show cause notice under section 274 r.w.s. 271(1)(c) of the Act for levy of penalty. In view of the said facts, the Tribunal observed as under:- 6. We have heard the rival contentions and perused the record. Briefly, in the facts of the case, the Assessing Officer had made reference to the TPO vis- -vis to determine the arm's length price of international transaction entered into by the assessee with its associate enterprises. The TPO vide order dated 28.01.2014 under section 92CA(3) of the Act had proposed the adjustment to arm's length price of international transaction and had passed the said order. The Assessing Officer on receipt of said order passed order under section 143(3) r.w.s. 92C(4) and 144C of the Act. The said or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 shall complete the assessment on the basis of draft order if the assessee intimates to the Assessing Officer the acceptance of the variation or no objections are received within period specified in sub-section (2) of section 144C of the Act. Thereafter, the Assessing Officer is empowered to pass the assessment order within one month from the end of month, in which the acceptance is received or the period of filing objections under sub-section (2) of section 144C of the Act expires. Under sub-section (5) of section 144C of the Act, it is provided that the Dispute Resolution Panel shall in case where objection is received under sub-section (2) issue such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. Upon receipt of the said directions, the Assessing Officer shall in conformity with the same, complete the assessment without providing any further opportunity of being hearing to the assessee within one m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te 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 144C(3) of the Act. In the present case, without following the above mandatory procedure, the AO has passed the order of assessment on 26.03.2013 and subsequently issued a corrigendum on 15.04.2014 to rectify the mistake committed in passing the final order of assessment inter alia to treat it as a draft assessment order. This course of action adopted by the second respondent is contrary to the mandatory provisions contained in the Act and the corrigendum issued by the AO could not cure the defect. The very fact that the Assessing Officer has signed the order of assessment and also assessed the amount payable by the assessee has become complete and it cannot be simply treated as a draft assessment order or it can be rectified by issuing the corrigendum. In fact, pursuant to the order of assessment under section 143C, demand was also made for payment of the amount and such demand has not been withdrawn by the second respondent even after issuing the corrige ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 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 to the cut off date of 01.10.2009 indicates the intention of Legislature to make it applicable. The Hon ble High Court of A.P further held that the Circular No.5/2010 issued by the CBDT stating that section 144C(1) of the Act would apply only from assessment year 2010-11 and subsequent years and not from assessment year 2008-09 was contrary to the expressed language of the section and the said view of the Revenue was held to be not acceptable. The Hon ble High Court of A.P thereafter held that the impugned order of assessment dated 23.12.2011 passed by the respondent was contrary to the mandatory provisions of section 144C of the Act is declared as one without jurisdiction, null and void and unenforceable. The Hon ble High Court of Andhra Pradesh held as under:- In this view of the matter we are of the view that the impugned order of assessment dt. 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore 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 with its objections to such a draft assessment order. This is for the reason that an eligible assessee s grievance can be addressed before a final assessment order is passed and appellate proceedings invoked by it. However, these special rights made available to eligible assessee under Section 144C of the Act are rendered futile, if directly a final order under Section 143(3) of the Act is passed without being preceded by draft assessment order. 6. In the above view, the assessment order dated 23rd March, 2015 passed by the Assessing Officer for the assessment year 2012-13 is completely without jurisdiction. This is so as it has not been preceded by a draft assessment order. Hence, the foundational/basic order viz. the assessment order dated 23rd March, 2015 is set aside and quashed as being without jurisdiction. Consequent orders passed on rectification application as well as on penalty are also quashed and set aside being unsu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal 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 passing of the draft assessment order, wherein the Assessing Officer had issued demand notice in ITNS-150 and had also initiated penalty proceedings. Undoubtedly, the said assessment was framed as draft assessment but in actual fact, the Assessing Officer had made the assessment in the hands of assessee by not only assessing the income but also determining the demand payable. In the case of draft assessment order, proposed additions are to be made and the assessee is show caused either to accept the same or file the objections before the DRP. However, in the present facts, there was not a proposal for making addition but final assessment order was passed. Undoubtedly, the Assessing Officer said that he is passing draft assessment order and the assessee was also at liberty to file the objections before the DRP or accept the same, but in actual fact, the order passed by the Assessing Officer was complete assessment order which is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 corrigendum after the final assessment order was passed. Consequently, not only the final assessment order but also the corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) quashed the final order of the AO and the demand notice. Interestingly, even as regards the corrigendum issued, the Madras High Court held that it was beyond the time permissible for issuance of such corrigendum and, therefore, it could not be sustained in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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