TMI Blog2018 (4) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... c direction or purpose of verification or re-computation etc., then also the A.O. has to give effect to such direction and pass a fresh assessment order thereby determining the income of the assessee and work out the tax demand accordingly. If the assessee is aggrieved by such an assessment order giving effect to the appellate order, then in that case, the only remedy open for appeal is before the first appellate authority in terms of section 246 and 246A. - IT Appeal No. 741 (delhi) of 2018 - - - Dated:- 16-2-2018 - Amit Shukla, Judicial Member and Prashant Maharishi, Accountant Member Himanshu Sinha , Adv. for the Appellant. H.K. Choudhary , CIT (DR) for the Respondent. ORDER PER AMIT SHUKLA, J.M. The aforesaid appeal has been filed against final assessment order dated 7.11.2017 passed u/s 254/143(3)/144C for the assessment year 2012-13. 2. One of the main grounds raised by the assessee before us is that the final assessment order dated 7.11.2017, passed by the Ld. A.O. u/s 143(3) r.w.s. 254/144C is ex-facie illegal, non-est, null and void in as much as the Ld. A.O. has failed to forward a draft assessment order to the assessee, which is in gross v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the proposed adjustment, added the said amount and instead of passing draft assessment order passed final assessment order vide order dated 7.11.2017 which has been captioned as u/s 254/143(3)/144C. Thus, the A.O. instead of passing the draft assessment order had passed final assessment order and also issued demand notice for payment of demand of ₹ 11,68,29,560/- and also initiated penalty proceedings u/s 271(1)(c) vide notice u/s 274 r.w.s 271 on the same date, i.e., 7.11.2007. Against the said assessment order, the assessee has preferred appeal before Tribunal directly. 5. Before us the Ld. Counsel for the assessee Shri Himanshu Sinha, submitted that when the transfer pricing adjustment was set aside to the file of the AO/TPO and in pursuance of such remand by the Tribunal, fresh assessment order was required to be passed in terms of procedure laid down in section 144C, first draft assessment order had to be issued so that assessee can file objection if any before the DRP within 30 days in terms of sub section (2) of section 144C or intimate to the A.O in this regard for the acceptance of the variation and no objection is filed within 30 days, then AO passes the final ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision dated 17th July 2015 passed in ITA No. 275/2015 (Pr. Commissioner of Income Tax, Delhi-2, New Delhi v. Citi Financial Consumer Finance India Pvt. Ltd.) where it was held: Section 292B of the Act cannot be read to confer jurisdiction on the AO where none exists. The said Section only protects return of income, assessment notice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings, provided the same are in substance and in effect in conformity with the intent of purposes of the Act. 20. The Court further observed that Section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. As the Court explained, the issue involved is-not about a mistake in the said order but the power of the AO to pass the order. 21. In almost identical facts, in Turner International (supra), this Court held in favour of the Assessee on the ground that it was mandatory for the AO to have passed a draft assessment order under Section 144C of the Act prior to issuing the final assessment order. The following passages from said decision are relevant for the present purposes: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at High Court held that it was of 'great importance and mandatory'. The following passages of the said decision of Gujarat High Court are relevant for the present purposes: 6. These statutory provisions make it abundantly clear that the procedure laid down under Section 144C of the Act is of great importance and is mandatory. Before the Assessing Officer can make variations in the returned income of an eligible assessee, as noted, sub-section (1) of Section 144C 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 'notwithstanding anything to the contrary contained in the Act'. Sub-section (5) of Section 144C empowers the DRP to issue directions to the Assessing Officer to enable him to complete the assessment. Sub-section (10) of Section 144C makes, such directions binding on the Assessing Officer. As per Sub-Section ] 44C, the Assessing Officer is required to pass the order of assessment in terms of such directions without any further hearing being granted to the assessee. 7. The procedure laid down under Section 144C of the Act is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... best, be a curable defect. According to him the matter must be restored to the AO to pass a draft assessment order and for the Petitioner, thereafter, to pursue the matter before the DRP. 16. The Court is unable to accept the above submission. The legal position as explained in the above decisions in unambiguous. The failure by the AO 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. 25. For all of the aforementioned reasons, the Court finds no difficulty in holding that the impugned final assessment orders dated 30th March 2016 passed by the AO for AY s 2006-07, 2007-08 and 2008-09 are without jurisdiction on account of the failure, by the AO, to first pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the [mal assessment order. The Court also sets aside the orders of the TPO dated 30 March 2016 issued pursuant to the remand by the ITAT. 6. Thus, he submitted that in view of the aforesaid judgment of principle la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the matter back to the file of the AO/TPO. Once an appeal has been disposed of by the Tribunal by remanding back the matter before the A.O. to be pass fresh assessment order in accordance with the law, then it relegates back to the stage of assessment proceedings as if it is a fresh assessment which has to be done by the A.O. Even if the matter is remanded with specific direction or purpose of verification or re-computation etc., then also the A.O. has to give effect to such direction and pass a fresh assessment order thereby determining the income of the assessee and work out the tax demand accordingly. If the assessee is aggrieved by such an assessment order giving effect to the appellate order, then in that case, the only remedy open for appeal is before the first appellate authority in terms of section 246 and 246A. 9. Now here in this case, the AO instead of passing draft assessment order u/s 144C, which he was though mandatorily required under the law, has passed a final assessment order. Whether such an order may survive or not in view of the aforesaid principle laid down by the Hon'ble Jurisdictional High Court is an altogether a secondary issue, because, at the thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al and all the consequence of passing of fresh assessment order will follow. Most of these judgments have been rendered under writ jurisdiction of the Hon'ble High Court where non adherence to procedure laid down in section 144C has been struck down or has been held as nullity. 10. Accordingly, we agree with the objection raised by the Ld. CIT (DR) that the appeal filed by the assessee is not maintainable before the Tribunal and hence treated as infructuous being not been filed before the appropriate authority under the law. 11. However, under the given facts and circumstances of the case and in the interest of justice, we can only direct the assessee to seek shelter of statutory remedy of filing of first appeal before the CIT (Appeals) and if such an appeal is filed, then Ld. CIT (A) should entertain the appeal and decide the matter at the earliest and in accordance with the law. Otherwise the constitutional remedy is always available to the assessee before the Hon'ble High Court if so advised, of course with discretion and the permission of the Hon'ble Court as it deems fit whether to entertain such a remedy or not. Accordingly, we hold that assessee is at liber ..... X X X X Extracts X X X X X X X X Extracts X X X X
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