TMI Blog2018 (5) TMI 942X X X X Extracts X X X X X X X X Extracts X X X X ..... shal Kalra For The Revenue : Shri Rajeev Kumar, CIT ORDER PER D. KARUNAKARA RAO, AM : This is the appeal filed by the Assessee against the orders of DRP/TPO/AO. In this case, TPO passed the order u/s.92CA(3) of the I.T. Act, 1961 on 24-01-2013. Subsequently, AO passed the draft assessment order u/s.144C(1) of the Act on 26-03-2013 incorporating the adjustments recommended by the TPO. As per the law, assessee approached the DRP seeking directions and the DRP passed an order dated 31-12-2013. Eventually, a final assessment order was passed by the AO on 15-01-2014 determining the total income at 34,89,59,976/- as against the returned loss of ₹ 9,47,21,950/-. 2. In the appeal filed before the ITAT, assessee raised 21 grounds involving both corporate as well as Transfer Pricing issues. Further, assessee also filed the following additional grounds and the same as extracted as under : 1. That on the facts and circumstances of the case and in law, the assessment order dated March 26, 2013 issued by the Assessing Officer ( AO ) is bad in law and void ab initio as the same has been passed in violation of section 144C of the Income-tax Act, 1961 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aring both the parties on the legal issue of admission of additional grounds, we find the said additional grounds should be admitted and adjudicated in this order. Further, on the merits of these additional grounds, we find the relevant facts of the case include that assessee is a company and is engaged in the manufacture and distribution of fluid power equipment such as pumps, gear pumps, valves, cylinders and related components for mobile industrial markets. In this case, a reference was made to the Transfer Pricing Officer (TPO) u/s. 92CA(1) of the Act, who in turn, passed an order dated 24-01-2013 u/s. 92CA(3) of the Act, proposing total adjustments of ₹ 344,308,840/-. The AO thereafter, passed draft assessment order dated 26-03-2013 u/s.143(3) r.w.s. 144C(1) of the Act. Ld. AR for the assessee referring to the said draft assessment order and pointed out that while passing the said draft order, the AO crystallized the demand at this stage itself and issued notice u/s.156 of the Act as well as the notice u/s.274 r.w.s.271(1)(c) of the Act. The copies of these notices are available in the records. The demand notice u/s.156 of the Act was issued to the assessee with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion but the final assessment order was passed though the Assessing Officer calls it a draft assessment order and also observed that the assessee was at liberty to file objections before the DRP or accept the same. The Assessing Officer in the draft assessment order itself crystallized the demand on income assessed in the hands of assessee and he also issued demand notice under section 156 of the Act. The Assessing Officer further initiated penalty proceedings under section 271(1)(c) of the Act by issuing notice under section 274 of the Act. The contention of learned Departmental Representative for the Revenue is that though the demand notice was issued but the same was not served upon the assessee. However, we find that the assessee in the Appeal Memo itself had attached copy of demand notice issued and has also filed the same during the course of hearing before us. In any case, the demand notice issued is available on record and the same is issued against the assessee. Hence, there is no merit in the plea of learned Departmental Representative for the Revenue in this regard and the same is dismissed. 10. We find similar issue arose before Tribunal in the case of DCIT Vs. M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 order of Assessing Officer was forwarded to the assessee along with letter dated 28.02.2014, wherein the Assessing Officer categorically said that the draft assessment order was being forwarded for necessary action at the end of assessee. It was clearly mentioned in the said letter that on receipt of draft order, the assessee may within 30 days of the receipt of draft order either file acceptance of variation as proposed in the order or file objections to the variation to the DRP or to the undersigned. However, the Assessing Officer also issued demand notice under section 156 of the Act dated 28.02.2014 and also issued notice under section 274 r.w.s. 271 of the Act. The assessee on understandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 month from the end of the month in which such direction is received, notwithstanding anything to the contrary contained in section 153 or 153B of the Act, as per sub-section (13) to section 144C of the Act. In view of the provisions of section 144C of the Act impliedly where the TPO proposes any variation in the income or loss returned by the assessee, which is prejudicial to the interest of assessee, the Assessing Officer shall in the first instance forward the draft of the proposed assessment order to the assessee and thereafter, if no objections are received and / or the assessee files his acceptance to the variation to the Assessing Officer, then the Assessing Officer is empowered to com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 corrigendum. Even as per the website of the department, the demand made to the petitioner company continues till date and therefore, the final order as well as the corrigendum issued by the second respondent are vitiated by errors apparent on the face of the record and they are legally not sustainable. 9. The similar issue had arisen before the Pune Bench of Tribunal in Agfa India Pvt. Ltd. Vs. ACIT in ITA Nos.341/PN/2014 and 1072/PN/2014, relating to assessment year 2008-09, order dated 28.10.2015 and reference was made to the decision of the Hon ble High Court of Andhra Pradesh at Hyderabad in M/s. Zuari Cements Ltd. Vs. ACIT in WP No.5557/2012, vide judgment dated 21.02.2013 and the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igh 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. T he 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 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. 21. The Hon ble Supreme Court (supra) in ACIT Vs. Zuari Cements Ltd. (supra) had dismissed the Special Leave Petition filed by the Department upon hearing the Counsel. The learned Authorized Representative for the assessee contended that since the said Special Leave Petition was dismissed after hearing the Counsel and the view taken by the Hon ble High Court of Andhra Pradesh at Hyderabad has been approved by the Apex Court and any order contradicting the conditions lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment 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 unsustainable. 11. The learned Authorized Representative for the assessee has placed reliance on the ratio laid down by the International Air Transport Association Vs. DCIT (supra) and 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 vis- -vis. Whereas the learned Departmental Representative for the Revenue strongly opposed and pointed out that the Assessing Officer has sent the draft assessment order wherein the letter clearly says that it is draft assessment order. He pointed out that the DRP had misinterpreted and the issue may be sent back to the file of DRP. He also pointed out that the facts b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itions 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 not envisaged under section 143(3) r.w.s. 144C of the Act. Accordingly, we hold that draft assessment order passed in the case is invalid in law. 11. We further find that the Hon ble High Court of Delhi in JCB India Ltd. Vs. DCIT (2017) 85 taxmann.com 155 (Del) has laid down that even in remand proceedings the Assessing Officer cannot straightaway pass final assessment order without issuing draft assessment order under section 144C of the Act. The Hon ble High Court did not accept the stand of Revenue that it was an irregularity which was curable under section 292B of the Act. Relying on earlier decision of the said High Court, it was observed that section 292B of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision (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 law. 14. Recently, this Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of India [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra), the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel, Chennai (supra) as well as the Bombay High Court in International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46, came to the same conclusion. 12. Applying the said ratio to the facts of the present case and also the issue arising before us being identical to the issue before Tribunal in DCIT Vs. M/s. Rehau Polymers Pvt. Ltd. (supra) and in M/s. Sandvik Asia Pvt. Ltd. Vs. DCIT (supra), we hold that the draft assessment order passed by the Assessing Officer was complete assessment order which is not envisaged under section 143(3) r.w.s. 144C of the Act. According ..... X X X X Extracts X X X X X X X X Extracts X X X X
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