TMI Blog2018 (6) TMI 146X X X X Extracts X X X X X X X X Extracts X X X X ..... hri Vijay Pal Rao, JM Shri Vikram Singh Yadav, AM Revenue by : Smt. Seema Meena (JCIT) Assessee by : Shri Rajeev Sogani (CA) ORDER Per: Vikram Singh Yadav, A.M. These are cross appeals filed by the Revenue and the assessee against the order of ld. CIT(A)-2 Jaipur dated 26.10.2016 for Assessment Year 2011-12. The respective grounds of appeal taken by the Revenue and the assessee are as under:- ITA. No. 1084/JP/2016: 1. Whether on the facts and in the circumstances of the case and in law the ld. CIT(A) has erred in deleting the addition of ₹ 46,53,648/- made by the AO u/s 92C of the IT Act, 1961. 2. Whether on the facts and circumstances of the case and in law, the ld. CIT(A) was justified in not appreciating the fact that assessee s claim is self contradictory. On one hand assessee is claiming that the average sale price of AE is better than the unrelated parties whereas on the other hand it has been claimed that the AE is given bulk discount for which no evidence was produced whatsoever. 3. Whether on the facts and circumstances of the case in law, ld. CIT(A) was justified in not appreciating the fact that the second proviso to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come declared by the assessee by making an adjustment on account of arms length price in respect of international transactions entered into by the assessee with its associate enterprise amounting to ₹ 78,38,255/-. As against the returned income of ₹ 1,83,51,750/-, assessed income was determined at ₹ 2,61,90,005/- by passing an order u/s 143(3) of the Act. Along with assessment order, a notice of demand u/s 156 vide entry in D CR No. 104/20 dated 18.02.2015 was raised wherein an amount of ₹ 38,98,400/- was determined as payable by the assessee. Separately, the penalty proceedings u/s 271(1)(c) were also initiated for furnishing of inaccurate particulars of income and a notice u/s 274 read with section 271 dated 18.02.2015 was issued to the assessee company. 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and raised an additional ground of appeal stating that the the AO has erred in not providing a draft of the proposed order of assessment in terms of the provisions of section 144C of the Act which is prejudicial to the interest of the appellant and therefore, the order of the AO is invalid and void ab initio. The said gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue to the assessee and the same has also not been denied by the Authorized Representative. No additions have been made which were not included in the show cause notice and the reply to the show cause notice was duly considered when passing the assessment order. It was accordingly held by the ld. CIT(A) that adequate opportunity was provided to the assessee for filing objections and the same has also been availed by assessee and in view of the above, this ground of appeal was dismissed. Against the said finding of the ld. CIT(A), the assessee is in appeal before us. 7. During the course of hearing, the ld. AR drawn our reference to the provisions of section 144C of the Act and submitted that the intention of the legislature could be gauged from the clear language employed in and various phrases/words used in sub-section (1) of section 144C of the Act whereby the draft order is required to be passed and served upon the assessee before passing the final assessment order. It was submitted that the term shall has been used which means that the AO/TPO are bound to follow this provision of section 144(C). The term Notwithstanding .. in this Act has been used which means this is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (1), renders proceedings illegal and a show cause notice cannot be equated with draft assessment order. 11. It was accordingly submitted by the ld AR that the AO has failed to passing order in accordance with prescribed law and therefore the order passed is invalid and void ab initio which deserves to the quashed. 12. The ld. DR is heard who has relied on the findings of the lower authorities and submitted that adequate opportunity has been provided to assessee to submit objections against the ALP adjustments by the TPO as well as by the Assessing Officer. Accordingly, it is not a case where the rights of the assessee have been prejudiced in any manner. 13. We have heard the rival contentions and purused the material available on record. 14. Firstly, it would be relevant to refer to the provisions of section 144C which reads as under:- 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 144C(1) of the Act. 17. We have also carefully perused the assessment order passed under section 143(3) of the Act dated 18.02.2015. It is a regular assessment order in form and in substance. Along with assessment order, a notice of demand u/s 156 vide entry in D CR No. 104/20 dated 18.02.2015 was raised wherein an amount of ₹ 38,98,400/- was determined as payable by the assessee. Separately, the penalty proceedings u/s 271(1)(c) were also initiated for furnishing of inaccurate particulars of income and a notice u/s 274 read with section 271 dated 18.02.2015 was issued to the assessee company. It is therefore a case where not only that income has been finally determined by the AO computed, the tax payable thereon has also been computed and demand entries are made on the basis of this order in the D CR register and even penalty proceedings are initiated. Such an exercise could not have been done if the assessment order was indeed a draft assessment order. Undoubtedly, if draft of assessment order is wrongly titled an assessment order, section 292B should have come to the rescue of the Assessing Officer. However given the fact that resultant tax demand and penalty proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... had simply filed a brief note before the Assessing Officer giving a gist of the basis of adjustments made by the TPO with the remark that the explanation may be put on record for further reference. The show cause notice issued by the Assessing Officer was nothing but a draft assessment order as no other additions had been made by the Assessing Officer apart from the adjustments made by the TPO. If the assessee had any objections on the proposed additions by the Assessing Officer, it should have filed such objections within 30 days before the DRP and the Assessing Officer. However, since the assessee had not filed any objections before the DRP and the Assessing Officer his contentions in this regard were not tenable. On appeal, the Coordinate Bench held as under: 7. We find that the issue is covered is now covered in favour in of the assessee by judgment of Hon'ble Madras High Court, in the case of Vijay Television (P.) Ltd v. Dispute Resolution Panel, wherein Hon'ble High Court has, inter alia, observed as follows: '20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required to pass only a draft assessment order on the basis of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... draft assessment order, rather it is a final order. Thus, the first respondent had treated the order dated 26.03.2013 of the second respondent as a final order and therefore it refused to entertain the objections filed on behalf of the petitioner company. 22. As mentioned supra, as per Section 144C (1) of the Act, the second respondent-assessing officer has no right to pass a final order pursuant to the recommendations made by the TPO. In fact, the second respondent-assessing officer himself has admitted by virtue of the corrigendum dated 15.04.2013, that the order dated 26.03.2013 is only a final order and it was directed to be treated as a draft assessment order. In this context, it is worthwhile to refer to the decision of the Honourable Supreme Court in the decision Deepak Agro Foods (supra) wherein in Para No.10, the Honourable Supreme Court discussed as to when an order could be construed as a final order:- 10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid since the provision about consultation in terms of Section 5 (3) of Patiala Act was merely directory and not mandatory. In the present case, the procedure that was required to be followed by the second respondent to pass a draft assessment order is mandatory and it is prescribed by the statute. Therefore, this decision relied on by the learned standing counsel for the respondents cannot be made applicable to this case. 26. The learned senior counsel for the petitioners relied on the decision of the Allahabad High Court in the case of Shital Prasad Kharag Prasad (supra) wherein the Division Bench of the Allahabad High Court held that a notice contemplated under Section 148 of the Income Tax Act is a jurisdictional notice and it is not curable by issuing a notice under Section 292 B of the Act, if it was not served in accordance with the provisions of the Act. 27. Similarly, the Division Bench of this Court in the decision in the case of V. Ramaiah (supra) Madras held that when an order is passed under Section 158BC of the Act instead of Section 158BD, it is not valid since it is not a defect curable under Section 292B of the Act. It was also held that an order passed afte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 145 shall, so far as may be apply. This indicates that this clause enables the Assessing Officer, after the return is filed, to complete the assessment under Section 143 (2) by following the procedure like issue of notice under Section 143 (2)/142. This does not provide accepting the return as provided under Section 143 (1) (a). The Officer has to complete the assessment order under Section 143 (3) only. If an assessment is to be completed under Section 143 (3) read with Section 158BC, notice under Section 143 (2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing officer to issue notice under Section 143(2) cannot be a procedural irregularity and is not curable. 30. It is evident from the above decision of the Division Bench of this Court that where there is an omission on the part of the assessing officer to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. 31. In identical case as that of the case on hand, the Division Bench of the Andhra Pradesh High Court, in an unreported decision, had an occasion to co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above condition is satisfied and other provisions, in which similar contrary intention is not indicated, which were introduced by the said enactment, would apply from 01.04.2009 i.e., from the assessment year 2010-2011. It is not disputed that the memorandum explaining the Finance Bill and the Notes and clauses accompanying the Finance Bill which preceded the Finance (No.2) Act, 2009 clearly indicated that the amendments relating to S.144C would take effect from 01.10.2009. In our view, the circular No.5/2010 issued by the CBDT stating that S.144C(1) would apply only from the assessment year 2010-2011 and subsequent years and not for the assessment year 2008-09 is contrary to the express language in S.144C(1) and the said view of the Revenue is unacceptable. The circular may represent only the understanding of the Board/Central Government of the statutory provisions, but it will not bind this Court or the Supreme Court. It cannot interfere with the jurisdiction and power of this Court to declare what the legislature says and take a view contrary to that declared in the circular of the CBDT (Ratan Melting and Wire Industries Case (1 Supra), Indra Industries (2 supra). The Re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he corrigendum dated 15.04.2013. By issuing the corrigendum, the respondents cannot be allowed to develop their own case. Therefore, following the order passed by the Division Bench of the Andhra Pradesh High Court, which was also affirmed by the Honourable Supreme Court by dismissing the Special Leave Petition filed thereof, on 27.09.2013, the orders, which are impugned in these writ petitions are liable to be set aside.' 8. Learned Departmental Representative, on the other hand, submits that this lapse on the part of the Assessing Officer is at best a procedural lapse and the matter should, therefore, be restored to the file of the Assessing Officer for adjudication de novo. 9. We are, however, unable to see any legally sustainable merits in the stand so taken by the learned Departmental Representative. Hon'ble High Court's esteemed views, as extracted above, bind us and we have to respectfully follow the same. Accordingly, in due deference to this binding judicial precedent, and other binding judicial precedents referred to therein, we quash the impugned assessment order. It is a legal nullity. As for the show cause notice issued by the Assessing Officer, befor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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