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2019 (6) TMI 658

fore DRP or the AO the assessee raised objections challenging the validity of Draft Assessment Order - HELD THAT:- The demand notice u/s. 156 and notice initiating penalty proceedings u/s. 271(1)(c) are issued only after passing of final assessment order. Since, the said notices were issued by the AO along with the Draft Assessment Order, the said assessment order partake the character of final assessment order. The AO at no point of time after issuing notice u/s. 156 and u/s. 271(1)(c) has withdrawn the said notices. Failure of AO to adhere mandatory requirement of section 144C in not first passing the Draft Assessment Order invalidates the final assessment order and subsequent the proceedings arising there from. In catena of judgments by Hon’ble High Courts it has been held that passing of final assessment order u/s. 144C(13) r.w.s. 143(3) without passing Draft Assessment Order u/s. 144C(1) is in violating of provisions of section 144C and hence, such final assessment order is unsustainable. Thus assessment order issued along with notice of demand u/s. 156 and notice of penalty u/s. 271(1)(c) is passed in violation of mandatory provisions of section 144C of the Act. - Decid .....

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reference was made to Transfer Pricing Officer (TPO) u/s. 92CA(1) of the Act to benchmark arm s length price (ALP) of international transactions entered into with AEs. The TPO vide order dated 28-10-2011 made adjustment of ₹ 89,09,33,936/- on international transactions with AEs. Thereafter, the Assessing Officer vide order dated 28-12-2011 made additions proposed by the TPO u/s. 92CA and also made additions on following counts : i. Supervision charges for construction of temporary parking space ₹ 1,24,69,797/-. ii. SAP implementation charges ₹ 1,56,45,757/-. Along with the assessment order the Assessing Officer issued notice of demand u/s. 156 of the Act and notice u/s. 271(1)(c) of the Act for initiating penalty proceedings. 3.1 The ld. AR pointed that though in the title of order it is mentioned as Draft Assessment Order but in fact it is final assessment order as the Assessing Officer had issued notice of demand u/s. 156 and notice of penalty u/s. 271(1)(c) along with the order. In effect the Assessing Officer passed the final assessment order without affording opportunity to the assessee to file objections before the DRP. Thus, the assessment order dated 28-12 .....

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order was made. The objection raised by the assessee by filing additional grounds is an afterthought. 5. We have heard the submissions made by rival sides and have perused the orders of authorities below. We have also considered various decisions on which the ld. AR of assessee has placed reliance to support his arguments. The contention of the assessee is that since the Assessing Officer has issued demand notice u/s. 156 and the notice for initiating penalty proceedings u/s. 271(1)(c) along with the Draft Assessment Order dated 28-12-2011, the Draft Assessment Order become the final assessment order. The failure of Assessing Officer to pass Draft Assessment order is in violation of provisions of section 144C(1) of the Act. 6. It is no more res integra that final assessment order passed without passing Draft Assessment order is unsustainable and the subsequent proceedings if any arising there from are vitiated. In the instant case, the facts are peculiar where the Draft Assessment Order has been passed and thereafter the assessee has filed objection before DRP. After the directions of DRP, final assessment order has also been passed. However, the Assessing Officer committed an erro .....

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ly, a final order was passed on 12th March, 2014 and is being sought to be corrected by issue of corrigendum on 16th April, 2014 i.e. after the time to pass the Draft Assessment Order has expired. In fact, the Tribunal placed reliance upon the decision of a single judge of the Madras High Court in Vijay Television (P) Ltd., (supra). This, decision has now been upheld by the Division Bench of the Madras High Court in Assistant Commissioner of Income Tax v/s. Vijay Television (P) Ltd., 407 ITR 642. In the above case, non issue of Draft Assessment Order could not be corrected by issuing a corrigendum to a final Assessment Order. Just as in the facts before the Madras High Court, here also the demand notice and institution of pending proceedings were not withdrawn by the corrigendum. Besides, in International Air Transport Association v/s. Deputy Commissioner of Income Tax 68 taxmann.com 246 - this Court has held that the Draft Assessment Order is necessary in terms of Section 144 C(1) of the Act before the Assessing Officer can proceed to pass a final Assessment Order. In the absence thereof, the order is without jurisdiction. So far the contention on behalf of the Revenue that the Re .....

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e-in-below : 7. We have heard both the parties on this legal issue and find there is no dispute about the facts of making the assessment order dated 29.12.2009 accompanied by the demand notices and the penalty notices. When the demand notice u/s 156 of the Act is issued and served on the assessee, the same constitutes an assessment order final in all respects. After the appeals were filed before the CIT(A), Aurangabad, the Assessing Officer made a mistake of undoing the same by making good of said mistake i.e. not making a draft assessment order in accordance with the provisions of section 144C of the Act. The attempts of making correction by issue of letters/notices, the Assessing Officer made a mistake of not withdrawing original demand notices and penalty notices. We also perused the written note along with discussed case laws furnished by the assessee in the Court. On finding the relevant of the same, we proceed to extract the said case laws as follows :- a. International Air Transport Association vs. DCIT [68 taxmann.com 246 (Bombay)]. b. Nokia India Pvt. Ltd. vs. Addl.CIT [98 taxmann.com 373 (Delhi)]. c. ACIT vs. Vijay Television Pvt. Ltd. [46 taxmann.com 100 (Madras)]. d. DC .....

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