TMI Blog2019 (8) TMI 1268X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Skoda Auto India Pvt. Ltd. Vs. ACIT [ 2019 (8) TMI 1157 - ITAT PUNE] and also in the case of DCIT, Circle-10, Pune Vs. Rehau Polymers (P) Ltd. ( [ 2017 (8) TMI 1294 - ITAT PUNE] ). Respectfully following the above referred decisions, we hold the draft assessment order to be bad in law and void-ab-initio and thereby allow the additional ground raised in appeal by the assessee - ITA No. 2467/PUN/2016 - - - Dated:- 26-8-2019 - Shri R.S.SYAL, VP And Shri Partha Sarathi Chaudhury, JM For the Assessee : Shri Rajendra Agiwal For the Revenue : Smt. Mugdha Sardeshpande, JCIT ORDER PER PARTHA SARATHI CHAUDHURY, JM : This appeal preferred by the assessee emanates from the order of the Ld. CIT(Appeals)-13, Pune dated 21.07.2016 for the assessment year 2009-10 as per the grounds of appeal on record. 2. At the time of hearing, the Ld. AR of the assessee filed certain additional ground which pertains to violation of Section 144C of the Income Tax Act, 1961 (hereinafter referred to as the Act‟) by the Assessing Officer while framing the draft asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ision of the Pune Bench of the Tribunal in ITA No.566/PUN/2015 for assessment year 2010-11 in the case of DCIT, Circle 10, Pune Vs. Rehau Polymers (P) Ltd., 85 taxmann.com 23 ( Pune-Trib.) wherein the facts are as follows: 7. Briefly, in the facts of the case, the assessee had filed the return of income declaring total income of ₹ 1,77,77,012/-. The case of assessee was selected for scrutiny. The first issue which arises in the present appeal is against notice issued under section 143(2) of the Act. However, without going into the merits of the said issue, we find that the Assessing Officer had made reference under section 92CA(1) of the Act to the Transfer Pricing Officer (TPO) to determine the arm's length price of international transactions undertaken by the assessee. The TPO vide order passed under section 92CA(3) of the Act dated 24.01.2014 applied CUP method and determined the arm's length price of international transactions of payment of service fees at Nil as against ₹ 3,45,55,434/- determined by the assessee. The Assessing Officer passed the draft assessment order under section 143(3) r.w.s. 144C(1) of the Act dated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollows: 10. We have heard the rival contentions and perused the record. The issue which arises in the present appeal is in relation to the draft assessment order passed by the Assessing Officer under section 143(3) r.w.s. 144C(1) of the Act. After receipt of the order under section 92CA(3) of the Act from the TPO, the Assessing Officer was supposed to issue draft assessment order proposing to make the addition. However, the Assessing Officer called the said order to be draft assessment order but assessed income in the hands of assessee and further issued demand notice along ITNS-150, after charging interest under sections 234A, 234B 234C, etc. He also initiated penalty proceedings under section 271(1)(c) of the Act. Undoubtedly, the assessee on understanding that the same was draft assessment order, made objections to the DRP, who gave certain directions and thereafter, the Assessing Officer passed an order under section 143(3) r.w.s. 144C(13) of the Act. However, in order to adjudicate the issue raised, we need to make reference to the provisions of section 144C of the Act. 11. We find that similar issue of assessment to be framed under sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d under the Statute. However, the said objections of assessee were not considered by the DRP and the same were rejected on the surmise that the order passed by the Assessing Officer was final assessment order since the Assessing Officer had also issued demand notice under section 156 of the Act and show cause notice under section 274 r.w.s. 271 of the Act for levy of penalty. The DRP observed that since the assessment order passed by the Assessing Officer was final assessment order, it did not have any jurisdiction to issue any directions on such final assessment order. After receiving the DRP s order, the assessee filed an application before the Assessing Officer for necessary action. The Assessing Officer in reply, vide letter dated 30.01.2015 stated that the DRP had clearly mentioned that the order passed on 28.02.2014 was final order and not draft order, so the Assessing Officer does not have any jurisdiction over the case. 7. In order to adjudicate the issue, reference needs to be made to the provisions of section 144C of the Act. Under the provisions of section 144C of the Act, it is provided that where the Assessing Officer proposes to make, on or after 01 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nth thereof. In case, the assessee files his objection before the DRP and where the said Panel issues directions as it thinks fit, then the Assessing Officer on receipt of such directions shall complete the assessment in conformity with such directions. In view of the said provisions of the Act, the compliance to section 144C of the Act is mandatory in all such cases, where the TPO proposes variation in the income or loss returned, which is prejudicial to the interests of assessee. Only after complying with the conditions laid down in section 144C of the Act, the Assessing Officer is empowered to pass the order under section 143(3) r.w.s. 144C of the Act completing the assessment on such enhanced income or variation in the loss returned by the assessee. 8. 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, it was held that non-passing of draft assessment order after adjustment made by the TPO renders proceedings null void by observing as under:- Under Section 144C(1) of the Act, with effect from 1st October 2009, the Assessing Officer has to man ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ble Supreme Court in ACIT Vs. M/s. Zuari Cement Ltd. vide Special Leave Petition CC No.16694/2013, judgment dated 27.09.2013 and it was held as under:- 20. The Hon ble High Court of Andhra Pradesh at Hyderabad in M/s. Zuari Cements Ltd. Vs. ACIT (supra) on similar issue where after receipt of the order passed by the TPO under section 92CA(3) of the Act, the Assessing Officer had passed the assessment order under section 143(3) of the Act raising a demand of ₹ 27,40,71,913/- without giving an opportunity to the assessee under section 144C of the Act, observed that where the Assessing Officer proposes to make on or after 01.10.2009, any variation in the income or loss returned by the assessee, then notwithstanding to the contrary contained in the Act, he shall first pass the draft assessment order, forward the same to the assessee and after assessee files his objections, if any, the Assessing Officer shall complete the assessment within one month, in view of the provisions of section 144C of the Act. It was further observed that the assessee is also given an option to file an objection before the DRP, in which the latter can issue directions for the guidan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contradicting the conditions laid down in section 144C of the Act is null and void and unenforceable in law. 22. Further, the Delhi Bench of Tribunal in the case of Capsugel Healthcare Limited in ITA No.1356/Del/2012, vide order dated 30.09.2014 have upheld the similar view that Failure to pass draft assessment order after TPO s order renders proceedings void. Show cause notice cannot be quoted with draft assessment order . 10. Further, the Hon ble Bombay High Court in International Air Transport Association Vs. DCIT (supra) have also down the similar proposition and held as under:- 4. The Petitioner had consequent to the assessment order dated 23rd March 2015 filed its objection in terms of Section 144C(2) of the Act to the Dispute Resolution Panel ( DRP ). By an order dated 7th October, 2015, the DRP refused to pass any direction on the objections because the objections had been filed in respect of a final order under Section 143(3) of the Act and not in respect of the draft assessment order passed under Section 144C(1) of the Act. The order dated 7th October, 2015 of the DRP holds that its jurisdiction is only to entert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent 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 before the Hon ble Bombay High Court were different and the said proposition is not applicable. We find no merit in the plea of learned Departmental Representative for the Revenue. The Assessing Officer passed the order on 28.02.2014 along with which it also issued the demand notice and show cause notice for levy of penalty. In other words, the Assessing Officer has crystallized the demand in the case of assessee. Whereas, as per the provisions of the Act where the Assessing Officer proposes to vary the income in the hands of assessee, there was requirement to issue show cause notice to the assessee to the said additions, by way of draft assessment order. The demand does not get crystallized in draft assessment order. Undoubtedly, the Assessing Officer had issued covering letter where it says that it is draft assessment order but in spirit, it had finalized the assessment, wherein the demand was crystallized and demand notice was issued to the assessee. The Assessing Officer has not f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uncement placed before us. The issue is clearly identifiable and is covered in favour of the assessee by the decision of the Co-ordinate Bench of the Tribunal, Pune as herein above referred. Respectfully, following the same, we hold the draft assessment order to be bad in law and void ab initio and thereby allow the additional ground of appeal. 6. We have perused the case records and heard the rival contentions. We have also considered the judicial pronouncements placed before us. The issue is clearly identifiable and covered in favour of the assessee by the decisions rendered by the Co-ordinate Bench of the Tribunal, Pune in the case of Skoda Auto India Pvt. Ltd. Vs. ACIT (supra.) and also in the case of DCIT, Circle-10, Pune Vs. Rehau Polymers (P) Ltd. (supra.). Respectfully following the above referred decisions, we hold the draft assessment order to be bad in law and void-ab-initio and thereby allow the additional ground raised in appeal by the assessee. 7. Since the legal ground has been answered in favour of the assessee, all other grounds in this appeal becomes academic in nature. 8. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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