TMI Blog2018 (4) TMI 1785X X X X Extracts X X X X X X X X Extracts X X X X ..... any subsequent rectification proceedings or corrigendum and in such a situation all the subsequent proceedings and final assessment order will get invalidated. It is a trite proposition that errors which can be rectified either u/s.154 or some error in the printing work for which a corrigendum has been issued, cannot be resorted for curing the defect of jurisdictional nature and if there is an error of jurisdiction or limitation, then same cannot be validated by such an order. Rectification orders can only be exercised in respect of an order which is valid on the date of proposed rectification and if the order itself was void ab initio for want of following the correct procedure of law then such a rectification cannot revive its legality. Accordingly, we hold that the proposed corrigendum issued by the Assessing Officer so as to cure the defect of the original final assessment order is bad in law and same could not have been done and consequently entire subsequent proceedings and final assessment order dated 30.10.2013 is held to be invalid being barred by limitation and is hereby quashed - Decided in favour of assessee. - I.T.As. No.6288/DEL/2013, I.T.As. No.6741/DEL/2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh Court in a writ petition Special Auditor was granted extension of time for completion of audit and finally the report was submitted on 4.9.2012 which was filed before the Assessing Officer on 12.10.2012. After receiving of the Special Audit Report on 04.09.2012, the time period for completion of assessment as per Section 153 was up till 3rd November, 2012. This is also accepted by Assessing Officer, which is evident from letter dated 27.09.2012 issued by Addl. CIT, Range-13 to the assessee, the relevant extract of which is reproduced hereunder: To, The Principal Officer, M/s. Oracle India Pvt. Ltd., F-01/02, 1st Floor, Salcon Ras Villas, D-1, District Centre, Saket, New Delhi-17 Sir, Sub: Adjournment of hearing Dated. 26.09.2012 for A.Y. 200607- reg. Ref: your letter Dated. 26.09.2012, asking for adjournment of hearing. With reference to the subject cited above. Tour letter Dated. 26.09.2012, asking for adjournment of the hearing fixed on 26.09.2012, was received wherein you have mentioned that you are in the process of collecting details and in drafting a reply. You have also mentioned that you are in the process of obtaining a soft cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessment Year 2006-07 reg. The order Dated 02.11.2012 for Assessment Year may be read as, a draft order u/s.144C read with section 143(3) of the Income Tax Act, 1961. Therefore, the demand notice/penalty notice, stands withdrawn and not enforceable. You have the option to apply before DRP or CIT (A) for resolution of dispute. 6. Mr. Tarandeep Singh submitted that such a corrigendum order can neither be reckoned as draft assessment order nor order passed u/s.154; and otherwise also such a corrigendum order is beyond the limitation period as prescribed under Section 153, because the outer limit for passing the assessment order was 03.11.2012. Accordingly, he submitted that once the assessment order was passed on 02.11.2012 which was a final assessment order, then no order could have been passed by the Assessing Officer either rectifying the same or by way of a corrigendum so as to say that such an order passed by him was a draft assessment order. In support, he strongly relied upon the judgment of Hon'ble Madras High Court in the case of Vijay Television Pvt. Ltd. vs. DRP and Ors, reported in (2014) 369 ITR 113 (Mad.), wherein the Hon'ble High Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in the demand notice, i.e., less than 30 days. Distinguishing the judgment of Hon'ble Madras High Court in the case of Vijay Television (supra), he submitted that there is an observation by the Court that the Assessing Officer had called for petitioner to pay the tax amount and also levy penalty u/s.271 which is absent here in this case, because the grace period of 30 days had not expired in the case of the assessee and within 5 days of passing of the order, corrigendum was issued. Hence in such circumstances, it cannot be held that demand still existed. Here in this case by virtue of this corrigendum issued by the Assessing Officer on 07.11.2012, it is ardently clear that the order passed by the Assessing Officer on 02.11.2012 was only a draft assessment order which was passed within the time limit prescribed under the Act. He further submitted that here in this case, the DRP has entertained the draft assessment order and this issue was not raised before the DRP that such an order is not a draft assessment order or it suffers any legal infirmity. This only goes to show that assessee itself treated it as draft assessment order. Hence, it cannot be held that the order passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submissions and also perused the relevant facts qua the issue of limitation raised by the assessee by way of additional ground. First of all, the additional ground raised by the assessee is merely a clarification of issue raised by the assessee in original ground no.2 and in any case being an issue of limitation and jurisdictional issue, the same can be raised at any stage if all the material on record are available to decide such an issue and does not require any investigation of fact. Hence in view of the Hon ble Supreme Court Judgment in the case of National Thermal Power Company Ltd. vs. CIT, reported in (1998) 229 ITR 383; and in the light of the judgment of Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society, reported in 397 ITR 374, we are admitting the additional ground raised by the assessee. 10. From the facts as discussed above, following chronology of events can be culled out: Particulars Date Date of Commencement of Special Audit 09-Mar-2012 Special Audit report issued by auditor 04-Sep-2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e period specified in sub-section (2). 11. From the plain reading of the aforesaid provision, it is clear that the Assessing Officer has to forward a draft assessment order to the assessee if he proposes to make any variation in the income or loss return which is prejudicial to the interest of the assessee. On receipt of the said draft assessment order, the assessee is eligible within the time period of 30 days of receipt of such order either to file its acceptance on such variation before the Assessing Officer; or can file his objection to such variation with the DRP. It was only when the assessee intimates to the Assessing Officer that he has accepted the variation or raises no objection within 30 days, then he has to complete the assessment on the basis of the draft assessment order. Here in this case, clearly the Assessing Officer has not adhered to the procedure laid down u/s.144C as the assessment order dated 02.11.2012 which though was passed under the period of limitation, but was passed as final assessment order instead of draft assessment order which he could not have passed under the expressed provision of the law as stated above. Such an assessment order later on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endum dated 15.04.2013, the petitioner company approached the first respondent, but the first respondent declined to issue any direction to the assessment officer on the ground that the first respondent has got jurisdiction only to entertain such an appeal if the order passed by the second respondent is a preassessment order. Therefore, it is evident that the first respondent declined to entertain the objections raised by the petitioner company on the ground that the order passed by the second respondent is not a 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e second respondent lacks jurisdiction especially when it is beyond the period of limitation prescribed by the statute. When there is a statutory violation in not following the procedures prescribed, such an order cannot be cured by merely issuing a corrigendum. xxx xxx xxx xxx xxx xxx xxx 33. The decision of the Division Bench of the Andhra Pradesh High Court deals with an identical issue as that of the present case. In this case, against the order passed by the second respondent on 26.03.2013, the petitioner filed objections before the DRP, the first respondent herein and the first respondent refused to entertain it by stating that the order passed by the second respondent is a final order and it had jurisdiction to entertain objections only if it is a draft assessment order. While so, the order dated 26.03.2013 of the second respondent can only be termed as a final order and in such event it is contrary to Section 144C of the Act. As mentioned supra, in and by the order dated 26.03.2013, the second respondent determined the taxable amount and also imposed penalty payable by the petitioner. According to the learned senior counsel for the petitioners, even as on this date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the period of limitation. Further Hon'ble Court also observed that the assessment order dated 26.03.2013 has to be reckoned as the final assessment order which was in contravention of Section 144C and any subsequent corrigendum beyond the period of limitation will not cure the defect and will not revive the limitation. Thus, from the aforesaid judgment following corollory or proposition can be culled out:- Firstly, the procedure laid down u/s.144C is to be strictly adhered too and such a non adherence cannot be cured; Secondly, when there is a violation of the statute and jurisdiction/limitation ceases to exist, the order cannot be cured merely by issuing a corrigendum and; Lastly, corrigendum issued after a period of limitation for which jurisdiction to pass order ceases then it cannot revive limitation. The defect is fatal which cannot be cured even by consent. 13. The aforesaid proposition of the Hon'ble Madras High Court had been referred and followed by the Division Bench of the Hon'ble Jurisdictional High Court in the case of Turner India Pvt. Ltd., wherein Their Lordships had observed and held as under: 10. The short ground on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , came to the same conclusion. 15. Mr. Dileep Shivpuri, learned counsel for the Revenue sought to contend that the failure to adhere to the mandatory requirement of issuing a draft assessment order under Section 144C(1) of the Act would, at 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. 17. For the aforementioned reasons, the final assessment orders dated 31st March, 2015 passed by the AO for AYs 2007-08 and 2008-09, the consequential demand notices issued by the AO and the initiation of penalty proceedings are hereby set aside. [Emphasis in bold is ours] 14. Thus, the Hon'ble Jurisdictional High Court has clearly held that if the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not been passed in accordance with the procedure laid down in Section 144C (1) and instead final assessment order has been passed though within the limitation time, then such an order cannot be cured after the limitation has expired by any subsequent rectification proceedings or corrigendum and in such a situation all the subsequent proceedings and final assessment order will get invalidated. It is a trite proposition that errors which can be rectified either u/s.154 or some error in the printing work for which a corrigendum has been issued, cannot be resorted for curing the defect of jurisdictional nature and if there is an error of jurisdiction or limitation, then same cannot be validated by such an order. Rectification orders can only be exercised in respect of an order which is valid on the date of proposed rectification and if the order itself was void ab initio for want of following the correct procedure of law then such a rectification cannot revive its legality. 16. Accordingly, we hold that the proposed corrigendum issued by the Assessing Officer so as to cure the defect of the original final assessment order is bad in law and same could not have been done and co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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