TMI Blog2020 (8) TMI 273X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have no hesitation to hold that the proceedings culminated on 27.12.2018 when the demand notice was issued and served upon the assessee along with penalty notice u/s 274 of the Act and, therefore, all the subsequent proceedings and orders become non est. The additional ground is, accordingly, allowed. - ITA No. 9116/DEL/2019 - - - Dated:- 11-8-2020 - Shri N.K. Billaiya, Accountant Member, And Ms. Suchitra Kamble, Judicial Member For the Assessee : Shri Nageshwar Rao, Adv, Ms. Deepika Aggarwal, Adv For the Revenue : Shri Anupam Kant Garg, CIT-DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, With this appeal, the assessee has challenged the validity and correctness of the assessment order dated 31.10.2019 framed u/s 143(3) r.w.s 144C of the [hereinafter referred to as 'the Act' for short]. 2. Grounds of appeal of the assessee can be summarised as under: i) Grounds relating to treatment of AMP expenses as international transactions; ii) Grounds against substantive adjustment using AMP intensity approach; iii) Grounds against protective adjustment using Bright Line Test; iv) Grounds against protective adjustment using residual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... auses pertinent for adjudication of the quarrel reads as under: (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (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 contained in section 153 51a[or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. 13. In the light of the afore stated provisions of section 144C of the Act and relevant sub-sections, the ld. counsel for the assessee vehemently argued that the assessment proceedings concluded on 27.12.2018, and therefore, any orders passed thereafter are non est, to which the ld. DR rebutted by stating that the assessee itself has participated in the subsequent proceedings. Therefore, it cannot be said that the proceedings culminated on 27.12.2018. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Incometax Act, 1961, in consequence of such an order. The statute does not, Page No : 55 however, require that both the computations (i.e., of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed 'assessment order'. It does not prescribe any form for the purpose. Once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time-consuming. If, therefore, the Income-tax Officer first draws up an order assessing the total income and, indicating the adjustments to be made, directs the office to compute Company Law Institute of India Pvt. Ltd. - 4 - the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income-tax Officer that the process described in section 143(3) will be complete. In our opinion, this decision, far from helping the Revenue, goes against it. The Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the decision of the Hon'ble High Court of Gujarat in the case of Purshottam Das [supra], the ld. DR stated that the same has to be considered in the light of the decision of the Hon'ble Supreme Court in the case of Sun Engineering Works Pvt Ltd 198 ITR 297 wherein the Hon'ble Supreme Court has held as under: It is neither desirable nor permissible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a later case, the courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. In Madhav Rao Jiwaji Rao Scindia Bahadur and Ors. v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Company 117 Taxmann.com 276 in ITA No. 2298/KOL/2016. It is the say of the ld. DR that under similar circumstances, the Tribunal has upheld the assessment order. The ld. DR vehemently stated that by participating in subsequent proceedings, the assessee was well aware that the order dated 27.12.2018 is merely a draft assessment order and not a final assessment order. The ld. DR concluded by saying that the assessee cannot approbate and reprobate. 27. The question whether participation in subsequent proceedings would estop the assessee from challenging the validity of the order dated 27.12.2018 has been answered by the Hon'ble Supreme Court in the case of V Mr. T.P. Firm MUAR in 56 ITR 67 wherein the Hon'ble Supreme Court has laid down the ratio Approbate and Reprobate is only species of estoppel. It applies only to conduct of parties as in the case of estoppel, it cannot operate against the provisions of a statute. IF particular income is taxable under the I.T. Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nternational India Pvt. Ltd. v. Deputy Commissioner of Income Tax, Circle 25(2), New Delhi) to urge that the AO could not have passed the final assessment order without complying with the mandatory requirement under Section 144C of the Act whereby first a draft order had to be issued in respect of which an objection can be filed by the Assessee before the DRP. The failure to do so, according to Mr. Syali, was not a mere irregularity. He further referred to a decision of the Gujarat High Court dated 31st July 2017 in Tax Appeal No. 542 of 2017 (Commissioner of Income Tax, Vadodara-2 v. C-Sam (India) Pvt. Ltd.) W.P.(C) Nos. 3399/2016, 3429/2016 3431/2016 Page 7 of 12 16. In response, Mr. Sanjay Jain, learned Additional Solicitor General of India appearing for the Revenue, submitted that there was an efficacious alternative remedy available to the Petitioner to file appeals against the impugned final assessment orders passed by the AO. It is denied that it was mandatory on the part of the AO to pass a draft assessment order since this was a second round before the TPO pursuant to remand by the ITAT. Moreover, it was not as if the ITAT had set aside the entire assessment order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the power of the AO to pass the order. 21. In almost identical facts, in Turner International (supra), this Court held in favour of the Assessee on the ground that it was mandatory for the AO to have passed a draft assessment order under Section 144C of the Act prior to issuing the final assessment order. The following passages from said decision are relevant for the present purposes: 11. The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of Section 144C(1) W.P.(C) Nos. 3399/2016, 3429/2016 3431/2016 Page 9 of 12 of the Act is no longer resintregra. There is a long series of decisions to which reference would be made presently. 12. In Zuari Cement Ltd. v. ACIT (decision dated 21st February, 2013 in WP(C) No.5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order without jurisdiction, null and void and unenforceable. In that case, the consequent demand notice was also set aside. The decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act'. Sub-section (5) of Section 144C empowers the DRP to issue directions to the Assessing Officer to enable him to complete the assessment. Sub-section (10) of Section 144C makes, such directions binding on the Assessing Officer. As per Sub-Section 144C, the Assessing Officer is required to pass the order of assessment in terms of such directions without any further hearing being granted to the assessee. 7. The procedure laid down under Section 144C of the Act is thus of great importance. When an Assessing Officer proposes to make variations to the returned income declared by an eligible assesses he has to first pass a draft order, provide a copy thereof to the assessee and only thereupon the assessee could exercise his valuable right to raise objections before the DRP on any of the proposed variations. In addition to giving such opportunity to an assessee, decision of the DRP is made binding on the Assessing Officer. It is therefore not possible to uphold the Revenue's contention that such requirement is merely a procedural. The requirement is mandatory and gives substantive rights to the assessee to object to any additions before they are made and such objections ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reasons, the Court finds no difficulty in holding that the impugned final assessment orders dated 30th March 2016 passed by the AO for AYs 2006-07, 2007-08 and 2008 -09 are without jurisdiction on account of the failure, by the AO, to first pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order. The Court also sets aside the orders of the TPO dated 30th March 2016 issued pursuant to the remand by the ITAT. 34. Considering the facts of the case in totality, in the light of the decisions discussed hereinabove, we have no hesitation to hold that the proceedings culminated on 27.12.2018 when the demand notice was issued and served upon the assessee along with penalty notice u/s 274 of the Act and, therefore, all the subsequent proceedings and orders become non est. The additional ground is, accordingly, allowed. 35. Since we have held that the order of the DRP and final assessment orders are non est, therefore, we do not find it necessary to dwell into the grounds raised in the Appeal Memo. 36. In the result, the appeal of the assessee in ITA No. 9116/DEL/2019 is allowed. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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