TMI Blog2020 (10) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 144C shows that AO shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the AO shall proceed by framing the final assessment order and if the objections are raised before the DRP, then, upon receipt of directions issued by the DRP, the assessee shall complete the assessment. However, we find that while framing the said draft assessment order, the AO not only issued and served demand notice, but has also initiated the penalty proceedings. As relying on PERFETTI VAN MELLE (INDIA) PVT. LTD VERSUS THE A.C.I.T CIRCLE 3 (1) GURGAON [ 2020 (8) TMI 273 - ITAT DELHI] no hesitation to hold that the proceedings culminated on 21.12.2018 when the demand notice was issued and served upon the assessee and penalty proceedings were simultaneously initiated making all subsequent proceedings and orders non-est. Ground No. 1 of assessee allowed - ITA No. 203/DEL/2020 - - - Dated:- 28-9-2020 - Shri N.K. Billaiya, Accountant Member, And Shri Kuldip Singh, Judicial Member For the Assessee : Shri Ravi Sharma, Adv, Shri Rishab Mal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer also initiated penalty proceedings. 8. In our considered opinion, assessment proceedings concluded on 21.12.2018 and, therefore, any orders passed thereafter are non-est. In our considered view, provisions of section 144C of the Act triggers a series of steps prescribed in sub-section (2) to section 12 and as can be seen from the most relevant sub-sections (3) and (13) the assessment is complete either under subsection (3) or sub section (13). 9. Facts on record show that on 21.12.2018, the Assessing Officer quantified the taxable income and determined tax payable by issuing and serving demand notice u/s 156 of the Act. In our considered opinion, this action of the Assessing Officer has brought the proceedings to an end and the proceedings initiated u/s 144C of the Act stand concluded. 10. A perusal of Section 144C of the Act shows that the Assessing Officer shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the Assessing Officer shall proceed by framing the final assessment order and if the objections are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Supreme Court has in terms stated that assessment is one integrated process involving not only the assessment of the total income but also the determination of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete. What section 153 requires is that the assessment should be completed within the prescribed time-limit. The words order of assessment cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght 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. Union of India this Court cautioned: It is not proper to regard a word, a clause or a sentence occurring in a judgment of the Supreme Court, divorced from its context, as containing a full exposition of the law on a question when the question did not even fall to be answered in that judgment. 21. We fail to persuade ourselves to agree with the submissions of the ld. DR. In our understanding of the law, there is no provision in the I.T Act which provides for proposed/draft notice of demand and secondly, whether the demand has been entered in Demand and Collection Register or the order uploaded in the ITD is and internal matter/procedure of the Revenue and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 not. If it is not, the ITO Has no power to tax the said income. 28. With our utmost respect to the co-ordinate bench [Kolkatta], we fail to persuade ourselves to follow the same as the said decision of the Tribunal has not considered the decision of the Hon ble Supreme Court discussed hereinabove and the decision is per incurium. 29. The ld. DR has tried to distinguish the decisions relied upon by the ld. counsel for the assessee in his written submissions. 30. We have carefully perused the written submissions of the ld. DR. We are of the considered view that the decisions relied upon by us extracted hereinabove are directly related to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 99/2016, 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 AO. The setting aside was only in respect of the transfer pricing adjustment and that too with a specific direction to the AO for determining the arms length price after considering fresh comparables. Since the assessment itself was not cancelled by the ITAT or completely set aside, it is the provisions of Section 153 (3) (ii) of the Act which would apply. Mr Jain submitted that the requirement of passing a draft assessment order under Section 144C was only in the first instance and not after the remand by the ITAT. 17. The Court is unable to agree with the submissions made on behalf of the Revenue by Mr. Jain. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 16, 3429/2016 3431/2016 Page 9 of 12 of the Act is no longer res intregra. 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 decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) No. 16694/2013] on 27th September, 2013. 13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113 (Mad.), a similar question arose. There, the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently, not only the 20 final assessment order but also the corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a num ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble 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 have to be considered not by the Assessing Officer but by the DRP. Interestingly, once the DRP gives directions under sub-section (5) of Section 144C, the Assessing Officer is expected to pass the order of assessment in terms of such directions without giving any further hearing to the assessee. Thus, at the level of the Assessing Officer, the directions of the DRP under subsection (5) of Section 144C would bind even the assessee. He may of course challenge the order of the Assessing Officer before the Tribunal and take up all contentions. Nevertheless at the stage of assessment, he has no remedy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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. 12. On finding parity in the facts and underlying facts in issue being identical, we have no hesitation in following the order of the coordinate bench [supra] and have no hesitation to hold that the proceedings culminated on 21.12.2018 when the demand notice was issued and served upon the assessee and penalty proceedings were simultaneously initiated making all subsequent proceedings and orders non-est. Ground No. 1 is, accordingly, allowed. 13. 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. 14. In the result, the appeal filed by the assessee in ITA No. 203/DEL/2020 is allowed. The order is pronounced in the open court on 28.09.2020. - - TaxTM ..... X X X X Extracts X X X X X X X X Extracts X X X X
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