TMI Blog2020 (12) TMI 820X X X X Extracts X X X X X X X X Extracts X X X X ..... (Delhi) on 24.01.2020 which was Friday and 25th January 26th January being Saturday and Sunday, the assessee physically filed the acknowledgment of filing objection at DRP before AO on 27.01.2020). AO ought to have awaited the decision of the DRP as envisaged under sub-section (5) of section 144C of the Act and which direction of DRP was binding on the AO as per sub-section (13) of section 144 and it is to be noted that after the direction of DRP, the AO could have framed the assessment without providing any opportunity to the assessee as envisaged in sub-section (13) of section 144C. In this case, the AO failed to await for the direction of the DRP and has arbitrarily framed the final assessment order which vitiates the final assessment order passed by him. AO had no jurisdiction to frame the final assessment order on 27.01.2020 u/s. 144(3) of the Act, since he was divested of jurisdiction to pass final order between 27.01.2020 to 31.01.2020. Even the AO could not have framed the final order u/s. 144C(3) on 27.01.2020 because the assessee had filed its objection before the DRP on 24.01.2020, the DRP is in seisn of the case of assessee and between 24.01.2020 and till the D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... yed that the impugned assessment order be held as void ab initio, bad in law and illegal and consequently the entire assessment be quashed. 3. The Ld. AR Shri Akkal Dudhwewala assailing the action of AO on the aforesaid legal issue submitted that in this case assessee had received a draft assessment order dated 28.12.2019 as per sub-section (1) of section 144C of the Act on 28.12.2019. According to the Ld. AR, section 144C is a complete code in itself which has set out a separate assessment mechanism for eligible assessee s whose income are subject to transfer pricing variation or who are non-residents or foreign companies. According to him, this code entitles these eligible assessee s to first receive a draft assessment order from the AO, and gives them the option to decide the forum to prefer objection against the draft assessment order or the choice to accept the draft assessment order and retain the liberty to prefer regular appeal route before the Ld. CIT(A). So, according to the Ld. AR, as per sub-section (2) of section 144C of the Act the assessee is given a choice as to whether they wish to object to such order (draft assessment order of AO) before the DRP or whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed its option on 24.01.020 as envisaged under subsection (2)(b)(i) of section 144C of the Act by filing an objection before the DRP against the draft assessment order dated 28.12.2019 and also filed before the AO a copy of the Form 35A which was filed before the DRP [along with acknowledgment that it has been received in the office of the DRP-II, Delhi on 24.01.2020]. According to the Ld. AR, even though assessee had brought to the notice of the AO that it has exercised its option to file objection before the DRP within the statutory limitation prescribed by the statute i.e. within 30 days of receipt of the draft assessment order, the AO erroneously proceeded to issue the final assessment order u/s 144C(3) of the Act, on the same date i.e. on 27.01.2020 without awaiting for the DRP s direction which was binding on the AO as per sub-section (13) of section 144C of the Act. Even otherwise, according to the Ld. AR in any case the AO could not have passed the final assessment order u/s 144C(3) of the Act. According to Ld AR, even if for argument sake it is taken that the assessee had not filed any objection before the DRP, then also the AO could not have passed the final assessment or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tented by Ld DR that in any case, even if there is any procedural violation then it is curable defect and so the impugned order may be set aside back to the AO for rectifying the mistake and suitable direction may be given to AO to pass the final assessment order in accordance to law. 5. In his rejoinder, contesting the submission of Ld DR, the Ld. AR elaborated the procedure/mechanism prescribed by section 144C of the Act which according to him, should be followed by AO scrupulously. According to Ld. AR, section 144C of the Act is not merely procedural in nature, it prescribes mandatory provisions to be followed by the AO because it gives valuable right to assessee to opt for reference to DRP or to accept the draft order. According to him, the AO has to first of all issue the draft assessment order as per sub-section (1) of section 144C of the Act and thereafter provide 30 days time to the assessee to file objection before the DRP as prescribed in sub-section (2) of section 144 of the Act and thereafter, if the assessee accepts the draft assessment order or if it does not prefer any objection before the DRP, in that event the AO can pass the final assessment order as envisaged ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . According to him, the AO has to mandatorily follow the procedure prescribed u/s. 144C of the Act and for this proposition of law he relied upon the decision of the Hon ble Madras High Court in Vijay Television Pvt. Ltd. Vs. DRP 369 ITR 113 (Madras High Court) as well as CIT Vs. C Sam India Pvt. Ltd. 398 ITR 182 (Guj. High Court). In the light of the law and ratio laid in above cited decisions, and the facts discussed the Ld AR pleaded that the legal issue may be allowed and the final assessment order passed by the AO dated 27.01.2020 be held as null in the eyes of law. 6. For completeness the Ld.AR also drew our attention to page 15 to 23 of the paper book which is the impugned final assessment order passed by the AO dated 27.01.2020 wherein the AO has issued the demand notice of tax u/s. 156 of the Act dated 27.01.2020 which is placed at page 23C paper book (PB) along with the computation sheet of income from page no. 23A to 23B of the (PB). According to the Ld. AR, once an order was passed by the AO assessing the total income and the AO determines the tax payable thereon, such an order can only be termed as a final order of assessment as held by the Hon ble Supreme Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the Assessing Officer on 27.01.2020 11. Time period for the AO to have passed final assessment order in case if assessee accepts the draft assessment order or does not file objection before DRP as per sec. 144C(3) (4) of the Act Between 01.02.2020 to 28/29.02.2020 12. Since the assessee had filed the objection before the DRP on 24.01.2020, the AO should have await the direction DRP (refer section 144C(5) (13) of the Act). AO to pass final order within one month from the end of the month of DRP direction 7. The short question which needs to be answered is whether the AO could have framed the final assessment order on 27.01.2020 when the admitted facts are that the assessee has received the draft assessment order on 28.12.2019 and the assessee had filed objection before the DRP on 24.01.2020. For answering this legal issue, it would be gainful to refer to the legal provision which governs the issue i.e. section 144C of the Act which is reproduced as under: Reference to dispute resolution panel. 144C. (1) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. Explanation.-For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore the Ld. CIT(A). As per section 144C of the Act once the assessee receives the draft assessment order from AO u/s 144C(1) of the Act, the AO is duty bound to thereafter give the assessee 30 days time to make-up its mind either to accept the draft order or to object to such order (draft assessment order of AO) before the DRP as per sub-section (2) (b) of section 144C of the Act. And if the assessee chooses to file objection before the DRP, then the AO is duty bound to wait for the direction of the DRP; and then only on receipt of the DRP direction u/s. 144C(5) of the Act that AO is legally empowered to pass the final assessment order as per section 144C(13) of the Act. So, we note that as per the scheme/mechanism envisaged in section 144C of the Act, once the AO passes the draft assessment order, the assessee has 30 days time period for approaching the DRP to file objection if it desire; and the 30 days starts from the date on which the assessee receives the draft assessment order; and in case if the assessee files the objection before the DRP within 30 days, then the AO has to await the decision/direction of the DRP and thereafter the AO can frame the final assessment order in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . So even if for argument sake, we accept the contention of the Ld. DR, that since the assessee having received the draft order on 28.12.2019 did not turn up before the AO within 30 days and 30 days expires on 27.01.2020 the AO is legally entitled to frame the final assessment order on 27.01.2020 u/s. 144C(3) of the Act and if the assessee turned up later on the same date i.e. 27.01.2020 before the AO after the AO had framed the final order, does not affect the legality of the order cannot be countenanced because it is erroneous. Because even if the assessee had accepted the draft order or the period of 30 days expired or as suggested by Ld. DR or in the event of the assessee s failure to bring to the notice of AO of it s filing the objection before DRP before AO has passed the final order on 27.01.2020, then also AO could not have passed the final order u/s. 144C(3) of the Act as per the time limit prescribed in sub-section (4) of section 144C of the Act. In that event also the AO could have passed the final assessment order u/s 144C(3) only within the time period as prescribed in section 144C(4) of the Act i.e. within one month from the end of the month i.e. in this case AO can p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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