TMI Blog2020 (12) TMI 1086X X X X Extracts X X X X X X X X Extracts X X X X ..... that no question of law, let alone a substantial question of law, arises in the present appeal. This Court is of the view that till the Income Tax Department ensures that the Assessing Officers follow the mandate of law, in particular, binding provisions like Section 144C and eschew filing of unnecessary appeals rather than in nearly all matters where the Assessing Officer has taken a view against the Assessee, the assessments will not achieve finality for a number of years like in the present case where the case of assessment year 2007-08 stands remanded and restored to the file of the Assessing Officer. Revenue appeal dismissed with cost. - ITA 77/2019 - - - Dated:- 24-12-2020 - HON'BLE MR. JUSTICE MANMOHAN AND HON'BLE MR. JUSTICE SANJEEV NARULA Appellant Through: Mr. Deepak Anand, Advocate. Respondent Through: None J U D G M E N T MANMOHAN, J: 1. Elementary My Dear Watson is a popular phrase often attributed to Sherlock Homes, the English detective in the works of Sir Arthur Conan Doyle. However, it seems, like the present case highlights, nothing is elementary to the appellant, even when the statute uses clear and explicit langua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. This has not been done in respect of 20 comparables. Therefore, the matter of transfer pricing adjustment is restored to the file of the AO for following proper procedure as mentioned above and decide the matter denovo. (emphasis supplied) 6. Pursuant to the aforesaid remand, the Assessing Officer passed the assessment order dated 31st March, 2014 and the same was challenged by the respondent-assessee before the CIT(A), which partly allowed the appeal. Being aggrieved by the order passed by the CIT(A), respondent-assessee as well as Revenue filed appeals before the ITAT, being ITA No. 5409/DEL/2014 and ITA No. 6117/DEL/2014 respectively. 7. In its appeal, respondent-assessee raised the ground with regard to validity of the remand assessment as the Assessing Officer had not followed the procedure contemplated under Section 144C of the Act, while framing remand assessment. The ITAT vide order dated 30th September, 2015 allowed the appeal of the respondent-assessee on the said ground without going into the merits of the case. The relevant portion of the said order is reproduced hereinbelow:- 10. . it is crystal clear that, a direction was given t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or re-computation or fresh assessment, as the case may be, expires.] 12. After receiving the order from the TPO, the AO is required to pass a draft assessment order u/s 144C(1) of the Act and the same is to be forwarded to the eligible assessee who after receiving the draft assessment order may file his objection, if there is any variation in the income or loss returned, to the Dispute Resolution Penal within 30 days of the receipt of the draft order and the DRP after considering the objections of the assessee shall issue the directions as per the provisions of section 144C(6)of the Act which read as under: 144C . (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following namely: (a) Draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Assessing Officer was mandated to first pass a draft assessment order, communicate it to the assessee, hear his objections and then complete the assessment. Admittedly, this had not been done and the Assessing Officer had passed a final assessment order dated December 22, 2011, straightaway. Therefore, the order of assessment was clearly contrary to section 144C and was without jurisdiction, null and void. 14. In view of the aforesaid discussion and the judicial pronouncement, we set aside the impugned order of the ld. CIT(A) on this issue. In the present case, the procedure contemplated u/s 144C of the Act is violated by the AO, therefore, we are of the confirmed view that the assessment vide order dated 31.03.2014 framed by the AO was null and void ab initio. Since we have decided the legal issue in favour of the assessee therefore, no separate findings are being given for the other issues raised by the assessee on merit. 15. In the result appeal of the assessee is partly allowed. 8. In view of the aforesaid order dated 30th September, 2015, ITAT dismissed the Revenue s appeal holding that since the assessment had been annulled in the appeal filed by the respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 144C of the Act mandates the procedure to be followed only in the first instance and not in the course of remand assessment. 11. He stated that the ITAT had erroneously dismissed the appeal on the aforesaid ground without adjudicating and deciding the grounds of appeal raised by the Revenue on merits. 12. He lastly stated, without prejudice to other grounds, that this was not a case of an order passed without jurisdiction and at the highest, assuming without admitting, it was a procedural irregularity and not an illegality. COURT S REASONING ONCE THE ITAT DIRECTED THE ASSESSING OFFICER TO DECIDE THE MATTER DE NOVO, IT MEANT THAT A NEW HEARING OF THE MATTER HAD TO BE CONDUCTED, AS IF THE ORIGINAL HEARING HAD NOT TAKEN PLACE. CONSEQUENTLY, THE ASSESSING OFFICER HAD TO DECIDE THE MATTER IN ACCORDANCE WITH THE ELABORATE PROCEDURE MENTIONED IN SECTION 144 C AND NOT DEHORS IT. 13. The ITAT while remanding the matter of transfer pricing adjustment to the Assessing Officer vide order dated 17th July, 2012 had not only restored the matter to the file of the Assessing Officer for following proper procedure but also to decide the matter de novo . ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of 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 remov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt not being a company, or any foreign company.] 17. In the opinion of this Court, Section 144C is a self contained provision which carves out a separate class of assesses i.e. eligible assessee i.e. any person in whose case the variation arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of Section 92CA. For this class of assesses, it prescribes a collegium of three commissioners, once objections are preferred. Dispute Resolution Panel s powers are co-terminous with the CIT(A), including the power to confirm, reduce or enhance the variation proposed and to consider the issues not agitated by the Assessee in the objections. In fact, under Section 144C, the Dispute Resolution Panel can issue directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment and the Dispute Resolution Panel can confirm, reduce or enhance the variations proposed in the draft order. It is specifically stipulated in Section 144C that every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. This is akin to the Assessing Officer giving effect to an order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... REATED AS AN IRREGULARITY/ CURABLE DEFECT. 22. The appellant has also contended that the failure to follow the procedure under Section 144C of the Act, at the highest, was a procedural irregularity and not an illegality. This issue is no longer res integra. It is now settled law that failure to adhere to the mandatory procedure prescribed under Section 144C of the Act would vitiate the entire proceedings and the same cannot be treated as an irregularity/ curable defect. 23. In ESPN Star Sports Mauritius S.N.C. ET Companies vs. Union of India, (2016) 388 ITR 383 (Delhi) this Court, after discussing the judgments of the Andhra Pradesh High Court, High Court of Bombay as well as Madras High Court in Vijay Television Pvt. Ltd. vs. TRP and Ors. (2014) 369 ITR 130 has held that failure to pass a draft assessment order under Section 144C(1) of the Act would render the final assessment order without jurisdiction, null and void and unenforceable. The said view was reiterated by this Court in Turner International India Pvt. Ltd. vs. Deputy Commissioner of Income Tax, Cirlce-25(2), New Delhi, WP(C) 42604261/2015 as well Nokia India Pvt. Ltd. vs. Additional Commissioner of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evenue 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. CONCLUSION 24. Consequently, in the present case, in complete contravention of Section 144C, the Assessing Officer wrongfully assumed the jurisdiction and passed the final assessment order without passing a draft assessment order and without giving the respondent/assessee an opportunity to raise objections before the Dispute Resolution Panel. 25. Keeping in view the aforesaid, this Court is of the opinion that no question of law, let alone a substa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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