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TMI Blog2022 (1) TMI 638X X X X Extracts X X X X X X X X Extracts X X X X ..... s the "Act"). The grounds of appeal raised by the revenue is against the action of the Ld. CIT(A) in holding that the AO could not have passed the final assessment order u/s. 143(3) of the Act without passing the draft assessment order u/s. 144(1) of the Act pursuant to the TPO's order. Let us examine this action of Ld. CIT(A). 4. Brief facts of the case are that the assessee is a private limited company engaged in the manufacturing business of TMT Bars. The assessee had filed its return of income for the A.Y. 2015-16 on 29.09.2015 and had declared total income of Rs. 91,66,620/-. The case was selected for scrutiny through CASS and the statutory notices u/s. 143(2)/142(1) of the Act was issued by the AO. Later the AO referred the assessee's specified domestic transaction to TPO u/s. 92CA(1) of the Act. Pursuant to the reference made by the AO, the TPO passed an order u/s. 92CA(3) of the Act dated 31.10.2018 by making adjustment of Rs. 5,30,80,102/-. Thereafter, the AO has passed the assessment order u/s. 143(3) of the Act on 23.12.2018 by making an addition of Rs. 5,30,80,102/-. Aggrieved by the aforesaid action of the AO, the assessee preferred an appeal before the Ld. CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-section (2) of section 144C of the Act on receipt of the draft order, the eligible assessee shall within 30 days of the receipt, file his acceptance of the variation to the Assessing Officer or file his objections, if any, to such variation with the DRP. And as per sub-section (3) of section 144C of the Act, if the assessee intimates to the Assessing Officer the acceptance of the variation or no objections are received by him within period specified (30 days) in subsection (2) of section 144C of the Act, then the AO shall complete the assessment on the basis of the draft order within one month from the end of month, in which the acceptance is received or the period of filing objections under sub-section (2) of section 144C of the Act has expired. And in case, if the assessee had opted to file objection before the DRP in exercise of the discretion conferred upon it u/s. 144(2)(b), then the AO shall not pass the final assessment order and await for the DRP direction as contemplated under sub-section (5) of section 144C of the Act, which empowers the DRP to issue such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. Upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he aforesaid view of ours, we rely on the decision in the case of M/s. Vijay Television vs. DRP [2014] 225 Taxman 35 (Mad) passed by the Hon'ble Madras High Court wherein, it was held in para 12 that non-passing of draft assessment order after adjustment made by the TPO renders proceedings null & void by observing as under:- "Under Section 144C(1) of the Act, with effect from 1st October 2009, the Assessing Officer has to mandatorily issue a draft assessment order if there is a proposed variation to the return which are prejudicial to the eligible assessee. The fact that the petitioner is an eligible assessee is not in dispute. While so, under section 144C(2) of the Act, the eligible assessee has the option, either to accept the variation or to file their objections before the DRP and such option has to be exercised within 30 days. On such objections filed by the assessee, the DRP shall issue appropriate direction for the guidance of the Assessing Officer under section 144C(5) of the Act. It is only thereafter, the AO is bound to pass a final order of assessment in compliance with the directions issued by the DRP under section 144C(3) of the Act. In the present case, without ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment within one month as per section 144C(4) of the Act. The Hon'ble High Court further observed that in case if the assessee had filed an objection before the DRP, then based on the directions issued by the DRP to Assessing Officer he has to complete the final assessment. Thus according to the Hon'ble High Court where the Assessing Officer accepted the variation submitted by the TPO without giving the assessee any opportunity to object to it and pass the assessment order, then in such an event the impugned order of assessment was contrary to section 144C of the Act and was without jurisdiction, null and void and thus unenforceable. The Hon'ble High Court (Andhra Pradesh) held as under:- "In this view of the matter we are of the view that the impugned order of assessment dt. 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S. 144C of the Act and is passed in violation thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside." 9. And further it was brought to our notice that the Hon'ble Supreme Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act dated 31.10.2018. The Ld. Pr. CIT has interfered with the AO's order u/s. 143(3) of the Act, and after hearing the assessee has held as under: "6. The contention of the assessee has been examined with reference to the material on record. On perusal of order of JCIT (TP), Range-3, Kolkata dated 31.10.2018 passed u/s. 92CA(3) of the Income Tax Act, 1961, it is observed that for the purpose of determination of ALP and computation of TP adjustment, the TPO has not followed the TP provisions and did not draw any comparable in objective manner. On perusal of record, it is found that the TPO has not followed the prescribed methods i.e. Comparable Uncontrolled Price (CUP) and Transactional Net Margin Method (TNMM) etc. while working out the TP adjustment. The TPO has chosen a random purchase price with its AE, compared the same with other purchase prices of its AE and computed the difference in purchase price of the assessee with reference to random purchase price, to arrive at the TP adjustment to be made at Rs. 5,30,80,102/- vide order u/s. 92CA(3) of the I.T. Act, 1961. The Assessing Officer completed the assessment u/s. 143(3) of the I.T. Act, 1961 by adding the TP adju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A). Here in this case, the assessment order is dated 23.12.2018 u/s. 143(3) of the Act which order of AO has been held to be void by the Ld. CIT(A) by order dated 09.09.2020, therefore, the subject matter on which Ld. Pr CIT has found fault with the assessment order and held it as erroneous as well prejudicial to revenue by the impugned order dated 24.03.2021, was therefore considered by the Ld. CIT(A) in his order dated 09.09.2020. Therefore, Explanation (1)(c) of section 263 of the Act does not allow/permit the Ld. Pr. CIT to revise the order of the AO. Explanation (1)(c) of section 263 of the Act reads as under: "(c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended] to such matters as had not been considered and decided in such appeal]." Therefore, in this case, we note that since the subject matter of the appeal of the assessee was before the Ld. CIT(A) and the Ld. CIT(A) has held the AO's assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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