TMI Blog2023 (1) TMI 923X X X X Extracts X X X X X X X X Extracts X X X X ..... rly settled and is no more res integra. Section 144C(10) r.w.s. 144(13) mandates the AO to pass the assessment order after receiving a direction. Further, in our opinion, the law mandates that if an Act is required to be done in the particular manner, it should be done in that manner or not. Further, during the course of argument, it was submitted that the draft assessment order/assessment order dated 26.02.2021 was passed by NFAC and window was not opening for passing the final assessment order and thereby giving effect to the directions of the DRP. In our view, it is for the revenue to devise its own means and ways to correct the software and pass the final assessment order in accordance with the law. In the present case, the AO had straight way passed the assessment order instead of passing the draft assessment order as per section 144C(1) of the Act and further, the Assessing Officer has not passed the final order as per section 144C(10) of the Act. In view of the above, we find that the assessee has made out a case on quashing the entire assessment order being passed in violation of the mandatory provisions of the law. See Aker Powergas Pvt.Ltd [ 2022 (6) TMI 1118 - ITAT MU ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Solutions (India) Private Ltd, Hyderabad Vs. ACIT Special Range-9, New Delhi (ITANo.6665/DeI./2017). 6. The DRP failed to appreciate the fact that when TNMM method has been applied as the most appropriate method, it could take care of all notional interest costs wherever it could be applied and there could be no separate upwards adjustment for export receivables for delayed realisation of bills as decided by the Hon'ble Income Tax Appellate Tribunal. Chennai in the case of Mis Gimpex Pvt Ltd Vs. Assistant Commissioner of Income Tax, Central Circle 1(2), Chennai[IT(TP)A.No.57/Chny/2019] 7. Leamed Dispute Resolution Pa nol-1 erred in net considering the plea of the Appellant that no separate bench marking is required for export dues realised beyond 60 days period as receivables ingrained in the sale. 8. The learned DRP failed to appreciate the fact that sales result in profit and that of lending money gives interest income and thus it is evident that interest income Is associated only with lending or borrowing of money and not with sale as concluded by the Hon'ble Delhi Tribunal in the case of M/s corbus India pvt Ltd Vs. DCIT, Circle 3( 1), New Delhi ((3) ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the return of income and audit report filed by the assessee. During the course of assessment proceedings, it was found from the 3CEB report that the assessee company had entered into international transactions with its associated enterprises aggregating to Rs.9,50,25,02,242/-. The case was selected for scrutiny and the reason for selection of scrutiny is T.P. risk parameter, i.e. Large International transactions , . 3.1 . Hence a reference as per Para 3.2 of the Board s instruction No.3/2016 dated 10/03/2016 was made to the TPO (Transfer Pricing Officer), on 17.06.2019 after obtaining the approval of the Pr.Commisioner of Income-tax. Tirupati. 3.2 Accordingly, the Transfer Pricing matters were examined by the Dy. Commissioner of Income-tax(Transfer Pricing Officer)-1, Hyderabad and an order u/s. 92CA(3) of the Incometax Act, 1961 was passed by him on 22.01.2021 determining the upward adjustment of Rs.15,45,798/- u/s. 92CA of the Act, mentioning as assessment order . 3.3 Subsequently, the TPO passed rectification order u/s. 92CA(3) r.w.s. 154 dated 18.02.2021 reducing the enhancement from Rs.15,45,28,798 to Rs.11,72,618/-. 3.4 Accordingly, the income returned was enh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt order on 26102/2021, the learned Assessing Officer has finalized the assessment at the stage of draft assessment order and thereby failed to follow the statutorily mandatory procedure under the Act and hence the order passed by the learned Assessing Officer is not a valid order and liable to be set aside. 6. In an identical case, Hon'ble ITAT Delhi in the case of Perfetti Van Melle India Pvt Ltd. Vs. ACIT Circle 3(1), Gurgaon 2020(8) TMI 273 - ITAT Delhi held that by issuing demand notice along with draft assessment order. the Assessing Officer by passed the mandatory sub sections of section 144C of the Act and set aside the order. 7. The Appellant rely upon the following Hon'ble Tribunal and High Court decisions rendered in similar to the case of the Appellant. i) Hon'ble Jurisdictional High Court in Zuari Cements Ltd Vs. ACIT [ WP. No.5557/2012] - AP High Court ii) Hon'ble Delhi High Court in the case of Turner International India Pvt Ltd. V. The Deputy Commissioner of Income Tax, Circle 25(2), New Delhi [398 ITR 177] iii) Hon'ble ITAT Mumbai in Aker Powergas P.Ltd Vs. The Deputy Commissioner of Income Tax, Circle 15(1)(1), Mumbai [ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had treated the assessment order as draft assessment order and has filed the appeal against the said order before the DRP. 9. We have heard the rival contention of the parties and perused the material available on record. 10. In the present case, there are two discrepancies which are in the nature of jurisdiction error namely, the AO has directly passed the assessment order along with the penalty notice and computation of income to the assessee instead of passing the draft assessment order. Secondly, the AO vide his communication dated 25.10.2022 had admitted that no final assessment order pursuant to the direction of the ld.DRP had been passed as the Assessing Officer had already passed the assessment order on 26.02.2021 though the Assessing Officer was required to pass the draft assessment order under section 144C(1) of the Act. After receipt of the draft assessment order, the assessee within 30 days of the receipt of order may file objections, if any, before the DRP. In case, the assessee files objections before DRP, the DRP shall issue the directions after considering draft order / objections, evidences etc. At the time of issuance of direction, the DRP may co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. Admittedly the draft assessment order passed by the learned assessing officer on 21/12/2016 is accompanied with the notice of demand as well as show cause notice u/s 274 read with Section 271 (1) ( c) of the act of the even date. Issue that arises is Whether draft assessment order accompanied with [1] Notice of Demand, [2] tax Computation sheet and [3] Show Cause Notice for penalty u/s 271 (1) (C) of the act, can it be considered as draft assessment order or a final assessment order. If it is a final assessment order then naturally the procedure laid down under the act has not been followed by the ld AO. In such circumstances, the assessment order passed by the ld AO becomes void ab intio and to be quashed. 020. We find that identical issue has been considered by the coordinate bench in 649/ Pun / 2013 in case of Atlas corpo India Ltd vide order dated 29/8/2019 wherein it has been held as Under:- 7. Briefly stated, the facts of the case are that the assessee filed its return declaring income of ₹ 1,44,59,01,250/-. Certain international transactions were reported by the assessee. The Assessing Officer (AO) made a reference to the Transfer Pricing Officer (TPO) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. Subsection (2) of section 144C states that the assessee shall either file his acceptance to the AO on the variations proposed in the draft order or file his objections, if any, with the DRP. In case, the assessee accepts the variation in the draft order or no objections are received within 30 days, then subsection (3) states that: `The Assessing Officer shall complete the assessment on the basis of the draft order . In case, the assessee does not agree with the draft order, it can, inter alia, raise objections before the DRP, which shall issue directions under subsection (5) of section 144C. Upon receipt of the directions from the DRP, the AO completes the assessment under subsection (13) in conformity with the directions given by the DRP. 10. An overview of section 144C of the Act deciphers that a draft order passed under sub-section (1) is only a tentative order which does not fasten any tax liability on the assessee. In case variations to the income in the draft order are accepted by the assessee or no objections are received within 30 days, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 156. 12.On going through the above precedents, it is manifested that the assessment proceedings come to an end on the issue of notice of demand u/s 156 of the Act. Once a notice of demand is issued, the AO becomes functus officio in so far as the completion of assessment is concerned. It consequently follows that issue of notice of demand marks the completion of the assessment. 12. Turning to the facts of the instant case, it turns out that the AO issued notice of demand on 29.12.2011 tantamounting to legally finalizing the assessment, which was just the stage of draft order. As against that, it was incumbent upon him to statutorily pass the final assessment order after the draft order and then issue notice of demand. Issue of notice of demand brings down the curtain on the process of assessment. Until notice of demand is issued, the assessment cannot be said to have concluded. 13. The Hon ble Madras High Court in Vijay Television (P) Ltd. Vs. DRP (2014) 369 ITR 113 (Mad.) was confronted with a situation in which the AO, pursuant to the order of the TPO, passed a final assessment order instead of a draft order. A question arose as to whether the order so passed could be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted the route of the DRP. Be that as it may, it is found that similar issue came up for consideration before the Pune Benches of the Tribunal in series of cases including Eaton Fluid Power Ltd. Vs. DCIT (2018) 96 taxmann.com 512 (Pune Trib.). In that case also, the AO passed the draft order u/s.143(3) r.w.s. 144C(1) of the Act. Thereafter, he issued notice of demand u/s.156 and initiated penalty proceedings u/s.271(1)(c) of the Act. When this infirmity in not following the statutorily mandated procedure was pointed out, the Tribunal declared the assessment order to be without jurisdiction and hence, null and void. 16. It is observed that the facts and circumstances of the instant case are similar to those considered by the Pune Benches of the Tribunal in the case of Skoda Auto India Ltd. Vs. ACIT (supra) and Eaton Fluid Power Ltd. Vs. DCIT (supra). As the AO in the extant case issued notice of demand at the stage of the draft order, which, actually ought to have been done at the stage of passing the final order, thereby assigning the finality to the assessment at the stage of draft order itself, we hold that the resultant final assessment order got vitiated in the eyes of law ..... X X X X Extracts X X X X X X X X Extracts X X X X
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