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TMI Blog2019 (4) TMI 2098X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the meaning of section 144C(15)(b) of the Income-tax Act, 1961 (the Act), the learned Assessing Officer erred in passing a draft order under section 143(3) r.w.s. 144C(l) of the Act instead of an assessment order under section 143(3) of the Act. The appellant therefore submits that the order issued under section 143(3) r.w.s. 144C(13)of the Act, is, invalid, bad in law and ought to be quashed. The appellant craves leave to add to, amend, alter, vary, omit or substitute the aforesaid additional ground of appeal or add a new ground or grounds at any time before or at the time of hearing of the appeal as they may be advised." 3. We have heard the learned Counsels appearing for the rival parties on admission of additional grounds. The additional ground raised by the assessee involves important legal and jurisdictional issue going to the root of the matter and does not require investigation into fresh facts. Therefore, following the decision of the Hon'ble Supreme Court in National Thermal Power Corporation Ltd. v/s CIT, 229 ITR 383 (SC) and the decision of the Hon'ble Jurisdictional High Court in CIT v/s Pruthvi Brokers and Shareholders Ltd., 349 ITR 336 (Bom.), we ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act. He submitted, the Assessing Officer can pass a draft assessment order under sub-section (1) of section 144C of the Act only in respect of an eligible assessee. He submitted, as per the definition of eligible assessee under section 144C(15)(b) of the Act, it means any person in whose case there is a variation in income as a consequence of order passed by the Transfer Pricing Officer under section 92CA(3) of the Act, and any foreign company. He submitted, in assessee‟s case neither any variation has arisen as a consequence of an order passed by the Transfer Pricing Officer under section 92CA(3) of the Act nor the assessee is a foreign company as it is a limited liability partnership. He submitted, the Department has also accepted the status of the assessee as partnership firm by issuing PAN as a firm. He submitted, the assessee has also filed its return of income showing its status as a partnership firm. In this context, he drew our attention to the copy of the return of income as well as computation of income for the impugned assessment year as submitted in the paper book. Further, he drew our attention to the residency certificate issued in Form no.10F showing the statu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts relevant for deciding the issue, it is necessary to deal with the relevant statutory provisions which are applicable to the facts of the present issue. Undisputedly, the Assessing Officer has proceeded to pass the draft assessment order under section 144C(1) of the Act against the assessee for the impugned assessment year. A reading of section 144C(1) of the Act makes it clear that notwithstanding anything to the contrary contained under the Act the Assessing Officer shall propose a draft assessment order and forward it to the eligible assessee if he intends to undertake any variation in the income or loss returned by the said assessee which is prejudicial to the interest of the said assessee. Sub-section (15)(b) of section 144C of the Act defines eligible assessee as under:- "(15) For the purpose of this section,- (a) ........ (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company.]" 10. A reading of the aforesaid provision makes it clear that "eligible assessee‟ wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmissions on the issue of additional ground raised by the assessee before us and also the material referred to and the judgments in support of the said ground. All the additional grounds in the impugned assessment years involve purely a legal issue which goes to the very root of the validity of the assessment passed u/s 144C (1) and for adjudication of such an issue no new facts or material is required to be examined or investigated. Therefore, such an additional ground is admitted. For admission of such a legal ground, we are supported by the judgment of Hon‟ble Supreme Court in the case of National Thermal Power Co. Ltd. vs. CIT (1998) 229 ITR 383 (SC). 6. As stated above, the assessee is a non-resident entity which is a partnership firm incorporated under the laws of Mauritius and is also a tax resident of Mauritius. It had filed its return of income shown "nil‟ income on 31.10.2005 which was duly processed u/s 143(1) on 18.3.2006. Thereafter, assessee‟s case was reopened U/S 147 vide notice dated 10th June, 2008 issued u/s 148 and in pursuance thereof, draft assessment order was passed/ proposed u/s 144C (1). In the impugned draft assessment order, but has e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tius SNC ET Compagnie (supra) the Hon‟ble Jurisdictional High Court on same issue had quashed such order passed u/s 144C (1) and consequently the final assessment order passed in pursuance of DRP‟s direction. The relevant observation and finding reads as under:- "It appears to the Court that it is plain that under section144C, the AO should have proceeded to pass an order under Section 143(3) of the Act. Instead the AO confirmed the draft assessment order passed under section 144C (1) of the Act. This, therefore, vitiated the entire exercise. The Court has no hesitation in holding that the final assessment order dated 28th January, 2015 is without jurisdiction and null and void. The draft assessment order dated 28th March, 2014, having been passed in respect of entities which were not eligible assessee‟s is also held to be invalid." 9. Again this issue had come up for consideration before the Tribunal in the case of assessee‟s sister concern, i.e., ESPN Star Sports Mauritius SNC ET Compagnie (supra) wherein on exactly similar facts this Tribunal following the judgment of Hon‟ble Delhi High Court had observed and held as under:- "12. We now espous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or the assessment year 2010-11. Respectfully following the binding precedent, we set aside the final assessment order. The additional ground is, therefore, allowed to this extent. 15. In view of our decision on the additional ground setting aside the assessment order, there is no need to deal with the grounds on merits." 10. There are other judgments of Hon‟ble Delhi High Court wherein similar issue has been decided in favour of the assessee like in the case of, Honda Cars India Limited vs. DCIT judgment dated 17.2.2016 passed in WP(C)4262/2015 and CM No. 7736/2015; wherein the Hon‟ble High Court had observed and hold as under:- "8. A reading of Section 144C(1) of the Act shows that the Assessing Officer in the first instance is to forward a draft of the proposed order of assessment to the "eligible assessee"", if he proposes to make any variation in the income or loss return which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an "eligible assessee" which means that for the section to apply a person has to be an "eligible assessee". 9. Section 144C (15)(b) of the Act defines as " eligible assessee" to mean (i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4C and the final assessment order consequently becomes time barred. Accordingly, following the aforesaid binding judicial precedents, we hold that the draft assessment order is invalid and consequently the impugned final assessment order is also unsustainable in law and is set aside. Consequently the additional ground as well as the appeal of the assessee is allowed." 11. The Hon'ble Delhi High Court in Honda Cars India Ltd. (supra) and ESPN Star Sports Mauritius SNC (supra), have also expressed similar view. The Hon‟ble Gujarat High Court in Pankaj Extrusion Ltd. (supra) has also held that unless the assessee is an eligible assessee under section 144C(15)(b) of the Act, the Assessing Officer cannot pass a draft assessment order under section 144C of the Act. Keeping in view the principle of law propounded in the aforesaid judicial precedents, we have no hesitation in holding that the draft assessment order passed in case of the assessee for the impugned assessment year is invalid. Therefore, all the proceedings consequent thereupon are also invalid. Consequently, the draft assessment order as well as the final assessment order passed in pursuance thereof is quashed. In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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