A division bench of the Delhi High Court, in JCB India Ltd v. DCIT, held that the Assessing Officer cannot pass a Final Assessment Order after the Remand Proceedings without Draft Order under section 144C of the Income Tax Act, 1961.
The petitioner-assessee is a Subsidiary Company of a UK based Company. The petitioner’s income tax return for the relevant assessment year was rejected by the Assessing Officer. Since there were international transactions involving the Petitioner-Assessee and its Associated Enterprise, the Officer referred the matter to the TPO and passed a final assessment order under Section 143 (3) read with Section 144C of the Act wherein certain additions were made.
The petitioners challenged the order before the appellate authorities. On second appeal, the ITAT remanded the matter back to the files of the Dispute Resolution Panel. Subsequently, the Assessing Officer passed a final order without passing a draft order.
Aggrieved by the order, the assessee approached the High Court through a writ petition contending that AO ought to have passed a draft assessment order after receipt of the report from the TPO.
The department contended that the failure to pass a draft assessment order under Section 144C of the Act is a curable defect and the Court should now delegate the parties to a stage as it was when the TPO issued a fresh order after the remand by the ITAT.
The bench noticed the decision in Turner International, wherein the Court held that 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.
Based on the above view, the bench invalidated the impugned order with a specific direction to pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order.
Read the full text of the Order below.
