The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that the Assessing Officer (AO) has no jurisdiction to declare the assessment order passed earlier by him as null and void and substitute it with another assessment order and thus upheld the decision of Commissioner of Income Tax (Appeals) [CIT(A)] in declaring the assessment order as invalid.
The assessee Mondon Investments Ltd is a non-resident corporate entity. In the assessment year under dispute, the assessee filed its return of income on declaring nil income. Assessee’s case was selected for scrutiny and in course of assessment proceedings.
The AO noticed that in the year under consideration, the assessee has entered into international transactions with its Indian Associated Enterprises (AEs) by subscribing to fully convertible debentures (FCDs), made reference to the Transfer Pricing Officer (TPO) for determining Arm’s Length Price (ALP) of the international transactions.
The TPO passed an order under Section 92CA(3) of the Income Tax Act,1961 proposing an adjustment of Rs.29,06,35,700/- to the income of the assessee. Based on the order passed by the TPO, the Assessing Officer passed an assessment order, purportedly, under Section 143(3) read with Section 144C(3) of the Income Tax Act Act determining total income at Rs.29,06,35,700/-.
Against the order the assessee filed an appeal before the CIT (A). Subsequent to passing of the assessment order the AO issued a letter to the assessee stating that the earlier assessment order was passed due to an inadvertent mistake/oversight and should be treated as null and void.
Realizing the fact that the assessee, being an eligible assessee in terms of Section 144C(15) of the Income Tax Act, and no variation in the income returned could be made, which is prejudicial to the interests of the assessee, the AO passed a subsequent passed a draft assessment order, purportedly, under Section 143(3) read with Section 144C(1) of the Income Tax Act and subsequently, passed the final assessment order.
The assessee filed an appeal against the second assessment order before the CIT(A), where it was held that non-framing of a draft assessment order under Section 144C(1) of the Income Tax Act is not a curable defect under Section 292B of the Income Tax Act. Hence, he held the assessment order to be invalid. Accordingly, he quashed the assessment order.
The Revenue filed an appeal before the Tribunal and submitted that the original assessment order passed under Section 143(3) read with Section 144C(3) of the Income Tax Act was subsequently cancelled/withdrawn by the AO, as it was passed due to an inadvertent mistake.
Further it was submitted that, the error committed by the Assessing Officer in not passing the draft assessment order originally, at first instance, under Section 144C(1) of the Income Tax Act is a curable defect and would be covered under Section 292B of the Income Tax Act.
The Authorised representative of the assessee submitted that the statute only vests powers on the Assessing Officer to either initiate assessment proceedings under Section 147 of the Income Tax Act on the ground that income has escaped assessment or pass rectification order under section 154 of the Income Tax Act in case there is mistake apparent on the fact of record.
Further he submitted that the statute does not confer any power on the Assessing Officer to cancel / nullify / withdraw / recall or hold the assessment order to be null and void, merely because the period of limitation to pass assessment order is available, it will not empower the AO to pass any number of assessment orders.
The Bench comprising of G.S. Pannu, President and Saktijit Dey, Vice-President stated that they are unable to locate any such power vested with the AO to declare an assessment order passed by him earlier as null and void.
It observed that the AO has not only declared the assessment order passed by him earlier as null and void, but has passed a fresh assessment order when earlier assessment order was under challenge before the first appellate authority.
The Tribunal held that the AO himself cannot assume the role of either the appellate authority or the revisionary authority to revise / modify / cancel or withdraw the assessment order, if it is permitted to do so, it will lead to undesirable consequences and will give a free hand to the AO to pass an assessment order and subsequently withdraw/modify/cancel it according to his own whims and caprices.
Hence the Bench held that the AO had no jurisdiction to declare the assessment order passed earlier by him as null and void and substitute it with another assessment order. In view of the aforesaid upheld the decision of CIT(A) declaring the assessment order as invalid.
Thus the appeal was dismissed.
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