AO passes Assessment Order without the Mandatory Requirements u/s 144C (1) of Income Tax Act: ITAT quashes Order [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the assessing officer passed the order without complying with the mandatory requirement, and thus set aside the order of CIT(A) and allowed additional ground of appeal.

The assessee company is engaged in the business of Information Technology Services. The return of income declaring total income at Rs.252,98,040/- was filed on 28.09.2012. The case was subject to scrutiny assessment and notice under Section 143(2) of the Income Tax Act was issued on 06.08.2013.

The transfer pricing officer made an upward adjustment to the price at Rs.7,35,17,512/- in relation to the international transactions entered into by the assessee company with its Associated Enterprises. The assessing officer passed assessment order under Section 143(3) and 144C (1) of the Income Tax Act on 29.03.2016 and total income was assessed at Rs.988,15,549/- after including the upward adjustment of Rs.735,17,512/- made by the Transfer Pricing Officer.

Aggrieved, the assesse filed the appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

It was submitted that additional ground is the legal ground challenging the validity of the assessment order and no further documentary evidences is required to adjudicate this ground of appeal. Also final assessment order dated 29.03.2016 is invalid as same was passed without passing a draft assessment order under Section 144C(1) of the Income Tax Act.

The assessing officer passed final assessment order on 29.03.2016 after making addition of Transfer Pricing Adjustment of Rs.73,51,752/- as proposed by the Transfer Pricing Officer vide order under Section 92CA(3) of the Income Tax Act dated 28.01.2016.

After pursuing the judicial pronouncements relied upon, The Hon’ble jurisdictional High Court of Bombay in the case of SHL (India) P. Ltd. Vs. DCIT (2021) held that failure on part of the Assessing Officer to follow procedure under Section 144C(1) of Income Tax Act is not a mere procedural or inadvertent error, but a breach of a mandatory provision which is incurable, Section 292B cannot cure it and the final assessment order passed by the assessing officer stand vitiated on account of lack of decision which is incurable and deserves to be set aside as void ab initio.

The two bench members consisting of Aby T Varkey (Judicial member) and Amarjit Singh (Accountant member) held that the assessing officer passed the order dated 29.03.2016 under Section 143(3) and 144C(1) without complying with the mandatory requirement of Section 144C(1) of the Income Tax Act, therefore, following the aforesaid decision the said order is quashed and set aside. Accordingly, additional ground of appeal filed by the assessee was allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates