The Income Tax Appellate Tribunal (ITAT) Mumbai Bench by allowing appeal filed by the assessee held that the Assessing officer failed to follow the mandatory procedure laid down under Section 144C of Income Tax Act, 1961 for passing draft assessment order.
The assessee Brightstar Infrastructure Private Limited company is a joint venture between Ruchi Reality Holding Limited and Shubham S.A. Investment LLC, holding 55% and 45% stake respectively in the company. The company was engaged in the business of real estate development. The assessee’s case was selected for scrutiny after filing the return of income.
Subsequently, a reference was made by the AO to a Transfer Pricing Officer Determination of arm’s length price in respect of the transaction entered into by the assessee with its associated enterprise as reported in Form 3CEB filed by the assessee.
Accordingly, the assessee made an objection before the Dispute Resolution Panel (DRP) against the variation proposed by the assessing officer in the draft assessment order relied upon the order of Transfer pricing officer. However, the DRP rejected the objection.
Aggrieved by the order, the assessee filed an appeal before the tribunal.
Ketan Ved, counsel for the assessee submitted that the draft assessment order passed by Assessing officer on 17.03.2021 was without following the procedure laid down in the Section 144C of the Income Tax Act. Therefore, the TP adjustment made in the draft assessment order was bad in law.
Aditya M Rai, Departmental representatives supported the decision of lower authorities.
During the appeal proceedings, the tribunal observed that the assessing officer had passed the draft assessment order on 17.03.2021 and also issued notice of demand under Section 156 Income Tax Act along with a computation sheet dated 17.03.2021.
It can be concluded that the assessing officer has not followed the mandatory provisions of Section 144C of the Income Tax Act while issuing draft assessment order along with demand notice and computation sheet in the case of the assessee.
After reviewing the facts and submissions of the both parties, the two member bench of Aby T Varkey (Judicial Member) and Amarjit Singh, (Accountant Member) observed that the assessing officer has failed to follow the mandatory procedure laid down under Section 144C of the Income Tax Act at the stage of passing draft assessment order Hence the final assessment order will become null and void and the mistake could not be curable under Section 292B of the Income Tax Act.
Therefore, the bench allowed the appeal.
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