ITAT quashes Final Assessment Order Passed Without Draft Order, terms it Void ab Initio [Read Order]

The Delhi Bench of the Income Tax Appellate Tribunal ( ITAT ) has quashed assessment orders passed against the assessee Sanko Svance JRG Tooling India Pvt. Ltd. for Assessment Year 2016–17, declaring them invalid and without jurisdiction. The assessee filed the appeal—assessment orders passed by the Assessing Officer (AO). The matter was based on: first, whether the AO followed the mandatory procedure of issuing a draft assessment order under Section 144C(1) before finalising the assessment; and second, whether the final assessment passed after directions from the Dispute Resolution Panel (DRP) was time-barred.

The assessee contended that the assessment order was passed as a final assessment order without preceding it with a draft assessment order, a mandatory requirement under Section 144C when a reference to the Transfer Pricing Officer has been made. The AO also issued a demand and penalty notice confirming that the order was final and not a draft.

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To rectify this procedural flaw, the AO later issued a “clarification” through a rectification order, stating that the order dated 12.12.2019 should be “read as a draft assessment order.”

The assessee further argued that even the second assessment order passed, in response to DRP directions, was barred by limitation. DRP issued its directions on 30.09.2020. Even considering the COVID-related extensions under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA), the last permissible date for passing the final order was 30.06.2021. The order, having been passed three months later, was time-barred.

The departmental representative admitted the factual timeline but defended the validity of the rectification and the delayed order. However, he could not refute the fact that the procedural lapses had occurred.

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On the issue of the first assessment order, the ITAT held that the final assessment order passed without following the mandatory provisions set out under Section 144C of the Act is without jurisdiction and liable to be quashed.

Referring to the ruling in ACIT vs. Vijay Televisions (P) Ltd, the Bench noted that such lapses are not mere procedural irregularities that can be cured through a corrigendum or rectification. As for the second assessment order dated 29.09.2021, the Tribunal found it time-barred, citing the Bombay High Court judgment in Shell India Markets P. Ltd. vs. Addl. CIT. Even with the benefit of TOLA, the deadline had lapsed months earlier.

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As both the initial and follow-up assessment orders were found to be legally unsustainable, the Tribunal quashed the entire assessment against the assessee. As a result, the appeal was allowed, with the assessee prevailing on both legal grounds.

To Read the full text of the Order CLICK HERE

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