Income Tax Appellate Tribunal - Delhi
Addl. Cit, New Delhi vs M/S. Oracle India Pvt. Ltd., New Delhi on 13 April, 2018
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I-2" NEW DELHI
BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER
&
SHRI AMIT SHUKLA, JUDICIAL MEMBER
I.T.As. No.6288/DEL/2013
Assessment Years: 2006-07
Addl. CIT, Range-13, v. Oracle India Pvt. Ltd.,
New Delhi. F-01/02, 1st Floor,
Salcon Ras Vilas,
D-1, District Centre,
Saket,
New Delhi.
TAN/PAN: AAACO 0158L
(Appellant) (Respondent)
I.T.As. No.6741/DEL/2013
Assessment Years: 2006-07
Oracle India Pvt. Ltd., v. Addl. CIT, Range-13,
F-01/02, 1st Floor, Salcon Ras New Delhi.
Vilas,
D-1, District Centre, Saket,
New Delhi
TAN/PAN: AAACO 0158L
(Appellant) (Respondent)
Appellant by: Shri Tarandeep Singh, Adv & Shri
Naveen Dhamisa, CA.
Respondent by: Shri H.K. Choudhary, CIT-D.R.
Date of hearing: 18 01 2018
Date of pronouncement: 13 04 2018
ORDER
PER AMIT SHUKLA, J.M.:
The aforesaid cross appeals have been filed by the assessee as well as by the Revenue against final assessment I.T.As. No.6288 & 6741/DEL/2013 2 order dated 30th October, 2013, passed by learned Assessing Officer u/s.143(3) r.w.s. 144C, in pursuance of direction given by the Dispute Resolution Panel-II, New Delhi (DRP) u/s.144C(5), vide order dated 16.08.2013 for the Assessment Year 2006-07.
2. We will first take up the assessee's appeal wherein assessee has raised as many as 29 grounds with various sub- grounds challenging the merits of the additions made by the Assessing Officer, whereas in Revenue's appeal also as many as 11 grounds have been raised challenging the issues which has been decided in favour of the assessee by the DRP.
3. At the outset, ld. counsel for the assessee, Mr. Tarandeep Singh, submitted that assessee has also filed an 'additional ground' which in fact is clarification of ground no.2 raised by the assessee in the original appeal memo, whereby assessee is challenging the impugned orders that it is void ab initio passed in contravention of the provision of Section 144C. In the said ground it has been highlighted that in this case the Assessing Officer instead of passing a 'draft assessment order' as required u/s 144C has passed final assessment order u/s 143(3) on 2nd November, 2012 which was not in accordance with the provision of Section 144C(1) r.w.s. sub-section (2) and (3) thereto, and therefore, in view of the various judgments of Hon'ble Jurisdictional High Court, the said order is unsustainable in law and consequentially the entire proceedings and order needs to be quashed.
I.T.As. No.6288 & 6741/DEL/2013 34. Highlighting the brief facts and background of the case, he submitted that assessee is wholly owned subsidiary of Oracle System Corporation, USA. It has filed its return of income for the Assessment Year 2006-07 on 27.11.2006 at an income of Rs.1,59,40,87,230/-. The said return was selected for scrutiny and later on the matter was referred to Special Auditor for carrying out audit u/s.142(2A) vide direction dated 29.12.2009. Later on, in pursuance of direction given by the Hon'ble High Court in a writ petition Special Auditor was granted extension of time for completion of audit and finally the report was submitted on 4.9.2012 which was filed before the Assessing Officer on 12.10.2012. After receiving of the Special Audit Report on 04.09.2012, the time period for completion of assessment as per Section 153 was up till 3rd November, 2012. This is also accepted by Assessing Officer, which is evident from letter dated 27.09.2012 issued by Addl. CIT, Range-13 to the assessee, the relevant extract of which is reproduced hereunder:
"To, The Principal Officer, M/s. Oracle India Pvt. Ltd., F-01/02, 1st Floor, Salcon Ras Villas, D-1, District Centre, Saket, New Delhi-17 Sir, Sub: Adjournment of hearing Dated. 26.09.2012 for A.Y. 2006- 07- reg.
Ref: your letter Dated. 26.09.2012, asking for adjournment of hearing.
With reference to the subject cited above.I.T.As. No.6288 & 6741/DEL/2013 4
Tour letter Dated. 26.09.2012, asking for adjournment of the hearing fixed on 26.09.2012, was received wherein you have mentioned that you are in the process of collecting details and in drafting a reply. You have also mentioned that you are in the process of obtaining a soft copy of the special Audit report and its annexures form the Special Auditor to analyze the data therein.
As you are unable to give a reply to any of the queries that you were required to submit on 26.09.2012, you are again given another opportunity to submit the same on 01.10.2012 at 3PM at my office. However, you are required to note that the Spl. Audit report was submitted to you on 04.09.2012 and that the assessment is required to be completed within 60 days of the audit. It must be noted that opportunity that can be given to you for representing your position and claims, and the verification of the same is governed by this limitation."
5. The Assessing Officer had in fact passed the assessment order on 2nd November, 2012, which read as order u/s. 143(3), (the copy of which has been placed from pages 71 onwards in the paper book filed on 30.01.2017). From the said order, Ld. Counsel pointed out that this was a final assessment order duly accompanied with notice of demand u/s.156 and also a show cause notice u/s. 274 r.w.s. 271 of the Income Tax Act. The said order however cannot be reckoned as legally sustainable order as it has not been passed in terms of procedures enshrined in Section 144C. As per the said provision, the Assessing Officer has to first pass a proposed draft assessment order if he proposes to make any variation in the income or loss return; and it is after the receipt of such order the assessee is eligible to file either his I.T.As. No.6288 & 6741/DEL/2013 5 acceptance for the variation to the Assessing Officer or file objection to such variation before the DRP within 30 days of receipt of the draft assessment order. Once, the assessee has intimated to the Assessing Officer either the acceptance or makes no objection within the specified period then Assessing Officer completes assessment on the basis of the draft assessment order. Thus, here in this case, there is a clear violation of Section 144C (1); (2) and (3). After having passed the final assessment order on 2-11-2012, immediately after five days of completion of final assessment order, the Assessing Officer on 07.11.2012 had passed corrigendum order dated 07.11.2012, which reads as under:
"To, The Principal Officer, M/s. Oracle India Private Limited, F-01/02, 1st Floor, Salcon Ras Villas, D-1, District Centre, Saket, New Delhi-110017 Sir/Madam, Sub: Order Dated.02.11.2012 for the Assessment Year 2006-07 - reg.
The order Dated 02.11.2012 for Assessment Year may be read as, a draft order u/s.144C read with section 143(3) of the Income Tax Act, 1961. Therefore, the demand notice/penalty notice, stands withdrawn and not enforceable. You have the option to apply before DRP or CIT (A) for resolution of dispute."
6. Mr. Tarandeep Singh submitted that such a corrigendum order can neither be reckoned as draft assessment order nor order passed u/s.154; and otherwise I.T.As. No.6288 & 6741/DEL/2013 6 also such a corrigendum order is beyond the limitation period as prescribed under Section 153, because the outer limit for passing the assessment order was 03.11.2012. Accordingly, he submitted that once the assessment order was passed on 02.11.2012 which was a final assessment order, then no order could have been passed by the Assessing Officer either rectifying the same or by way of a corrigendum so as to say that such an order passed by him was a draft assessment order. In support, he strongly relied upon the judgment of Hon'ble Madras High Court in the case of Vijay Television Pvt. Ltd. vs. DRP and Ors, reported in (2014) 369 ITR 113 (Mad.), wherein the Hon'ble High Court has held that if Assessing Officer has passed a final assessment order u/s.143(3) instead of passing the draft assessment order u/s.144C, then there is a clear cut violation of procedure laid down under the Act, and therefore, such an order needs to be set aside/cancelled, His Lordship in the said judgment has clarified that a subsequent corrigendum issued by the Assessing Officer modifying the final order of the assessment to be read as draft assessment order after the limitation period, would not cure the defect in the existing original order. This judgment of Madras High Court clearly clinches the issue in favour of the assessee and hence the impugned final assessment order passed by the Assessing Officer on 30th October, 2013 is unsustainable. He further submitted that this judgment of Hon'ble Madras High Court has been followed by the Hon'ble Jurisdictional High Court by the Division Bench in the case of Turner International Pvt. Ltd. vs. DCIT, reported in (2017) 82 Taxmann.com 125 (Del), I.T.As. No.6288 & 6741/DEL/2013 7 wherein their Lordships while interpreting the provision of Section 144C(1) held that; failure of Assessing Officer to adhere to the mandatory requirement of Section 144C(1) would result in invalidation of the final assessment order and consequently the entire demand and penalty proceedings. Again similar principle has been reiterated in a very detailed manner by the Hon'ble Jurisdictional High Court in the case of JCB India Ltd. vs. DCIT, in WP(C) No.3399/2016 vide judgment and order dated 17.09.2017, wherein again their Lordships have held that such a defect is not curable even u/s.292B. Thus, in the wake of such binding precedence of Hon'ble Jurisdictional High Court, the impugned final assessment order passed by the Assessing Officer has to be declared as invalid being barred by limitation.
7. On the other hand, learned DR, appearing on behalf of the Revenue submitted that here in this case though the final assessment order was passed on 02.11.2012, but immediately thereafter the Assessing Officer realized his mistake and rectified the same by issuing a corrigendum on 07.11.2012, whereby he has clearly clarified that the earlier order should be read as draft assessment order u/s.144C r.w.s. 143(3) and the entire demand and penalty notices stand withdrawn and shall not be enforceable. Such a corrigendum has been passed much before the time limit prescribed in the demand notice, i.e., less than 30 days. Distinguishing the judgment of Hon'ble Madras High Court in the case of Vijay Television (supra), he submitted that there is an observation by the Court that the Assessing Officer had I.T.As. No.6288 & 6741/DEL/2013 8 called for petitioner to pay the tax amount and also levy penalty u/s.271 which is absent here in this case, because the grace period of 30 days had not expired in the case of the assessee and within 5 days of passing of the order, corrigendum was issued. Hence in such circumstances, it cannot be held that demand still existed. Here in this case by virtue of this corrigendum issued by the Assessing Officer on 07.11.2012, it is ardently clear that the order passed by the Assessing Officer on 02.11.2012 was only a draft assessment order which was passed within the time limit prescribed under the Act. He further submitted that here in this case, the DRP has entertained the draft assessment order and this issue was not raised before the DRP that such an order is not a draft assessment order or it suffers any legal infirmity. This only goes to show that assessee itself treated it as draft assessment order. Hence, it cannot be held that the order passed by the Assessing Officer is time barred and the letter issued by the Assessing Officer is only clarificatory that earlier order should be read as draft assessment order and the entire demand notice was withdrawn. Thus, he submitted that the order dated 02.11.2012 is a draft assessment order passed within the limitation time and consequently the final assessment order is correct in law.
8. By way of rejoinder, Mr. Tarandeep Singh, pointed out that this precise issue and facts were also involved in the case before the Hon'ble Madras High Court wherein within the period of 30 days as given in the demand notice corrigendum order was passed withdrawing the said demand notice as well I.T.As. No.6288 & 6741/DEL/2013 9 as the penalty notice and also the Assessing Officer had mentioned that earlier order should be read as draft assessment order. In that case also, there was an argument by the Department that the DRP has entertained the said order as draft assessment order, and therefore, once the petitioner company had approached the DRP treating the order passed by the Assessing Officer as draft assessment order then petitioner company is estopped from questioning the same very order though it is a final order. This particular argument has specifically been rejected by the Hon'ble High Court. He further relied upon the decision of ITAT Mumbai Bench in the case of Lionbridge Technologies Pvt. Ltd. vs. DCIT, reported in (2015) 171 TTJ 684 (Mum.), wherein in that case where the assessment was restored back by the Tribunal to the stage of passing of the draft assessment order and thereafter the Assessing Officer had passed a fresh assessment order without adhering to provision of Section 144C (1), within the time limit prescribed, then such an assessment order is not enforceable in law. Thus, in the light of the judicial precedence and without there being any contrary decision of Jurisdictional High Court on this point, the impugned final assessment order needs to be quashed on the ground that the earlier order passed by the Assessing Officer on 02.11.2012 was the final assessment order, without following the procedure laid down u/s.144C(1) and consequently, the impugned order is bad in law as the corrigendum passed by the Assessing Officer rectifying the earlier order is clearly barred by limitation and would not cure the legal defect crept in the said order.
I.T.As. No.6288 & 6741/DEL/2013 109. We have heard the rival submissions and also perused the relevant facts qua the issue of limitation raised by the assessee by way of additional ground. First of all, the additional ground raised by the assessee is merely a clarification of issue raised by the assessee in original ground no.2 and in any case being an issue of limitation and jurisdictional issue, the same can be raised at any stage if all the material on record are available to decide such an issue and does not require any investigation of fact. Hence in view of the Hon'ble Supreme Court Judgment in the case of National Thermal Power Company Ltd. vs. CIT, reported in (1998) 229 ITR 383; and in the light of the judgment of Hon'ble Supreme Court in the case of CIT vs. Sinhgad Technical Education Society, reported in 397 ITR 374, we are admitting the additional ground raised by the assessee.
10. From the facts as discussed above, following chronology of events can be culled out:
Particulars Date Date of Commencement of Special Audit 09-Mar-2012 Special Audit report issued by auditor 04-Sep-2012 Time period for completion of assessment as per section 03-Nov-2012
153 of the Income Tax Act - also acknowledged by AO vide letter dated 27th September 2012 Assessment Order passed by AO u/s 143(3) of the Income 02-Nov-2012 Tax Act - demand notice u/s 156, show cause notice u/s 274 and ITNS-150 issued I.T.As. No.6288 & 6741/DEL/2013 11 Corrigendum issued by AO - demand notice, penalty 07-NOV-2012 notice withdrawn Objections filed before DRP as per section 144C of the Act 04-Dec-2012 DRP directions issued on 16-Aug-2013 Assessment order u/s 143(3) r.w.s. 144C passed by the AO 30-0ct-2013 Here in this case, it is an undisputed fact that limitation for passing the draft assessment order in terms of Section 153 was expiring on 03.11.2012. The Assessing Officer had in fact passed the assessment order on 02.11.2012, but it was passed u/s. 143(3) as final assessment and said assessment order also accompanied with demand notice u/s.156 and a show cause notice u/s. 274. The said assessment order clearly was a final assessment order and was not in accordance with procedure laid down in Section 144C sub Section (1), (2) & (3), which for the sake of ready reference is reproduced hereunder:
144C "(1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,--
(a ) file his acceptance of the variations to the Assessing Officer; or I.T.As. No.6288 & 6741/DEL/2013 12 (b ) file his objections, if any, to such variation with,--
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if--
(a ) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b ) no objections are received within the period specified in sub- section (2)."
11. From the plain reading of the aforesaid provision, it is clear that the Assessing Officer has to forward a draft assessment order to the assessee if he proposes to make any variation in the income or loss return which is prejudicial to the interest of the assessee. On receipt of the said draft assessment order, the assessee is eligible within the time period of 30 days of receipt of such order either to file its acceptance on such variation before the Assessing Officer; or can file his objection to such variation with the DRP. It was only when the assessee intimates to the Assessing Officer that he has accepted the variation or raises no objection within 30 days, then he has to complete the assessment on the basis of the draft assessment order. Here in this case, clearly the Assessing Officer has not adhered to the procedure laid down u/s.144C as the assessment order dated 02.11.2012 which though was passed under the period of limitation, but was passed as final assessment order instead of 'draft assessment order' which he could not have passed under the expressed provision of the law as stated above. Such an assessment order later on has been stated by the Assessing Officer that it I.T.As. No.6288 & 6741/DEL/2013 13 should be read as 'draft assessment order u/s.144C r.w.s. 143(3') and also stated that demand notice/penalty notice stand withdrawn and will not be enforceable. By way of such corrigendum letter dated 07.11.2012, the Assessing Officer is now seeking to validate the final assessment order by stating that it should be treated and read as 'draft assessment order'. Now whether such subsequent corrigendum letter issued after period of limitation can validate the earlier assessment order, which admittedly has been passed in complete violation of procedure lays down in Section 144C. This precise issue as pointed out by the learned counsel had been discussed threadbare by the Single Judge of Hon'ble Madras High Court in the case of Vijay Television (supra), the relevant observation and the findings of the Hon'ble High Court reads as under:
"21. As rightly pointed out by the learned senior counsel for the petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand as also imposed penalty. Such demand has to be raised only after a final order has been passed determining the tax liability. The very fact that the taxable amount has been determined itself would show that it was passed as a final order. In fact, a notice for demand under Section 156 of the Act was issued pursuant to such order dated 26.03.2013 of the second respondent. Both the order dated 26.03.2013 and the notice for demand thereof have been served simultaneously on the petitioner. Therefore, not only the assessment is complete, but also a notice dated 28.03.2013 was issued thereon calling upon the petitioner to pay the tax amount as also penalty under Section 271 of the Act. Thereafter, the petitioner was given an opportunity of hearing on
12.04.2013. Subsequently, the second respondent realised the I.T.As. No.6288 & 6741/DEL/2013 14 mistake in passing a final order instead of a draft assessment order which resulted in issuing a corrigendum on 15.04.2013. In the corrigendum it was only stated that the order passed on 26.03.2013 under Section 143C of the Act has to be read and treated as a draft assessment order as per Section 143C read with Section 93CA (4) read with Section 143(3) of the Act. In and by the order dated 15.04.2013, the second respondent granted thirty days time to enable the assessee to file their objections. On receipt of the corrigendum dated 15.04.2013, the petitioner company approached the first respondent, but the first respondent declined to issue any direction to the assessment officer on the ground that the first respondent has got jurisdiction only to entertain such an appeal if the order passed by the second respondent is a pre- assessment order. Therefore, it is evident that the first respondent declined to entertain the objections raised by the petitioner company on the ground that the order passed by the second respondent is not a draft assessment order, rather it is a final order. Thus, the first respondent had treated the order dated 26.03.2013 of the second respondent as a final order and therefore it refused to entertain the objections filed on behalf of the petitioner company.
22. As mentioned supra, as per Section 144C(1) of the Act, the second respondent-assessing officer has no right to pass a final order pursuant to the recommendations made by the TPO. In fact, the second respondent-assessing officer himself has admitted by virtue of the corrigendum dated 15.04.2013, that the order dated 26.03.2013 is only a final order and it was directed to be treated as a draft assessment order. In this context, it is worthwhile to refer to the decision of the Honourable Supreme Court in the decision reported in (Deepak Agro Foods vs. State of Rajasthan and others) reported in (2008) 16 VST 454 (SC) wherein in Para No.10, the I.T.As. No.6288 & 6741/DEL/2013 15 Honourable Supreme Court discussed as to when an order could be construed as a final order:-
"10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore- extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period."
23. It is evident from the above decision of the Honourable Supreme Court that if an order is passed beyond the statutory period prescribed, such order is a nullity and has no force of law. In that case before the Honourable Supreme Court, the period for assessment proceedings expired and thereafter, fresh assessment orders have been issued by anti-dating it. In those circumstances, it was held that the High Court ought not to have remanded the matter back to the assessment officer and by doing so, the statutory period prescribed for completion of assessment has been extended by conferring jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period. In that case, the Honourable Supreme Court also held that there is a distinction between an order which is a nullity and an order which is irregular and illegal. Where an authority making order lacks inherent jurisdiction, such an order will be null and void ab initio, I.T.As. No.6288 & 6741/DEL/2013 16 as the defect of jurisdiction goes to the root of the matter and strikes at his very authority to pass any order and such a defect cannot be cured even by consent of the parties.
24. This decision squarely applies to the facts of this case. In this case, the order passed by the second respondent lacks jurisdiction especially when it is beyond the period of limitation prescribed by the statute. When there is a statutory violation in not following the procedures prescribed, such an order cannot be cured by merely issuing a corrigendum.
xxx xxx xxx xxx xxx xxx xxx
33. The decision of the Division Bench of the Andhra Pradesh High Court deals with an identical issue as that of the present case. In this case, against the order passed by the second respondent on 26.03.2013, the petitioner filed objections before the DRP, the first respondent herein and the first respondent refused to entertain it by stating that the order passed by the second respondent is a final order and it had jurisdiction to entertain objections only if it is a draft assessment order. While so, the order dated 26.03.2013 of the second respondent can only be termed as a final order and in such event it is contrary to Section 144C of the Act. As mentioned supra, in and by the order dated 26.03.2013, the second respondent determined the taxable amount and also imposed penalty payable by the petitioner. According to the learned senior counsel for the petitioners, even as on this date, the website of the department indicate the amount determined by the second respondent payable by the company inspite of issuance of the corrigendum on 15.04.2013 as a tax due amount. Thus, while issuing the corrigendum, the second respondent did not even withdraw the taxable amount determined by him or updated the status in the website. In any event, such an order dated I.T.As. No.6288 & 6741/DEL/2013 17 26.03.2013 passed by the second respondent can only be construed as a final order passed in violation of the statutory provisions of the Act. The corrigendum dated 15.04.2013 is also beyond the period prescribed for limitation. Such a defect or failure on the part of the second respondent to adhere to the statutory provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013. By issuing the corrigendum, the respondents cannot be allowed to develop their own case. Therefore, following the order passed by the Division Bench of the Andhra Pradesh High Court, which was also affirmed by the Honourable Supreme Court by dismissing the Special Leave Petition filed thereof, on 27.09.2013, the orders, which are impugned in these writ petitions are liable to be set aside."
12. In the aforesaid judgment, the Hon'ble High Court had dealt with precisely the same situation, wherein the Assessing Officer had passed the assessment order on 26.03.2013 which was a final assessment order and later on the Assessing Officer had issued a corrigendum on 15.04.2013, i.e., within the period of 30 days as given in the demand notice stating that the final assessment order dated 26.03.2013 should be read as draft assessment order. In the said judgment, one of the argument taken by the Revenue before the Hon'ble High Court which has been taken by the learned DR also before us, that once the assessee has approached the DRP, then assessee is estopped from questioning the same order even though it was final assessment order. The Hon'ble High Court has turned down such a plea of the Revenue. Further the Hon'ble High Court referring to the judgment of Hon'ble Supreme Court in the I.T.As. No.6288 & 6741/DEL/2013 18 case of Deepak Agro Foods vs. State of Rajasthan and others, reported in (2008) 16 VST 454 (SC), held that if an order has been passed beyond the statutory period prescribed then such an order is nullity and has no force in law and consequently the corrigendum issued by the Assessing Officer cannot nullify the period of limitation. Further Hon'ble Court also observed that the assessment order dated 26.03.2013 has to be reckoned as the final assessment order which was in contravention of Section 144C and any subsequent corrigendum beyond the period of limitation will not cure the defect and will not revive the limitation. Thus, from the aforesaid judgment following corollory or proposition can be culled out:-
Firstly, the procedure laid down u/s.144C is to be strictly adhered too and such a non adherence cannot be cured;
Secondly, when there is a violation of the statute and jurisdiction/limitation ceases to exist, the order cannot be cured merely by issuing a corrigendum and;
Lastly, corrigendum issued after a period of limitation for which jurisdiction to pass order ceases then it cannot revive limitation. The defect is fatal which cannot be cured even by consent.
13. The aforesaid proposition of the Hon'ble Madras High Court had been referred and followed by the Division Bench of the Hon'ble Jurisdictional High Court in the case of Turner I.T.As. No.6288 & 6741/DEL/2013 19 India Pvt. Ltd., wherein Their Lordships had observed and held as under:
"10. The short ground on which the aforementioned final assessment orders and the consequent demand notices have been challenged is that there was non-compliance with the mandatory provision contained in Section 144C(1) of the Act requiring the AO to first frame draft assessment orders.
11. The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of Section 144C(1) of the Act is no longer res intregra. There is a long series of decisions to which reference would be made presently.
12. In Zuari Cement Ltd. vs. ACIT (decision dated 21st February, 2013 in WP(C) No.5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C(1) of the Act would result in rendering the final assessment order "without jurisdiction, null and void and unenforceable." In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] on 27th September, 2013.
13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113 (Mad.), a similar question arose. There, the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently, not only the final assessment order but also the corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) I.T.As. No.6288 & 6741/DEL/2013 20 quashed the final order of the AO and the demand notice. Interestingly, even as regards the corrigendum issued, the Madras High Court held that it was beyond the time permissible for issuance of such corrigendum and, therefore, it could not be sustained in law.
14. Recently, this Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of INdia [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) , the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) as well as the Bombay High Court in International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46, came to the same conclusion.
15. Mr. Dileep Shivpuri, learned counsel for the Revenue sought to contend that the failure to adhere to the mandatory requirement of issuing a draft assessment order under Section 144C(1) of the Act would, at best, be a curable defect. According to him the matter must be restored to the AO to pass a draft assessment order and for the Petitioner, thereafter, to pursue the matter before the DRP.
16. The Court is unable to accept the above submission. The legal position as explained in the above decisions in unambiguous. 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.
17. For the aforementioned reasons, the final assessment orders dated 31st March, 2015 passed by the AO for AYs 2007-08 and 2008-09, the consequential demand notices issued by the AO and the initiation of penalty proceedings are hereby set aside."
[Emphasis in bold is ours] I.T.As. No.6288 & 6741/DEL/2013 21
14. Thus, the Hon'ble Jurisdictional High Court has clearly held that if the Assessing Officer has not mandatorily adhered to the requirements of first passing the 'draft assessment order' in terms of Section 144C (1), then it would result in validation of final assessment order and consequently the entire demand and penalty proceedings ensued is illegal. This judgment was again discussed in detail by the subsequent judgment of the Hon'ble Jurisdictional High Court in the case of JCB India Ltd. (supra), wherein the Hon'ble High Court after extensively quoting the case of Turner International India Pvt. Ltd. vs. DCIT, reported in (2017) 82 taxmann.com 125 (Del.), had observed and held as under:
"19. As already noted, the final assessment order of the AO stood vitiated not on account of mere irregularity but since it was an incurable illegality. Section 292B of the Act would not protect such an order. This has been explained by this Court in its decision dated 17th July 2015 passed in ITA No. 275/2015 (Pr. Commissioner of Income Tax, Delhi-2, New Delhi v. Citi Financial Consumer Finance India Pvt. Ltd.) where it was held:
"Section 292B of the Act cannot be read to confer jurisdiction on the AO where none exists. The said Section only protects return of income, assessment, notice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings, provided the same are in substance and in effect in conformity with the intent of purposes of the Act."
The Court further observed that Section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. As the Court explained, "the issue involved is not about a mistake in I.T.As. No.6288 & 6741/DEL/2013 22 the said order but the power of the AO to pass the order."
15. The sequitur of the aforesaid judgments of the Hon'ble Jurisdictional High Court, which can be culled out are as under:-
Firstly, Assessing Officer has to follow the mandatory procedure of Section 144C (1), i.e., to pass a draft assessment order and if such a draft assessment order has not been passed and instead final assessment order has been passed, then such a final assessment order is null and void;
Secondly, merely by issuing a corrigendum, final assessment order passed cannot be converted into a draft assessment order especially when such corrigendum has been passed beyond the period of limitation; and Lastly, if the draft assessment order has not been passed in accordance with the procedure laid down in Section 144C (1) and instead final assessment order has been passed though within the limitation time, then such an order cannot be cured after the limitation has expired by any subsequent rectification proceedings or corrigendum and in such a situation all the subsequent proceedings and final assessment order will get invalidated.
It is a trite proposition that errors which can be rectified either u/s.154 or some error in the printing work for which a corrigendum has been issued, cannot be resorted for curing I.T.As. No.6288 & 6741/DEL/2013 23 the defect of jurisdictional nature and if there is an error of jurisdiction or limitation, then same cannot be validated by such an order. Rectification orders can only be exercised in respect of an order which is valid on the date of proposed rectification and if the order itself was void ab initio for want of following the correct procedure of law then such a rectification cannot revive its legality.
16. Accordingly, we hold that the proposed corrigendum issued by the Assessing Officer so as to cure the defect of the original final assessment order is bad in law and same could not have been done and consequently entire subsequent proceedings and final assessment order dated 30.10.2013 is held to be invalid being barred by limitation and is hereby quashed.
17. In view of the aforesaid findings, the assessee's appeal is treated as allowed whereas the Revenue's appeal is treated as dismissed. Since impugned assessment order itself has been held invalid, all the grounds raised on merits become purely academic and same is treated as infructuous.
18. In the result, the appeal of the Revenue is dismissed and the appeal of the Assessee is allowed.
Order pronounced in the open Court on 13th April, 2018.
Sd/- Sd/-
[R.K. PANDA] [AMIT SHUKLA]
ACCOUNTANT MEMBER JUDICIAL MEMBER
DATED: 13th April, 2018
I.T.As. No.6288 & 6741/DEL/2013 24
PKK:
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
Assistant Registrar