Income Tax Appellate Tribunal - Chennai
Assistant Commissioner Of Income Tax, ... vs Transworld Garnet India Private ... on 4 May, 2026
आयकर अपीलीय अधिकरण, 'बी' न्यायपीठ, चे न्नई
IN THE INCOME TAX APPELLATE TRIBUNAL
'B' BENCH, CHENNAI
श्री मनु कुमार गिरर, न्याययक सदस्य एवं श्री एस. आर. रघुनाथा, लेखा सदस्य के समक्ष
BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND
SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER
आयकर अपीलसं./ITA No.4142/CHNY/2025
ननर्ाारण वर्ा / Assessment Year: 2018-19
The Assistant Commissioner Transworld Garnet India
of Income Tax, vs. Private Limited,
Central Circle-2, New No.14, Old No.500,
Madurai. Pantheon Road,
Third Floor, Egmore
Chennai-600 008.
[PAN: AAACT-3408-N]
(अपीलाथी/Appellant) (प्रत्यथी/Respondent)
अपीलाथी की ओर से/ Appellant by : Mr. R. Venkata Raman, C.A
प्रत्यथी की ओर से /Respondent by : Mr. Shiva Srinivas, CIT
सुनवाई की तारीख/Date of Hearing : 22.04.2026
घोर्णा की तारीख /Date of : 04.05.2026
Pronouncement
आदे श / O R D E R
PER S. R. RAGHUNATHA, AM:
The present appeal filed by the Revenue is directed against the order dated 17.10.2025 passed by the Learned Commissioner of Income Tax (Appeals)-19, Chennai [hereinafter referred to as "Ld.CIT(A)"], arising from the assessment order dated 30.03.2024 passed by the Deputy Commissioner of Income Tax, Central Circle-2, Madurai [hereinafter referred to as "the AO"] u/s.153A r.w.s 263 of the Income-tax Act, 1961 [hereinafter referred to as "the Act"], for the Assessment Year 2018-19.
2 ITA No.4142/Chny/20252. The Revenue has raised the following grounds of appeal:
1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts and in law.
2. The Ld.CIT(A) erred in giving relief to the assessee as the TPO made an upward adjustment of Rs.39,21,15,575/- to the value of inter-unit transfers and directed re-computation of the deduction u/s.10AA vide order u/s.92CA(3), instead of annulling the assessment order, the Ld.CIT(A) ought to have set aside the order directing the AO to make a fresh assessment after issue of draft order u/s.144C(1) to the assessee proposing the adjustments to be made.
3. The Ld.CIT(A) erred in deletion of the addition made without taking into consideration the recent directions of the Hon'ble High Court of Madras in (Suo Motu PIL) WP No.1592 of 2015 involving 'Illegal Mining and Sale of 'Beach Sand Minerals' in which the present assessee is a respondent and against which serious observations of Illegal trade practices have been noted by the Hon'ble High Court, Madras in its order dated 17.02.2025, the issue of the total turnover & the Net profit thereon needs a revisitation accordingly.
4. For these grounds and any other ground including amendment of grounds that may be raised during the course of appeal proceedings, the Order of the Ld CIT(Appeals) may be set aside and that of the Assessing Officer may be restored.
3. The brief facts of the case as emanate from the records are that the assessee is a Private Limited Company engaged in the business of manufacture and processing of Garnet Abrasive of various grades and Ilmenite. The assessee operates two industrial undertakings in the State of Andhra Pradesh, namely, one unit situated at Visakhapatnam within a Special Economic Zone (SEZ Unit) and another functioning as a 100% Export Oriented Unit (EOU) at Srikakulam, both of which are engaged in the manufacture and export of Garnet.
4. A search and seizure action u/s.132 of the Act, was carried out in the case of the assessee and its group concerns on 25.10.2018.
5. For the impugned assessment year, the assessee filed its return of income u/s.139(4) of the Act on 29.03.2019, declaring a loss of 3 ITA No.4142/Chny/2025 Rs.17,32,18,221/- under the normal provisions of the Act and book profit of Rs.1,99,15,237/- u/s.115JB of the Act.
6. Subsequently, the case of the assessee was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) mechanism on account of Specified Domestic Transactions entered into by the assessee during the relevant previous year, the aggregate value whereof, as disclosed in Form No.3CEB, was Rs.21,77,30,625/-. Accordingly, notice u/s.143(2) of the Act came to be issued on 22.09.2019.
7. In consequence of the search proceedings, the pending scrutiny assessment stood abated by operation of law. Thereafter, the jurisdiction over the case was centralized with the Assistant Commissioner of Income Tax, Central Circle-2, Madurai, vide order dated 26.07.2019, and notice u/s.153A of the Act was issued on 27.02.2020. The assessment was thereafter completed u/s.153A r.w.s 143(3) of the Act vide order dated 06.05.2021 determining the total income at 'Nil'.
8. Thereafter, the Principal Commissioner of Income Tax, Central Circle-2, Chennai, in exercise of revisionary jurisdiction u/s.263 of the Act, initiated proceedings on the premise that the assessment order passed u/s.153A r.w.s 143(3) of the Act was erroneous insofar as it was prejudicial to the interests of the Revenue. Vide order dated 21.01.2022 passed u/s.263 of the Act, the Ld.PCIT set aside the assessment order dated 06.05.2021 and directed the AO to frame a de novo assessment after making a reference to the Transfer Pricing Officer (hereinafter referred to as "the TPO") u/s.92CA of the Act for determination of the Arm's Length Price of the Specified Domestic Transactions in accordance with law.
9. Pursuant to the aforesaid directions, the AO referred the matter to the TPO u/s.92CA of the Act. Consequential notices under sections 143(2) and 4 ITA No.4142/Chny/2025 142(1) of the Act were issued on 10.02.2023 and 29.01.2024 respectively, and the TPO passed an order u/s.92CA(3) of the Act on 25.01.2024.
10. It was observed by the TPO that during the relevant previous year, the assessee had undertaken inter-unit transfer of Garnet from its Srikakulam EOU to its SEZ Unit at Visakhapatnam aggregating to Rs.21,77,30,625/-. The Srikakulam Unit had transferred 52,280 tonnes of Garnet at Rs.4,165/- per tonne. According to the TPO, such transfer price was substantially lower than the average price of Garnet prevailing in Andhra Pradesh during Financial Year 2017-18, which, as per the Indian Minerals Yearbook 2018 published by the Ministry of Mines, was Rs.11,665 per tonne. The TPO further noted that the principal manufacturing functions were undertaken by the Srikakulam Unit and formed a view that the depressed transfer pricing arrangement was structured with the object of shifting profits to the SEZ Unit so as to avail enhanced deduction u/s.10AA of the Act. Proceeding on the aforesaid basis, the TPO substituted the transfer price with the alleged Arm's Length Price of Rs.11,665/- per tonne and consequently proposed an upward adjustment of Rs.39,21,15,575/- to the Specified Domestic Transactions.
11. The aforesaid adjustment proposed by the TPO vide order dated 25.01.2024 was incorporated by the AO while framing the assessment u/s.153A r.w.s 263 of the Act vide order dated 30.03.2024. Consequently, the AO passed the impugned assessment order assessing the total income of the assessee at Rs.21,88,97,354/- after making an addition of Rs.39,21,15,575/- on account of transfer pricing adjustment in respect of the Specified Domestic Transactions.
12. Aggrieved of the above assessment order, assessee carried the matter in appeal before the Ld.CIT(A).
13. The assessee, before the Ld.CIT(A), assailed the validity of the impugned final assessment order dated 30.03.2024 passed u/s.153A r.w.s. 263 of the Act, 5 ITA No.4142/Chny/2025 primarily on the legal ground that the same stood vitiated for complete non- compliance with the mandatory procedure prescribed u/s.144C of the Act.
14. It was submitted that the assessee squarely fell within the ambit of an "eligible assessee" as defined u/s.144C(15)(b), inasmuch as the TPO, vide order dated 25.01.2024 passed u/s.92CA of the Act, had proposed an upward transfer pricing adjustment of Rs.39,21,15,575/-, which was admittedly prejudicial to the interest of the assessee. In such circumstances, it was contended that the AO was statutorily bound, in terms of section 144C(1) of the Act, to first forward a draft assessment order incorporating the proposed variations, thereby enabling the assessee to exercise its substantive statutory right of filing objections before the Dispute Resolution Panel u/s.144C(2) of the Act.
15. According to the assessee, instead of adhering to the aforesaid mandatory statutory framework, the AO directly proceeded to pass the final assessment order u/s.153A r.w.s.263 of the Act without issuance of any draft assessment order. By such action, the assessee was unlawfully deprived of its vested right to approach the DRP, which right was specifically introduced by the legislature w.e.f. 01.10.2009 as an alternate dispute resolution mechanism intended to expedite adjudication in eligible cases involving prejudicial variations.
16. The assessee elaborately submitted before the Ld.CIT(A) that the scheme of section 144C of the Act is mandatory and jurisdictional in character. It was argued that where prejudicial variation is proposed in the case of an eligible assessee, the AO has no discretion but to first issue a draft order; thereafter, depending upon whether objections are filed before the DRP or not, the final assessment order can be framed only in accordance with section 144C(3), section 144C(5), and section 144C(10), as the case may be. Thus, bypassing the draft order stage was contended to be not a mere procedural lapse, but an incurable illegality striking at the root of jurisdiction.
6 ITA No.4142/Chny/202517. It was further urged that the omission to issue a draft assessment order could not be cured by invoking section 292B of the Act, since the defect was not one of form but one of inherent lack of jurisdiction, rendering the final assessment order void ab initio.
18. In support of the aforesaid proposition, the assessee placed before Ld.CIT(A) extensive reliance upon judicial precedents, inter alia, the judgments of the Hon'ble Madras High Court in Enfinity Solar Solutions (P.) Ltd. v. DCIT [2025] 176 taxmann.com 170 and Vijay Television (P.) Ltd. v. DRP [369 ITR 113], the Hon'ble Bombay High Court in SHL (India) (P.) Ltd. v. DCIT [438 ITR 317], the Hon'ble Delhi High Court in PCIT v. Sumitomo Corporation India (P.) Ltd. [2024] 166 taxmann.com 55, Turner International India Pvt. Ltd., JCB India Ltd., and the Hon'ble Gujarat High Court in C-SAM (India) Pvt. Ltd., wherein it has been consistently held that failure to first pass a draft assessment order u/s.144C(1) of the Act in the case of an eligible assessee renders the consequential final assessment order a nullity in law.
19. The assessee also specifically relied upon the order of this Tribunal in its own case for A.Y. 2009-10 in ITA No.1458/Mds/2013, wherein, following the ratio laid down by the Hon'ble Madras High Court in Vijay Television (P.) Ltd., it was held that omission by the AO to pass a draft assessment order is not a procedural irregularity but an incurable defect.
20. On the strength of the aforesaid statutory scheme and binding judicial precedents, the assessee submitted that the AO, by directly passing the final assessment order dated 30.03.2024 without issuance of draft assessment order, had acted wholly without jurisdiction, thereby depriving the assessee of a valuable substantive right before the DRP. It was, therefore, submitted before the Ld.CIT(A) that the impugned assessment order be quashed as void ab initio and set aside in limine for non-compliance with the mandatory provisions of section 144C of the Act.
7 ITA No.4142/Chny/202521. Considering the aforesaid submissions advanced by the assessee, the Ld.CIT(A) was pleased to quash the impugned assessment order dated 30.03.2024, framed by the AO u/s.153A r.w.s 263 of the Act, holding that the failure to issue a draft assessment order constituted a fatal procedural infirmity, thereby vitiating the entire assessment proceedings.
22. Upon due consideration of the assessment records, the impugned order passed u/s 153A r.w.s. 263 dated 30.03.2024, the written submissions of the assessee, and the judicial precedents cited, the Ld.CIT(A) held that the assessee squarely fell within the ambit of an "eligible assessee" as contemplated u/s.144C(15)(b) of the Act, since the assessment involved a transfer pricing adjustment pursuant to an order passed by the TPO u/s.92CA(3) of the Act. In such circumstances, the AO was mandatorily required to first forward a draft assessment order u/s. 144C(1) of the Act before passing the final assessment order.
23. The Ld.CIT(A) recorded a categorical finding that the AO, instead of complying with the statutory mandate of section 144C of the Act, directly passed the final assessment order on 30.03.2024 incorporating the TP adjustment of Rs.39,21,15,575/-, thereby depriving the assessee of its substantive statutory right to approach the DRP. It was held that such non-issuance of draft assessment order was not a mere procedural irregularity but a jurisdictional defect striking at the root of the assessment proceedings.
24. Relying upon the ratio laid down in Vijay Television (P.) Ltd. v. DRP (369 ITR 113) (Mad), JCB India Ltd. v. DCIT (398 ITR 189) (Del), Honda Siel Power Products Ltd., Zuari Cement Ltd., and the recent decision of the Hon'ble Madras High Court in Enfinity Solar Solutions (P.) Ltd. v. DCIT, the Ld.CIT(A) concluded that failure to adhere to section 144C(1) of the Act renders the final assessment order void ab initio, non est in law, and incapable of being cured u/s 292B.
8 ITA No.4142/Chny/202525. Accordingly, the Ld.CIT(A) quashed the assessment order dated 30.03.2024 as invalid for want of jurisdiction due to non-compliance with the mandatory procedure prescribed u/s.144C of the Act, and allowed the appeal in favour of the assessee. The relevant observations of the Ld.CIT(A) for ready reference are as under:
"6.2.1 In this ground, the appellant has contended that the AO erred in not having passed a draft order in terms of Section 144C (1) of the Act.
6.2.2 The undersigned notes that the appellant in this ground has challenged the validity of the order passed by the AO. The primary issue for adjudication in the present ground is the validity of the assessment order passed u/s 153A r.w.s. 263 of the Act dated 30.03.2024 without the issuance of a draft assessment order u/s 144C (1) of the Act as mandated under the Act. To substantiate the ground, the AR has submitted a detailed written submission and has relied upon various judicial decisions including the decision of the jurisdictional tribunal in the appellant's own case for the AY 2009-10.
6.2.3 The undersigned has carefully examined the issue under consideration. It is an undisputed fact that the appellant company is an "eligible assessee" within the meaning of section 144C(15)(b) of the Act, since a reference to the Transfer Pricing Officer (TPO) u/s 92CA was made with the approval of the Principal Commissioner of Income Tax, Central-2, Chennai, and an order u/s 92CA(3) of the Act dated 25.01.2024 was duly passed, proposing an upward adjustment of Rs.39,21,15,575/- to the value of inter-unit transfers of garnet. This adjustment was directly incorporated by the AO while completing the assessment u/s 153A r.w.s. 263, of the Act on 30.03.2024 resulting in the assessed income being determined at Rs.21,88,97,354/-, as against the returned loss of Rs.17,32,18,221/-.
6.2.4 However on examination of records, it is observed that the AO did not issue a draft order u/s 144C(1) proposing the adjustments to be made before passing the final assessment order. Instead, a final order of assessment was passed straightaway on 30.03.2024. This procedural lapse strikes at the root of jurisdiction and renders the assessment order invalid in law.
6.2.5 The provisions of Section 144C(1) of the Act provides that in the case of an eligible assessee, where any variation prejudicial to the interest of such assessee is proposed, the AO shall, before passing the assessment order, forward a draft of the proposed order of assessment to the assessee. Sub-section (2) further provides that the assessee may file objections before the Dispute Resolution Panel (DRP) within thirty days. Only after the DRP has issued its directions u/s 144C(5) of the Act the AO can pass the final order u/s 144C (13) of the Act. Thus, the issue of a draft order is a statutory pre-condition and not a mere procedural formality as mandated in the Act.
6.2.6 The appellant to substantiate its stand has relied upon a series of judicial precedents wherein various judicial forums have consistently held that non-issuance of a draft assessment order is a jurisdictional defect, which cannot be cured u/s 292B of the Act. The following decisions are noteworthy:9 ITA No.4142/Chny/2025
• Vijay Television (P.) Ltd. v. DRP & Others [(2014) 369 ITR 113 (Mad)] - The Hon'ble Madras High Court held that issuance of a draft order u/s 144C(1) is a mandatory requirement, and failure to do so vitiates the entire assessment. The Court observed that such a lapse is not a procedural irregularity but a jurisdictional error, which cannot be rectified under section 292B.
• JCB India Ltd. v. DCIT [(2017) 398 ITR 189 (Del)] - The Hon'ble Delhi High Court ruled that where the AO fails to follow the mandatory procedure under section 144C(1) by not issuing a draft order, the resultant final assessment order is void ab initio and non est in law. The Court categorically held that the requirement of forwarding a draft assessment order is not optional, but a jurisdictional mandate.
• ESPN Software India (P.) Ltd. • v. UOI [(2009) 301 ITR 368 (Del)]
- The Hon'ble Delhi High Court clarified that non-issuance of a draft assessment order deprives the assessee of the statutory right to approach the DRP, rendering the assessment illegal and unenforceable.
• Honda Siel Power Products Ltd. v. CIT [(2015) 379 ITR 431 (SC)]
- The Hon'ble Supreme Court upheld the Delhi High Court's decision and affirmed that failure to comply with the mandatory procedure under section 144C results in an invalid assessment.
• Zuari Cement Ltd. v. ACIT [(2013) 50 SOT 389 (Hyd) (SB)] - The Special Bench of the ITAT, Hyderabad, held that the assessment order passed without following the procedure prescribed under section 144C(1) is void ab initio, and such a defect cannot be cured either by section 292B or by issuing a corrigendum thereafter.
• Lionbridge Technologies (P.) Ltd. v. ACIT [(2022) 142 taxmann.com 147 (Bom)] - The Hon'ble Bombay High Court reiterated that issuance of a draft assessment order is a mandatory statutory safeguard and not a procedural nicety. The absence of a draft order deprives the assessee of the valuable opportunity to file objections before the DRP, thereby vitiating the assessment.
6.2.7 Further, the Hon'ble Madras High Court in a recent decision in the case of Enfinity Solar Solutions (P.) Ltd. v DCIT [2025] 176 taxmann.com 170 (Madras) has held as under.
9. In a similar case, where the tribunal had set aside the Transfer Pricing adjustments and remanded the matter to AO/TPO, for de novo consideration, the Bombay High Court in CWT India Limited's case (supra), in which one of us [the Hon'ble Chief Justice] was a member, held that the failure to forward the draft assessment order would render the assessment order invalid.
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10. Similarly, the Delhi High Court on identical facts in JCB India Limited's case (supra) held as follows:
10 ITA No.4142/Chny/2025"14. The short question that arises for consideration is whether, after the remand proceedings, the AO could have, without issuing a draft assessment order under Section 144C of the Act, straightway issued the final assessment order.
15. Mr. Syali, learned Senior Counsel for the Assessee, referred to the decision of this Court dated 17th May 2017 passed in W.P. (C) No. 4260/2015 (Turner International India Pvt. Ltd. v. Deputy Commissioner of Income Tax, Circle 25(2), New Delhi) to urge that the AO could not have passed the final assessment order without complying with the mandatory requirement under Section 144C of the Act whereby first a draft order had to be issued in respect of which an objection can be filed by the Assessee before the DRP. The failure to do so, according to Mr. Syali, was not a mere irregularity. He further referred to a decision of the Gujarat High Court dated 31st July 2017 in Tax Appeal No. 542 of 2017 (Commissioner of Income Tax, Vadodara-2 v. C-Sam (India) Pvt. Ltd.).
16. In response, Mr. Sanjay Jain, learned Additional Solicitor General of India appearing for the Revenue, submitted that there was an efficacious alternative remedy available to the Petitioner to file appeals against the impugned final assessment orders passed by the AO. It is denied that it was mandatory on the part of the AO to pass a draft assessment order since this was a second round before the TPO pursuant to remand by the ITAT. Moreover, it was not as if the ITAT had set aside the entire assessment order of the AO. The setting aside was only in respect of the transfer pricing adjustment and that too with a specific direction to the AO for determining the arms length price "after considering fresh comparables." Since the assessment itself was not cancelled by the ITAT or completely set aside, it is the provisions of Section 153(3)(ii) of the Act which would apply. Mr. Jain submitted that the requirement of passing a draft assessment order under Section 144C was only in the first instance and not after the remand by the ITAT.
17. The Court is unable to agree with the submissions made on behalf of the Revenue by Mr. Jain. Section 144C (1) of the Act is unambiguous. It requires the AO to pass a draft assessment order after receipt of the report from the TPO. There is nothing in the wording of Section 144C (1) which would indicate that this requirement of passing a draft assessment order does not arise where the exercise had been undertaken by the TPO on remand to it, of the said issue, by the ITAT.
18. It was then contended by Mr. Jain that the assessment order passed by the AO should not be declared to be invalid because of the failure to first pass a draft assessment order under Section 144C of the Act. In this regard, reference is made to Section 292B of the Act.
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-11 ITA No.4142/Chny/2025
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."
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12. Further, it is well settled that where the assessment order is passed without a draft assessment order, it would be vitiated, as it is not a mere irregularity, but is an incurable illegality. This position of law has been reiterated in the judgments extracted supra.
6.2.8 The Hon'ble Madras High Court in Vijay Television (P.) Ltd v. DRP [2014] 369 ITR 113 (Mad) has held as under: -
"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 Deepak Agro Foods (supra) wherein in Para No.10, the 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 12 ITA No.4142/Chny/2025 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, 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."
6.2.9 In the present case, the AO, while passing the assessment order, directly adopted the ALP adjustment made by the TPO without first issuing a draft order u/s 144C(1) of the Act, thereby denying the appellant company its statutory right to object before the Dispute Resolution Panel. Such non- compliance is not a curable defect but a fatal error of jurisdiction.
6.2.10 It is also significant to bring on record that the jurisdictional tribunal in the appellant's own case for the AY 2009-10 vide ITA No. 1458/Mds/2013 has held that omission by the AO to pass draft assessment order is not a mere procedural irregularity and it cannot be cured at all. The relevant part of the decision of the Hon'ble ITAT is as under: -
"4. We have considered the rival submissions on either side and perused the material available on record. The question arises for consideration is can the Ld.AO make any variations in the income or loss written in respect of international transaction after 01.10.2009 without passing a draft assessment order. This issue was specifically considered by the Madras High Court in Vijay Television (P) Ltd supra. The Madras High Court after considering the judgment of the Andhra Pradesh High Court found that the omission to pass draft assessment order is not a mere procedure irregularity and it cannot be cured at all. This judgment of the Madras High Court is binding on all authorities in the State. Furthermore the Ld.DR very fairly submitted that the issue is covered by the judgment of the Madras High Court in Vijay Television (P) Ltd supra. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly, the same is confirmed."
6.2.11 In view of the binding judicial precedents and the clear statutory language of section 144C of the Act, the undersigned holds that the AO has failed to adhere to the mandatory procedure prescribed under law. The omission to issue a draft assessment order vitiates the entire assessment proceedings. Therefore, the assessment order passed u/s 153A r.w.s. 263 dated 30.03.2024 is void ab initio and without jurisdiction. Accordingly, the assessment order passed u/s 153A r.w.s. 263 dated 30.03.2024 is hereby annulled on this legal ground alone. Therefore, this ground is treated as allowed and the AO is directed to delete the addition(s) made for the AY 2018-19."
13 ITA No.4142/Chny/202526. Aggrieved of the above order of the Ld.CIT(A), Revenue is in appeal before this Tribunal.
27. The Ld.DR, appearing on behalf of the Revenue, vehemently supported the findings and conclusions recorded in the assessment order as well as the grounds raised in appeal. It was contended that the mere omission or failure on the part of the AO to pass a draft assessment order, as contemplated under the relevant statutory provisions, does not, by itself, render the final assessment order null, void, or liable to be quashed in limine.
28. Elaborating further, the Ld.DR submitted that such procedural lapse, if any, ought to be construed as a curable irregularity rather than a jurisdictional defect going to the root of the assessment proceedings. According to the Revenue, the substantive assessment proceedings having already been undertaken, the interests of justice would be better served by restoring the matter to the file of the AO, thereby affording the Revenue one further opportunity to rectify the procedural deficiency by first issuing the requisite draft assessment order in accordance with law, inviting objections from the assessee as per the prescribed mechanism, and thereafter completing the assessment afresh.
29. The Ld.DR thus prayed that, instead of annulling the impugned assessment on technical grounds, this Hon'ble Tribunal may be pleased to set aside the assessment order and remand the matter back to the file of the AO with appropriate directions to strictly adhere to the statutory procedure by passing the draft assessment order first, and thereafter finalize the assessment in due compliance with the provisions of the Act. In essence, the Revenue's plea was that the procedural omission should not defeat substantive adjudication on merits, and that an opportunity be granted to cure the defect in the larger interest of justice and proper administration of tax law.
14 ITA No.4142/Chny/202530. Per contra, the Ld.AR, appearing on behalf of the assessee, strongly supporting the impugned order passed by the Ld.CIT(A), submitted that the first appellate authority has correctly appreciated the statutory mandate embodied u/s.144C of the Act as well as the binding judicial precedents governing the issue. It was contended that there is no dispute on facts that the assessee is an "eligible assessee" within the meaning of section 144C(15)(b) of the Act, inasmuch as a reference was admittedly made to the TPO u/s.92CA of the Act and an adjustment prejudicial to the interest of the assessee was proposed and incorporated by the AO while framing the assessment. In such circumstances, the AO was statutorily bound to first forward a draft assessment order u/s.144C(1) of the Act before assuming jurisdiction to pass a final assessment order. The use of the expression "shall" in section 144C(1) of the Act leaves no room for discretion, and the statutory procedure prescribed therein is mandatory in nature. It was argued that section 144C of the Act is a complete code in itself, laying down a distinct mechanism whereby the draft assessment order is to be first issued, objections are to be invited before the DRP, directions are to be obtained from the DRP, and only thereafter can a final assessment order be passed. By completely bypassing this mandatory legislative framework, the AO acted in patent excess of jurisdiction, thereby vitiating the entire assessment proceedings.
31. The Ld. AR further submitted that the failure to issue a draft assessment order is not a mere procedural lapse or technical irregularity, but a substantive illegality which deprives the assessee of a valuable statutory right specifically conferred by Parliament, namely, the right to approach the DRP against the proposed variations. Such a right is not an empty formality, but a substantive safeguard intended to protect eligible assessee's from arbitrary transfer pricing and other prejudicial variations. Once this vested statutory remedy is denied, the resultant final assessment order becomes fundamentally illegal and unenforceable in law. It was therefore submitted that the omission strikes at the 15 ITA No.4142/Chny/2025 very root of the jurisdiction assumed by the AO and renders the final order void ab initio.
32. In support of the above proposition, the Ld.AR placed heavy reliance on the binding judgment of the Hon'ble Jurisdictional Madras High Court in Vijay Television (P.) Ltd. v. DRP (369 ITR 113), wherein it has been categorically held that non-issuance of a draft assessment order u/s.144C(1) of the Act is a jurisdictional defect and not a curable procedural error, and such an illegality cannot be salvaged either by corrigendum or by invoking section 292B of the Act. It was submitted that the ratio laid down by the Hon'ble Madras High Court squarely governs the present case and is binding on all authorities functioning within the State. Reliance was also placed on the judgments of the Hon'ble Delhi High Court in JCB India Ltd. and ESPN Software India Pvt. Ltd., the Hon'ble Bombay High Court in Lionbridge Technologies Pvt. Ltd., and the recent judgment of the Hon'ble Madras High Court in Enfinity Solar Solutions Pvt. Ltd., all of which uniformly reiterate that failure to comply with section 144C(1) of the Act renders the assessment order void ab initio and non est in law.
33. The Ld. AR also brought to notice that in the assessee's own case for A.Y. 2009-10, this Tribunal had already adjudicated this very issue in favour of the assessee by holding that omission to pass a draft assessment order is not a mere procedural irregularity and cannot be cured at all. It was therefore submitted that on principles of judicial consistency and discipline, the Revenue is barred from canvassing a contrary stand on identical facts, particularly when no distinguishing feature has been brought on record.
34. In response to the Revenue's contention that the omission to issue a draft order is a curable procedural defect, the Ld.AR submitted that such an argument is wholly misconceived and directly contrary to the settled distinction between "lack of jurisdiction" and "irregular exercise of jurisdiction." In the present case, the AO lacked the very authority to pass a final order in the absence of compliance with section 144C(1) of the Act, and therefore the defect 16 ITA No.4142/Chny/2025 goes to the root of the matter. Section 292B, according to the Ld.AR, can protect only technical mistakes in otherwise valid proceedings; it cannot cure a foundational defect where jurisdiction itself was never validly assumed. A statutory defect which extinguishes the assessee's right to approach the DRP cannot be treated as a mere irregularity.
35. The Ld.AR further submitted that the plea of the Revenue seeking restoration of the matter to the file of the AO for fresh compliance is equally untenable in law. Once an order is void ab initio, there remains no legally sustainable proceeding capable of being revived or restored. Remanding the matter to enable the AO to issue a draft order afresh would effectively amount to granting the Revenue a second opportunity to cure an incurable jurisdictional defect and would, in substance, confer fresh jurisdiction beyond the period prescribed by statute. Such a course has been specifically frowned upon by the Hon'ble Supreme Court and the Hon'ble Madras High Court, which have consistently held that where an order is a nullity, it cannot be revived by remand so as to enlarge statutory limitation or confer authority that did not originally exist.
36. It was argued that the Revenue's plea that substantive justice should prevail over technicalities is fundamentally flawed, since the present defect is not a technical breach but a violation of a mandatory statutory safeguard consciously enacted by Parliament. Where the statute prescribes a particular mode for assumption of jurisdiction, the authority must act strictly in that manner alone or not at all. The Tribunal, in exercise of appellate powers, cannot dilute the mandatory legislative command merely on considerations of equity, convenience, or administrative expediency. Accepting the Revenue's argument would render section 144C of the Act redundant and reduce the DRP mechanism to a discretionary formality, thereby defeating the very legislative intent behind introducing the provision.
17 ITA No.4142/Chny/202537. The Ld.AR, placing strong reliance upon the ratio laid down by the Hon'ble Bombay High Court in Hansgrohe India (P.) Ltd. v. Assessment Unit [2026] 185 taxmann.com 86, vehemently submitted that the AO, having admittedly passed the final assessment order directly without first issuing and serving upon the assessee a draft assessment order as mandatorily prescribed under section 144C of the Act, had committed a fundamental jurisdictional error which strikes at the very root of the assessment proceedings. It was contended that compliance with section 144C is not a mere procedural formality but a substantive statutory obligation, specifically enacted by the legislature to safeguard the rights of an eligible assessee, and any breach thereof renders the resultant final assessment order null, void ab initio, and legally unsustainable.
38. The Ld.AR further submitted that the Hon'ble Bombay High Court, in unequivocal terms, has held that failure to adhere to the mandatory procedure contemplated under section 144C of the Act cannot be cured by subsequently treating such invalid final assessment order as a draft assessment order, nor can the defect be rectified by restoring the matter to the AO for de novo compliance of the draft assessment mechanism. According to the Ld. AR, once the statutory mandate is violated at the threshold, the consequential order is vitiated in its entirety and becomes non est in the eyes of law.
39. It was thus argued that the statute does not confer any enabling power either upon the AO or upon appellate / judicial authorities to retrospectively regularise or validate such an incurable jurisdictional defect, particularly where the very assumption of authority to pass the final assessment order stood frustrated by non-observance of the condition precedent prescribed u/s.144C of the Act. The Ld.AR emphasized that in the absence of any express statutory sanction, neither a legal fiction nor an equitable construction can be invoked to revive proceedings that have already been rendered void due to foundational illegality.
18 ITA No.4142/Chny/202540. The Ld.AR also forcefully contended that any direction to remand the matter back to the file of the AO with an observation to construe the impugned final assessment order as a draft assessment order would be wholly futile, academic, and contrary to the statutory scheme, inasmuch as the limitation period prescribed under the Act for passing a valid final assessment order had already expired. Therefore, once the period of limitation stood exhausted, no lawful assessment could thereafter be framed in accordance with section 144C of the Act, and any such exercise would amount to conferring jurisdiction upon the AO contrary to law.
41. The Ld.AR further placed reliance upon the decision of the Coordinate Bench of the Delhi Tribunal in Urvashi Narain v. ITO [2023] 156 taxmann.com 189, and vehemently contended that once an assessment order is duly passed, the AO becomes functus officio qua such order and is not vested with any authority under the statute to review, withdraw, modify, or substitute the same by passing another assessment order, except in accordance with specific provisions expressly enabling such course. It was submitted that the Act does not confer any unfettered or inherent power upon the AO to tinker with a concluded assessment at his own discretion. Permitting such an exercise would lead to manifestly arbitrary and disastrous consequences, conferring upon the AO an unbridled licence to alter concluded assessments based on mere whims and caprice. Such a proposition, according to the Ld. AR, would be wholly contrary to the scheme and framework of the Act, apart from offending the well- settled canons of law governing finality, certainty, and sanctity of judicial and quasi-judicial proceedings.
42. In view of the above submissions, the Ld.AR prayed that the impugned assessment order, being vitiated by a fatal and non-curable jurisdictional defect and hence the action of the ld.CIT(A) cannot be disturbed or interfered by the Tribunal.
19 ITA No.4142/Chny/202543. The Ld. AR therefore submitted that the order of the Ld.CIT(A) does not suffer from any legal infirmity, as the first appellate authority has correctly followed the binding statutory framework and judicial precedents in holding that the assessment framed without issuance of a draft assessment order is void ab initio and without jurisdiction. Accordingly, it was prayed that the order of the Ld.CIT(A) annulling the assessment deserves to be upheld in toto and the grounds raised by the Revenue, being devoid of merit, are liable to be dismissed.
44. We have heard the submissions advanced by both the parties, perused the orders of the lower authorities, carefully examined the material placed on record, and duly considered the statutory framework as well as the judicial precedents governing the controversy in issue relied on by both the parties.
45. At the very outset, the short but substantial question which arises for our adjudication in the present appeal is whether, in the admitted factual matrix of the case, the AO, after receipt of the order passed by the TPO u/s.92CA(3) of the Act proposing an upward adjustment prejudicial to the interest of the assessee, could have lawfully assumed jurisdiction to directly pass a final assessment order u/s.153A r.w.s.263 of the Act without first complying with the mandatory statutory requirement of forwarding a draft assessment order as contemplated u/s.144C(1) of the Act.
46. Upon careful consideration, we find that the relevant foundational facts are not in dispute. It is an admitted and undisputed position borne out from the records that pursuant to the revisionary directions issued by the Ld.PCIT u/s.263 of the Act, reference was made by the AO to the TPO u/s.92CA of the Act for determination of the Arm's Length Price in respect of the 'Specified Domestic Transactions' undertaken by the assessee. Consequent thereto, the TPO vide order dated 25.01.2024 passed u/s.92CA(3) of the Act proposed an upward transfer pricing adjustment of Rs.39,21,15,575/-, which variation was clearly prejudicial to the interest of the assessee and was thereafter 20 ITA No.4142/Chny/2025 incorporated by the AO while framing the impugned assessment order dated 30.03.2024. Thus, by operation of section 144C(15)(b) of the Act, the assessee unmistakably fell within the statutory ambit of an "eligible assessee".
47. Once the assessee answers the description of an "eligible assessee" and a variation prejudicial to such assessee is proposed, the legislative command embedded in section 144C(1) of the Act becomes operative in mandatory terms. The provision employs the expression "shall", thereby unequivocally obligating the AO to first forward a draft of the proposed order of assessment to the assessee before passing any final order. The statutory scheme thereafter confers upon the assessee a valuable and substantive right to raise objections before the DRP u/s.144C(2) of the Act, whereafter alone the AO acquires jurisdiction to pass a final assessment order in conformity with the directions contemplated under the succeeding sub-sections of section 144C of the Act. Thus, section 144C of the Act is not a procedural embellishment but a complete code by itself, consciously enacted by Parliament to provide an alternate dispute resolution mechanism and to protect eligible assessee's against prejudicial variations without prior recourse to the DRP.
48. In the present case, however, the record unmistakably demonstrates that the AO, in patent disregard of the aforesaid mandatory legislative framework, bypassed the draft assessment stage in toto and proceeded straightaway to pass the final assessment order dated 30.03.2024. Such a course of action, in our considered view, amounts not merely to deviation from procedure, but to complete failure in satisfying the jurisdictional condition precedent prescribed by statute.
49. The contention advanced on behalf of the Revenue that such omission constitutes only a curable procedural irregularity incapable of invalidating the assessment does not impress us. The distinction between an irregular exercise of jurisdiction and absence of jurisdiction is too well settled to admit any ambiguity. Where the statute prescribes a particular mode for assumption of 21 ITA No.4142/Chny/2025 jurisdiction, the authority must act strictly in the manner so prescribed or not at all. Failure to satisfy a condition precedent to jurisdiction strikes at the root of the authority itself and renders the resultant order void ab initio. Section 292B of the Act, which cures only technical or clerical defects in proceedings otherwise validly initiated, cannot be invoked to salvage an order passed in derogation of an express statutory mandate where jurisdiction itself was never lawfully assumed.
50. This settled proposition of law is no longer res integra. The Hon'ble Jurisdictional High Court, in Vijay Television (P.) Ltd. v. DRP (2014) 369 ITR 113, has unequivocally held that failure to issue a draft assessment order in the case of an eligible assessee constitutes a substantive jurisdictional infirmity, and is not a mere procedural irregularity. Their Lordships have further categorically laid down that such a foundational defect is incapable of being cured either by issuance of a corrigendum or by invoking the provisions of section 292B of the Act. The relevant observations and ratio laid down by the Hon'ble High Court are reproduced hereunder:
"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 Deepak Agro Foods (supra) wherein in Para No.10, the 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."22 ITA No.4142/Chny/2025
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, 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."
51. We find that the aforesaid principle stands reiterated by the Hon'ble Madras High Court in its recent decision in Enfinity Solar Solutions (P.) Ltd. v. DCIT (2025) 176 taxmann.com 170 (Mad.), wherein their Lordships have held as under:
"9. In a similar case, where the tribunal had set aside the Transfer Pricing adjustments and remanded the matter to AO/TPO, for de novo consideration, the Bombay High Court in CWT India Limited's case (supra), in which one of us [the Hon'ble Chief Justice] was a member, held that the failure to forward the draft assessment order would render the assessment order invalid. ..................................................................................................
10. Similarly, the Delhi High Court on identical facts in JCB India Limited's case (supra) held as follows:
"14. The short question that arises for consideration is whether, after the remand proceedings, the AO could have, without issuing a draft assessment order under Section 144C of the Act, straightway issued the final assessment order.
15. Mr. Syali, learned Senior Counsel for the Assessee, referred to the decision of this Court dated 17th May 2017 passed in W.P. (C) No. 4260/2015 (Turner International India Pvt. Ltd. v. Deputy Commissioner of Income Tax, Circle 25(2), New Delhi) to urge that the AO could not have passed the final assessment order without complying with the mandatory requirement under Section 144C of the Act whereby first a draft order had to be issued in respect of which an objection can be filed by the Assessee before 23 ITA No.4142/Chny/2025 the DRP. The failure to do so, according to Mr. Syali, was not a mere irregularity. He further referred to a decision of the Gujarat High Court dated 31st July 2017 in Tax Appeal No. 542 of 2017 (Commissioner of Income Tax, Vadodara-2 v. C-Sam (India) Pvt. Ltd.).
16. In response, Mr. Sanjay Jain, learned Additional Solicitor General of India appearing for the Revenue, submitted that there was an efficacious alternative remedy available to the Petitioner to file appeals against the impugned final assessment orders passed by the AO. It is denied that it was mandatory on the part of the AO to pass a draft assessment order since this was a second round before the TPO pursuant to remand by the ITAT. Moreover, it was not as if the ITAT had set aside the entire assessment order of the AO. The setting aside was only in respect of the transfer pricing adjustment and that too with a specific direction to the AO for determining the arms length price "after considering fresh comparables." Since the assessment itself was not cancelled by the ITAT or completely set aside, it is the provisions of Section 153(3)(ii) of the Act which would apply. Mr. Jain submitted that the requirement of passing a draft assessment order under Section 144C was only in the first instance and not after the remand by the ITAT.
17. The Court is unable to agree with the submissions made on behalf of the Revenue by Mr. Jain. Section 144C (1) of the Act is unambiguous. It requires the AO to pass a draft assessment order after receipt of the report from the TPO. There is nothing in the wording of Section 144C (1) which would indicate that this requirement of passing a draft assessment order does not arise where the exercise had been undertaken by the TPO on remand to it, of the said issue, by the ITAT.
18. It was then contended by Mr. Jain that the assessment order passed by the AO should not be declared to be invalid because of the failure to first pass a draft assessment order under Section 144C of the Act. In this regard, reference is made to Section 292B of the Act.
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."
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12. Further, it is well settled that where the assessment order is passed without a draft assessment order, it would be vitiated, as it is not a mere irregularity, but is an incurable illegality. This position of law has been reiterated in the judgments extracted supra."
52. Significantly, even in assessee's own case for A.Y. 2009-10, the Coordinate Bench of this Tribunal vide order in ITA No.1458/Mds/2013, 24 ITA No.4142/Chny/2025 following the binding ratio of Vijay Television (P.) Ltd.(supra), had already held that omission to pass a draft assessment order is incurable and renders the assessment unsustainable in law. The relevant observations of this Tribunal are as under:
"4. We have considered the rival submissions on either side and perused the material available on record. The question arises for consideration is can the Ld.AO make any variations in the income or loss written in respect of international transaction after 01.10.2009 without passing a draft assessment order. This issue was specifically considered by the Madras High Court in Vijay Television (P) Ltd supra. The Madras High Court after considering the judgment of the Andhra Pradesh High Court found that the omission to pass draft assessment order is not a mere procedure irregularity and it cannot be cured at all. This judgment of the Madras High Court is binding on all authorities in the State. Furthermore, the Ld.DR very fairly submitted that the issue is covered by the judgment of the Madras High Court in Vijay Television (P) Ltd supra. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly the same is confirmed."
53. We further place reliance on the following judgments of the Hon'ble High Courts, wherein it has been categorically held that any failure on the part of the AO to first pass a draft assessment order is in clear infraction of the mandatory mandate enshrined u/s.144C of the Act, and consequently, any final assessment order passed in derogation thereof is rendered void ab initio and liable to be treated as a nullity in the eyes of law.
54. The Hon'ble Bombay High Court in SHL (India) (P.) Ltd v. DCIT [2021] 438 ITR 317 has held as under:
"27. Applying the aforesaid principles to the facts of this case, we are of the view that the failure on the part of the Assessing Officer to follow the procedure under section 144C(1) is not a merely procedural or inadvertent error, but a breach of a mandatory provision. We are also not impressed with the arguments of the Revenue that the Assessing Officer was under
pressure of two charges, as there were timelines to adhere to, since the said timelines from time to time have been extended, the most recent one being to 30th September, 2021. The Revenue ought to have appreciated that the requirement under section 144C(1) to first pass a draft Assessment Order and to provide a copy thereof to the assessee is a mandatory requirement which gave substantive right to the assessee to object to any variation, that is prejudicial to it. In this case, the order under section 92CA (3) of the IT Act, proposed to make an adjustment of Rs. 107,454,337/- to the arm's length price considered as Nil by Petitioner and to that extent the said adjustment was evidently prejudicial to the interest of Petitioner. Depriving 25 ITA No.4142/Chny/2025 Petitioner of this valuable right to raise objection before DRP would be denial of substantive rights to the assessee, for which, in our view, the Assessing Officer has no power under the statute, as the provision clearly mandates the Assessing Officer to pass and furnish a draft Assessment Order in the first instance in such a case. The legislature, in our view, has intended to give an important opportunity to Petitioner, who is an eligible assessee, which in our view, has been taken away. In our view, failure to follow the procedure under section 144C(1) would be a jurisdictional error and not merely procedural error or a mere irregularity. The Assessment Order has not been passed in accordance with the provisions of section 144C of the IT Act. This is not an issue, which involves a mistake in the said order, but it involves the power of the Assessing Officer to pass the order. By not following the procedure laid down in section 144C(1) to pass and furnish a draft Assessment Order to Petitioner and directly passing a final Assessment Order and without giving Petitioner an opportunity to raise objections before the DRP, there is a complete contravention of section 144C, the Assessing Officer having wrongly assumed jurisdiction to straight away pass the final order. This is not a mere irregularity but an incurable illegality. Even the provisions of section 292B of the IT Act would not protect such an order as section 292B of the IT Act cannot be read to confer jurisdiction on the Assessing Officer, where none exists. The Supreme Court decision in the case of ITO v. M. Pirai Choodi [2012] 20 taxmann.com 733/[2011] 334 ITR 262, referred to in the Revenue's reply is also not applicable to the issue at hand as that was a case where the assessee was not given an opportunity to cross-examine the concerned witness and which assessee also had a statutory appellate remedy which the assessee had failed to avail of, whereas there is no such right available to Petitioner in this case. In fact, Petitioner has lost a substantive right due to the failure of the Respondents to pass and forward a draft assessment order in the first instance on a variance, prejudicial to the interest of Petitioner. In our view, this is clearly a case of jurisdictional error. The final assessment order passed by the Assessing Officer stands vitiated on account of lack of jurisdiction, which is incurable and deserves to be set aside as void ab initio."
55. The Hon'ble Delhi High Court in PCIT v. Sumitomo Corporation India (P.) Ltd [2024] 166 taxmann.com 55 has held as under:
"11. It becomes pertinent to note that the issue of whether the AO could ignore the requirement of drawing up a draft assessment order and pass a final order and the same being in violation of the procedure contemplated under section 144C appears to have arisen before our Court on previous occasions also. The consistent view which this Court appears to have taken in that respect was that a failure to frame an assessment order in draft would clearly be violative of the mandatory prescriptions of Section 144C and the final order of assessment framed in violation thereof liable to be viewed as a nullity."
56. Judicial discipline, propriety, and the settled principles of consistency therefore require that the same view be respectfully followed and applied, particularly in a situation where the Revenue has neither brought on record any 26 ITA No.4142/Chny/2025 distinguishing factual matrix nor demonstrated any change in law or circumstance warranting a departure from the earlier view. In the absence of any such differentiating feature, deviation would be contrary to the doctrine of judicial consistency and would undermine the certainty and uniformity that must govern adjudicatory proceedings.
57. We are equally unable to accept the plea of the Revenue that the matter should merely be restored to the file of the AO for fresh compliance with section 144C of the Act. Once the assessment order is held to be void ab initio for want of jurisdiction, the same is rendered non est in the eyes of law. A nullity cannot be revived through remand so as to confer fresh jurisdiction upon the AO which was otherwise not validly exercised within the statutory framework. To accept such a proposition would amount to judicially extending limitation and permitting the Revenue a second opportunity to cure a foundational illegality, which is impermissible in law. In support of this view, we place reliance on the judgement of the Hon'ble Bombay High Court in Hansgrohe India (P.) Ltd v. Assessment Unit [2026] 185 taxmann.com 86, wherein it was held as under:
"8 As far the contentions of the Revenue regarding treating the final Assessment Order as a Draft Assessment Order is concerned, or even to remand the matter back to the Assessing Officer, we are unable to agree with the aforesaid submissions. Once the final Assessment Order is passed in breach of the mandatory provisions of Section 144 C (1), read with Section 144B(1)(xxi) to (xxix), the final Assessment Order has to be quashed and set aside. If the Assessing Officer, in law, is entitled to commence this process again by passing a fresh Draft Assessment Order and serving the same upon the Petitioner, he/she is free to do so. We have not opined on this aspect of the matter one way or the other."
58. We further observe that Ground No. 3 raised by the Revenue, predicated upon certain observations stated to have been made in separate and independent proceedings before the Hon'ble High Court concerning alleged illegal mining activities, is wholly misconceived, extraneous, and devoid of any relevance insofar as the present appellate proceedings are concerned. The issues arising in such collateral proceedings neither emanate from the impugned assessment order nor bear any proximate nexus to the jurisdictional 27 ITA No.4142/Chny/2025 controversy requiring adjudication before us in the present appeal. It is a settled principle of appellate jurisprudence that matters dehors the subject matter of assessment and unrelated factual allegations arising in independent proceedings cannot be imported so as to influence adjudication on the legality of the assessment under challenge. Accordingly, the said ground, being wholly irrelevant to the controversy before us, is rendered infructuous and liable to be dismissed as such.
59. We may further observe that once the assessment itself has been found to be legally unsustainable and void on the foundational jurisdictional defect arising from admitted non-compliance with the mandatory procedure prescribed under section 144C(1) of the Act, no occasion survives for entering into the merits of the transfer pricing adjustment or any other ancillary factual disputes sought to be canvassed by the Revenue. It is trite law that where the assumption of jurisdiction itself is vitiated, the consequential assessment order collapses in its entirety. A jurisdictional illegality strikes at the very root of the assessment proceedings and nullifies the existence of the assessment order in the eyes of law. In such circumstances, all issues touching upon additions on merits, factual controversies, or collateral allegations become purely academic, hypothetical, and incapable of adjudication, since any determination thereon would be merely of academic significance without legal consequence.
60. In view of the foregoing discussion, and having carefully examined the factual matrix as borne out from the record as well as the settled legal position governing the field, we are of the considered opinion that the Ld.CIT(A) has rightly appreciated the controversy in its correct perspective, both on facts and in law, in holding that the impugned assessment order dated 30.03.2024 passed u/s.153A r.w.s 263 of the Act, without first issuing the mandatory draft assessment order as contemplated u/s.144C(1) of the Act, suffers from a fatal jurisdictional infirmity and is therefore void ab initio, non est in law, and liable to be annulled. The statutory mandate contained in section 144C of the Act is not a mere procedural formality but a substantive jurisdictional safeguard, and any 28 ITA No.4142/Chny/2025 breach thereof vitiates the entire assessment proceedings. We thus find ourselves in complete agreement with the conclusion drawn by the Ld. CIT(A).
61. We find that the order passed by the Ld.CIT(A), in our considered view, is well-reasoned, legally sustainable, and founded upon correct appreciation of statutory provisions as well as binding judicial principles. We do not find any factual perversity, legal infirmity, or jurisdictional error therein so as to warrant interference by this Tribunal. Accordingly, we uphold the impugned order of the Ld.CIT(A) annulling the assessment in question, reject all grounds raised by the Revenue as being devoid of merit, and dismiss the appeal filed by the Revenue.
62. In the result, the appeal preferred by the Revenue stands dismissed.
Order pronounced in the open court on 04th May, 2026 at Chennai.
Sd/- Sd/-
(मनु कुमार गिरर) (एस. आर. रघुनाथा)
(MANU KUMAR GIRI) (S. R. RAGHUNATHA)
न्याययक सदस्य/Judicial Member लेखासदस्य/Accountant Member
चेन्नई Chennai:
ददनांक Dated : 04th May, 2026
Devadas
आदे श की प्रतिलिपि अग्रेपिि/Copy to:
1. अपीलाथी/Appellant
2. प्रत्यथी/Respondent
3.आयकर आयुक्त/CIT- Chennai/Coimbatore/Madurai/Salem
4. ववभागीय प्रनतननधर्/DR
5. गार्ा फाईल/GF