|CORAM:||Duvvuru RL Reddy (JM), Sanjay Arora (AM)|
|CATCH WORDS:||Draft assessment order|
|DATE:||December 30, 2016 (Date of pronouncement)|
|DATE:||January 18, 2017 (Date of publication)|
|FILE:||Click here to download the file in pdf format|
|S. 144C: The lapse committed by the AO in passing the assessment order without first passing a draft order, against which the assesee may file objections with the DRP, seeking its directions to the AO, is only a procedural irregularity, which does not impinge on the jurisdiction on the AO to pass the assessment order. The assessee has no vested right against procedure. However, as the lapse was held to be fatal in Vijay Television 369 ITR 113 (Mad), the same has to be followed|
(i) The lapse committed by the AO in passing the assessment order without first passing a draft order, against which the assesee may file objections with the DRP, seeking its directions to the AO, is only a procedural irregularity, which does not impinge on the jurisdiction on the AO to pass the assessment order, which he assumes on the issue of notice u/s. 143(2), even as observed by the Hon’ble jurisdictional High Court itself in a number of cases, reference to one of which, i.e., R.V. Sarojini Devi v. IAC  242 ITR 329 (Mad) stands made in the decision itself (also refer Asst. CIT v. Hotel Blue Moon  321 ITR 362 (SC)). Reference in this regard may be made to the decision in Daewon Kang Up Co. Ltd. v. DDIT Guduthur Bros. v. ITO  40 ITR 298 (SC), wherein the Apex Court clarified that the AO assumes jurisdiction to assess on issue of a valid notice, and which obtained till the same remained to be disposed of. The proceedings completed without allowing the assessee an opportunity of being heard was an illegality, vitiating the proceedings, which would relate back in time, having occurred during the course of the assessment proceedings itself. The impugned order was to be set aside, and the proceedings to commence from the stage the illegality or the irregularity had occurred.
(ii) In the present case too, the order has been passed by the AO by, in effect, without allowing the assessee the opportunity of being heard by the DRP, i.e., prior to it being finalized. That there is no vested right against procedure is well-settled. Again, it is nobody’s case that the same was done to purchase time, or that in the event the said opportunity was allowed, the assessment would get barred by time. In fact, no such contention could in law be raised as s. 144C(13) itself excludes the operation of s. 153 (or s. 153B), stipulating time limit for passing orders order the Act, setting it at one month after the receipt by the AO of the directions by the DRP. There is no question of the assessment getting time barred or having crossed the bar of time by which it could have been passed. The decision in Deepak Agro Foods (supra) would also thus not apply in the facts and circumstances of the case, i.e., even assuming non application of the decision in Guduthur Bros. (supra). Why, in many a case, as in GKN Drive Shafts (India) Ltd. v. ITO  259 ITR 19 (SC), the Apex Court, finding the assessment to be procedurally deficient, set aside the same to the file of the AO to pass a fresh assessment order complying with the conditions or the procedure as prescribed or laid down.
(iii) Further, once the Revenue itself admits the order passed to be a draft assessment order, it cannot in law proceed to collect the demand raised, so that the raising of demand would be without the sanction of law. So, however, the decision in Vijay Television (P.) Ltd.  369 ITR 113 (Mad) is judicially binding on us. The same is directly on the point, and is therefore squarely applicable. In fact, in the present case there is no attempt by the AO to rectify his mistake. We have set out our humble opinion in the matter only with a view of its consideration by the Hon’ble Court in a given case. Respectfully following the decision in Vijay Television (P.) Ltd. (supra), we hold the assessment in the present case as bad in law. In consequence, the assessee is only liable for tax on its’ returned income (refer: CIT v. Shelly Products  261 ITR 367 (SC)). The assessment failing, we do not consider it relevant or necessary to address the issue arising in quantum assessment on merits.
“The assessee has no vested right against procedure.”
“However, as the lapse was held to be fatal in Vijay Television 369 ITR 113 (Mad), the same has to be followed”
Beg your pardon- There appears to be some self-contradiction!
However, thank goodness; the conclusion is,of course,logical, not faulty.