The Assessee filed a return of income, reference was made to the Ld. Transfer Pricing Officer (“TPO”) for determining the Arm’s Length Price (“ALP”) and the Ld. TPO passed Transfer Pricing Order. The Ld. AO subsequently passed the assessment order under section 143(3) rws 144C of the Act. The Ld. AO issued corrigendum stating that the Assessment Order should be treated as Draft Assessment Order (“DAO”) under Section 143(3) rws section 144C(1) of the Act after which the Ld. AO passed the Final Assessment Order (“FAO”).

The Assessee challenged the Assessment Order before the Hon’ble CIT(A). The grievance of the Assessee is that the Ld. AO has not followed the procedure under section 144C of the Act which requires, DAO to be passed after which the Assessee is required to respond within 30 days of receipt of the DAO file its acceptance of the variations contained in the DAO with the Ld. AO or file its objection to the variations with the Dispute Resolution Panel (“DRP”).

On receipt of the FAO, the Assessee filed objections before the Hon’ble DRP. The Hon’ble DRP rejected the objections, treated the Assessment Order as DAO. The Assessee filed an appeal before the Hon’ble Tribunal which ruled against the Assessee and upheld the DRP directions. The Assessee filed appeal before the Hon’ble High Court.

The Hon’ble High Court ruled in favour of the Assessee, observed that mere reference to section 144C(1) of the Act in the Assessment Order without following the procedure does not make the Assessment Order a DAO. The Assessment Order merely concluded the assessment and raised demand, without reference to the mandatory requirement of section 144C (2) of the Act. The corrigendum issued cannot override the fundamental requirements of section 144C (2) of the Act.

The Assessee was denied the statutory right to respond, as the Assessment Order was final in nature. The errors committed by the revenue are not procedural but fundamental to jurisdiction and go to the root of the matter. The Hon’ble Tribunal’s decision was incorrect as the Assessment Order is valid as a regular assessment, making the Hon’ble DRP and Hon’ble Tribunal proceedings invalid. (AY. 2007-08)