Corrigendum cannot validate draft assessment order passed u/s 143(3)/144C

Corrigendum cannot validate draft assessment order passed u/s 143(3)/144C by Assessing Officer clearly mentioning that order passed was a draft assessment order

ABCAUS Case Law Citation:
ABCAUS 3255 (2020) (02) ITAT

Important case law relied upon by the parties:
Vijay Television P. Ltd. Vs Dispute Resolution Panel & Ors. (2014) 369 ITR 113 (Mad.);
Oracle India Pvt. Ltd. Vs. ACIT
Turner International India Pvt. Ltd. Vs. DCIT (2017) 398 ITR 177 (Del.)
Principal Commissioner of Income Tax Vs. Lionbridge Technologies Pvt. Ltd.

In the instant case, the appeal was filed by the appellant assessee against the impugned order passed by Commissioner of Income Tax (Appeals) for the quantum of assessment passed u/s 143(3) r.w.s. 144C of the Income Tax Act, 1961 (the Act).

The assessee challenged the validity of entire assessment order on the ground that same had been passed beyond the limitation period. He submitted that Assessing Officer had passed the assessment order as ‘draft assessment order’, whereby he has made addition on account of transfer pricing adjustments and addition on account of other corporate tax issues.

The assessee submitted that the said draft assessment order was accompanied by forwarding letter wherein in no ambiguous words it was mentioned that it was a Draft Assessment Order. Thus the Assessing Officer had issued the order with all its intention and purpose as a ‘draft assessment order’.

Also, the draft assessment order was not accompanied by any notice of demand. However, later on after the expiry of time barring date for framing the assessment, Assessing Officer issued a corrigendum stating that in the order sent by him, it was wrongly mentioned as assessment order passed u/s.144C r.w.s. 143(3), that it was a draft order and it should be treated as final assessment order. Along with the said corrigendum the Assessing Officer had issued Notice of Demand and show cause notice u/s. 271(1)(c).

The assessee contended that the said corrigendum issued could not be treated as final assessment order as a draft assessment order, when the corrigendum itself had been issued beyond the period of limitation.

The Tribunal observed that a bare perusal of the impugned assessment order showed that it was captioned as ‘draft assessment order’. Along with the said draft assessment order, the Assessing Officer had written a forwarded letter, which clearly showed that he was forwarding the ‘draft assessment order’ and that it had been passed u/s.143(3) r.w.s. 144C.

The AO had categorically said that if Transfer Pricing Adjustment was not acceptable, then assessee may file objection before the DRP within 30 days after the receipt of the order. Thereafter, Assessing Officer had passed the corrigendum.

The Tribunal opined that a corrigendum could not validate the draft assessment order passed by the Assessing Officer, where he had clearly mentioned that, order passed u/s.143(3)/144C, was a draft assessment order and even his forwarding letter further clarified the same and the intention of the Assessing Officer.

The Tribunal further observed it is only when assessee intimates to the Assessing Officer that he has accepted the variation order he has no objection within 30 days then Assessing Officer has to complete the assessment order on the basis of draft assessment order.

The Tribunal noted that in the instant case, there was international transaction and deviation arose out of transfer pricing adjustments though without referring to TPO in terms of Section 92CA, the Assessing Officer was obliged to follow the procedure u/s.144C, which he had not.

The Tribunal held that the draft assessment order could not be treated as final assessment order simply by way of issuing corrigendum later and since no final assessment order had been passed but only a draft assessment order, therefore, the said draft order had no consequence and was null and void.

Accordingly, the Tribunal on the above ground allowed the appeal of the assessee.

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