Marriott International Inc. C/o Marriott Hotels India Pvt. Ltd. Vs DCIT (ITAT Mumbai)
Draft Order or Final Order in Disguise? ITAT Quashes Assessment for Violating Section 144C
The Mumbai ITAT quashed the assessment orders passed against Marriott International Inc. (USA) after holding that the Assessing Officer failed to follow the mandatory procedure prescribed under Section 144C for eligible assessees.
The AO had issued what was described as a “draft assessment order” proposing to tax marketing and service fee receipts as royalty. However, along with the so-called draft order, the AO also issued a demand notice u/s 156, computed tax liability, adjusted prepaid taxes, denied the refund claimed by the assessee and initiated penalty proceedings u/s 271(1)(c). The Tribunal observed that these are actions that can be taken only after a final assessment is made.
Relying on several judicial precedents, including the Karnataka High Court decision in Cisco Systems Services BV and earlier orders in Marriott’s own cases, the Tribunal held that merely labeling an order as a “draft assessment order” does not make it a draft order when, in substance, the AO has completed the assessment and raised a demand. Such action defeats the statutory right of the assessee to approach the DRP under Section 144C.
Holding that compliance with Section 144C is mandatory and jurisdictional, the ITAT ruled that the assessment orders were passed without following the prescribed procedure and were therefore invalid and without jurisdiction. Consequently, the assessment orders for both years were quashed, and the remaining grounds were left open.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
Captioned appeals of the assessee arise out of two separate orders of learned Commissioner of Income Tax (Appeals), Mumbai, pertaining to Assessment Years 2013-14 and 2014-15.
