Defsys Solutions Pvt Ltd Vs ACIT (ITAT Delhi)
ITAT Delhi held that passing of final assessment order without complying with the terms of section 144C of the Income Tax Act, 1961 is untenable in law.
Facts- In the present case, the entire quarrel revolves around the fact that the Assessing Officer has mentioned “Assessed u/s 143(3) r.w.s 144C(13) of the Act” and directed to calculate tax and charge interest as per the I.T. Act and further directed to give credit for prepaid taxes. As if this was not enough, he initiated penalty proceedings u/s 271AAB(1A)(b) r.w.s 274 of the Act.
Conclusion- Hon’ble Delhi High Court held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order “without jurisdiction, null and void and unenforceable.
Hon’ble Gujarat High Court in the case of C-Sam (India) has held that noncompliance with the terms of Section 144C of the Act is merely an ‘irregularity’. The Gujarat High Court held that it was of ‘great importance and mandatory’.
Held that the proceedings culminated on 28.06.20228 when the demand notice was issued and served upon the assessee along with penalty notice u/s 274 of the Act and, therefore, all the subsequent proceedings and orders become non est.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by the assessee is preferred against the order dated 27.04.2023 framed u/s 143(3) r.w.s 144C(13) of the Income-tax Act, 1961 [hereinafter referred to as ‘The Act’] pertaining to A.Y. 2020-21.
2. Though the assessee has raised as many as 12 grounds of appeal with sub grounds, only the following grounds were argued before us:
“1. That the order passed by the Ld. Assessing Officer (hereinafter referred to as “the Ld. AO”) under section 143(3) r.w.s 144C (13) of the Income Tax Act 1961 (“the Act”) dated 27.04.2023 is illegal, bad in law and void as the same has been passed in contravention of section 144C of the Act.
2. That the Ld. AO has grossly erred in law and on the facts in passing the final order dated 28.06.2022 instead of passing the draft order u/s 143(3) r.w.s 144C (1) of the Act, which is evident from the fact that the notice of demand u/s 156 of the Act was issued along with said purported draft order dated 28.06.2022 and the penalty proceedings u/s 271AAB (1A) (b) r.w.s section 274 of the Act were also initiated therein.
2.1 The so-called draft assessment order dated 28.06.2022 passed by the Ld. AO is in contravention of the provisions of section 144C (1) of the Act, and therefore, the subsequent order passed by the Hon’ble DRP-1 u/s 144C (5) of the Act dated 16.03.2023, as well as the impugned order passed by the Ld, AO u/s 143(3) read with section 144C(13) of the Act dated 27.04.20203, are illegal and void.
2.2 The Hon’ble DRP has also erred in law and on the facts in holding that the order passed by the. AO dated 28.06.2022 was a draft order and omission of words like “Proposed Initiation of Penalty “and “Proposed adjustments” ete. can at best to be considered to be technical irregularity and the same does not vitiate the entire draft order.
3. The underlying facts in the aforementioned quarrel are that while framing the order dated 28.06.2022, the Assessing Officer has mentioned section 143(3) r.w.s 144C of the Act and titled the order as “Assessment order”.
4. While framing the said order, the Assessing Officer concluded the assessment by observing at Para 13 as under:
