Case Law Details
DCIT Vs Mondon Investments Ltd. (ITAT Delhi)
ITAT Delhi held that law does not confer any power on the Assessing Officer to either withdraw or modify or substitute one assessment order passed by him earlier with another assessment order subsequently.
Facts- Based on the proposal of TPO, AO passed an assessment order, purportedly, u/s. 143(3) read with section 144C(3) of the Act on 31.10.2016 determining total income at Rs.29,06,35,700/-. Against the said assessment order, the assessee preferred an appeal before learned first appellate authority.
Subsequent to passing of the assessment order, AO issued a letter dated 09.11.2016 to the assessee stating that the assessment order dated 31.10.2016 was passed due to an inadvertent mistake/oversight and should be treated as null and void. He further stated that since the assessee is an eligible assessee as per section 144C of the Act and a variation to the income returned by the assessee is proposed, which is prejudicial to the assessee, a draft assessment order in terms of section 144C(1) of the Act was required to be passed. Accordingly, on 09.11 .2016, he passed a draft assessment order, purportedly, u/s. 143(3) read with section 144C(1) of the Act. Since, the assessee did not raise any objections against the draft assessment order within the statutory period of limitation, AO passed the final assessment order on 19.01.2017 u/s. 143(3) read with section 144C(3) of the Act determining total income at Rs.29,06,35,700/-. Against the second assessment order as well, the assessee preferred an appeal before learned first appellate authority.
Commissioner (Appeals) held that AO should have passed a draft assessment order u/s. 144C(1) of the Act instead of passing the final assessment order u/s. 143(3) read with section 144C(3) of the Act. Thus, he held that non-framing of a draft assessment order u/s. 144C(1) of the Act is not a curable defect under section 292B of the Act. Hence, he held the assessment order dated 31.10.2016 to be invalid. Admittedly, against this order of learned Commissioner (Appeals), the Department is not in appeal.
In so far as the appeal preferred by the assessee against final assessment order dated 19.01.2017 passed in pursuance to the draft assessment order dated 09.11.2016 is concerned, learned Commissioner (Appeals) held that since he has already held the assessment order dated 31.10.2016 to be invalid, the assessment order dated 19.01.2017 would also be invalid. Accordingly, he quashed the assessment order.
Conclusion- Held that the statute does not confer any power on the Assessing Officer to either withdraw or modify or substitute one assessment order passed by him earlier with another assessment order subsequently. If the Assessing Officer is permitted to do so, it will lead to undesirable consequences and will give a free hand to the Assessing Officer to pass an assessment order and subsequently withdraw/modify/cancel it according to his own whims and caprices. This will not only be against the scheme of the Act, but against all legal principles. In view of the aforesaid, we hold that the Assessing Officer had no jurisdiction to declare the assessment order passed earlier by him as null and void and substitute it with another assessment order. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) in declaring the assessment order as invalid, though, based on our own reasoning. Grounds are dismissed.
FULL TEXT OF THE ORDER OF ITAT DELHI
1. Captioned appeal by the Revenue arises out of the order dated 23.03.2018 passed by learned Commissioner of Income Tax (Appeals) in Appeal No. 101/2016-17/CIT(A)-44 pertaining to assessment year 2013-1 4.
2. At the outset, we must observe that learned Commissioner of Income-tax (International Taxation)-2, Delhi had issued an order dated 23.05.2018 authorising filing of appeal in respect of two separate orders, both, dated 23.03.2018, passed in Appeal Nos. 85 & 101/2016-17. Whereas, the present appeal has been filed by the Assessing Officer without mentioning the specific order of learned Commissioner (Appeals), against which, the appeal is preferred, though, both the orders of learned first appellate authority have been attached to the memorandum of appeal.
3. When the Bench called upon learned Departmental Representative to clarify which order of learned first appellate authority is under challenge, he furnished a report of the Assessing Officer stating that the present appeal has been preferred against order dated 23.03.2018 passed by learned Commissioner (Appeals) in Appeal No. 101/2016-1 7. Keeping in view the clarification received from the Revenue, we proceed to adjudicate the appeal.
4. Briefly, the facts are, the assessee is a non-resident corporate In the assessment year under dispute, the assessee filed its return of income on 29.11.2013 declaring nil income. Assessee’s case was selected for scrutiny and in course of assessment proceedings, the Assessing Officer, having noticed that in the year under consideration, the assessee has entered into international transactions with its Indian Associated Enterprises (AEs) by subscribing to fully convertible debentures (FCDs), made reference to the Transfer Pricing Officer (TPO) for determining Arm’s Length Price (ALP) of the international transactions. After examining the issue, the TPO passed an order on 26.09.2016 under section 92CA(3) of the Act proposing an adjustment of Rs.29,06,35,700/- to the income of the assessee. Based on the order passed by the TPO, the Assessing Officer passed an assessment order, purportedly, under section 143(3) read with section 144C(3) of the Act on 31.10.2016 determining total income at Rs.29,06,35,700/-. Against the said assessment order, the assessee preferred an appeal before learned first appellate authority.
5. Subsequent to passing of the assessment order, as aforesaid, the Assessing Officer issued a letter dated 09.11.2016 to the assessee stating that the assessment order dated 31.10.2016 was passed due to an inadvertent mistake/oversight and should be treated as null and void. He further stated that since the assessee is an eligible assessee as per section 1 44C of the Act and a variation to the income returned by the assessee is proposed, which is prejudicial to the assessee, a draft assessment order in terms of section 144C(1) of the Act was required to be passed. Accordingly, on 09.11 .2016, he passed a draft assessment order, purportedly, under section 143(3) read with section 144C(1) of the Act. Since, the assessee did not raise any objections against the draft assessment order within the statutory period of limitation, the Assessing Officer passed the final assessment order on 19.01.2017 under section 143(3) read with section 144C(3) of the Act determining total income at Rs.29,06,35,700/-. Against the second assessment order as well, the assessee preferred an appeal before learned first appellate authority.
6. While deciding the appeal arising out of first assessment order dated 31.10.2016, learned Commissioner (Appeals) held that since, the assessee is an eligible assessee under section 144C(15) of the Act and the Assessing Officer has proposed a variation to the income returned by the assessee, which is prejudicial to the interest of the assessee, he should have passed a draft assessment order under section 144C(1) of the Act instead of passing the final assessment order under section 143(3) read with section 144C(3) of the Act. Thus, he held that non-framing of a draft assessment order under section 144C(1) of the Act is not a curable defect under section 292B of the Act. Hence, he held the assessment order dated 31.10.2016 to be invalid. Admittedly, against this order of learned Commissioner (Appeals), the Department is not in appeal.
7. In so far as the appeal preferred by the assessee against final assessment order dated 19.01.2017 passed in pursuance to the draft assessment order dated 09.11.2016 is concerned, learned Commissioner (Appeals) held that since he has already held the assessment order dated 31.10.2016 to be invalid, the assessment order dated 19.01.2017 would also be invalid. Accordingly, he quashed the assessment order.
8. Before us, learned CIT(Departmental Representative) submitted that the original assessment order dated 31.10.2016 passed under section 143(3) read with section 144C(3) of the Act was subsequently cancelled/withdrawn by the Assessing Officer, as it was passed due to an inadvertent mistake. He submitted, since, the assessee is an eligible assessee under section 144C(15) of the Act, the Assessing Officer was required to pass a draft assessment order under section 144C(1) of the Act, which he has ultimately passed. Thus, he submitted, the error committed by the Assessing Officer in not passing the draft assessment order originally, at first instance, under section 144C(1) of the Act is a curable defect and would be covered under section 292B of the Act.
9. Per contra, learned counsel appearing for the assessee submitted that once an assessment order was passed, which had been subject matter of appeal before learned first appellate authority, it cannot be cancelled/recalled/ nullified/withdrawn by the Assessing Officer under any circumstance. He submitted, the statute only vests powers on the Assessing Officer to either initiate assessment proceedings under section 147 of the Act on the ground that income has escaped assessment or pass rectification order under section 154 of the Act in case there is mistake apparent on the fact of record. He submitted, the statute does not confer any power on the Assessing Officer to cancel / nullify / withdraw / recall or hold the assessment order to be null and void. He submitted, merely because the period of limitation to pass assessment order is available, it will not empower the Assessing Officer to pass any number of assessment orders. In support of such contention, learned counsel relied upon the decision in the case of ITO vs. P.N. Krishanmurthy & Anr. (2020) 58 CCH 413 (Bang.)
10. We have considered rival submissions in the light of decisions relied upon and perused materials on record. There is no dispute between the parties in so far as factual aspects relating to the issue in dispute are concerned. The chronology of events discussed herein before clearly indicate that the Assessing Officer had originally passed an assessment order under section 143(3) read with section 144C(3) of the Act on 31.10.201 6. Thereafter, realizing the fact that the assessee, being an eligible assessee in terms of section 144C(15) of the Act, and no variation in the income returned could be made, which is prejudicial to the interests of the assessee, without proposing a draft assessment order at the first instance in terms of section 144C(1) of the Act, the Assessing Officer issued a communication dated 09.11.2016 to the assessee indicating therein that the assessment order dated 31.10.2016 passed earlier was wrongly passed, hence, should be treated as null and void. On the very same date, the Assessing Officer passed a draft assessment order, purportedly, under section 143(3) read with section 1 44C(1) of the Act and subsequently, passed the final assessment order on 19.01.2017, purportedly, under section 143(3) read with section 1 44C(3) of the Act.
11. The issue, which arises for consideration is, once the Assessing Officer has passed an assessment order, whether rightly or wrongly, does he has the power to cancel / recall / withdraw the assessment order or declare it as null and void ? On carefully scanning through the provisions of the Act, we were unable to locate any such power vested with the Assessing Officer to declare an assessment order passed by him earlier as null and void. However, in the facts of the present case, the Assessing Officer has not only declared the assessment order passed by him earlier as null and void, but has passed a fresh assessment order when earlier assessment order was under challenge before the first appellate authority. Once, an assessment order is passed by Assessing Officer and communicated to the assessee, he becomes functus officio in respect of that assessment and cannot tinker with the assessment order passed. Of course, the Assessing Officer is empowered under the Act to reopen the assessment in case there is escapement of income or rectify the assessment order. However, such exercise of power by the Assessing Officer has to be in strict compliance with the conditions of section 147 and 154, respectively. An assessment order passed by the Assessing Officer can only be interfered with either by higher appellate authorities in terms of section 250 and 254 of the Act or by the revisionary authority under section 263 of the Act. The Assessing Officer himself cannot assume the role of either the appellate authority or the revisionary authority to revise / modify / cancel or withdraw the assessment order. The statute does not confer any power on the Assessing Officer to either withdraw or modify or substitute one assessment order passed by him earlier with another assessment order subsequently. If the Assessing Officer is permitted to do so, it will lead to undesirable consequences and will give a free hand to the Assessing Officer to pass an assessment order and subsequently withdraw/modify/cancel it according to his own whims and caprices. This will not only be against the scheme of the Act, but against all legal principles. In view of the aforesaid, we hold that the Assessing Officer had no jurisdiction to declare the assessment order passed earlier by him as null and void and substitute it with another assessment order. In view of the aforesaid, we uphold the decision of learned Commissioner (Appeals) in declaring the assessment order as invalid, though, based on our own reasoning. Grounds are dismissed.
12. In the result, appeal is dismissed.
Order pronounced in the open court on 25/07/2023.
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