Issuing Final Assessment Order Without Section 144C Compliance Unlawful

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:

Assessed u/s 143(3) r.w.s 144C of the I.T. Act,1961. Calculate tax and charge interest as per the IT Act. Give credit for prepaid taxes, if any. Copy of the order and demand notice are being issued to the assessee. Penalty Proceedings u/s 271AAB(1A)(b) r..w.s 274 of the Act.”

5. 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.

6. Referring to several judicial decisions, the ld. counsel for the assessee vehemently stated that the assessment order so framed by the Assessing Officer, by any stretch of imagination, cannot be called as “draft assessment order” and, is therefore, in violation of provisions of section 144C of the Act.

7. Strong reliance was placed on the decision of the Hon’ble High Court of Karnataka in the case of CISCO Systems Services BV 293 com 85, Hon’ble High Court of Madras in the case of Vijay Television Pvt Ltd 46 Taxmann.com 113 and Hon’ble High Court of Bombay in the case of SHL (India) Ltd WPL No. 11293 of 2021.

8. The ld. counsel for the assessee also relied on the decision of the Hon’ble High Court of Delhi in the case of Nokia India Pvt ltd, 98 com, Turner International India Pvt Ltd 4260/201 5, JCB India Ltd WP(C) 3399/2016 and Control Risk India Pvt Ltd SLP (Civil) 7090/2018 and also the decision of the co-ordinate bench in the case of Perfetti Van Melle [India] Pvt Ltd ITA No. 9116/DEL/2019

9. The ld. counsel for the assessee read the operative part of all the decisions referred to by him during the course of his submissions.

10. Defending the orders of the authorities below, the ld. DR vehemently stated that the order which has been alleged to be not a draft assessment order is in substance, a draft assessment order, which is evident from the language used by the Assessing Officer while proposing the impugned additions. The ld. DR emphatically referred to the concluding para of the impugned order which reads as under:

“Further, if the assessee wants to file objections, against the said draft order, he may do so by filing objections before the DRP within 30 days from the date of issue of this order.”

11. It is the say of the ld. DR that the Assessing Officer has made his intentions very clear that what he is forwarding is only a draft assessment order and the assessee can approach the DRP if it is having some objections.

12. In support of his contention, the ld. DR placed strong reliance on the following decisions:

1. GE Oil & Gas India Pvt Ltd 126 com 275 [Madras High Court]

2. BSC C& C Joint Venture W.P.(C) 7623/2017 & CM 31553/2017 [Delhi High Court]

3. Stryker India Pvt Ltd 103 com 267 [Delhi High Court ]

4. Caterpillar Global Mining Europe GMBH 136 com 406 [ITAT Hyderabad]

13. And also relied upon the decision in respect of validity of such order u/s 292B of the Act in the case of Jagat Novel Exhibitors Private Limited 405 ITR 325 in ITA No. 7/2006, 2, 3, 4, 5, 8,10, 11, 17 and 22/2006, 138 com 145 Karnataka in the case of National Faceless Assessment Centre, Delhi and in the case of M. Pirai Choodi 20 Taxmann.com 733 [Supreme Court].

14. The ld. DR read the operative part of the decisions relied upon by him.

15. We have given thoughtful consideration to the orders of the authorities below and have carefully considered the judicial decisions relied upon by both the sides. Provisions of section 144C read under:

 “144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee.”

16. Most relevant clauses pertinent for adjudication of the quarrel reads as under:

“(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if—

(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or

(b) no objections are received within the period specified in sub-section (2).

(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 ^51a[or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.”

17. In light of the aforesaid provisions, let us now consider the facts. The impugned order is dated 28.06.2022. Tax Computation Sheet is dated 28.06.2022. Notice of demand is also dated 28.06.2022 and penalty notice is also dated 28.06.2022. Irrespective of the language of the order for all intent and purposes, keeping in mind the relevant provisions of the Act, it can be said that the proceedings ended on 28.06.2022 and, therefore, any orders passed thereafter are non est.

18. The contentions of the ld. DR that not only the assessee has participated in the proceedings, but has also filed objections before the DRP and also participated thereon. It is the say of the ld. DR that now at this stage, the assessee cannot say that the said order is not a draft order and is in contravention of the provisions of section 144C(1) of the Act.

19. We do not find much force in these contentions of the ld. DR, as, in our considered view, provisions of section 144C of the Act trigger a series of steps prescribed in sub-section (2) to sub-section (13) and as can be seen from the most relevant sub-sections (3) and (13) extracted hereinabove, the assessment is complete either under sub-section (3) or sub section (13).

20. Facts on record show that on 28.06.2022, the Assessing Officer quantified the taxable income and determined tax payable by issuing and serving demand notice u/s 156 of the Act. In our considered opinion, this action of the Assessing Officer has brought proceedings to an end and proceedings initiated u/s 144C(1) of the Act has been concluded.

21. A perusal of Section 144C of the Act shows that the Assessing Officer shall, at the first instance, forward a draft of the proposed order of assessment and on receiving such order, the assessee may approach the DRP by raising objections. If the assessee accepts the variation, then the Assessing Officer shall proceed by framing the final assessment order and if the objections are raised before the DRP, then, upon receipt of directions issued by the DRP, the Assessing Officer shall complete the assessment. However, we find that while framing the said draft assessment order, the Assessing Officer not only issued and served demand notice, but has also initiated the penalty proceedings.

22. The question whether demand notice is an integral part of the assessment order has been answered by the Hon’ble High Court of Gujarat in the case of CIT Vs. Purshottam Das T Patel 209 ITR 52 wherein the Hon’ble High Court has relied on the decision of the Hon’ble Supreme Court in the case of Kalyan Kumar Ray Vs. CIT 191 ITR 634. The relevant findings of Hon’ble High Court read as under:

” ‘Assessment’ is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial as the former. The Income-tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and the demand notice has to be issued under section 156 of the Incometax Act, 1961, in consequence of such an order. The statute does not, Page No : 55 however, require that both the computations (i.e., of the total income as well as of the sum payable) should be done on the same sheet of paper, the sheet that is superscribed ‘assessment order’. It does not prescribe any form for the purpose. Once the assessment of the total income is complete with indications of the deductions, rebates, reliefs and adjustments available to the assessee, the calculation of the net tax payable is a process which is mostly arithmetical but generally time-consuming. If, therefore, the Income-tax Officer first draws up an order assessing the total income and, indicating the adjustments to be made, directs the office to compute © Company Law Institute of India Pvt. Ltd. – 4 – the tax payable on that basis and then approves of it, either immediately or some time later, no fault can be found with the process, though it is only when both the computation sheets are signed or initialled by the Income-tax Officer that the process described in section 143(3) will be complete.” In our opinion, this decision, far from helping the Revenue, goes against it. The Supreme Court has in terms stated that assessment is one integrated process involving not only the assessment of the total income but also the determination of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete. What section 153 requires is that the assessment should be completed within the prescribed time-limit. The words “order of assessment” cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act. Admittedly, in this case the second step was not taken within the prescribed time. After determining the total income, the Income-tax Officer possibly left the matter to his subordinates for the purpose of calculating the tax payable by the assessee on the basis of the assessed total income. Even if we assume in favour of the Assessing Officer that he approved the said calculation when the papers were put before him for signing the demand notice, and that he signed the same, the fact remains that that step was taken by him after the prescribed period was over. The Tribunal was, therefore, right in holding that the assessment in this respect was time-barred. Page No : 56 We, therefore, answer the question in the affirmative, i.e., against the Revenue and in favour of the assessee. No order as to costs”

23. Though the ld. DR time and again has stated that the conclusion of the Assessing Officer speaks for the order as a draft assessment order and there should not be any confusion on that point. In our considered view, the impugned order by the Assessing Officer has bypassed the relevant sub-section i.e. sub-section (3) and (13) to section 144C of the Act.

24. Whether by by-passing mandatory provisions of the Act can assessment survive? The answer has been given by the Hon’ble Supreme Court in the case of Dipak Babaria 3SCC 502 wherein the Hon’ble Supreme Court has held as under:

“If the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute.

25. In light of the above ratio laid down by the Hon’ble Supreme Court, we are of the considered opinion that by issuing the demand notice on 28.06.2022 itself the Assessing Officer has bypassed all the mandatory sub-sections of section 144C of the Act.

26. The ld. DR has vehemently stated that by participating in the subsequent proceedings, the assessee was well aware that the order dated 28.06.2022 is merely a draft assessment order and not final assessment order and the assessee cannot blow hot and cold in the same breath.

27. The question whether participation in subsequent proceedings would estop the assessee from challenging the validity of the order dated 27.04.2023 has been answered by the Hon’ble Supreme Court in the case of V Mr. T.P. Firm MUAR in 56 ITR 67 wherein the Hon’ble Supreme Court has laid down the ratio :

“Approbate and Reprobate” is only species of estoppel. It applies only to conduct of parties as in the case of estoppel, it cannot operate against the provisions of a statute. If particular income is taxable under the I.T. Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or not. If it is not, the ITO Has no power to tax the said income.”

28. With our utmost respect to the co-ordinate benches [Bangalore and Hyderabad], we fail to persuade ourselves to follow the same as the said decision of the Tribunal has not considered the decision of the Hon’ble Supreme Court discussed hereinabove and the decision is per incurium.

29. Another argument of the ld. DR that merely issue of notice of demand and penalty notice will not convert draft assessment order into final assessment order, does not hold any water, in as much as the mandatory provisions of the Act have to be followed and the Assessing Officer does not get any leverage for bypassing the mandatory provisions of the Act.

30. The ld. DR has also drawn strong support from the provisions of section 292B of the Act stating that the subsequent participation of the assessee would debar the assessee to raise this issue before the appellate authority.

31. In support of this contention, strong reliance was placed on the decision of the Hon’ble High Court of Delhi in the case of M/s Jagat Novel Exhibitors Private Limited [supra].

32. The answer to this has been given by the Hon’ble High Court of Delhi in the case of JCB India Ltd [supra]. The relevant findings read as under:

“14. The short question that arises for consideration is whether, after the remand proceedings, the AO could have, without issuing a draft assessment order under Section 144 C of the Act, straightway issued the final assessment order. 15. Mr Syali, learned Senior Counsel for the Assessee, referred to the decision of this Court dated 17th May 2017 passed in W.P. (C) No. 4260/2015 (Turner International India Pvt. Ltd. v. Deputy Commissioner of Income Tax, Circle 25(2), New Delhi) to urge that the AO could not have passed the final assessment order without complying with the mandatory requirement under Section 144C of the Act whereby first a draft order had to be issued in respect of which an objection can be filed by the Assessee before the DRP. The failure to do so, according to Mr. Syali, was not a mere irregularity. He further referred to a decision of the Gujarat High Court dated 31st July 2017 in Tax Appeal No. 542 of 2017 (Commissioner of Income Tax, Vadodara-2 v. C-Sam (India) Pvt. Ltd.) W.P.(C) Nos. 3399/2016, 3429/2016 & 3431/2016 Page 7 of 12 16. In response, Mr. Sanjay Jain, learned Additional Solicitor General of India appearing for the Revenue, submitted that there was an efficacious alternative remedy available to the Petitioner to file appeals against the impugned final assessment orders passed by the AO. It is denied that it was mandatory on the part of the AO to pass a draft assessment order since this was a second round before the TPO pursuant to remand by the ITAT. Moreover, it was not as if the ITAT had set aside the entire assessment order of the AO. The setting aside was only in respect of the transfer pricing adjustment and that too with a specific direction to the AO for determining the arms length price “after considering fresh comparables.” Since the assessment itself was not cancelled by the ITAT or completely set aside, it is the provisions of Section 153 (3) (ii) of the Act which would apply. Mr Jain submitted that the requirement of passing a draft assessment order under Section 144C was only in the first instance and not after the remand by the ITAT. 17. The Court is unable to agree with the submissions made on behalf of the Revenue by Mr. Jain. Section 144C (1) of the Act is unambiguous. It requires the AO to pass a draft assessment order after receipt of the report from the TPO. There is nothing in the wording of Section 144C (1) which would indicate that this requirement of passing a draft assessment order does not arise where the exercise had been undertaken by the TPO on remand to it, of the said issue, by the ITAT. 18. It was then contended by Mr. Jain that the assessment order passed by the AO should not be declared to be invalid because of the failure to first W.P.(C) Nos. 3399/2016, 3429/2016 & 3431/2016 Page 8 of 12 pass a draft assessment order under Section 144C of the Act. In this regard, reference is made to Section 292B of the Act. 19. As already noted, the final assessment order of the AO stood vitiated not on account of mere irregularity but since it was an incurable illegality. Section 292B of the Act would not protect such an order. This has been explained by this Court in its decision dated 17th July 2015 passed in ITA No. 275/2015 (Pr. Commissioner of Income Tax, Delhi-2, New Delhi v. Citi Financial Consumer Finance India Pvt. Ltd.) where it was held: “Section 292B of the Act cannot be read to confer jurisdiction on the AO where none exists. The said Section only protects return of income, assessment, notice, summons or other proceedings from any mistake in such return of income, assessment notices, summons or other proceedings, provided the same are in substance and in effect in conformity with the intent of purposes of the Act.” 20. The Court further observed that Section 292B of the Act cannot save an order not passed in accordance with the provisions of the Act. As the Court explained, “the issue involved is not about a mistake in the said order but the power of the AO to pass the order.” 21. In almost identical facts, in Turner International (supra), this Court held in favour of the Assessee on the ground that it was mandatory for the AO to have passed a draft assessment order under Section 144C of the Act prior to issuing the final assessment order. The following passages from said decision are relevant for the present purposes: “11. The question whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of first passing draft assessment order in terms of Section 144C(1) W.P.(C) Nos. 3399/2016, 3429/2016 & 3431/2016 Page 9 of 12 of the Act is no longer res intregra. There is a long series of decisions to which reference would be made presently. 12. In Zuari Cement Ltd. v. ACIT (decision dated 21st February, 2013 in WP(C) No.5557/2012), the Division Bench (DB) of the Andhra Pradesh High Court categorically 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.” In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue’s SLP (C) [CC No. 16694/2013] on 27th September, 2013. 13. In Vijay Television (P) Ltd. v. Dispute Resolution Panel [2014] 369 ITR 113 (Mad.), a similar question arose. There, the Revenue sought to rectify a mistake by issuing a corrigendum after the final assessment order was passed. Consequently, not only the final assessment order but also the corrigendum issued thereafter was challenged. Following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra) and a number of other decisions, the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel (supra) quashed the final order of the AO and the demand notice. Interestingly, even as regards the corrigendum issued, the Madras High Court held that it was beyond the time permissible for issuance of such corrigendum and, therefore, it could not be sustained in law. 14. Recently, this Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of India [2016] 388 ITR 383 (Del.), following the decision of the Andhra Pradesh High Court in Zuari Cement Ltd. v. ACIT (supra), the Madras High Court in Vijay Television (P) Ltd. v. Dispute Resolution Panel, Chennai (supra) as well as the Bombay High Court in International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46, came to the same conclusion.” W.P.(C) Nos. 3399/2016, 3429/2016 & 3431/2016 Page 10 of 12 22. In the decision of the Gujarat High Court in C-Sam (India) (supra), the Court negated the plea 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’. The following passages of the said decision of Gujarat High Court are relevant for the present purposes:

“6. These statutory provisions make it abundantly clear that the procedure laid down under Section 144C of the Act is of great importance and is mandatory. Before the Assessing Officer can make variations in the returned income of an eligible assessee, as noted, sub-section (1) of Section 144C lays down the procedure to be followed notwithstanding anything to the contrary contained in the Act. This non­obstante clause thus gives an overriding effect to the procedure ‘notwithstanding anything to the contrary contained in the Act’. Sub-section (5) of Section 144C empowers the DRP to issue directions to the Assessing Officer to enable him to complete the assessment. Sub­section (10) of Section 144C makes, such directions binding on the Assessing Officer. As per Sub-Section 144C, the Assessing Officer is required to pass the order of assessment in terms of such directions without any further hearing being granted to the assessee. 7. The procedure laid down under Section 144C of the Act is thus of great importance. When an Assessing Officer proposes to make variations to the returned income declared by an eligible assesses he has to first pass a draft order, provide a copy thereof to the assessee and only thereupon the assessee could exercise his valuable right to raise objections before the DRP on any of the proposed variations. In addition to giving such opportunity to an assessee, decision of the DRP is made binding on the Assessing Officer. It is therefore not possible to uphold the Revenue’s contention that such requirement is merely a procedural. The requirement is mandatory and gives substantive rights to the assessee to object to any additions before they are made and such objections have to be considered W.P.(C) Nos. 3399/2016, 3429/2016 & 3431/2016 Page 11 of 12 not by the Assessing Officer but by the DRP. Interestingly, once the DRP gives directions under sub-section (5) of Section 144C, the Assessing Officer is expected to pass the order of assessment in terms of such directions without giving any further hearing to the assessee. Thus, at the level of the Assessing Officer, the directions of the DRP under sub­section (5) of Section 144C would bind even the assessee. He may of course challenge the order of the Assessing Officer before the Tribunal and take up all contentions. Nevertheless at the stage of assessment, he has no remedy against the directions issued by the DRP under sub-section (5). All these provisions amply demonstrate that the legislature desired to give an important opportunity to an assessee who is likely to be subjected to upward revision of income on the basis of, transfer pricing mechanism. Such opportunity cannot be taken away by treating it as purely procedural in nature.” 23. In the present case, just as in Turner International (supra), it is submitted that, at the most, failure to pass a draft assessment order under Section 144C of the Act is a curable defect and that the Court should now delegate the parties to a stage as it was when the TPO issued a fresh order after the remand by the ITAT. 24. This very argument of the Revenue has been negated by the Court in Turner International (supra) where it was observed in paras 15 and 16 as under: “15. Mr. Dileep Shivpuri, learned counsel for the Revenue sought to contend that the failure to adhere to the mandatory requirement of issuing a draft assessment order under Section 144C (1) of the Act would, at best, be a curable defect. According to him the matter must be restored to the AO to pass a draft assessment order and for the Petitioner, thereafter, to pursue the matter before the DRP. W.P.(C) Nos. 3399/2016, 3429/2016 & 3431/2016 Page 12 of 12 16. The Court is unable to accept the above submission. The legal position as explained in the above decisions in unambiguous. The failure by the AO to adhere to the mandatory requirement of Section 144C (1) of the Act and first pass a draft assessment order would result in invalidation of the final assessment order and the consequent demand notices and penalty proceedings.” 25. For all of the aforementioned reasons, the Court finds no difficulty in holding that the impugned final assessment orders dated 30th March 2016 passed by the AO for AYs 2006-07, 2007-08 and 2008 -09 are without jurisdiction on account of the failure, by the AO, to first pass a draft assessment order and thereafter, subject to the objections filed before the DRP and the orders of the DRP, to pass the final assessment order. The Court also sets aside the orders of the TPO dated 30th March 2016 issued pursuant to the remand by the ITAT.”

33. The Hon’ble Supreme Court, while dismissing the SLP filed by the Revenue in the case of Nokia India Pvt Ltd has said that :

“Once there is a clear order of setting aside of an assessment order with the requirement of the Assessing Officer/TPO to undertake fresh exercise of determining the arm’s length price, failure to pass draft assessment order would violate the provisions of section 144(1) of the Act. This is not a curable defect in terms of section 292 B of the Act.”

34. Considering the facts of the case in totality, in the light of the decisions discussed hereinabove, we have no hesitation to hold 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.

35. Ground Nos. 1 and 2 with its sub-grounds argued before us are

36. Since we have held that the order of the DRP and final assessment order are non est, therefore, we do not find it necessary to dwell into the other grounds raised in the Appeal Memo.

37. In the result the appeal of the assessee in ITA No. 1818/DEL/2023 is allowed.

The order is pronounced in the open court on 17.10.2023.