When TPO proposes additions to assessee’s ALP, AO is duty bound to pass a draft assessment order

DCIT Vs Tally Solutions Pvt.Ltd. (ITAT Bangalore)

Hon’ble Supreme Court in the case of DCIT v. Control Risks India (P.) Ltd. reported in 107 taxmann.com 83, had held that when TPO proposes additions to assessee’s ALP, the AO is duty bound to pass a draft assessment order. It was held by the Hon’ble Supreme Court that the final assessment order which is passed without a draft assessment order depriving the assessee an opportunity of questioning the draft assessment order before the DRP is in contravention of the provisions of section 144C of the I.T.Act. The relevant finding of the Hon’ble Supreme Court reads as follow:-

“7. That consequent upon an order of the TPO under Section 92CA(3) of the Act, it is incumbent upon the AO to pass a draft assessment order under Section 144C of the Act, is the settled legal position as explained by the Court in its decision in Turner International India (P.) Ltd. v. Dy.CIT [2017] 82 taxmann.com 125/398 ITR 177 (Delhi). In the present case, clearly the AO overlooked the above legal position and proceeded to pass a final assessment order, thereby depriving the Assessee of an opportunity of questioning the draft assessment order under Section 144C of the Act before the DRP.”

Similar view has been held by the Hon’ble Delhi High Court in the case of JCB India Ltd. v. DCIT & Anr. [(2017) 398 ITR 189 (Delhi)] and Control Risk India Pvt. Ltd. 107 taxmann.com 83. In view of the above judicial pronouncements, we hold that the CIT(A) is justified in quashing the assessment order u/s 143(3) r.w.s. 254 dated 29.12.2017. It is ordered accordingly. In the result, the appeal filed by the Revenue is dismissed.

FULL TEXT OF THE ITAT JUDGEMENT

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