M/S. JHANDEWALA FOODS LIMITED 35, JOHARI BAZAR, JAIPUR,JAIPUR vs. ACIT CIRCLE-1, JAIPUR, CIRCLE-1, JAIPUR

None has appeared on behalf of the assessee in spite of fact that the scheduled date of hearing was noted by the ld. AR on behalf of the assessee. The notice scheduling the hearing for today was also instructed to be served M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur through the DR who has submitted the report stating that notice has been duly served on the assessee by the Assessing Officer on 19th December, 2019. It thus appears that the assessee has nothing further to submit/make any personal representation and it was accordingly decided to hear the matter ex- parte qua the assessee based on material available on record.

Briefly stated, the facts of the case are that the assessee filed its return of income declaring total income of Rs. 1,62,48,040/- which was selected for scrutiny assessment and notice u/s 143(2) was issued to the assessee. On examination of audit report in Form 3CEB, the Assessing officer noticed that the domestic transactions with Associated Enterprises (AE) were more than Rs. 15 crores and which is also one of the reasons for selection of matter under scrutiny, therefore, the matter was referred to the TPO for determination of arm’s length price of the domestic transactions as provided u/s 92CA of the Act. The TPO thereafter examined the matter and has passed an order u/s 92CA(3) dated 10.07.2017 wherein he has proposed an adjustment of Rs. 2,84,613/- being excess interest paid to the related parties. Thereafter, on receipt of the TPO order, notice u/s 142(1) was issued to the assessee dated 20.11.2017 and in compliance thereof, the ld AR attended the assessment proceedings and during such proceedings, the order of TPO was discussed with AR of the assessee. Thereafter, after examination of information and details filed by the assessee and the observations made by the TPO, the returned income was finally determined by the AO at Rs. 1,65,32,653/- after making the adjustment on account of excess interest paid to related parties as determined by the TPO amounting to Rs. 2,84,613/- and order under section 144C(1)/143(3) dated 25.12.2017 was issued along with demand notice u/s 156 of even date determining a sum of Rs 92,340 as tax payable by the assessee and penalty proceedings u/s 271(1)(c) was initiated for filing inaccurate particulars of income. 2 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur 4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT(A) and it was contended that the Assessing Officer has passed the order u/s 144C(1)/143(3) dated 25.12.2017 along with demand notice u/s 156 and also issued notice u/s 271(1)(c) without providing a draft assessment order as laid down u/s 144C of the Act. It was submitted that the order passed by the Assessing Officer without forwarding a draft of the proposed order is against the provisions of Income Tax Act and is bad in law and void-ab-initio and reliance was placed on various decisions including the decision of the Co- ordinate Bench in case of Jaipur Rugs Company (P) Ltd vs. DCIT Circle-2, Jaipur (ITA No. 46/JP/2017 & 1084/JP/2016 dated 24.04.2018).

The ld. CIT(A) referring to the provisions of section 144C held that as per the said provisions, even though the draft order is to be forwarded to the appellant before making any transfer pricing adjustment, however, the same being procedural lapse has not caused any prejudice to the assessee. The assessee was given an opportunity during the assessment proceedings and the order of the TPO was discussed with the AR before making the adjustment and accordingly the contention raised by the assessee was not accepted. Further, on merits, the ld. CIT(A) has sustained the addition made by the Assessing Officer. Against the said findings, the assessee is in appeal before us.

During the course of hearing, the ld. DR relied on the findings of the ld CIT(A) and submitted that where the order TPO was discussed by the Assessing Officer with the AR of the assessee during the course of assessment proceedings, there is no prejudice which has been caused to the assessee and therefore, the principle of natural justice has been followed. In view of the same, not issuing the draft order being a prejudicial lapse should not be basis to hold that the whole of the proceedings are bad in law. M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur 7. We have heard the rival contentions and perused the material available on record. The issue under consideration is whether non-issue of draft order as provided under section 144C(1) is a procedural lapse on part of the Assessing officer or the same being an essential requirement and non-issue of draft order before issuing the final order will make the final order as bad in law. In this regard, we find that during the course of appellate proceedings before the ld CIT(A), the ld AR has placed reliance on the decision of Coordinate Bench in case of Jaipur Rugs Company (P) Ltd vs. DCIT, Jaipur (Supra) wherein we find that the similar issue has been examined at length and we deem it appropriate to reproduce the relevant findings as under:- “14. Firstly, it would be relevant to refer to the provisions of section 144C which reads as 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. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,— (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,— (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (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 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur (b) no objections are received within the period specified in sub-section (2) (4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under subsection (3) within one month from the end of the month in which,— (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:— (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),— (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur (5) for further enquiry and passing of the assessment order. Explanation.—For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (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 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. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee. M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur (14A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the Principal Commissioner or Commissioner as provided in sub-section (12) of section 144BA. (15) For the purposes of this section,— (a) "Dispute Resolution Panel" means a collegiums comprising of three Principal Commissioners or] Commissioners of Income-tax constituted by the Board for this purpose; (b) "eligible assessee" means,— (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company. 15. The scheme of section 144C is unambiguous and sub-section (1) of section 144C clearly provides for issuance of a draft order which is a sine qua non before the Assessing Officer can pass a regular assessment order u/s 143(3) of the Act. It is not in dispute that in the instant case, the AO has made an addition based on the ALP adjustment proposed by the TPO and has thus made a variation in the income returned which is prejudicial to the interest of such assessee. 16. During the course of hearing, in order to determine whether draft assessment order was prepared and furnished to the assessee by the AO or not, the assessment records were called for. Thereafter, at the hearing scheduled on 12.04.2018, the assessment records were produced by the ld DR and on perusal of the same, it is noted that there is nothing on record in terms of draft assessment order which was prepared and furnished to the assessee and further, there is no entry which has been recorded in the order sheet to this effect that draft assessment order was prepared and furnished to the assessee. Therefore, it is a undisputed fact that in the instant case, there was no 7 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur draft assessment order which was prepared and furnished to the assessee as contemplated under section 144C(1) of the Act. 17. We have also carefully perused the assessment order passed under section 143(3) of the Act dated 18.02.2015. It is a regular assessment order in form and in substance. Along with assessment order, a notice of demand u/s 156 vide entry in D&CR No. 104/20 dated 18.02.2015 was raised wherein an amount of Rs. 38,98,400/- was determined as payable by the assessee. Separately, the penalty proceedings u/s 271(1)(c) were also initiated for furnishing of inaccurate particulars of income and a notice u/s 274 read with section 271 dated 18.02.2015 was issued to the assessee company. It is therefore a case where not only that income has been finally determined by the AO computed, the tax payable thereon has also been computed and demand entries are made on the basis of this order in the D&CR register and even penalty proceedings are initiated. Such an exercise could not have been done if the assessment order was indeed a draft assessment order. Undoubtedly, if draft of assessment order is wrongly titled an assessment order, section 292B should have come to the rescue of the Assessing Officer. However given the fact that resultant tax demand and penalty proceedings have been initiated, it is a final assessment order which has been passed by the Assessing Officer in substance and in effect. 18. Now, coming to the contention of the ld DR that adequate opportunity has been provided to assessee to submit objections against the ALP adjustments by the TPO as well as by the Assessing Officer. Accordingly, it is not a case where the rights of the assessee have been prejudiced in any manner. In other words, the contentions of the ld DR is that where show-cause notice towards proposed ALP adjustment has been issued to the assessee, the same is a sufficient compliance and in such a scenario, there is no necessity to furnish the draft assessment 8 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur order. We are however unable to accede to the said contentions raised by the ld DR as the same is not what has been contemplated by the legislature under section 144C(1) of the Act. And if we were to accept the said contentions of the ld DR, it will make the provisions of section 144C redundant and will take away the assessee’s right of approaching the Dispute Resolution Panel as basis such show-cause notice, the assessee could not have approached the Dispute Resolution Panel and thus, the same cannot be accepted. As we have noted above, the scheme of section 144C is unambiguous and sub-section (1) of section 144C clearly provides for issuance of a draft order which is a sine qua non before the Assessing Officer can pass a regular assessment order u/s 143(3) of the Act. 19. In this regard, we refer to the decision of the Co-ordinate Bench in the case of Capsugel Healthcare Ltd vs. ACIT (supra) wherein the facts of the case are identical and ratio thereof equally applies in the instant case. In that case, certain transfer pricing adjustment under section 92CA(1) was made to the income of the assessee. However, the Assessing Officer did not furnish to the assessee a draft assessment order, before passing a final assessment order. On appeal before the ld CIT(A), the assessee raised its grievance of not being furnished a draft assessment order. The ld CIT(A) rejected this grievance and observed that in the instant case, after receipt of the order passed by TPO, the Assessing Officer issued a show cause notice proposing to make additions as per the adjustments made by the TPO. In response to this, the assessee instead of filing objections, if any, with the DRP and the Assessing Officer had simply filed a brief note before the Assessing Officer giving a gist of the basis of adjustments made by the TPO with the remark that the explanation may be put on record for further reference. The show cause notice issued by the Assessing Officer was 9 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur nothing but a draft assessment order as no other additions had been made by the Assessing Officer apart from the adjustments made by the TPO. If the assessee had any objections on the proposed additions by the Assessing Officer, it should have filed such objections within 30 days before the DRP and the Assessing Officer. However, since the assessee had not filed any objections before the DRP and the Assessing Officer his contentions in this regard were not tenable. On appeal, the Coordinate Bench held as under: “7. We find that the issue is covered is now covered in favour in of the assessee by judgment of Hon'ble Madras High Court, in the case of Vijay Television (P.) Ltd v. Dispute Resolution Panel, wherein Hon'ble High Court has, inter alia, observed as follows: '20. Under Section 144 (C) of the Act, it is evident that the assessing officer is required to pass only a draft assessment order on the basis of the recommendations made by the TPO after giving an opportunity to the assessee to file their objections and then the assessing officer shall pass a final order. According to the learned senior counsel for the petitioners, this procedure has not been followed by the second respondent inasmuch as a final order has been straightaway passed without passing a draft assessment order. 21. As rightly pointed out by the learned senior counsel for the petitioners, in the order passed on 26.03.2013, the second respondent even raised a demand as also imposed penalty. Such demand has to be raised only after a final order has been passed determining the tax liability. The very fact that the taxable amount has been determined itself would show that it was passed as a final order. In fact, a notice for demand under Section 156 of the Act was issued pursuant to such order dated 26.03.2013 of the second respondent. Both the order dated 26.03.2013 and the notice for demand thereof have been served 10 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur simultaneously on the petitioner. Therefore, not only the assessment is complete, but also a notice dated 28.03.2013 was issued thereon calling upon the petitioner to pay the tax amount as also penalty under Section 271 of the Act. Thereafter, the petitioner was given an opportunity of hearing on 12.04.2013. Subsequently, the second respondent realised the mistake in passing a final order instead of a draft assessment order which resulted in issuing a corrigendum on 15.04.2013. In the corrigendum it was only stated that the order passed on 26.03.2013 under Section 143C of the Act has to be read and treated as a draft assessment order as per Section 143C read with Section 93CA (4) read with Section 143 (3) of the Act. In and by the order dated 15.04.2013, the second respondent granted thirty days time to enable the assessee to file their objections. On receipt of the corrigendum dated 15.04.2013, the petitioner company approached the first respondent, but the first respondent declined to issue any direction to the assessment officer on the ground that the first respondent has got jurisdiction only to entertain such an appeal if the order passed by the second respondent is a pre- assessment order. Therefore, it is evident that the first respondent declined to entertain the objections raised by the petitioner company on the ground that the order passed by the second respondent is not a draft assessment order, rather it is a final order. Thus, the first respondent had treated the order dated 26.03.2013 of the second respondent as a final order and therefore it refused to entertain the objections filed on behalf of the petitioner company. 22. As mentioned supra, as per Section 144C (1) of the Act, the second respondent-assessing officer has no right to pass a final order pursuant to the recommendations made by the TPO. In fact, the second respondent-assessing officer himself has admitted by virtue of the corrigendum dated 15.04.2013, that the order dated 26.03.2013 is only a 11 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur final order and it was directed to be treated as a draft assessment order. In this context, it is worthwhile to refer to the decision of the Honourable Supreme Court in the decision Deepak Agro Foods (supra) wherein in Para No.10, the Honourable Supreme Court discussed as to when an order could be construed as a final order:— "10. Shri Rajiv Dutta, learned senior counsel appearing on behalf of the appellant, submitted that in the light of its afore-extracted observations and a clear finding that the assessment order for the assessment year 1995-96 had been anti-dated, the order was null and void. It was urged that assessment proceedings after the expiry of the period of limitation being a nullity in law, the High Court should have annulled the assessment and there was no question of a fresh assessment. Thus, the nub of the grievance of the appellant is that in remanding the matter back to the Assessing Officer, the High Court has not only extended the statutory period prescribed for completion of assessment, it has also conferred jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period." 23. It is evident from the above decision of the Honourable Supreme Court that if an order is passed beyond the statutory period prescribed, such order is a nullity and has no force of law. In that case before the Honourable Supreme Court, the period for assessment proceedings expired and thereafter, fresh assessment orders have been issued by anti-dating it. In those circumstances, it was held that the High Court ought not to have remanded the matter back to the assessment officer and by doing so, the statutory period prescribed for completion of assessment has been extended by conferring jurisdiction upon the Assessing Officer, which he otherwise lacked on the expiry of the said period. In that case, the Honourable Supreme Court also held that there is a distinction between an order which is a nullity and an order which is 12 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur irregular and illegal. Where an authority making order lacks inherent jurisdiction, such an order will be null and void ab initio, as the defect of jurisdiction goes to the root of the matter and strikes at his very authority to pass any order and such a defect cannot be cured even by consent of the parties. 24. This decision squarely applies to the facts of this case. In this case, the order passed by the second respondent lacks jurisdiction especially when it is beyond the period of limitation prescribed by the statute. When there is a statutory violation in not following the procedures prescribed, such an order cannot be cured by merely issuing a corrigendum. 25. In the decision rendered by the Honourable Supreme Court of India in the case of (L. Hazari Mal Kuthiala (supra), which was relied on by the learned standing counsel for the respondents, it was held that the mistake or defect on the part of the Commissioner to consult the Central Board of Revenue did not render his order invalid since the provision about consultation in terms of Section 5 (3) of Patiala Act was merely directory and not mandatory. In the present case, the procedure that was required to be followed by the second respondent to pass a draft assessment order is mandatory and it is prescribed by the statute. Therefore, this decision relied on by the learned standing counsel for the respondents cannot be made applicable to this case. The learned senior counsel for the petitioners relied on the decision of the Allahabad High Court in the case of Shital Prasad Kharag Prasad (supra) wherein the Division Bench of the Allahabad High Court held that a notice contemplated under Section 148 of the Income Tax Act is a jurisdictional notice and it is not curable by issuing a notice under Section 292 B of the Act, if it was not served in accordance with the provisions of the Act. M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur 27. Similarly, the Division Bench of this Court in the decision in the case of V. Ramaiah (supra) Madras held that when an order is passed under Section 158BC of the Act instead of Section 158BD, it is not valid since it is not a defect curable under Section 292B of the Act. It was also held that an order passed after the period of limitation laid down in Section 158BC is not a valid order. It was further held that when there is a prescribed procedure contemplated under the Act or in a particular section and it is violated, then it cannot be cured. In the present case, certain procedure has been contemplated under Section 144C of the Act and they have been violated by the second respondent by passing final order of assessment and therefore such order passed by the second respondent has got no jurisdiction or it can be cured by virtue of issuing a corrigendum. 28. By referring to the decision of the Division Bench of this Court dated 10.02.2014 passed in Tax Case (Appeal) No. 2412 of 2006, the learned standing counsel for the respondents sought to make a distinction with the decision of the Division Bench of this Court mentioned in the preceding paragraph. That is a case where the facts relating to the order covered in the decision of the Honourable Supreme Court, which the Division Bench relied on, could not be made applicable to the facts of that case and therefore it was not discussed by the Division Bench in the order dated 10.02.2014. For more clarity, the relevant portion of the decision of the Division Bench of this Court in the case of V. Ramaiah (supra) is extracted hereunder:— "Certainly passing an order of assessment under Section 158BC instead of Section 158BD (inspite of clear terminology used in both the sections) would not amount to a mistake, a defect or an omission, much less a curable one. When different contingencies are dealt with under different sections of the Act, allowing an illegality to be perpetrated and then 14 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur taking a plea by the Revenue that such an action adopted on their part would not nullify the proceedings, cannot be appreciated since by virtue of such actions, the Revenue has attempted to nullify the scheme of things of limitations legally propounded under the Act...." 29. In yet another decision of the Division Bench of this Court in the case of Smt. R.V. Sarojini Devi (supra), which was relied on by the learned senior counsel for the petitioners, it was held as follows:— "Under Section 158BC of the Act empowers the assessing officer to determine the undisclosed income of the block period in the manner laid down in Section 158BB and 'the provisions of Section 142, subsections (2) and (3) of Section 143, Section 144 and Section 145 shall, so far as may be apply. This indicates that this clause enables the Assessing Officer, after the return is filed, to complete the assessment under Section 143 (2) by following the procedure like issue of notice under Section 143 (2)/142. This does not provide accepting the return as provided under Section 143 (1) (a). The Officer has to complete the assessment order under Section 143 (3) only. If an assessment is to be completed under Section 143 (3) read with Section 158BC, notice under Section 143 (2) should be issued within one year from the date of filing of the block return. Omission on the part of the assessing officer to issue notice under Section 143(2) cannot be a procedural irregularity and is not curable." 30. It is evident from the above decision of the Division Bench of this Court that where there is an omission on the part of the assessing officer to follow the mandatory procedures prescribed in the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. 31. In identical case as that of the case on hand, the Division Bench of the Andhra Pradesh High Court, in an unreported decision, had an 15 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur occasion to consider the scope of the validity of the demand notice issued by the assessing officer in the case of Zuari Cement Ltd. (supra), wherein it was held as under:— "A reading of the above section shows that if the assessing officer proposes to make, on or after 01.10.2009, any variation in the income or loss returned by an assessee, then, notwithstanding anything to the contrary contained in the Act, he shall first pass a draft assessment order, forward it to the assessee and after the assessee files his objections, if any, the assessing officer shall complete assessment within one month. The assessee is also given an option to file objections before the Dispute Resolution Panel in which event the latter can issue directions for the guidance of the Assessing Officer to enable him to complete the assessment. In the case of the petitioner, admittedly the TPO suggested an adjustment of Rs.52.14 crores u/s.92CA of the Act on 20.09.2011 and forwarded it to the Assessing Officer and to the assessee under subsection (3) thereof. The assessing officer accepted the variation submitted by the TPO without giving the petitioner any opportunity to object to it and passed the impugned assessment order. As this has occurred after 01.10.2009, the cut off date prescribed in sub-section (1) of S.144C, the Assessing Officer is mandated to first pass a draft assessment order, communicate it to the assessee, hear his objections and then complete assessment. Admittedly, this has not been done and the respondent has passed a final assessment order dated 22.12.2011 straight away. Therefore, the impugned order of assessment is clearly contrary to S.144C of the Act and is without jurisdiction, null and void. The contention of the Revenue that the circular No.5/2010 of the CBDT has clarified that the provisions of S.144C shall not apply for the assessment year 2008-09 and would apply only from the assessment 16 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur year 2010-2011 and later years is not tenable in as much as the language of Sub-section (1) of Section 144C referring to the cut off date of 01.10.2009 indicates an intention of the legislature to make it applicable, if there is a proposal by the Assessing Officer to make a variation in the income or loss returned by the assessee which is prejudicial to the assessee, after 01.10.2009. Therefore, this particular provision introduced by Finance (No.2) Act, 2009, would apply if the above condition is satisfied and other provisions, in which similar contrary intention is not indicated, which were introduced by the said enactment, would apply from 01.04.2009 i.e., from the assessment year 2010-2011. It is not disputed that the memorandum explaining the Finance Bill and the Notes and clauses accompanying the Finance Bill which preceded the Finance (No.2) Act, 2009 clearly indicated that the amendments relating to S.144C would take effect from 01.10.2009. In our view, the circular No.5/2010 issued by the CBDT stating that S.144C(1) would apply only from the assessment year 2010-2011 and subsequent years and not for the assessment year 2008-09 is contrary to the express language in S.144C(1) and the said view of the Revenue is unacceptable. The circular may represent only the understanding of the Board/Central Government of the statutory provisions, but it will not bind this Court or the Supreme Court. It cannot interfere with the jurisdiction and power of this Court to declare what the legislature says and take a view contrary to that declared in the circular of the CBDT (Ratan Melting and Wire Industries Case (1 Supra), Indra Industries (2 supra). The Revenue has not been able to pursuade us to take a contra view by citing any authority. In this view of the matter, we are of the view that the impugned order of assessment dated 23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation 17 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur thereof. Therefore, it is declared as one without jurisdiction, null and void and unenforceable. Consequently, the demand notice dated 23.12.2011 issued by the respondent is set aside." 32. As against this order of the Division Bench of the Andhra Pradesh High Court, the Revenue went on appeal before the Honourable Supreme Court. The record of proceedings of the Supreme Court indicate that the Special Leave Petition was dismissed on 27.09.2013. 33. The decision of the Division Bench of the Andhra Pradesh High Court deals with an identical issue as that of the present case. In this case, against the order passed by the second respondent on 26.03.2013, the petitioner filed objections before the DRP, the first respondent herein and the first respondent refused to entertain it by stating that the order passed by the second respondent is a final order and it had jurisdiction to entertain objections only if it is a draft assessment order. While so, the order dated 26.03.2013 of the second respondent can only be termed as a final order and in such event it is contrary to Section 144C of the Act. As mentioned supra, in and by the order dated 26.03.2013, the second respondent determined the taxable amount and also imposed penalty payable by the petitioner. According to the learned senior counsel for the petitioners, even as on this date, the website of the department indicate the amount determined by the second respondent payable by the company inspite of issuance of the corrigendum on 15.04.2013 as a tax due amount. Thus, while issuing the corrigendum, the second respondent did not even withdraw the taxable amount determined by him or updated the status in the website. In any event, such an order dated 26.03.2013 passed by the second respondent can only be construed as a final order passed in violation of the statutory provisions of the Act. The corrigendum dated 15.04.2013 is also beyond the period prescribed for limitation. Such a defect or failure on the part of the 18 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur second respondent to adhere to the statutory provisions is not a curable defect by virtue of the corrigendum dated 15.04.2013. By issuing the corrigendum, the respondents cannot be allowed to develop their own case. Therefore, following the order passed by the Division Bench of the Andhra Pradesh High Court, which was also affirmed by the Honourable Supreme Court by dismissing the Special Leave Petition filed thereof, on 27.09.2013, the orders, which are impugned in these writ petitions are liable to be set aside.' 8. Learned Departmental Representative, on the other hand, submits that this lapse on the part of the Assessing Officer is at best a procedural lapse and the matter should, therefore, be restored to the file of the Assessing Officer for adjudication de novo. 9. We are, however, unable to see any legally sustainable merits in the stand so taken by the learned Departmental Representative. Hon'ble High Court's esteemed views, as extracted above, bind us and we have to respectfully follow the same. Accordingly, in due deference to this binding judicial precedent, and other binding judicial precedents referred to therein, we quash the impugned assessment order. It is a legal nullity. As for the show cause notice issued by the Assessing Officer, before making the ALP adjustment, this cannot be treated as a draft assessment order nor the assessee could have approached the DRP against the same. Learned CIT(A) was thus clearly in error in equating the show cause notice with a draft assessment order against, and thus rationalizing the impugned assessment order. The stand of the CIT(A) cannot be upheld. In a case in which no draft assessment order is furnished to the assessee, to which assessee is entitled under section 144C (15), the assessment order passed by the AO is to be held is illegal and liable to be quashed on this ground alone. We do so.” M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur 20. In light of above discussions, respectively following the decision of the Hon’ble High Courts and the Co-ordinate Bench referred supra, since the AO has failed to follow the mandate of the provisions of section 144C of the Act whereby he was required to pass a draft assessment order which is mandatory and is prescribed by the statute, the final assessment order passed by the Assessing Officer u/s 143(3) is without jurisdiction. Further, the issuance of a show-cause notice cannot be equated and treated as a draft assessment order as the same would make the provisions of section 144C redundant. Accordingly, we quash and set aside the impugned assessment order. The ground of assessee’s appeal is thus allowed. 21. Since we have quashed the assessment order, there is no necessity to address the other grounds raised by the assessee on merits. The same are rendered infructious and are dismissed as such.”

In instant case, the TPO has passed the order u/s 92CA(3) on 10.07.2017 and has proposed an adjustment towards the domestic transactions undertaken for the assessee with its related parties and therefore, the assessee qualifies as an eligible assessee u/s 144C(15)(b)(i) of the Act. Therefore, in terms of section 144C(1) of the Act, the Assessing Officer was required to issue the draft of the proposed assessment order to the assessee as variation so proposed is prejudicial to the interest of the assessee, being a specific mandate of the legislation as provided u/s 144C(1) of the Act. Wherever, there is any variation to the returned income proposed in the hands of the eligible assessee, the Assessing Officer shall in the first instance issue a draft of the proposed order and only where the assessee intimate the Assessing Officer the acceptance of the variations so proposed or no objection is received within the specified period, the Assessing Offer shall pass the final assessment order. In the instant case, the Assessing officer has not issued the draft of the proposed 20 M/s Jhandewala Foods Ltd., Jaipur Vs. ACIT, Circle-01, Jaipur assessment order and the provisions of section 144C have been clearly violated and not followed by the Assessing Officer. The contention of the Revenue that due opportunity has been provided to the assessee during the course of assessment proceedings wherein the matter relating to the adjustment proposed by the TPO was discussed with the ld. AR of the assessee does not absolve the Assessing Officer from the mandatory and not just a procedural requirement of issuing the draft of the proposed order as required u/s 144C(1) of the Act. Therefore, following the decision in case of Jaipur Rugs Company (P) Ltd (supra), the assessment order so passed by the Assessing Officer u/s 144C(1) read with 143(3) without issuing the draft of the proposed order cannot be sustained in the eyes of law and is hereby set aside. In the result, the ground no. 1 of the assessee’s appeal is allowed.

The Ground no. 2 relates to merit of addition made by the Assessing officer, since we have set-aside the assessment order, the same become academic and is dismissed as infructious.