JOINT COMMISSIONER OF INCOME TAX(OSD), CIRCLE -1(1), RAIPUR, RAIPUR vs. SHIVALIK POWER AND STEEL PRIVATE LIMITED, RAIPUR, RAIPUR

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ITA 496/RPR/2026Status: DisposedITAT Raipur09 July 2026AY 2016-175 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the AO's failure to issue a draft assessment order as required by Section 144C(1) is a mandatory procedural requirement and a jurisdictional lapse, not a curable defect. This vitiates the entire assessment proceeding.

What were the facts?

The assessee filed its return of income, and after a defect notice, a rectified return was filed. The Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO), who proposed an upward adjustment. The AO then passed a final assessment order incorporating this adjustment without issuing a draft assessment order.

What were the issues?

Whether the AO's failure to issue a draft assessment order before passing a final assessment order, when a TPO adjustment is involved, renders the assessment order invalid.

Which sections of the Income-tax Act were involved?

Section 144C(1),Section 139(9),Section 292B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, RAIPUR BENCH “DB”, RAIPUR

Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI AVDHESH KUMAR MISHRA

For Appellant: Shri Praveen Goyal, CA
For Respondent: Shri Rituparna Namdeo. CIT-DR
Hearing: 08.07.2026Pronounced: 09.07.2026

आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM: The present appeal preferred by the Revenue emanates from the order of the Ld.ADDL/JCIT(A), Varanasi dated 20.03.2026 for the assessment year 2016-17 as per the grounds of appeal on record.

2.

The relevant facts in this case are that the assessee is a Private Limited Company engaged in the manufacturing of S.G Iron and C.I Castings for the Indian Railways and automotive sectors, had filed its return of income for the year under consideration on 10.09.2016. Following a notice of defect u/s.139(9) of the Income Tax Act, 1961 (for short ‘the Act’), a rectified return was filed on 14.03.2018. The A.O subsequently referred the matter to the Transfer Pricing Officer (TPO) for determination of the Arm’s Length Price (ALP) regarding Specified Domestic Transactions. The TPO vide order dated 29.10.2019 proposed an upward adjustment of Rs.3,91,23,820/-. Thereafter, the A.O proceeded to pass the final assessment order on 24.12.2019 incorporating the said adjustment.

3.

That before the Ld. ADDL/JCIT(A), the contention in law assailed by the assessee was that the A.O failed to issue a Draft Assessment Order as mandatorily required u/s.144C(1) of the Act, thereby, bypassing the statutory mechanism available to an “eligible assessee”. That on this backdrop, the Ld. Addl/JCIT(A) has held and observed as follows:

3 JCIT (OSD), Circle-1(1), Raipur (C.G.) Vs. Shivalik Power and Steel Private Limited ITA No.496/RPR/2026

“8. Judicial Findings and Reasoning I have carefully considered the submissions and scanned the relevant statutory provisions. I. Violation of the Mandatory Procedure under Section 144C(1) The language of Section 144C(1) is coached in mandatory terms, stating that the AO "shall, in the first instance, forward a draft of the proposed order of assessment" to the eligible assessee. This is a non-obstante provision designed to provide a specialized dispute resolution mechanism through the DRP. By passing a final assessment order directly, the AO has effectively short-circuited the legislative intent and deprived the Appellant of a substantive right. In light of the settled law by various High Courts, including the Hon'ble Delhi High Court and the Hon'ble Bombay High Court, the failure to pass a draft assessment order is not a mere procedural irregularity curable under Section 292B. It is a fundamental jurisdictional lapse that vitiates the entire assessment proceeding. As the AO acted in clear defiance of the mandatory statutory procedure, the resulting order is coram non judice and must be quashed.” “9. Conclusion The assessment order dated 24.12.2019 is found to be suffering from fatal legal infirmities. Since the very foundation of the assessment is found to be legally fragile, the same is hereby annulled. Consequently, we find no necessity to adjudicate upon the merits of the Transfer Pricing adjustment, as the same has been rendered academic. In the result, the appeal filed by the Assessee is ALLOWED.”

4.

That when the matter has been referred to the TPO and once the TPO makes an adjustment regarding ALP of the transactions, the A.O after receiving the adjustment from TPO who mandatorily as per Section 144C(1) of the Act “shall, in the first instance, forward a draft of the

4 JCIT (OSD), Circle-1(1), Raipur (C.G.) Vs. Shivalik Power and Steel Private Limited ITA No.496/RPR/2026

proposed order of assessment” to the eligible assessee. It is never open to the A.O to directly pass a final assessment order incorporating the said adjustment of the TPO without providing any opportunity to the assessee through Draft Assessment Order. This is the scheme of the Act when there is reference made to the TPO. Non furnishing of Draft Assessment Order as mandated u/s. 144C(1) of the Act is even not curable u/s.292B of the Act since such failure to pass Draft Assessment Order is not mere procedural irregularity. In fact, it is a jurisdictional lapse that vitiates the entire assessment proceedings resulting the order is “coram non judice” and must be quashed.

5.

In view thereof, we do not find any infirmity with the findings of the Ld. ADDL/JCIT(A) which is upheld and relief provided to the assessee is sustained.

6.

In the result, appeal of the Revenue is dismissed.

Order pronounced in the open court on 9th July, 2026.

Sd/- Sd/- AVDHESH KUMAR MISHRA PARTHA SARATHI CHAUDHURY (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) रायपुर/ RAIPUR ; �दनांक / Dated : 9th July, 2026. SB, Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to : 1. अपीलाथ� /The Appellant.

5 JCIT (OSD), Circle-1(1), Raipur (C.G.) Vs. Shivalik Power and Steel Private Limited ITA No.496/RPR/2026

2.

��यथ� /The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, रायपुर ब�च, रायपुर / DR, ITAT, Raipur Bench, Raipur. 5. गाड� फ़ाइल / Guard File. Samiran आदेशानुसार / BY ORDER, Bera, Sr. PS, // True Copy // ITAT, Senior Private Secretary आयकर अपील�य अ�धकरण, रायपुर / ITAT, Raipur. Raipur Digitally signed by Samiran Bera, Sr. PS, ITAT, Raipur Date: 2026.07.09 12:39:04 +05'30'

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