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Facts
The assessee challenged the validity of the Final Assessment Order, alleging it was passed without issuing a Draft Assessment Order as required by Section 144C of the Income Tax Act. The assessee claimed they never received a draft order and the final order was passed prematurely.
Held
The Tribunal held that the Final Assessment Order was passed in violation of Section 144C(3) and (4) of the Act because it was issued before the expiry of the 30-day period for filing objections, thus frustrating the assessee's right to do so. The CIT(A)'s order was also noted to have accepted the assessee's contention regarding the TPO's order being the effective appeal.
Key Issues
Whether the Final Assessment Order was validly passed without issuing a Draft Assessment Order and within the stipulated timeframes as per Section 144C of the Income Tax Act, 1961.
Sections Cited
144C, 143(3), 144B, 250, 92CA, 154, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B’’BENCH: BANGALORE
Before: MS. PADMAVATHY S. & SHRI RAHUL CHAUDHARY
Per Rahul Chaudhary, Judicial Member:
The present appeal preferred by the Assessee is directed against the Order, dated 24/07/2024, passed by the National Faceless Appeal Centre (NFAC), New Delhi [hereinafter referred to as ‘the CIT(A)’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had disposed off the appeal against the Final Assessment Order, dated 23/04/2021, passed under Section 143(3) read with Section 144B of the Act for the Assessment Year 2017-2018.
By way of Ground No. 5 raised in the present appeal, the Assessee had challenged the validity of the Final Assessment Order, dated
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30/03/2015. Ground No. 5 raised by the Assessee reads as under:
“Impugned order failed in not holding the Assessment order dated 23.4.2021 as invalid, null and void. Further impugned order erred in not deleting the Transfer pricing adjustment made to returned income.”
We have heard both the sides in relation to the above ground and have perused the material on record.
We note that Section 144C of the Act 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 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 (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 sub-section (3) within one month from the end of the month in which,-
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(a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires.”
Bare perusal of the above shows that under Section 144C(2) of the Act assessee is required to either file objections against the Draft Assessment Order or give acceptance within 30 days from the receipt of the draft order. Section 144C(3) & (4) of the Act provides that in case no objections are filed by the assessee within the aforesaid period of 30 day or if communication accepting the Draft Assessment Order is accepted, the assessing officer would be required to pass the Final Assessment Order within one month from the end of the month in which the 30 day period expires or acceptance is received, as the case may be.
In the present case, it was contended on behalf of the Assessee that no Draft Assessment Order has been received by the Assessee and that the Final Assessment Order has been passed without passing the Draft Assessment Order. Therefore, vide order dated 06/11/2024 report was called for from the Assessing Officer. The Learned Departmental Representative had placed on record copy of the report/letter dated 06/11/2024, which is accompanied by copy of draft assessment order and screenshot of entire case history. On perusal of the same it emerges that the draft assessment order was prepared on 15/04/2021. It is an admitted position that Final Assessment Order was generated on 23/04/2021. We find following are the entries reported between 15/04/2021 and 23/04/2021: Date Action/description From To Document 15/04/2021 Draft order u/s AO – MICROSOFT AAECM2252R 143(3) of Income Assessment RESEARCH Order u/s Tax Act, 1961 Unit LAB INDIA 143(3)_15042021.pdf submitted PRIVATE LIMITED Notings/Remarks: Signature:
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15/04/2021 Draft Issued AO- MICROSOFT AAECM2252R_Computation computation sheet Assessment RESEARCH sheet_15042021.pdf Unit LAB INDIA PRIVATE LIMITED Notings/Remarks: Signature:
15/04/2021 For Review report AO- National Assessment Faceless Unit Assessment Centre Notings/Remarks:For Review report Signature:
15/04/2021 Data sent to Review National AO-Review Unit Faceless Unit Assessment Centre Notings/Remarks: Kindly provide review report for the case Signature:
20/04/2021 For approval of AO – Review Range – Review report Unit Review Unit Notings/Remarks: DAO is accepted and submitted for further approval. Signature:
21/04/2021 Added additional Range – - remarks Review unit NotingsRemarks: AO’s report concurring with DAO is approved. Signature:
21/04/2021 Approved draft Range – AO -Review review report Review unit unit Notings/Remarks : AOs report concurring with DAO is approved Signature:
22/04/2021 Added additional AO – Review National remarks unit Faceless Assessment Centre Notings/Remarks : Pending for signing by Faceless Unit for Service through NaFAC Signature:
22/04/2021 Issued Review National AO -Regional AAECM2252R_Review report Faceless e- report_1032594788(1)_ Assessment assessment 22042021.pdf Centre unit Notings/Remarks: Review report forwarded to AU Signature: 22/04/2021 Approve AO- Range – Assessment order Assessment Assessment unit unit
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Notings/Remarks: Submitted for approval of assessment order after clearance from risk and review unit Signature:
22/04/2021 Approved for order Range – AO – generation Assessment Assessment unit unit Notings/Remarks : Approved Signature:
23/04/2021 Order generated u/s National MICROSOFT AAECM2252R_Order u/s 143(3) of Income Faceless RESEARCH 143(3)_10323637493(1)_ Tax Act, 1961 Assessment LAB INDIA 23042021.pdf Centre PRIVATE LIMITED Notings/Remarks: Signature:
23/04/2021 Action taken AO – Assessment unit Notings/Remarks: Ok Signature:
23/04/2021 Demand notice National MICROSOFT AAECM2252R_Demand notice generated u/s 156 Faceless RESEARCH u/s 156_1032637529(1)_ of Income Tax Act, Assessment LAB INDIA 23042021.pdf 1961 centre PRIVATE LIMITED Notings/Remarks: Signature:
23/04/2021 Issued computation National MICROSOFT AAECM2252R_Computation sheet Faceless RESEARCH sheet_1032637540(1)_ Assessment LAB INDIA 23042021.pdf Centre PRIVATE LIMITED
Thus, even if arguendo the above entries are accepted to be correct, the Final Assessment Order has been passed in violation of the provisions contained in Section 144C(3)/(4) of the Act. It is not the case of the Revenue that the Assessee has accepted the Draft Order. Therefore, the Assessing Officer could not have passed the Final Assessment Order before the expiry of the 30 days granted by Section 144C(2) of the Act to the Assessee to file objections. In the present case, the Final Assessment Order has been passed before the expiry of 30 days granted to the Assessee by Section 144C(2) of the Act to file objections. Thus, frustrating the right of the Page 5 of 7
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Assessee to file objections against the Draft Assessment Order.
We note that while disposing off the appeal preferred by the Assessee, the Learned CIT(A) has recorded as under:
“6.3 As per the provisions of section 92CA, when a reference is made to the TPO, the ALP determined, the Transfer Pricing Oder goes to the assessing officer, the assessing officer shall pass the 143(3) order incorporating the Transfer Pricing Order. The assessing officer has not discussed any thing about the transfer pricing adjustments made by the TPO and has accepted the transfer pricing adjustments in toto. Considering these facts no discussion of the grounds of appeal is made here. The TPO’s order is to be considered as the order appealed against. The rectification order passed on 1.6.2021 u/s 154 r.w.s. 143(3) reduced the tax demand from section 115BBE at the rate of sixty percent to normal computation rates. The assessment is set aside for the limited purpose of redoing the 143(3) order appealed against by incorporating the TP adjustments.
6.4 In the result, the appeal is set aside for doing it denovo.”
On perusal of above it appears that the Learned CIT(A) has, in a sense, accepted the contention of the Assessee and has concluded that the appeal is in effect appeal against the order passed by the Transfer Pricing Officer.
Given the above facts and circumstances we are of the view that the Final Assessment Order, dated 23.4.2021, was passed without following the mandate of the provisions contained in Section 144C of the Act and therefore, the same cannot be sustained.
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Accordingly, we quash the Final Assessment Order, dated 23/04/2021, passed under Section 144C of the Act. Consequently, the additions/disallowances and the corresponding demand raised upon the Assessee stands deleted. Ground No. 5 raised by the Assessee is allowed while all the other grounds raised by the Assessee are dismissed as having been rendered infructuous. In terms of the aforesaid, the appeal preferred by the Assessee is partly allowed.
Order pronounced in the open court on 28th Nov, 2025