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Facts
The Revenue appealed against the CIT(A)'s order which quashed an assessment order for AY 2009-10. The AO had passed the final assessment order on 28.03.2013 without first issuing a draft assessment order, as mandated by Section 144C(1) of the Income Tax Act. The Revenue contended that Section 144C was applicable from AY 2010-11 as per an earlier CBDT circular, while the assessee relied on later clarificatory circulars and court decisions stating its applicability from 01.10.2009 for variations prejudicial to the assessee.
Held
The tribunal upheld the CIT(A)'s decision, confirming that Section 144C(1) mandatorily required the AO to issue a draft assessment order for any variations prejudicial to the assessee made on or after 01.10.2009, irrespective of the assessment year. Consequently, the final assessment order passed without this prerequisite was deemed null and void, in line with High Court precedents.
Key Issues
Whether the final assessment order passed by the AO for AY 2009-10 without a preceding draft assessment order under Section 144C(1) was valid, considering the effective date of Section 144C provisions and subsequent CBDT circulars and judicial pronouncements.
Sections Cited
144C, 144C(1), 144C(3), 92CA(3)
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Income Tax Appellate Tribunal, DELHI BENCH “I”, DELHI
आयकर अपीलीय अिधकरण िद�ी पीठ “आई ”, िद�ी �ी िवकास अव�थी, �ाियक सद� एवं �ी �दीप कुमार केिडया, लेखाकार सद� के सम� IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “I”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आअसं.839/िद�ी/2023 (िन.व. 2009-10) ITA No.839/DEL/2023 (A.Y.2009-10) Deputy Commissioner of Income Tax, ...... अपीलाथ�/Appellant Circle-1(1), New Delhi बनाम Vs. M/s. ADM Agro Industries Kota & Akola Pvt. Ltd., Vatika Professional Point, 3rd Floor, Golf Course Extention Road, Sector-66, Gurugram 122018, Haryana. ..... �ितवादी/Respondent PAN: AABCS-9646-L अपीलाथ� �ारा/ Appellant by : Shri Rajesh Kumar, CIT(DR) Ms. Kanchan Garg, Sr.DR �ितवादी�ारा/Respondent by : Shri R.K. Kapoor, CA सुनवाई क� ितिथ/ Date of hearing : 06/06/2024 घोषणा क� ितिथ/ Date of pronouncement : 13/06/2024 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals) Delhi-44 (hereinafter referred to as ‘the CIT(A)’) dated 10.01.2023, for assessment year 2009-10. 2. The appeal is time barred by 16 days; the Assessing Officer (AO) has filed an application seeking condonation of delay in filing of appeal. The ld. Authorized Representative (AR) of the assessee has not raised any serious objection in
2 ITA NO.839/DEL/2023 (A.Y.2009-10) condoning the delay. After perusal of the application filed by the Department, we are satisfied that delay in filing of appeal was not intentional but was for bonafide reasons stated therein. Therefore, delay of 16 days in filing of appeal is condoned and appeal is admitted for hearing on merits. 3. The Department in appeal has assailed the order of CIT(A) by raising following grounds:- 1. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) erred in cancelling the assessment order on the basis of CBDT Circular No. 09/2013 dated 19.11.2013, by disregarding that: (a) The Explanatory Notes to the Provisions of the Finance Act 2009 (Circular No. 05/2010) issued on 03.06.2010, as applicable on the date of assessment order, mention that the amendments have been made applicable with effect from 1" October, 2009, and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. (b) The CBDT Circular No. 05/2010 was in force when the TP Order was passed on 28.01.2013 and when the assessment order was passed on 28.02.2013. (c) The CBDT Circular No. 09/2013 was issued on 19.11.2013 whereas TP Order was passed on 28.01.2013 and the assessment order was passed on 28.03.2013 i.e. before issue of CBDT Circular 09/2013. 2. Whether in the facts and circumstances of the case and in law, the Ld. CIT(A) erred in disregarding the judgement of Hon'ble Madras High Court in the case of Vedanta Ltd. (in writ petition No. 1729/2011) which was also applied by the Coordinate Bench of ITAT in AT Kearney Ltd. vs ADIT (ITA No. 4405/Del/2011) wherein it was held that the provisions of Section 144C of the Act are applicable from A. Y. 2010-11 onwards? 3. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any grounds(s) of appeal at any time before or during the hearing of this appeal. 4. Shri R.K. Kapoor, appearing on behalf of the assessee vehemently supporting the order of CIT(A) submitted that the Assessing Officer (AO) has passed final assessment order dated 28.03.2013, in violation of the provisions of
3 ITA NO.839/DEL/2023 (A.Y.2009-10) section 144C(1) of the Income Tax Act, 1961(hereinafter referred to as the ‘Act’). As per the provisions of said section, the Assessing Officer is mandatorily required to pass draft assessment order before passing final assessment order u/s. 144C(3) of the Act, where no objections are filed by the assessee. The CIT(A) has allowed assessee’s appeal in a well reasoned order following the decision of Hon’ble Andhra Pradesh High Court in the case of Zuari Cement Ltd. vs. ACIT in WP No.5557 of 2012 decided on 21.2.2013, upheld by the Hon’ble Supreme Court of India in SLP filed by the Department titled ACIT vs Zuari Cement Ltd. reported as TS-270-213-SC. The CIT(A) while deciding this issue has also considered various other decisions including the decision of Hon’ble Jurisdictional High Court in the case of ESPN Star Sports Mauritius S.N.C ET Compagnie vs. UOI 68 taxmann.com 377. The ld. AR prayed for upholding the order of CIT(A) and dismissing appeal of the Revenue. 5. Per contra, Shri Rajesh Kumar representing the Department vehemently defended validly of assessment order. The ld. DR narrating sequence of events submitted that the Transfer Pricing Officer (TPO) passed the order u/s. 92CA(3) on 28.01.2013. Thereafter, the AO passed the impugned assessment order on 28.03.2013. The provisions of section 144C were inserted by the Finance (No.2) Act, 2009 with retrospective effect from 01.04.2009 Para 45.5 of Explanatory Notes to the provisions of Finance (No.2) Act, 2009 made it clear that amendment would be applicable w.e.f 01.10.2009 and will apply to assessment year 2010-11 and subsequent assessment years. The AO passed the assessment order in bonafide manner on 28.03.2013. Subsequently, CBDT issued Circular No. 9/2013 dated 19.11.2013 replacing para 45.5 of Explanatory circular for Finance (No.2)
4 ITA NO.839/DEL/2023 (A.Y.2009-10) Act, 2009 to include assessment year 2009-10 within the preview of Section 144C of the Act. The said circular was issued subsequent to the passing of impugned assessment order; hence, there is no infirmity in the assessment order. The ld. DR placed reliance on the decision rendered in the case of Union of India & Others vs. Ashish Agarwal 236 Taxman 183 (SC) that contend that bonafide error by AO in applying the provisions of the Act, deserves leeway and the assessment order need not be quashed. 6. Rebutting the submissions made on behalf of the Department, the ld. AR submits that in similar set of facts where the assessment order was passed prior to the date of CBDT Circular No. 9/2013 (supra), the Hon’ble High Court in the case of Zuari Cement Ltd. vs. ACIT (supra), held the assessment order void and unenforceable. We have heard the submissions made by rival sides and have examined the 7. orders of authorities below. We have also considered the decisions and circulars on which respective sides have placed reliance in support of their submissions. 8. The undisputed fact is that the Assessing Officer has passed the final assessment order dated 28.03.2013, without passing any draft assessment order. The provisions of Section 144C of the Act were inserted by the Finance (No.2) Act, 2009 with retrospective effect from 01.04.2009. A bear perusal of sub-section (1) to section 144C of the Act would show that the Assessing Officer in the first instance is required to pass a draft assessment order in the case of eligible assessee, if he proposes to make any variation which is prejudicial to the interest of such assessee, on or after 01.10.2009. In the Explanatory circular for Finance
5 ITA NO.839/DEL/2023 (A.Y.2009-10) (No.2) Act, 2009 i.e. Circular No.5 of 2010 dated 03.6.2010 in Para 45.5 it was mentioned that the amendment would apply in relation to assessment year 2010- 11 and subsequent assessment years. Thereafter, CBDT issued a circular dated 19.11.2013 (supra) substituting Para 45.5. The substituted Para 45.5 reads as under:- "45.5. Applicability: Section 144C has been inserted with effect from 1st April, 2009. Accordingly, the Assessing Officer is required to forward a draft assessment 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. In other words section 144C is applicable to any order which proposes to make variation in income or loss returned by an eligible assessee, on or after 1st October, 2009 irrespective of the assessment year to which it pertains. Amendments to other sections of the Income-tax Act referred to in para 45.3 of the circular 5/2010 dated 3rd June, 2010 shall also apply from 1st October, 2009". 9. The Hon’ble Andhra Pradesh High Court in the case of Zuari Cement Ltd. vs. ACIT (supra) has considered the memorandum explaining Finance Bill and the Notes and clauses accompanying the Finance Bill and the Circular No. 5/2010 issued by CBDT clarifying the provisions of Section 144C of the Act. The Hon’ble High Court after examining the aforesaid circular held as under:- “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 2010-11 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),
6 ITA NO.839/DEL/2023 (A.Y.2009-10) Indra Industries (2 supra). The Revenue has not been able to persuade us to take a contra view by citing any authority. In this view of the matter, we are of the view thai the impugned order of assessment dt.23.12.2011 passed by the respondent is contrary to the mandatory provisions of S.144C of the Act and is passed in violation 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”. 10. The Hon’ble High Court made it clear that the circulars cannot supersede the provisions of Section 144C(1) of the Act, and held the final assessment order null and void that was passed without passing the draft assessment order in violation to mandatory provisions of Section 144C(1) of the Act. 11. Subsequently, the CBDT came out with another clarificatory circular dated 19.11.2013, the relevant contents of the same have been reproduced by us hereinabove in para 8 of this order. The subsequent clarificatory circular issued by CBDT is in line with the provisions of Section 144C(1) of the Act. The CBDT Circular and decision referred above makes it explicit that after 01.10.2009, the AO is statutorily required to pass draft assessment order u/s. 144C(1) of the Act, if he makes any addition, before passing the final assessment order u/s. 144C(3) of the Act. 12. The Coordinate Bench in the case of Xander Advisors India Pvt. Ltd. vs. ACIT, in somewhat similar case where the final assessment order was passed without passing draft assessment order, after considering various decisions including the decision rendered in the case of Zuari Cement Ltd. vs. ACIT (supra) the decision of Hon’ble Gujarat High Court in the case of CIT vs. C-Sam (India) (P.)
7 ITA NO.839/DEL/2023 (A.Y.2009-10) Ltd 84 taxmann.com 261 (Guj.) and CBDT circular dated 03.6.2010 and dated 19.11.2013 (supra) quashed the final assessment order. 13. In the instant case, the CIT(A) has quashed the final assessment order dated 28.03.2013 that has been passed without following the mandatory provisions of Section 144C(1) of the Act after considering decisions passed by various Hon’ble High Courts. We do not find any infirmity in the impugned order, hence, the same is upheld and appeal of the Revenue is dismissed being devoid of any merit. 14. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on Thursday the 13th day of June, 2024. Sd/- Sd/- (PRADIP KUMAR KEDIA) (VIKAS AWASTHY) लेखाकार सद�य/ACCOUNTANT MEMBER �याियक सद�य/JUDICIAL MEMBER िद�ी/Delhi, �दनांक/Dated 13/06/2024 NV/- �ितिलिप अ�ेिषतCopy of the Order forwarded to : 1. अपीलाथ�/The Appellant , 2. �ितवादी/ The Respondent. 3. The PCIT 4. िवभागीय �ितिनिध, आय.अपी.अिध., िद�ी /DR, ITAT, िद�ी 5. गाड� फाइल/Guard file.
BY ORDER,
//True Copy// (Dy./Asstt. Registrar) ITAT, DELHI