ACIT, CHENNAI vs. TRANSWORLD GARNET INDIA PVT LTD., CHENNAI

When the application filed by the assessee along with reply was taken up for hearing Shri M.M. Bhusari, the Ld. Departmental Representative submitted that the issue is squarely covered by the judgment of the Hon’ble High Court in Vijay Television Ltd vs. Dispute Resolution Panel, 369 ITR 113. The Ld. DR clarified that after 01.10.2009, the Ld.AO has to frame draft assessment order, if he propose to make variations in the income or loss written, which is prejudice to the interest of the assessee. In this case, admittedly draft assessment order was not made and the Ld.AO made variations after 01.10.2009. Therefore according to the Ld.DR it is squarely covered in favour of the assessee.

We heard Shri R. Sivaraman, the Ld. counsel for the assessee also. The Ld. counsel pointed out that Rule 11 of the Income Tax (Appellate Tribunal) Rules, 1963 clearly says that the additional ground shall be raised by the appellant with leave of the Tribunal. However the Tribunal while deciding the matter was not be confined to the grounds taken by the appellant in the memorandum of appeal or additional ground taken by the appellant with the leave of the Tribunal. The Tribunal shall rest its decision on any other ground after giving an opportunity to the other party. In fact the non-drafting of draft assessment order was specifically raised by the assessee before this Tribunal on 24.06.2015. This Tribunal recorded the issue raised by the assessee being the respondent and gave an opportunity to the Revenue to respond. After hearing the objection, the appeal was heard. Since the third member instructed the assessee to file an application, the application was filed and sufficient opportunity was given as directed by the third member. Since no draft assessment order was made, there cannot be any variation in the international transaction.

We have considered the rival submissions on either side and perused the material available on record. The question arises for consideration is can the Ld.AO make any variations in the income or loss written in respect of international transaction after 01.10.2009 without passing a draft assessment order. This issue was specifically considered by the Madras High Court in Vijay Television (P) Ltd supra. The Madras High Court after considering the judgment of the Andhra Pradesh High Court found that the omission to pass draft assessment order is not a mere procedure irregularity and it cannot be cured at all. This judgment of the Madras High Court is binding on all authorities in the State. Furthermore the Ld.DR very fairly submitted that the issue is covered by the judgment of the Madras High Court in Vijay Television (P) Ltd supra. In view of the above, this Tribunal do not find any reason to interfere with the order of the lower authority. Accordingly the same is confirmed.