Ge Oil & Gas India Private Ltdsf v. Assistant Commissioner Of Income Taxcorp Circle

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 05.01.2021 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH GE Oil & Gas India Private LtdSF No.608 Chettipalayam Road,Eachanari Post, Coimbatore - 641 021Tamil NaduRepresented by its Authorised Signatory Mr.Ranveer Singh Rana .. Petitioner Vs. Assistant Commissioner of Income TaxCORP Circle 1, CBE,Main Building, 63, Race Course Road,Coimbatore - 641 018, Tamil Nadu... Respondent Prayer: Writ Petition filed under Article 226 of theConstitution of India praying to Writ of Certiorari to call forthe records of the Assessment Order bearing no.ITBA/AST/S/143(3)/2019-2020/1023029029(1) and dated 24.12.2019 ('ImpugnedOrder') passed by the Respondent under section 143(3) of theIncome Tax Act, 1961 ('the Act') for Assesment Year 2016-17('Assessment Year') and quash the same. For Respondent : Mr.A.P.Srinivas, Senior Standing Counsel O R D E R The petitioner challenges order dated 24.12.2019 relatingto Assessment Year (AY) 2016-17 passed in terms of theprovisions of the Income Tax Act, 1961 (in short ‘Act’). Theprimary ground agitated is that the assessment involves issuesof Transfer Pricing and thus the Assessing Officer ought tohave passed an order of draft assessment in terms of Section144C of the Act and not an order of regular assessmentquantifying the final demand and imposing penalty. https://hcservices.ecourts.gov.in/hcservices/ 2. At paragraph nos. 6 to 8 of the counter filed by therespondent, the Officer concedes to the position that what oughtto have been passed in the circumstances is a draft and notfinal assessment order. The counter states as follows: '6. I submit that in reply to para 8, Whileassessing the total income of the assessee, the AOmade additions on various issues, one of the issuebeing adjustment on transfer pricing During thecourse of assessment proceedings in u/s.143(3) of theAct, while uploading the draft order, the assessingofficer inadvertently choose assessment order insteadof draft assessment order u/s.144C(1) of the Act inthe Income Tax Department software (ITBA),consequently the Demand Notice was automaticallyissued by the 'system'. This being a mere technicallapse, assessee could have approached the assessingofficer or the appellate authority for recourse,Instead the assessee filed writ before the Hon'bleHigh Court. 7.I submit that in reply to para 9, Eventhough Sec.144C(1) mandates assessing officer toissue draft assessment order before issuing finalassessment order in cases where Transfer Pricingissue involves, the assessee does not lose its rightor opportunity to approach the appellate authority. 8. I submit that in reply to para 10, Theassessee without approaching the assessing officer orthe appellate authority, directly went for writbefore the Hon'ble High Court. Had the assesseeapproached the assessing officer, the AO could haveissued a corrigendum on the order.' 3. The Officer raises the question of maintainability on theground that a statutory remedy is available before the AssessingOfficer for rectification of mistake. The error committed isnot a technical lapse as sought to be explained away, but onethat is substantive. It is an admitted position that theassessment of this petitioner involves issues of transfer pricingand an order has been passed by the Transfer Pricing Officerdetermining the arms length price. 4. The scheme of assessment in terms of Section 144Cstatutorily requires the officer to pass a draft assessment orderat the first instance and put the same to the assessee for itsacceptance or for filing of objections before the Dispute https://hcservices.ecourts.gov.in/hcservices/ Resolution Panel. The language of Section 144 C makes thisposition more than abundantly clear. 4. The scheme of assessment in terms of Section 144Cstatutorily requires the officer to pass a draft assessment orderat the first instance and put the same to the assessee for itsacceptance or for filing of objections before the Dispute https://hcservices.ecourts.gov.in/hcservices/ Resolution Panel. The language of Section 144 C makes thisposition more than abundantly clear. 5. I draw support in this regard from a decision of thisCourt in Vijay Television V. Dispute Resolution Panel (369 ITR113), confirmed by the Division Bench in 407 ITR 642 thatreiterates the settled proposition that Section 144C sets forth amandatory scheme of assessment and it is incumbent upon theAssessing Officer to pass an order of draft assessment at thefirst instance before proceeding to finalise the assessment inline with the procedure set out under Section 144C. 6. Moreover, to say that the impugned order has been passed‘inadvertently’ by choosing of the wrong field in the Income TaxDepartment software would not just be an over-simplification, buta wrong statement since a perusal of the order of assessmentreveals that the assessment has been styled consciously, as anorder of regular assessment only. To begin with, the Sectionunder which the assessment was made is stated to be ‘Section 143(3)’. The heading in the order is ‘assessment order’. Atparagraph 5, the officer states as follows: Penalty proceedings u/s.271(1) (c) of the Act isinitiated separately for furnishing inaccurateparticulars of income. The total income has been assessed and the order accompanied bya computation sheet determining the demand payable by thepetitioner along with interest. Penalty proceedings have beeninitiated in terms of Section 274(1)(c) of the Act. Thus, it isclear that the Officer has consciously proceeded to pass anorder of regular assessment, losing sight of the scheme of assessment in terms of Section 144C, which he is statutorilymandated to follow and apply. 7. In Principal Commissioner of Income Tax V. HeadstrongServices India Private Limited (I.T.A.No.77 of 2019 dated24.12.2020), the challenge was to an assessment made on remandfrom an appellate authority and the issue that arose was whetherthe assessing authority would have to pass a draft order ofassessment or a final order of assessment. The phrase ‘in thefirst instance’ in Section 144C was interpreted by the DivisionBench to the effect that, be an original order of assessment oran assessment made on remand, the mandate of Section 144C mustbe followed. 8. A draft order of assessment would normally indicate, inconclusion, that the assessee has the option of eitheracquiescing with the proposed assessment or proceeding to fileobjections to the same within 30 days. This statement isconspicuously absent in the present order. 9. In the light of the discussion as aforesaid, I have nohesitation in quashing the impugned order and consequentialdemand. The Writ Petition is allowed. Consequently, connectedmiscellaneous petitions are closed. No costs. Sd/-Assistant Registrar //True Copy// slTo Sub Assistant Registrar Assistant Commissioner of Income TaxCORP Circle 1, CBE,Main Building, 63, Race Course Road,Coimbatore - 641 018, Tamil Nadu. +1cc to Mr.A.P.Srinivas, Advocate, S.R.No. 274+1cc to Mr.Karthik Sundaram, Advocate, S.R.No. 295 RSI(CO)GN(05/02/2021)