Limited v. Deputy Commissioner Of Income Tax, Circle 8(2)(1), Mumbai1

PURTIPRASADPARAB IN THE HIGH COURT OF JUDICATURE AT BOMBAYDigitally signed byPURTI PRASAD PARABORDINARY ORIGINAL CIVIL JURISDICTIONDate: 2021.12.2317:49:51 +0530 WRIT PETITION NO. 1802 OF 2021 Shell India Market Pvt. Ltd. ….Petitioner V/s. Additional/Joint/Deputy/AssistantCommissioner of Income Tax/Income Tax Officer and Ors. …Respondents ---- Mr. J.D. Mistri, Senior Advocate a/w Mr. Madhur Agrawal, Ms. Sheeja John, Ms. Radhika Nair and Mr. Varun Sonawala i/b M/s. M.P. Savla & Co. for Petitioner. Mr. Suresh Kumar for Respondents. ---- CORAM : K.R. SHRIRAM &AMIT B. BORKAR, JJ. DATED : 22[nd] DECEMBER, 2021 P.C. : 1.Heard learned counsel and what we understood is that theRevenue has in effect, in the affidavit in reply, acknowledged that therewas failure on the part of the Assessing Officer to follow the procedureprescribed under Section 144C(1) of the Income Tax Act, 1961 (the Act).But according to Mr. Suresh Kumar, it is merely a procedural or inadvertenterror. Paragraph No.27 of the judgment of this court in SHL (India) Private Limited vs. Deputy Commissioner of Income Tax, Circle 8(2)(1), Mumbai1 reads as under : 27.Applying the aforesaid principles to the facts of thiscase, we are of the view that the failure on the part of theAssessing Officer to follow the procedure under Section144C(1) is not a merely procedural or inadvertent error, 1 (438) ITR 317 (BOM) but a breach of a mandatory provision. We are also notimpressed with the arguments of the Revenue that theAssessing Officer was under pressure of two charges, asthere were timelines to adhere to, since the said timelinesfrom time to time have been extended, the most recent onebeing to 30 th September, 2021. The Revenue ought tohave appreciated that the requirement under Section144C(1) to first pass a draft Assessment Order and toprovide a copy thereof to the assessee is a mandatoryrequirement which gave substantive right to the assessee toobject to any variation, that is prejudicial to it. In this case,the order under Section 92CA (3) of the IT Act, proposedto make an adjustment of Rs.107,454,337/- to the arm’slength price considered as Nil by Petitioner and to thatextent the said adjustment was evidently prejudicial to theinterest of Petitioner. Depriving Petitioner of this valuableright to raise objection before DRP would be denial ofsubstantive rights to the assessee, for which, in our view,the Assessing Officer has no power under the statute, asthe provision clearly mandates the Assessing Officer to passand furnish a draft Assessment Order in the first instancein such a case. The legislature, in our view, has intended togive an important opportunity to Petitioner, who is aneligible assessee, which in our view, has been taken away.In our view, failure to follow the procedure under Section144C(1) would be a jurisdictional error and not merelyprocedural error or a mere irregularity. The AssessmentOrder has not been passed in accordance with theprovisions of Section 144C of the IT Act. This is not anissue, which involves a mistake in the said order, but itinvolves the power of the Assessing Officer to pass theorder. By not following the procedure laid down in Section144C(1) to pass and furnish a draft Assessment Order toPetitioner and directly passing a final Assessment Orderand without giving Petitioner an opportunity to raiseobjections before the DRP, there is a completecontravention of Section 144C, the Assessing Officerhaving wrongly assumed jurisdiction to straight away passthe final order. This is not a mere irregularity but anincurable illegality. Even the provisions of Section 292B ofthe IT Act would not protect such an order as Section 292Bof the IT Act cannot be read to confer jurisdiction on theAssessing Officer, where none exists. The Supreme Courtdecision in the case of Income-Tax Officer Vs. M. PiraiChoodi; [2011] 334 ITR 262 (SC) referred to in the Revenue’s reply is also not applicable to the issue at handas that was a case where the assessee was not given anopportunity to cross-examine the concerned witness andwhich assessee also had a statutory appellate remedywhich the assessee had failed to avail of, whereas there isno such right available to Petitioner in this case. In fact,Petitioner has lost a substantive right due to the failure ofthe Respondents to pass and forward a draft assessmentorder in the first instance on a variance, prejudicial to theinterest of Petitioner. In our view, this is clearly a case ofjurisdictional error. The final assessment order passed bythe Assessing Officer stands vitiated on account of lack ofjurisdiction, which is incurable and deserves to be set asideas void ab initio. 2.Therefore, argument of Mr. Suresh Kumar that failure on thepart of the Assessing Officer to follow the procedure under Section 144C(1)is merely a procedural or inadvertent error cannot be accepted. Therequirement under Section 144C(1) of the Act to first pass the draftassessment order and to provide a copy thereof to the assesee is mandatoryrequirement that gave substantive right to the assessee to object to anyvariation, that is prejudicial to the assessee. Depriving petitioner of thisvaluable right to raise objection before DRP would be denial of substantiveright to the assessee. As held in SHL (India) Private Limited (supra),failure to follow the procedure under Section 144C(1) of the Act would be ajurisdictional error and not merely procedural error or a mere irregularity.Therefore, the Assessing Officer has assumed jurisdiction to straight awaypass the final order without following the mandatory procedure prescribedunder Section 144C of the Act. It is held in SHL (India) Private Limited(supra) that this is not a mere irregularity but an incurable irregularity. 3.In the circumstances, we quash and set aside the impugned assessment order dated 15[th] June, 2021. However, there shall be no order as to costs. 4.Petition disposed. (AMIT B. BORKAR, J.) (K.R. SHRIRAM, J.)