INCOME TAX ACT, 1961

Section 144C

Transfer pricing - Reference to dispute Resolution Panel - Failure to follow mandate of section 144C(1) - Validity of order section 92CA(3)

Petitioner filed its return of income which was processed under section 143(1). As there were international transactions, a reference was made by AO to TPO under sub-section (2) of section 92CA. TPO passed an order under section 92CA(3) making upward adjustment. On the basis of said order of TPO, AO passed draft assessment order making certain additions. Petitioner objected to additions made in draft assessment order however, DRP rejected contentions of Petitioner and upheld additions made by AO. Consequently, a final assessment order came to be passed under section 143(3) read with section 144C(13). ITAT set aside transfer pricing adjustments and remanded matter to AO/TPO for de-novo consideration. AO/TPO was also directed to consider Petitioner's additional submissions. TPO passed an order under section 92CA(3) making certain adjustments to arm's length price. This adjustment was prejudicial to the interest of Petitioner. AO, on receipt of order from the TPO, proceeded to issue a final assessment order under section 143(3) read with section 92CA and section 254. This order contained additions proposed in TPO's order but was passed without passing a draft assessment order under section 144C(1). Petitioner impugned this assessment order in these writ Petitions. Held: As per section 144C, AO shall, in first instance, forward a draft of proposed order of assessment to eligible assessee if he proposes to make any variation which is prejudicial to interest of such assessee. Certainly there is a variation in assessment order different from what was filed in return of income and since it is by way of an addition made, variation is prejudicial to the interest of Petitioner. Failure to pass draft assessment order under section 144C(1) of the Act has rendered the assessment as one without jurisdiction.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2009-10 and 2010-11

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