By K. B. BHUJLE
Advocate
The assessee was a foreign company
entitled to the procedure provided u/s. 144C. For relevant year assessee filed
its return declaring nil income. The Assessing Officer passed assessment order
u/s. 143(3) r.w.s. 144C(13) making certain addition to assessee’s income. The
assessee filed writ petition raising a contention that it was entitled to a
draft assessment order being passed u/s. 144C(1) before the final assessment
order as passed in this case u/s. 143(3) r.w.s. 144C(13) since the impugned
order ignored the mandate of section 144C same deserved be set aside.
The Bombay High Court allowed the
writ petition and held as under:
“i) It
is an undisputed position that the assessee is a foreign company and an
eligible assessee as defined in section 144C(15)(b)(ii) of the Act. A foreign
company is entitled to being assessed in accordance with section 144C of the
Act. It is the section 144C, which provides a separate scheme for the manner in
which the Assessing Officer would pass assessment orders under the Act and a
separate procedure to challenge a draft order i.e. before an assessment order
which is subject to appeal under the Act is passed.
ii) The
entire object is to ensure that the disputes of Foreign Companies are resolved
expeditiously and final assessment orders are not passed without a re-look to
the proposed order (draft order), if so desired by the Foreign Company. In
essence, it obliges the Assessing Officer to first pass a draft of the proposed
assessment order indicating the proposed variation in the income returned. This
draft Assessment Order is to be passed u/s. 144C(1) of the Act, which entitles
an eligible assessee such as a Foreign Company to approach the DRP with its
objection to the draft assessment order. This is so provided, so that an
eligible assessee can have his grievance addressed before the final assessment
order is passed. In case, an assessee does not object to the draft assessment
order, then a final assessment order is passed in terms of the draft assessment
order by the Assessing Officer. It is only on passing of the final assessment
order that the assessee, if aggrieved by it, would be able to approach the
appellate authorities under the Act. These special rights are made available
u/s. 144C to an eligible assessee such as the assessee. Therefore, it cannot be
ignored by passing a final order u/s. 144(13) of the Act without preceding it
with a draft assessment order as required therein.
iii) The contention of the revenue that the requirement of passing a
draft assessment order u/s. 144C of the Act would only extend to the orders
passed in the first round of proceedings or in respect of an order passed by
the Assessing Officer in remand proceedings by the Tribunal which has entirely
set aside the original assessment order. This distinction which is sought to be
drawn by the revenue is not borne out by section 144C of the Act. In fact, even
in partial remand proceedings from the Tribunal, the Assessing Officer is
obliged to pass a draft assessment order u/s. 144C(1) of the Act. The Assessing
Officer, is obliged to, in terms of section 144C to pass a draft assessment
order in all cases where he proposes to assess the Foreign Company under the
Act by making a variation in the returned income.
iv) In
this case, the impugned order has been passed in terms of section 143(3) read
with section 144C read with section 254 of the Act and it certainly makes a
variation to the returned income filed by the assessee. This even if, one
proceeds on the basis that the returned income stands varied by the order of
the Tribunal in the first round, to the extent the petitioner accepts it.
Therefore, the Assessing Officer correctly invokes section 144C of the Act in
the impugned order. Once having invoked section 144C, the Assessing Officer is
obliged to comply with it in full and not partly. This impugned order was
passed consequent to the order of the Tribunal restoring some of the issues before
it to the Assessing Officer for fresh adjudication.
v) This
‘fresh adjudication’ itself would imply that it would be an order which would
decide the lis between the parties, may not be entire lis, but
the dispute which has been restored to the Assessing Officer. The impugned
order is not an order merely giving an effect to the order of the Tribunal, but
it is an assessment order which has invoked section 143(3) of the Act and also
section 144C of the Act. This invocation of section 144C of the Act has taken
place as the Assessing Officer is of the view that it applies, then the
requirement of section 144C(1) of the Act has to be complied with before he can
pass the impugned order invoking section 144C(13) of the Act.
vi) In
fact, section 144C(13) of the Act can only be invoked in cases where the
assessee has approached the DRP in terms of s/s. 144C(2)(b) of the Act and the
DRP gives direction in terms of section 144C(5) of the Act. In this case, the
assessment order has invoked section 144C(13) of the Act without having passed
the necessary draft assessment order u/s. 144C(1) of the Act, which alone would
make a direction u/s. 144C(5) of the Act by the DRP possible. Thus, the
impugned order is completely without jurisdiction.
vii) Moreover, so far as a foreign company is concerned, the
Parliament has provided a special procedure for its assessment and appeal in
cases where the Assessing Officer does not accept the returned income. In this
case, in the working out of the order of the Tribunal results in the returned
income being varied, then the procedure of passing a draft assessment order
u/s. 144C(1) of the Act is mandatory and has to be complied with, which has not
been done.
viii) In the above view, the impugned order has
been passed without complying with the mandatory requirements of section 144C
of the Act which is applicable to a foreign company such as the assessee.
Therefore, the impugned order is quashed and set aside.”
