Assessment: S/s. 143(3) and 144C: A. Y. 2009- 10: Transfer pricing proceedings: Pursuant to order of TPO, AO passed a final order u/s. 143 (3) instead of passing a draft assessment order u/s. 144C: There being a failure on part of AO to adhere to statutory provisions of Act, impugned order was to be quashed: AO could not cure defect existing in impugned order:

The
case of the petitioner company was taken up for scrutiny assessment for
the A. Y. 2009-2010. Since the petitioner company had entered into
international transactions during the relevant year, the case was
referred to the Transfer Pricing Officer (TPO) for determination of the
arm’s length price. The TPO passed an order on 30-01-2013 and pursuant
to the said order, the Assessment Officer, instead of passing a
provisional order u/s. 144C of the Income-tax Act, 1961, passed a final
assessment order u/s. 143(3) on 26-03-2013. After realising the folly
that a final order ought not to have been passed pursuant to the order
passed by the TPO, the Assessment Officer issued a Corrigendum on
15-04-2013 modifying the final order of assessment passed on 26-03- 2013
to be read as a draft assessment order purported to have been passed
u/s. 144C of the Act. On receipt of the corrigendum, the petitioner
company filed their objections before the Dispute Resolution Panel,
Chennai on 26/04/2013 specifically questioning the validity of the
corrigendum issued by the Assessing Officer. It was specifically
contended that the corrigendum issued by the Assessing Officer is
without jurisdiction and such an order was passed beyond the period of
limitation. The Dispute Resolution Penal refused to entertain the
objections filed by the petitioner company. The assessee-petitioner
filed writ petition challenging the orders.

The Madras High Court allowed the writ petition and held as under:

“i)
U /s. 144C of the Act, it is evident that the Assessing Officer is
required to pass only a draft assessment order on the basis of the
recommendations made by the TPO after giving an opportunity to the
assessee to file their objections and then the Assessing Officer shall
pass a final order. According to the learned senior counsel for the
petitioners, this procedure has not been followed by the Assessing
Officer (second Respondent) inasmuch as a final order has been
straightaway passed without passing a draft assessment order.
ii) A s
rightly pointed out by the learned senior counsel for the petitioners,
in the order passed on 26-03-2013, the second respondent even raised a
demand as also imposed penalty. Such demand has to be raised only after a
final order has been passed determining the tax liability. The very
fact that the taxable amount has been determined itself would show that
it was passed as a final order. In fact, a notice for demand u/s. 156 of
the Act was issued pursuant to such order dated 26-03-2013 of the
second respondent. Both the order dated 26-03-2013 and the notice for
demand thereof have been served simultaneously on the petitioner.
Therefore, not only the assessment is complete, but also a notice dated
28-03-2013 was issued thereon calling upon the petitioner to pay the tax
amount as also penalty u/s. 271 of the Act. Thereafter, the petitioner
was given an opportunity of hearing on 12-04-2013. Subsequently, the
second respondent realised the mistake in passing a final order instead
of a draft assessment order which resulted in issuing a corrigendum on
15-04-2013. In the corrigendum it was only stated that the order passed
on 26-03-2013 u/s. 143(3) of the Act has to be read and treated as a
draft assessment order as per section 144C r.w.s. 93CA (4) r.w.s. 143
(3) of the Act. In and by the order dated 15- 04-2013, the second
respondent granted thirty days time to enable the assessee to file their
objections.
iii) S uch an order dated 26-03-2013 passed by the
second respondent can only be construed as a final order passed in
violation of the statutory provisions of the Act. The corrigendum dated
15-04-2013 is also beyond the period prescribed for limitation. Such a
defect or failure on the part of the second respondent to adhere to the
statutory provisions is not a curable defect by virtue of the
corrigendum dated 15-04-2013. By issuing the corrigendum, the
respondents cannot be allowed to develop their own case. Therefore,
following the order passed by the Division Bench of the Andhra Pradesh
High Court in the case of Zuari Cement Limited vs. Assistant
Commissioner of Income Tax, Circle 2 (1) passed in WP No. 5557 of 2012
dated 21-02-2013, which was also affirmed by the Honourable Supreme
Court by dismissing the Special Leave Petition filed thereof, on
27-09-2013, the orders, which are impugned in this writ petition are
liable to be set aside. Accordingly, the orders, which are impugned in
this writ petition are set aside and the writ petition is allowed.”