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Tax Publishers Perfetti Van Melle (India) (P) Ltd. v. ACIT [ITA No. 9116/Del/2019, dt. 11-8-2020] : 2020 TaxPub(DT) 3127 (Del-Trib) Questioning legality of assessment process under section 144C *Facts:* A draft assessment order was passed after TPO's additions for the assessee on 27-12-2018 with the assessing officer also issuing a demand notice under section 156 along with the draft assessment order. Assessee participated in the DRP proceedings subsequently and it was before the ITAT that they questioned the validity of the assessment order that the assessing officer did not follow the legal process as envisaged under section 144C for the first time. Held in favour of the assessee that the issuance of the demand notice with the draft assessment order was incorrect adoption of the process as per section 144C thus the assessment process came to an end by the issuance of the notice of demand under section 156 along with the draft assessment order. The order of the assessing officer enshrining the TPO additions all became non est by the action of the assessing officer. The process post a draft assessment order is for the assessing officer to wait for the acceptance of the order or seeking an appeal with DRP within the time limit as per law. It is after this that the draft order becomes a final order along with which the demand notice under section 156 may be raised. If this is not followed it cannot be cured by resort to under section 292B. Subsequent participation by the assessee in the DRP proceedings cannot create an estoppel against the assessee. Not following process as per section 144C was not mere irregularity to be cured by section 292B but an incurable illegality worthy of being stuck down as void by law. Demand notice is an integral part of the assessment order as well. The Supreme Court has in terms stated that assessment is one integrated process involving not only the assessment of the total income but also the determination of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete thus held in CIT v. Purshottam Das T Patel (1994) 209 ITR 52 (Guj-HC) : 1994 TaxPub(DT) 0544 (Guj-HC), Kalyan Kumar Ray v. CIT (1991) 191 ITR 634 (SC) : 1991 TaxPub(DT) 1526 (SC). " 'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial as the former. The Income Tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and the demand notice has to be issued under section 156 of the Income Tax Act, 1961, in consequence of such an order. The words "order of assessment" cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act". *Upheld:* Dipak Babaria 3 SCC 502 (SC) "If the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute". *Distinguished:* Price Water House Company (2020) 117 Taxmann.com 276 (Kol-Trib) in ITA No. 2298/KOL/2016 (Kolkata-ITAT) : 2020 TaxPub(DT) 2444 (Kol-Trib) Participation by assessee in subsequent assessment proceedings do they create an estoppel against the assessee has been answered by the Apex court in CIT v. Mr. P. Firm, Muar (1965) 56 ITR 67 (SC) : 1965 TaxPub(DT) 0204 (SC) -- "Approbate and Reprobate" is only species of estoppel. It applies only to conduct of parties as in the case of estoppel, it cannot operate against the provisions of a statute. If particular income is taxable under the Income Tax Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or not. If it is not, the ITO Has no power to tax the said income." *Affirmed :* Nikon India Pvt. Ltd. [ITA Nos. 8752 & 8753/DEL/2019] Turner International Pvt. Ltd. (2017) 398 ITR 177 (Del) : 2017 TaxPub(DT) 1685 (Del-HC) JCB India Ltd. [W.P. (C) No. 3399/2016] : 2017 TaxPub(DT) 4106 (Del-HC) Zuari Cement Ltd. v ACIT (decision dated 21-2-2013 in W.P. (C) No. 5557/2012), SLP dismissed by SC vide [CC No. 16694/2013 on 27-9-2013] Vijay Television (P) Ltd. v. Dispute Resolution Panel (2014) 369 ITR 113 (Mad.) : 2014 TaxPub(DT) 3520 (Mad-HC) ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of India (2016) 388 ITR 383 (Del.) : 2016 TaxPub(DT) 2166 (Del-HC) International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46 : 2016 TaxPub(DT) 1593 (Bom-HC)

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Perfetti Van Melle (India) (P) Ltd. v. ACIT [ITA No. 9116/Del/2019, dt. 11-8-2020] : 2020 TaxPub(DT) 3127 (Del-Trib)

Questioning legality of assessment process under section 144C

Facts:

A draft assessment order was passed after TPO's additions for the assessee on 27-12-2018 with the assessing officer also issuing a demand notice under section 156 along with the draft assessment order. Assessee participated in the DRP proceedings subsequently and it was before the ITAT that they questioned the validity of the assessment order that the assessing officer did not follow the legal process as envisaged under section 144C for the first time.

Held in favour of the assessee that the issuance of the demand notice with the draft assessment order was incorrect adoption of the process as per section 144C thus the assessment process came to an end by the issuance of the notice of demand under section 156 along with the draft assessment order. The order of the assessing officer enshrining the TPO additions all became non est by the action of the assessing officer.

The process post a draft assessment order is for the assessing officer to wait for the acceptance of the order or seeking an appeal with DRP within the time limit as per law. It is after this that the draft order becomes a final order along with which the demand notice under section 156 may be raised. If this is not followed it cannot be cured by resort to under section 292B. Subsequent participation by the assessee in the DRP proceedings cannot create an estoppel against the assessee. Not following process as per section 144C was not mere irregularity to be cured by section 292B but an incurable illegality worthy of being stuck down as void by law.

Demand notice is an integral part of the assessment order as well. The Supreme Court has in terms stated that assessment is one integrated process involving not only the assessment of the total income but also the determination of the tax. It has further observed that the latter is as crucial as the former. Therefore, unless the total income is determined and the determination of tax is also done, it cannot be said that the process of assessment is complete thus held in CIT v. Purshottam Das T Patel (1994) 209 ITR 52 (Guj-HC) : 1994 TaxPub(DT) 0544 (Guj-HC), Kalyan Kumar Ray v. CIT (1991) 191 ITR 634 (SC) : 1991 TaxPub(DT) 1526 (SC).

" 'Assessment' is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial as the former. The Income Tax Officer has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and the demand notice has to be issued under section 156 of the Income Tax Act, 1961, in consequence of such an order.

The words "order of assessment" cannot be construed to mean assessment of total income only. Those words would mean an order in writing whereby the total income of the assessee is assessed and the tax payable by him is determined. When an order in writing in respect of both these things is passed, it can be said that there is a complete order of assessment. These two steps may be taken simultaneously or separately, but it cannot be gainsaid that both of them will have to be taken within the time prescribed by the Act".

Upheld: Dipak Babaria 3 SCC 502 (SC)

"If the law requires that a particular thing should be done in a particular manner, it must be done in that way and none other. State cannot ignore the policy intent and procedure contemplated by the statute".

Distinguished: Price Water House Company (2020) 117 Taxmann.com 276 (Kol-Trib) in ITA No. 2298/KOL/2016 (Kolkata-ITAT) : 2020 TaxPub(DT) 2444 (Kol-Trib)

Participation by assessee in subsequent assessment proceedings do they create an estoppel against the assessee has been answered by the Apex court in CIT v. Mr. P. Firm, Muar (1965) 56 ITR 67 (SC) : 1965 TaxPub(DT) 0204 (SC) --

"Approbate and Reprobate" is only species of estoppel. It applies only to conduct of parties as in the case of estoppel, it cannot operate against the provisions of a statute. If particular income is taxable under the Income Tax Act, it cannot be taxed on the basis of estoppel or any other equal document. Equity is out of placed in tax place. A particular income is either exigible under the Income tax under taxing statute or not. If it is not, the ITO Has no power to tax the said income."

Affirmed :

Nikon India Pvt. Ltd. [ITA Nos. 8752 & 8753/DEL/2019]

Turner International Pvt. Ltd. (2017) 398 ITR 177 (Del) : 2017 TaxPub(DT) 1685 (Del-HC)

JCB India Ltd. [W.P. (C) No. 3399/2016] : 2017 TaxPub(DT) 4106 (Del-HC)

Zuari Cement Ltd. v ACIT (decision dated 21-2-2013 in W.P. (C) No. 5557/2012), SLP dismissed by SC vide [CC No. 16694/2013 on 27-9-2013]

Vijay Television (P) Ltd. v. Dispute Resolution Panel (2014) 369 ITR 113 (Mad.) : 2014 TaxPub(DT) 3520 (Mad-HC)

ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of India (2016) 388 ITR 383 (Del.) : 2016 TaxPub(DT) 2166 (Del-HC)

International Air Transport Association v. DCIT (2016) 290 CTR (Bom) 46 : 2016 TaxPub(DT) 1593 (Bom-HC)