ACIT., CIRCLE-1, NELLOR V. ZUARI CEMENT LIMITED, KADAPA

ITA 927/HYD/2025

AI Insights

The case involves M/s. Zuari Cement Limited, which appealed against the final assessment order passed by the Learned Assessing Officer (Ld. AO) under section 143(3) read with section 144C(13) of the Income Tax Act, 1961, following the directions of the Learned Dispute Resolution Panel (Ld. DRP). The Tribunal had previously set aside the assessment on certain issues, leading to a revised assessment order. The assessee contested this revised order, leading to the CIT(A)'s decision in favor of the assessee, which the Revenue then appealed against. The core legal issue revolved around the non-issuance of a draft assessment order under section 144C(1) before passing the final assessment order, which the Tribunal found to be a mandatory requirement, thus rendering the final assessment order without jurisdiction.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 771822 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Assessment Year: 2010-2011
• Other Referred Cases: Writ Petition No.5557 of 2012
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KUMAR NAIK
• Assessee Lawyers: NITIN NARANG
• Keywords: Set aside; Transfer pricing
• Section: 143(3)

Judgement Text

" आयकर अपीलीय अधिकरण, हैदराबाद पीठ IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘B’ Bench, Hyderabad श्री विजय पाल राि, उपाध् यक्ष एिं श्री मिुसूदन सािडिया, लेखा सदस् य क े समक्ष । BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI MADHUSUDAN SAWDIA, ACCOUNTANT MEMBER आ.अपी.सं /ITA No.927/Hyd/2025 (निर्धारण वर्ा/Assessment Year:2010-11) Asst. Commissioner of Income Tax, Circle 1, Nellore. Vs. M/s. Zuari Cement Limited, Kadapa. PAN:AAACZ1270E (Appellant) (Respondent) निर्धाररती द्वधरध/Assessee by: Shri Nitin Narang, C.A. रधजस् व द्वधरध/Revenue by: Dr. Narendra Kumar Naik, CIT-DR सुिवधई की तधरीख/Date of hearing: 12/08/2025 घोर्णध की तधरीख/Pronouncement: 26/08/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M. : This appeal is filed by the Revenue, feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals)-10, Hyderabad (“Ld. CIT(A)”), dated 01.03.2025 for the A.Y. 2010-11. 2. The Revenue has raised the following grounds of appeal : Printed from counselvise.com ITA No.927/Hyd/2025 2 Printed from counselvise.com ITA No.927/Hyd/2025 3 3. The brief facts of the case are that, M/s. Zuari Cement Limited (“the assessee”) is a company engaged in the business of manufacturing and sale of cement. It filed its return of income for A.Y. 2010-11 on 14.09.2010 declaring total income of Rs.153,28,07,880/-. The assessment of the assessee for A.Y. 2010-11 was completed by the Learned Assessing Officer (“Ld. AO”) under section 143(3) read with section 144C(13) of the Income Tax Act, 1961 (“the Act”) on 28.02.2015, determining the total income at Rs.252,54,44,320/-, in pursuance of the Printed from counselvise.com ITA No.927/Hyd/2025 4 directions of the Learned Dispute Resolution Panel ( “Ld.DRP”). Against the final assessment order of the Ld. AO, the assessee preferred an appeal before the Tribunal. Vide order dated 05.08.2016, this Tribunal set aside the assessment to the file of the Ld. AO / Learned Transfer Pricing Officer (“Ld. TPO”) on certain issues. The Ld. AO thereafter passed an order giving effect to the Tribunal’s order under section 254 of the Act on 31.12.2018, assessing the total income at Rs.184,97,16,370/-. 4. Aggrieved with the order giving effect of Ld. AO, the assessee preferred an appeal before the Ld. CIT(A), who allowed the appeal of the assessee on merits as well as on legal grounds. 5. Aggrieved with the order of Ld. CIT(A), the Revenue has filed the present appeal before the Tribunal in the second round. At the threshold of the hearing, the Learned Authorised Representative (“Ld. AR”) sought permission to defend the legal ground decided by the Ld. CIT(A) in favour of the assessee, although no cross-appeal or cross-objection was filed by the assessee. Accordingly, the Bench permitted the assessee to support the impugned order on that legal ground. Printed from counselvise.com ITA No.927/Hyd/2025 5 6. The Ld. AR invited our attention to para no. 6.10 of page no. 64 of the Ld. CIT(A)’s order wherein the legal ground of the assessee was allowed. He submitted that in the first round of proceedings, the original final assessment order was passed under section 143(3) read with section 144C(13) of the Act in conformity with the Ld. DRP’s directions, after issuance of a draft assessment order as required under section 144C(1) of the Act. However, while giving effect to the Tribunal’s order under section 254 of the Act in the second round, the Ld. AO directly passed a final assessment order without first issuing a draft assessment order under section 144C(1) of the Act. It was contended that the provisions of section 144C of the Act are mandatory and continue to apply even when the matter is remanded by the Tribunal. Non-compliance vitiates the final assessment order, which is without jurisdiction. In support of his contention, the Ld. AR placed reliance on the decision of Hon’blejurisdictional High Court, in assessee’s own case in Writ Petition No.5557 of 2012 dated 21.02.2013. Accordingly, it was prayed that the order Printed from counselvise.com ITA No.927/Hyd/2025 6 giving effect of the Ld. AO dated 31.12.2018 be held invalid in law and the Revenue’s appeal be dismissed. 7. Per contra, the Learned Departmental Representative (“Ld. DR”) placed reliance on the order of the Ld. AO and submitted that the order passed was in accordance with the Tribunal’s directions. 8. We have considered the rival submissions and perused the material available on record. The undisputed facts are that, (i) the original assessment was completed under section 143(3) read with section 144C(13) of the Act pursuant to Ld. DRP’s directions, after issuing a draft assessment order, (ii) the Tribunal set aside the matter to the file of the Ld. AO / Ld. TPO for fresh consideration and (iii) while giving effect to the Tribunal’s order, the Ld. AO straightaway passed a final assessment order under section 254 of the Act without first issuing a draft assessment order under section 144C(1) of the Act. The language of section 144C(1) is clear that where the Ld. AO proposes to make any variation in the income of an eligible assessee which is prejudicial to its interest, he “shall” first forward a draft assessment order to Printed from counselvise.com ITA No.927/Hyd/2025 7 the assessee. The word “shall” in this context makes the provision mandatory. 9. We have gone through the decision of the Hon’ble Andhra Pradesh High Court in assessee’s own case (supra), the relevant portion of the order placed at page nos. 7 & 8 of the order are reproduced as under : Printed from counselvise.com ITA No.927/Hyd/2025 8 10. On perusal of above, we found that, the Hon’ble High Court has held that failure to follow the procedure prescribed under section 144C of the Act by first passing a draft assessment order goes to the root of the matter and renders the final assessment order without jurisdiction applies equally when the matter is remanded by the appellate authority. In the present case, the Ld. AO, while giving effect to the Tribunal’s order, made variations prejudicial to the assessee without issuing a draft order. This is a clear violation of the mandate of section 144C of the Act. The Ld. CIT(A) has dealt with this legal issue in para no.6.10 of the impugned order as under : Printed from counselvise.com ITA No.927/Hyd/2025 9 Therefore, respectfully following the precedence laid down by the Hon’ble jurisdictional High Court in assessee’s own case (supra), we do not find any error or illegality in the order of Ld. CIT(A) holding the assessment order dated 31.12.2018 passed by the Ld. AO is invalid and void ab initio. 11. Since we uphold the order of Ld. CIT(A) on the issue of validity of the impugned assessment order of Ld. AO, the grounds raised by the Revenue on merits have become purely academic and do not call for adjudication. Printed from counselvise.com ITA No.927/Hyd/2025 10 12. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open Court on 26th Aug., 2025. Sd/- Sd/- (VIJAY PAL RAO) (MADHUSUDAN SAWDIA) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad. Dated: 26.08.2025. * Reddy gp Copy of the Order forwarded to : 1. M/s. Zuari Cement Limited, Krishna Nagar, Yerraguntla, Kadapa-516 311 Andhra Pradesh. 2. The ACIT, Circle-1, Nellore. 3. Pr.CIT, Tirupati. 4. DR, ITAT, Hyderabad. 5. Guard file. BY ORDER, Printed from counselvise.com "