Draft Order comes into the picture in the instances mentioned under Section 144C of the Income Tax Act. Sub-section (1) of Section 144C reads as “The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make any variation which is prejudicial to the interest of such assessee“.
For the purpose of the aforementioned section, “Eligible assessee” means:-
- any person in whose case the variation arises as a consequence of the order of the Transfer Pricing Officer passed; and
- any non-resident not being a company, or any foreign company.
On receipt of the draft assessment order, either the assessee can file acceptance of such variations, or file his objections. In the case of the latter, the matter goes to the Dispute Resolution Panel. However, in the case of the former or where no objections are received within the period prescribed, the final order is to be passed based on the Draft assessment order as provided under Section 144C(3). Sub-section (3) of Section 144C reads as-
“The Assessing Officer shall complete the assessment on the basis of the draft order, if-
(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or
(b) no objections are received within the period specified in sub-section (2).”
In such instances, any review by the AO at a later stage, at the time of the final assessment order, will be unlawful as no further hearings take place after the draft assessment order, or no directions are received by the AO regarding any variations pertaining to the subject matter.
The above view was upheld in the judgment of GALAXY SURFACTANTS LIMITED VERSUS ASSISTANT COMMISSIONER OF INCOME TAX by ITAT Mumbai, dated 24.05.2021.
Hence, there is no scope of variation in the final assessment order from the draft assessment order by the AO under Section 144C.
