ASSISTANT COMMISSIONER OF INCOME TAX MADURAI vs TRANSWORLD GARNET INDIA PRIVATE LIMITED CHENNAI

Judicial Analysis Court Copy Headnote Facts Arguments Court observation

2026 Supreme(Online)(ITAT) 11453

INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
ASSISTANT COMMISSIONER OF INCOME TAX MADURAI – Appellant
Versus
TRANSWORLD GARNET INDIA PRIVATE LIMITED CHENNAI – Respondent
ITA 4142/CHNY/2025[2018-19]

Headnote:(A) Income-tax Act, 1961 - Sections 144C, 153A, 143(3), 263, 92CA, 92CA(3), 292B - Transfer Pricing - Mandatory requirement of draft assessment order - Final assessment order passed without issuance of draft order u/s 144C(1) - Validity - Where assessee is an eligible assessee and a variation prejudicial to its interest is proposed, the Assessing Officer is statutorily bound to first forward a draft assessment order u/s 144C(1) - Failure to do so is not a curable procedural irregularity but a jurisdictional defect rendering the final assessment order void ab initio - Section 292B cannot cure such an incurable illegality. (Paras 46-50, 54, 55)

(B) Appeal - Scope and ambit - Where the assessment order is void ab initio for want of jurisdiction, no occasion survives for entering into the merits of the transfer pricing adjustment or other ancillary factual disputes. (Para 59)

Facts of the case:
The assessee, a company engaged in the manufacture and processing of Garnet and Ilmenite, operates two industrial units, including a Special Economic Zone (SEZ) Unit. Following a search action, the PCIT set aside the original assessment order u/s 263 and directed the AO to make a fresh assessment after a reference to the TPO. The TPO proposed an upward transfer pricing adjustment of Rs.39,21,15,575/-, which was prejudicial to the assessee. The AO directly passed a final assessment order u/s 153A r.w.s 263 incorporating this adjustment, without first issuing a draft assessment order u/s 144C(1). The Ld.CIT(A) quashed the assessment order as void ab initio for non-compliance with the mandatory procedure of section 144C. The Revenue appealed to the Tribunal.

Findings of Court:
The Tribunal upheld the order of the Ld.CIT(A), finding that the assessee was an eligible assessee under section 144C(15)(b). The failure of the AO to issue a mandatory draft assessment order u/s 144C(1) was a jurisdictional defect, not a curable procedural irregularity. The final assessment order was void ab initio. Section 292B could not cure this defect. The Revenue's plea to remand the matter was rejected, as a nullity cannot be revived through remand.

Issues: The main issue was whether the AO could lawfully pass a final assessment order without first complying with the mandatory requirement of forwarding a draft assessment order u/s 144C(1) of the Income-tax Act, 1961, in the case of an eligible assessee.

Ratio Decidendi: The court ruled that the requirement u/s 144C(1) is jurisdictional and mandatory. Where an assessee is an eligible assessee and a variation prejudicial to its interest is proposed, the AO has no jurisdiction to pass a final assessment order without first issuing a draft order. Non-compliance with this condition precedent renders the assessment void ab initio and incurable, even by section 292B. Result : Revenue's appeal dismissed.

Table of Content
1. appeal filed by revenue against cit(a) order. (Para 1 , 2)
2. assessee's business and sez/eou units. (Para 3)
3. search, scrutiny selection, and return filing. (Para 4 , 5 , 6)
4. assessment u/s 153a and revision u/s 263. (Para 7 , 8 , 9)
5. tpo's adjustment for inter-unit transfers. (Para 10 , 11)
6. assessee's challenge: no draft order u/s 144c. (Para 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20 , 21)
7. cit(a) held non-compliance with s.144c fatal. (Para 22 , 23 , 24 , 25)
8. revenue's appeal: lapse is curable irregularity. (Para 26 , 27 , 28 , 29)
9. assessee's rebuttal: jurisdictional defect, void ab initio. (Para 30 , 31 , 32 , 33 , 34 , 35 , 36 , 37 , 38 , 39 , 40 , 41 , 42 , 43)
10. ita's analysis: s.144c is mandatory, non-issuance void. (Para 44 , 45 , 46 , 47 , 48 , 49 , 50 , 51 , 52 , 53 , 54 , 55 , 56)
11. remand rejected; collateral ground dismissed as irrelevant. (Para 57 , 58 , 59)
12. ita upholds cit(a), appeal dismissed. (Para 60 , 61)

आदेश/ORDER

PER S. R. RAGHUNATHA, AM:

The present appeal filed by the Revenue is directed against the order dated 17.10.2025 passed by the Learned Commissioner of Income Tax (Appeals)-19, Chennai [hereinafter referred to as “Ld.CIT(A)”], arising from the assessment order dated 30.03.2024 passed by the Deputy Commissioner of Income Tax, Central Circle-2, Madurai [hereinafter referred to as “the AO”] u/s.153A r.w.s 263 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”], for the Assessment Year 2018-19.

2. The Revenue has raised the following grounds of appeal:

1. The order of the learned Commissioner of Income Tax (Appeals) is erroneous on facts and in law.

2. The Ld.CIT(A) erred in giving relief to the assessee as the TPO made an upward adjustment of Rs.39,21,15,575/- to the value of inter-unit transfers and directed re-computation of the deduction u/s.10AA vide order u/s.92CA(3), instead of annulling the assessment order, the Ld.CIT(A) ought to have set aside the order directing the AO to make a fresh assessment after issue of draft order u/s.144C(1) to the assessee proposing the adjustments to be made.

3. The Ld.CIT(A) erred in deletion of the addition made without taking into consideration the recent directions of the Hon’ble High Court of Madras in (Suo Motu PIL) WP No.1592 of 2015 involving ‘Illegal Mining and Sale of ‘Beach Sand Minerals’ in which the present assessee is a respondent and against which serious observations of Illegal trade practices have been noted by the Hon’ble High Court, Madras in its order dated 17.02.2025, the issue of the total turnover & the Net profit thereon needs a revisitation accordingly.

4. For these grounds and any other ground including amendment of grounds that may be raised during the course of appeal proceedings, the Order of the Ld CIT(Appeals) may be set aside and that of the Assessing Officer may be restored.

3. The brief facts of the case as emanate from the records are that the assessee is a Private Limited Company engaged in the business of manufacture and processing of Garnet Abrasive of various grades and Ilmenite. The assessee operates two industrial undertakings in the State of Andhra Pradesh, namely, one unit situated at Visakhapatnam within a Special Economic Zone (SEZ Unit) and another functioning as a 100% Export Oriented Unit (EOU) at Srikakulam, both of which are engaged in the manufacture and export of Garnet.

4. A search and seizure action u/s.132 of the Act, was carried out in the case of the assessee and its group concerns on 25.10.2018.

5. For the impugned assessment year, the assessee filed its return of income u/s.139(4) of the Act on 29.03.2019, declaring a loss of Rs.17,32,18,221/- under the normal provisions of the Act and book profit of Rs.1,99,15,237/- u/s.115JB of the Act.

6. Subsequently, the case of the assessee was selected for scrutiny under the Computer Assisted Scrutiny Selection (CASS) mechanism on account of Specified Domestic Transactions entered into by the assessee during the relevant previo

Click Here to Read the rest of this document

2026 Supreme(Online)(ITAT) 11453

INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)ASSISTANT COMMISSIONER OF INCOME TAX MADURAI – AppellantVersusTRANSWORLD GARNET INDIA PRIVATE LIMITED CHENNAI – RespondentITA 4142/CHNY/2025[2018-19]

INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
ASSISTANT COMMISSIONER OF INCOME TAX MADURAI – Appellant
Versus
TRANSWORLD GARNET INDIA PRIVATE LIMITED CHENNAI – Respondent
ITA 4142/CHNY/2025[2018-19]