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Judgment
PER MAHAVIR SINGH, VP:
This appeal by the assessee is arising out of the order of learned CIT(A)-24, Delhi dated 16th January, 2026 for the assessment year 2020-21. Assessment in this case was made by the Assistant Commissioner of Income Tax, Central Circle-8, Delhi vide order dated 4th February, 2025 passed under Section 147 of the Income-tax Act, 1961 (hereinafter referred to as 'the Act').
The first jurisdictional issue in this appeal of the assessee is as regards the order of learned CIT(A) confirming the action of the Assessing Officer in framing assessment which is bad in law on account of failure of the Assessing Officer to follow mandatory procedure provided under Section 144C of the Act and assessment is framed without framing draft assessment order, which is mandatory condition in the case of eligible assessee.
The brief facts of the case are that the assessee is a non-resident and an individual who filed his return of income for the assessment year 2020-21 on 23rd December, 2020. The return of income was processed under Section 143(1) of the Act by CPC, Bangalore on 24th January, 2021. Subsequently, a search operation under Section 132 was carried out on ALM group of companies on 3rd January, 2023 and, as the assessee and associated key persons entities were covered under these search operations based on the documents found during the course of search from ALM group of cases, certain documents and transactions found from the persons entities related to the assessee and accordingly, notice under Section 147 of the Act was issued and addition of unexplained commission income under Section 69A of the Act was made amounting to ₹37,08,000/-. Aggrieved, assessee preferred appeal before the learned CIT(A).
The assessee before the learned CIT(A) raised this ground that the Assessing Officer erred in passing the assessment order under Section 147 read with Section 143(3) of the Act inasmuch as the Assessing Officer failed to follow mandatory procedure under Section 144C of the Act as the assessee is a non-resident and falls under the eligible category as provided in Section 144C of the Act. Learned CIT(A) rejected the assessee's contention regarding applicability of Section 144C of the Act that no reference under Section 192CA(3) was made and he recorded that once no such reference to the TPO was made and there is variation in the income arising from incriminating material discovered during the course of search, the assessee does not qualify as an eligible assessee under Section 144C of the Act. Aggrieved, the assessee is now in appeal before us.
We have the arguments of both the sides and perused the material placed before us. The Revenue could not contradict the aforesaid facts narrated by the assessee before the learned CIT(A) and assessee stated that there is no dispute that the assessee is a NRI and his assessment should have been framed in terms of the provisions of Section 144C of the Act being an eligible assessee. Learned Counsel for the assessee relied on the decision of Hon'ble Delhi High Court in the case of Principal Commissioner of Income-tax Vs. Sumitomo Corporation India (P.) Ltd. – [2024] 166 taxmann.com 55, wherein Hon'ble Delhi High Court held as under:-
“51.We on an independent analysis, find ourselves equally unable to view or accept Section 144C when mandating a draft assessment order being framed as being a mere procedural requirement. As is manifest from a reading of that section, it not only adopts remedies that may be pursued to assail an order rendered on adjudication, but the decision is itself made subject to internal review at more than one level and a hierarchy of authorities. It creates a right to challenge a decision at multiple levels be it before the DRP, CIT(A) or the Tribunal. It is in that sense a self-contained code for assessment in respect of eligible assessees.
52.A failure to frame a draft order of assessment not only curtails the right of the assessee to adopt corrective measures, it also deprives it of a salutary right to challenge the draft in terms of the statutory mechanism laid in place. We thus find that the imperative of framing an order in draft was correctly propounded by JCB India Ltd., Nokia India, C-Sam as well as the host of precedents noticed above as being mandatory, a legal imperative and not merely a procedural irregularity as was contended at the behest of the respondents.
62.Accordingly, and for all the aforesaid reasons, we allow the instant writ petitions and quash the impugned final orders of assessment of ... and all consequential notices issued pursuant thereto. The petitioners shall be entitled to all consequential reliefs.”
Further, the assessee also relied on the judgment of Hon'ble Bombay High Court in the case of International Air Transport Association Vs. DCIT – [2016] 290 CTR 46, wherein Hon'ble Bombay High Court held as under:-
“5.However, it is pertinent to note that the order dated 7th October, 2015 of the DRP in paragraph (3) thereof records that “There is no dispute that the assessee is a foreign company". This position is undisputed even before us. Therefore, in view of Section 144C(15) of the Act which defines eligible assessee to whom Section 144C(1) of the Act applies to inter alia mean any foreign company. Therefore, a draft assessment order under Section 144C(1) of the Act is mandated before the Assessing Officer passes a final order under Section 143(3) of the Act in case of eligible assessee. An draft assessment order passed under Section 144C(1) of the Act bestows certain rights upon an eligible assessee such as to approach the DRP with its objections to such a draft assessment order. This is for the reason that an eligible assessee's grievance can be addressed before a final assessment order is passed and appellate proceedings invoked by it. However, these special rights made available to eligible assessee under Section 144C of the Act are rendered futile, if directly a final order under Section 143(3) of the Act is passed without being preceded by draft assessment order."
We noted that admittedly, the assessee is a non-resident and an eligible assessee in terms of the provisions of Section 144C of the Act. Once this position is established, the issue stands covered in favour of the assessee by the decision of Hon'ble Delhi High Court in the case of Sumitomo Corporation India (P.) Ltd. (supra). Accordingly, the ground raised by the assessee on jurisdictional issue is allowed.
The other grounds raised by the assessee in this appeal have been rendered academic in nature and need no adjudication in view of the fact that we have allowed the jurisdictional issue raised by the assessee as above.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on conclusion of hearing on 13th July, 2026.