Assessee’s Contentions

Revenue’s Contentions

Tribunal’s Judgment

The assessee contended that, being a non-resident individual, she was an “eligible assessee” u/s 144C(15)(b), pursuant to the amendment made by Finance Act, 2020 w.e.f. 01.04.2020. Accordingly, the AO was required to follow the procedure prescribed u/s 144C.

The Revenue argued that merely being a non-resident individual did not make the assessee an “eligible assessee” u/s 144C(15), and that the provision was not applicable in the absence of a TPO order.

The ITAT held that after the amendment effective from 01.04.2020, a non-resident individual is specifically covered within the definition of “eligible assessee”. Since the AO proposed a prejudicial variation, passing a draft assessment order was mandatory.

As the AO proposed a variation prejudicial to her interest, it was mandatory to first issue a draft assessment order u/s 144C(1). Directly passing the final order deprived her of the statutory right to approach the DRP, making the defect jurisdictional.

It contended that section 144C applied only where the assessee was a foreign company or where the variation arose pursuant to an order passed by the TPO u/s 92CA(3); hence, the AO was not required to pass a draft assessment order.

As the AO directly passed the final assessment order without issuing a draft order, the assessee was deprived of her statutory remedy before the DRP. The failure went to the root of the validity of the assessment; hence, the final assessment order was held to be without jurisdiction and quashed.