If the Assessing Officer passes a final assessment order on an eligible assessee without first issuing a draft order, can s.292B save it?
After a transfer pricing adjustment was proposed, the Assessing Officer passed a final order under s.143(3) without first forwarding a draft assessment order under s.144C(1). The Bombay High Court quashed the order, the demand notice and the penalty notice as void ab initio, and held that s.292B cannot confer jurisdiction that the officer never had.
Decided by the High Court on 2021-07-28, reported as Writ Petition (L) No. 11293 of 2021 (Bombay High Court), judgment dated 28 July 2021. It bears on section 144C, section 292B, section 143(3) of the Income Tax Act 1961, in Assessment & Scrutiny and Faceless Assessment & Appeals matters.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For AY 2017-18 the petitioner declared income of about Rs 1.01 crore and filed Form 3CEB for its international transactions with associated enterprises. The Transfer Pricing Officer proposed an adjustment of about Rs 10.74 crore. On 6 April 2021 the Assessing Officer passed a final assessment order determining income at about Rs 11.75 crore, together with a demand notice and penalty notice, without first forwarding a draft assessment order. The petitioner moved the High Court under Article 226 rather than appealing.
The procedure in s.144C is mandatory and not directory. Where a variation prejudicial to an eligible assessee is proposed, the Assessing Officer must first forward a draft order; the right to object before the Dispute Resolution Panel is a substantive right, not a formality. Section 292B cannot be read to confer jurisdiction on the Assessing Officer where none exists, and the omission is an incurable illegality rather than a mere irregularity. The assessment order, demand notice and penalty notice were quashed as void ab initio.
Section 144C opens with a non obstante clause and creates a distinct route for eligible assessees, so the draft order is the step that authorises everything that follows. Skipping it destroys the assessee's opportunity to have the variation tested by the Panel before it hardens into a demand, which is precisely the protection Parliament created. Section 292B is directed at defects, mistakes and omissions in a notice or order that is otherwise within jurisdiction; it does not operate where the officer lacked the power to pass the order at all. The Court therefore treated the defect as going to jurisdiction and refused to relegate the petitioner to the appellate remedy.
The procedure laid down under Section 144C of the IT Act is of great importance and is mandatory.
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Handle my notice → Ask a CA on WhatsAppAfter a transfer pricing adjustment was proposed, the Assessing Officer passed a final order under s.143(3) without first forwarding a draft assessment order under s.144C(1). The Bombay High Court quashed the order, the demand notice and the penalty notice as void ab initio, and held that s.292B cannot confer jurisdiction that the officer never had. This was decided by the High Court and bears on section 144C, section 292B, section 143(3) of the Income Tax Act 1961. It is reported as Writ Petition (L) No. 11293 of 2021 (Bombay High Court), judgment dated 28 July 2021. If it applies to you, the first step is this: On receiving any order after a TPO adjustment, check first whether it is headed 'draft' and whether it carries the s.144C(1) intimation of the 30-day option.
For AY 2017-18 the petitioner declared income of about Rs 1.01 crore and filed Form 3CEB for its international transactions with associated enterprises. The Transfer Pricing Officer proposed an adjustment of about Rs 10.74 crore. On 6 April 2021 the Assessing Officer passed a final assessment order determining income at about Rs 11.75 crore, together with a demand notice and penalty notice, without first forwarding a draft assessment order. The petitioner moved the High Court under Article 226 rather than appealing. The matter was decided on 2021-07-28 by the High Court. On those facts the High Court held as follows. The procedure in s.144C is mandatory and not directory. Where a variation prejudicial to an eligible assessee is proposed, the Assessing Officer must first forward a draft order; the right to object before the Dispute Resolution Panel is a substantive right, not a formality. Section 292B cannot be read to confer jurisdiction on the Assessing Officer where none exists, and the omission is an incurable illegality rather than a mere irregularity. The assessment order, demand notice and penalty notice were quashed as void ab initio.
Section 144C opens with a non obstante clause and creates a distinct route for eligible assessees, so the draft order is the step that authorises everything that follows. Skipping it destroys the assessee's opportunity to have the variation tested by the Panel before it hardens into a demand, which is precisely the protection Parliament created. Section 292B is directed at defects, mistakes and omissions in a notice or order that is otherwise within jurisdiction; it does not operate where the officer lacked the power to pass the order at all. The Court therefore treated the defect as going to jurisdiction and refused to relegate the petitioner to the appellate remedy. In the words reproduced by the source cited on this page: "The procedure laid down under Section 144C of the IT Act is of great importance and is mandatory."
It was decided by the High Court on 2021-07-28 and is reported as Writ Petition (L) No. 11293 of 2021 (Bombay High Court), judgment dated 28 July 2021. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 144C, section 292B, section 143(3), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It cuts both ways and is cited by both sides. The procedure in s.144C is mandatory and not directory. Where a variation prejudicial to an eligible assessee is proposed, the Assessing Officer must first forward a draft order; the right to object before the Dispute Resolution Panel is a substantive right, not a formality. Section 292B cannot be read to confer jurisdiction on the Assessing Officer where none exists, and the omission is an incurable illegality rather than a mere irregularity. The assessment order, demand notice and penalty notice were quashed as void ab initio. It arises in Assessment & Scrutiny and Faceless Assessment & Appeals matters, on section 144C, section 292B, section 143(3) of the Income Tax Act 1961. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. If a final order with a demand notice has issued directly, consider a writ petition rather than an appeal, because the defect is jurisdictional. Do not file objections before the DRP against a final order; the Panel will reject them as not maintainable, as happened in the reported cases. Preserve the point even if you also appeal, and plead expressly that s.292B cannot cure absence of jurisdiction. Confirm the assessee is an 'eligible assessee' under s.144C(15)(b) for the year in question, since the definition was amended with effect from 1 April 2020.
Still good law. Separate check: the same view has been taken repeatedly, including by the Delhi High Court in Sinogas Management Pte Ltd v DCIT (October 2023), which held the s.144C(1) process is not discretionary but mandatory and that omission of the draft order is a substantive lapse rendering the subsequent order without jurisdiction. That finding was checked against a published source, which is linked on this page, on 2026-08-19. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The procedure in s.144C is mandatory and not directory. Where a variation prejudicial to an eligible assessee is proposed, the Assessing Officer must first forward a draft order; the right to object before the Dispute Resolution Panel is a substantive right, not a formality. Section 292B cannot be read to confer jurisdiction on the Assessing Officer where none exists, and the omission is an incurable illegality rather than a mere irregularity. The assessment order, demand notice and penalty notice were quashed as void ab initio.
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