2021 (8) TMI 1262 - HC - Income Tax

Assessment u/s 144C - timeline for filing of objections before the DRP - notice for initiating penalty proceedings under Section 271AAC(1) - HELD THAT - Since an advance copy of the present writ petition had been served upon the petitioner, this Court has no other option but to proceed with the matter. However, the respondents are given liberty to seek variation/modification of the order in the event facts have been suppressed from this Court or facts have been mis-stated by the petitioner. Having perused the paperbook, this Court finds that the Assessment Order has been passed in violation of mandatory procedure prescribed under Section 144C of the Act as well as the aforementioned CBDT Circular inasmuch as without waiting for the decision of the DRP, Respondent No. 1 has passed the final Assessment Order. Keeping in view the aforesaid, the final Assessment Order dated 15th May, 2021, notice of demand issued under Section 156 and notice for initiating penalty proceedings under Section 271AAC(1) of the Act passed by Respondent No. 1 under Section 143(3) read with Section 144C for the assessment year 2017-18 are set aside and the proceeding is restored at the level of the DRP. With the aforesaid direction, the present writ petition along with pending applications stand disposed of.

Summary

Issues involved:
Challenging Assessment Order dated 15th May, 2021, notice of demand under Section 156, notice for penalty proceeding under section 271AAC(1) of the Income Tax Act, 1961, violation of mandatory procedure under Section 144C, restoring proceedings at the level of Dispute Resolution Panel (DRP).

Analysis:

1. The petitioner filed a writ petition challenging the Assessment Order, notice of demand, and penalty proceeding initiated under the Income Tax Act, 1961. The petitioner argued that the Assessment Order was passed without waiting for the decision of the DRP, despite filing objections within the prescribed time period. The petitioner contended that the Assessment Order violated the mandatory procedure under Section 144C of the Act and resulted in grave prejudice due to a substantial demand raised.

2. The Court issued notice to the respondents, and the respondent's counsel accepted notice but stated having no instructions in the case. The Court proceeded with the matter, allowing the respondents to seek variation or modification of the order if facts were suppressed or misstated. Upon perusing the documents, the Court found that the Assessment Order was indeed passed in violation of the mandatory procedure under Section 144C and the CBDT Circular, as it was done without waiting for the DRP's decision.

3. Consequently, the Court set aside the final Assessment Order, notice of demand, and penalty proceedings initiated by Respondent No. 1. The proceedings were restored at the level of the DRP, in line with the mandatory procedures prescribed under the Act. The Court disposed of the writ petition and pending applications, directing the order to be uploaded on the website and forwarded to the counsel via email for compliance and further action.

This judgment highlights the importance of adhering to the prescribed procedures under the Income Tax Act, ensuring that taxpayers' rights are protected, and due process is followed in assessment proceedings.