2021 (12) TMI 891 - HC - Income Tax

Assessment u/s 144C - reference to the Dispute Resolution Panel (DRP) - Petitioner s case is that Section 144C (2) requires assessee to choose to file reference before the Dispute Resolution Panel (DRP) to file such objection before DRP within 30 days from the receipt of Draft Assessment Order - HELD THAT - The section enquires assessee to file a copy of the reference with the Assessing Officer within the time limit prescribed. Section 144C (4) of the Act requires Assessing Officer to pass a final order within one month from the end of the month in which the period of filing of objections before DRP and AO expires. According to petitioner though Section 144C of the Act requires petitioner to communicate the reference filed it before the DRP to the AO, petitioner was under a reasonable belief that, with the assessments being faceless and completely electronic, the reference filed by it would automatically communicated to Respondent No.2 by Respondent No.5 which is the DRP. Unfortunately, petitioner s belief was not correct and the Assessing Officer not being aware of petitioner having filed reference before DRP, after expiry of prescribed period of 30 days proceeded to pass the Assessment Order dated 28th June, 2021 which is impugned in this petition. The reference before DRP is still pending. It is also not disputed that petitioner had filed to directly communicate the reference to DRP to the Assessing Officer. We have considered the petition, reply, rejoinder, sur-rejoinder and sur-sur-rejoinder and also heard Mr. S. Sriram and Mr. Suresh Kumar. Since petitioner had already filed a reference raising his objections to the DRP and Section 144C (4) of the Act requires the Assessing Officer to pass the final order including the view expressed by the DRP, we will be justified in setting aside the order of the Assessing Officer dated 28th June, 2021 which is impugned in this petition. We would also observe that the AO cannot be faulted for passing the impugned order. At the same time, the Assessing Officer will also have benefit of considering the views of DRP while passing a fresh Assessment Order.

Summary

Issues: Impugning Assessment Order under Income Tax Act for AY 2017-18, Interpretation of Section 144C requirements, Failure to communicate reference to Assessing Officer, Setting aside Assessing Officer's order, Consideration of DRP's views in fresh Assessment Order.

In this case, the petitioner challenged the Assessment Order dated 28th June, 2021, passed by Respondent No.2 under the Income Tax Act for the Assessment Year 2017-18, along with the consequential Notice of Demand and Show Cause Notice for penalty. The petitioner contended that Section 144C (2) of the Act mandates the assessee to file a reference before the Dispute Resolution Panel (DRP) within 30 days from the receipt of the Draft Assessment Order and to communicate a copy of the reference to the Assessing Officer within the prescribed time limit. However, the petitioner believed that the reference filed electronically with the DRP would automatically be communicated to the Assessing Officer due to the faceless assessment system. As a result, the Assessing Officer, unaware of the reference, proceeded to pass the impugned Assessment Order after the prescribed period had lapsed.

The Court noted that the reference before the DRP was still pending, and the petitioner had failed to directly communicate the reference to the Assessing Officer. Considering the arguments and submissions, the Court opined that since the petitioner had raised objections by filing a reference with the DRP, as per Section 144C (4) of the Act, the Assessing Officer should pass the final order, taking into account the views expressed by the DRP. Therefore, the Court decided to set aside the impugned Assessment Order, acknowledging that the Assessing Officer was not at fault but should consider the DRP's views while issuing a fresh Assessment Order.

Consequently, the petition was allowed, and a writ of Certiorari was issued to quash the impugned Assessment Order, Notice of Demand, and Show Cause Penalty Notice. The Assessing Officer was directed to take further steps in the matter after the DRP passes its order on the reference filed by the petitioner. Finally, the petition was disposed of in light of the above findings and directions provided by the Court.