2022 (4) TMI 1393 - HC - Income Tax

Validity of assessment order u/s 144-C (4) - period of limitation - HELD THAT - Neither Circular no.8/2021 nor notification no.74/2021 dated 25.6.2021 or press release dated 25.6.2021 would help respondent no.1. In Circular No. 8/2021 dated 30.4.2021, sub-clause (b) of Clause 1 only provides for objections to Dispute Resolution Panel u/s 144-C of the said Act for which, last date of filing under that Section is 1.4.2021 or thereafter may be filed within the time provided under that Section or by 31.5.2021 whichever is later. Therefore, it only provides for extension of time for filing of objections. It does not extend time for passing order under sub-section 4 of Section 144-C of the Act. In any case, even if, we proceed on the basis that, it would extend time to pass orders, still, as admitted in affidavit in reply itself, time to pass such order would have expired on 30.6.2021. Now coming to the notification no.74/2021 dated 25.6.2021 relied upon by respondent no.1, in our view that notification does not apply to assessment u/s 144-C of the Act. In fact press release clarifies Extension of Timelines- .. provided through notification nos.74/2021 and 75/2021 dated 25.06.2021 .. . None of the notifications referred in the press release pertains to any timeline prescribed u/s 144-C of the said Act. In the circumstances, we will have to agree with petitioner s case that the assessment order dated 27.09.2021 has been passed beyond prescribed time limit. WP Allowed.

Summary

Issues Involved:
1. Whether the Circular and Notifications relied upon by respondents cover petitioner’s case.
2. Whether time to complete assessment under Section 144-C(4) could be stated to have been extended till 30.9.2021.

Issue-wise Detailed Analysis:

1. Whether the Circular and Notifications relied upon by respondents cover petitioner’s case:

The petitioner, a tax resident of the Netherlands, challenged an assessment order dated 27.09.2021 under Section 143(3) read with Section 144-C(3) of the Income Tax Act, 1961, on the grounds that it was passed beyond the prescribed limitation period. The petitioner filed their original return for the Assessment Year 2018-2019 on 29.10.2018 and revised it later without changing the total income. The draft assessment order proposing an addition of ?38,97,58,539 was issued on 19.4.2021. The petitioner informed the respondent on 17.5.2021 that they would not opt for the Dispute Resolution Panel (DRP) route and would pursue the normal appellate channel, requesting the final assessment order to be passed based on the draft.

The petitioner contended that the final assessment order should have been passed by 30.06.2021, but it was issued on 27.09.2021, making it non-est and bad in law. The respondent argued that the order was within the limitation period due to extensions provided by Circular No. 8/2021 dated 30.4.2021 and Notification No. 74/2021 dated 25.6.2021, which extended the time limit for filing objections to the DRP and for completing assessments to 30.9.2021.

The court examined the provisions of Section 144-C, which allows an eligible assessee 30 days to file objections or accept the draft assessment order. If no objections are filed, the Assessing Officer must pass the final assessment order within one month from the end of the month in which the acceptance is received or the objection period expires. In this case, the communication was received on 17.5.2021, making the deadline for the final assessment order 30.06.2021.

The court found that Circular No. 8/2021 only extended the time for filing objections to the DRP, not for passing the final assessment order. Notification No. 74/2021, which extended the time limit for assessments under Sections 153 and 153-B, did not apply to Section 144-C. Therefore, the extensions cited by the respondent did not cover the petitioner's case.

2. Whether time to complete assessment under Section 144-C(4) could be stated to have been extended till 30.9.2021:

The court held that the assessment order dated 27.09.2021 was passed beyond the prescribed time limit. The court noted that neither Circular No. 8/2021 nor Notification No. 74/2021 or the press release dated 25.6.2021 extended the time for passing the final assessment order under Section 144-C(4). The court emphasized that the notification did not refer to Section 144-C and that the press release clarified that the extensions provided did not pertain to timelines under Section 144-C.

Conclusion:

The court agreed with the petitioner that the assessment order dated 27.09.2021 was passed beyond the prescribed time limit and allowed the petition. The final assessment order and the consequential penalty notice were quashed and set aside as non-est, being barred by limitation. The petition was disposed of with no order as to costs.