2024 (6) TMI 1224 - AT - Income Tax

Validity of the final assessment order passed by the AO u/s 144(C)(3) beyond period of limitation - Role of the Dispute Resolution Panel (DRP) in deciding on objections - mandation to pass the assessment order within one month from the end of the month in which the statutory period of filing the objections expired - HELD THAT - A perusal of Section 144C(2) of the Act would show that the assessee, on receipt of the draft order, shall file his objections within 30 days of the receipt of the draft order with Dispute resolution Panel and the AO. Only when no objections are received within the period specified under Sub- Section 2, the Assessing Officer shall complete the assessment on the basis of the draft order, as contemplated under Section 144(C)(3) of the said Act. What is contemplated under Section 144C(2) is the filing of the objections by the assessee with the Dispute Resolution Panel, if he is not accepting the draft assessment order. The said provision also contemplates filing of such objection before the Assessing Officer as well. If such objection is filed in time, then the Dispute Resolution Panel alone shall proceed to decide the matter as provided under Section 144C(5) 6 of the said Act. DRP may confirm, reduce or enhance the variation proposed in the draft order. It is not in dispute that the DRP rejected the objection filed by the assessee on the ground that it is barred by limitation. Though, it is an order rejecting the objections but the Panel concluded that it does not find it fit for issuing directions for the guidance of the assessing officer for enabling him to complete the assessment. Once, the DRP has chosen to reject the objections on the ground of delay, it goes without saying that resultant position of such rejection is nothing but confirming the merits of draft order passed by the AO but in no way extends the limitation of passing the order under sub-section (4) of Section 144 of the Act. The final order should have been passed under sub- section (3)(b) of Section 144 read with sub-section (4)(b) of Section 144 of the Act. of the Act. There is nothing in the DRP order stating that the directions are communication to the assessee and the departmental authorities as per the provision of Section 144C(5) of the said Act. Rather, being aware of the lapse at end of the AO, ordered that The Revenue is advised to take further course of action as per the law and precedents in interest of revenue. Consequently, we are inclined to hold that the final order passed of AO under Section 144C(13) of the Act, is devoid of jurisdiction. The additional ground is sustained. The appeals are allowed.

Summary

Issues:
1. Validity of the final assessment order passed by the AO within the statutory period.
2. Compliance with the provisions of Section 144C(2) of the Income Tax Act regarding filing objections.
3. Interpretation of the role of the Dispute Resolution Panel (DRP) in deciding objections.

Analysis:

1. The appellant challenged the final assessment order dated 29.06.2023 passed by the AO, arguing that it was barred by limitation. The AO reopened the case due to non-filing of income tax returns by the assessee. The DRP examined the objections and noted that the assessee failed to file objections within the specified time frame. The AO was required to pass the final assessment order within one month from the end of the month in which the period for filing objections expired, as per Section 144C(4) of the Act. However, the AO did not pass the final order within the stipulated time, leading to a dispute regarding the validity of the assessment order.

2. Section 144C(2) mandates that the assessee must file objections within 30 days of receiving the draft order with both the DRP and the Assessing Officer. Failure to do so allows the AO to proceed with the assessment based on the draft order. The DRP's role is crucial in deciding objections, and the AO cannot pass the final order until the DRP issues a decision. In this case, the DRP rejected the objections due to delay, advising the Revenue to take further action. The appellant's argument that informing the AO of filing objections before the DRP was sufficient was countered, emphasizing the importance of timely filing with both authorities.

3. The DRP's rejection of objections on the grounds of delay did not provide directions to the AO, rendering the final order passed by the AO under Section 144C(13) devoid of jurisdiction. The DRP's decision did not extend the limitation period for passing the final order, as it did not issue any directions for the AO to complete the assessment. Consequently, the final order was deemed invalid, and the appeals were allowed. The judgment emphasized the importance of complying with procedural requirements and the distinct roles of the DRP and the Assessing Officer in the assessment process.

This detailed analysis highlights the key legal issues, procedural requirements, and the interpretation of relevant sections of the Income Tax Act in the context of the judgment delivered by the Appellate Tribunal ITAT Delhi.