2024 (8) TMI 1367 - HC - Income Tax

Validity of final assessment order passed u/s 144 r.w.s. 144C(3)/144B along with the notice of demand issued u/s 156 and notice of penalty u/s 274 r.w.s. 270A - as argued petitioner had filed detailed objections before DRP and since the matter is sub-judice before the DRP, National e-Assessment Assessment Centre/AO had no jurisdiction to pass the impugned final assessment order without waiting for the directions from the DRP. HELD THAT - Recently, this Court has decided a similar controversy in Pepsico India Holdings Private Limited 2023 (12) TMI 226 - DELHI HIGH COURT once the objections have been filed by the assessee against a draft assessment order within the time limit prescribed u/s 144C(2)(b), the rest of the procedure should be followed as prescribed and the final assessment order ought to be passed by the AO in accordance with the directions issued by the DRP. This Court is further of the view that no prejudice will be caused to the Respondent-Department if the present petition is allowed and the impugned assessment order is set aside as Respondent-Department would be well within its rights to pass a fresh assessment order post the receipt of direction from the Respondent No. 3-DRP

Summary

Issues:
Challenging final assessment order under Income Tax Act, jurisdiction of Assessing Officer, filing objections before Dispute Resolution Panel (DRP), setting aside assessment order based on objections, passing fresh assessment order post DRP directions.

Analysis:
The High Court judgment pertains to a writ petition challenging a final assessment order dated 16th November, 2023 passed under the Income Tax Act, 1961 for the assessment year 2020-21. The petitioner contended that the Assessing Officer had no jurisdiction to pass the final assessment order without waiting for directions from the DRP, even though objections were filed before the DRP but not intimated to the Assessing Officer as required by law. The respondents argued that under the Act, objections should have been filed before the Assessing Officer upon receipt of the draft assessment order, and failure to do so allowed the Assessing Officer to complete the assessment based on the draft order if no objections were received within the specified time period.

The Court referred to a similar case and held that once objections are filed by the assessee against a draft assessment order within the prescribed time limit, the Assessing Officer should follow the procedure and pass the final assessment order in accordance with the DRP's directions. The Court emphasized that setting aside the assessment order based on objections does not fault the Assessing Officer, who will have the benefit of considering the DRP's views while passing a fresh assessment order. The judgment highlighted that allowing the petition and setting aside the assessment order would not prejudice the Revenue Department, as they could pass a fresh assessment order post receipt of directions from the DRP.

Based on the above analysis, the High Court set aside the impugned assessment order dated 16th November, 2023, along with the notices of demand and penalty, and allowed the writ petition. The respondents were given liberty to pass a fresh assessment order after receiving directions from the DRP. The Court clarified that it did not comment on the merits of the controversy, leaving the rights and contentions of the parties open for further proceedings.