2024 (10) TMI 1155 - HC - Income Tax

Validity of Assessment Order passed by ACIT, International Taxation - failure to file objections within the stipulated time period u/s 144C - concept of draft order - HELD THAT - Section 144C (2) provides that on receipt of the draft order, the eligible officer shall within 30 days of the receipt by him of the draft order file his objections, if any, to such variations with DRP and AO. The concept of draft order is introduced in Section 144B which provides for faceless assessment. Prior to insertion of Section 144B, there was no concept of draft order . Therefore, after the draft assessment order has been served upon the assessee, it was open for the assessee to upload form 35A on the Income Tax Portal. In the facts of the case, it is not in dispute that the petitioner had uploaded form 35A on 18.04.2023. The petitioner assessee had also sent form 35A in physical form through Maruti courier on 18.04.2023. Thus, for all intents and purpose, it cannot be said that the petitioner had not filed the objections within 30 days as specified under the provision of Section 144C (2) (b) of the Act. AO was therefore not justified in passing the impugned assessment order dated 29.05.2023 invoking provisions of Section 144C (3) of the Act on the ground that the assessee did not file objections within the specified time as per the provisions of Section 144C (2) (b) of the Act. The impugned Assessment Order is contrary to the provision of Section 144C of the Act and is therefore liable to be quashed and set aside and at the same time, when the DRP by the impugned order dated 29.12.2023 has refrained from passing any order on variation in view of the impugned final assessment order being passed. As the final assessment order is not tenable the order of DRP is also required to be quashed and set aside. Similarly, the provisional attachment placed under Section 281B of the Act would also not survive as the same has already lived its life of 6 years and there is nothing on record to show that the same is extended by the Assessing Officer more particularly after passing of the assessment order dated 29.05.2023. The petition succeeds and is accordingly allowed.

Summary

Issues:
1. Challenge to Assessment Order under Article 227 of the Constitution of India.
2. Alleged failure to file objections within the stipulated time period under Section 144C of the Income Tax Act, 1961.
3. Dispute regarding the filing of objections and subsequent Assessment Order.
4. Provisional attachment order under Section 281(B) of the Act.

Detailed Analysis:
Issue 1:
The petitioner challenged the Assessment Order dated 29.05.2023 passed by the Assistant Commissioner of Income Tax, International Taxation, under Article 227 of the Constitution of India. The petitioner contended that the Assessment Order was based on the draft assessment order as the objections were not filed within the specified time period before the Distribution Resolution Panel (DRP) as required by Section 144C of the Income Tax Act, 1961.

Issue 2:
The petitioner received multiple notices alleging income escapement, but due to non-residency, some notices were not responded to promptly. The petitioner later informed the authorities about non-residency and submitted necessary documents on the Income Tax E-portal. The draft assessment order was passed, and objections were filed within the stipulated time frame, both electronically and physically. However, the Assessment Order was still passed based on the draft assessment order.

Issue 3:
The petitioner argued that objections were filed within the prescribed time limit, supported by evidence of uploading the appeal electronically and dispatching it physically. The respondent contended that the physical submission was delayed by a day, justifying the Assessment Order. The Court found that the objections were filed within the required timeframe, and the Assessment Order was unjustified under Section 144C of the Act.

Issue 4:
The respondent continued a provisional attachment order despite the Assessment Order, which the petitioner argued was no longer valid. The Court held that since the Assessment Order was quashed, the provisional attachment order and the DRP's order were also set aside. The matter was remanded to the DRP for further consideration in accordance with the law.

Conclusion:
The High Court quashed the Assessment Order, DRP's order, and the provisional attachment order. The matter was remanded to the DRP for reconsideration based on the objections filed by the petitioner within the specified time limit. The Court clarified that the decision was based on procedural grounds and did not delve into the merits of the case.