2025 (1) TMI 1478 - AT - Income Tax

Final assessment order was passed u/s. 143(3) without first passing draft assessment order - HELD THAT - A perusal of assessment order dated 12.12.2019 shows that the assessment order has been passed u/s. 143(3) of the Act and not u/s. 144C(1) of the Act. Further issuance of demand notice and penalty notice along with said order clearly indicates that mentioning of section 143(3) of the Act on the order is not merely a typo mistake but a well thought out final assessment order passed by the AO. The final assessment order passed without following mandatory provisions set out u/s. 144C of the Act is without jurisdiction hence liable to be quashed. Timelines in passing the assessment order as time barred - Assessment order was passed by the AO on 29.09.2021 i.e. almost after 12 months from the end of month in which the DRP directions were passed. Even if benefit of TOLA is allowed to the AO the notification issued on 27.04.2021 under TOLA extended time for passing order u/s. 144C(13) of the Act up to 30.06.2021 hence final assessment order passed by the AO is time barred. Re. Shell India Markets P. Ltd. 2022 (2) TMI 1149 - BOMBAY HIGH COURT ). Hence assessment order dated 29.09.2021 is barred by limitation. Assessee appeal allowed.

ISSUES PRESENTED and CONSIDERED

The core issues considered in this judgment were:

The validity of the assessment order dated 12.12.2019, which was challenged on the grounds that it was passed as a final assessment order without first issuing a draft assessment order as required under section 144C(1) of the Income Tax Act, 1961.
The validity of the assessment order dated 29.09.2021, which was contested on the basis that it was issued beyond the statutory time limit, even considering the extensions provided under the Taxation and Other Laws (Relaxation and amendment of certain provisions) Act, 2020 (TOLA).

ISSUE-WISE DETAILED ANALYSIS

Validity of Assessment Order dated 12.12.2019

Relevant Legal Framework and Precedents: The legal requirement under section 144C(1) mandates the issuance of a draft assessment order before a final assessment order can be passed. The precedent set by the Madras High Court in ACIT vs. Vijay Televisions (P) Ltd. was pivotal, which held that bypassing the draft order stage renders the final assessment order invalid.
Court's Interpretation and Reasoning: The Tribunal noted that the assessment order dated 12.12.2019 was issued under section 143(3) instead of section 144C(1), accompanied by a demand and penalty notice, indicating it was intended as a final order. The Tribunal found this to be a significant procedural lapse, not merely a typographical error.
Key Evidence and Findings: The Tribunal observed that the issuance of the demand and penalty notices alongside the assessment order underscored its finality, contradicting the procedural requirement of a draft order.
Application of Law to Facts: The Tribunal applied the principles from the Vijay Televisions case, concluding that the failure to issue a draft order as required by section 144C(1) invalidated the final assessment order.
Treatment of Competing Arguments: The Tribunal rejected the department's attempt to rectify the procedural error through a rectification order, aligning with the precedent that such errors cannot be cured post facto.
Conclusions: The Tribunal quashed the assessment order dated 12.12.2019 for being issued without jurisdiction due to non-compliance with mandatory procedural requirements.

Validity of Assessment Order dated 29.09.2021

Relevant Legal Framework and Precedents: Section 144C(13) requires that the final assessment order be passed within one month after the end of the month in which the DRP's directions are received. The Tribunal considered the timeline extensions under TOLA.
Court's Interpretation and Reasoning: The Tribunal found that even with the extensions allowed under TOLA, the assessment order dated 29.09.2021 was issued beyond the permissible time frame, making it time-barred.
Key Evidence and Findings: The directions from the DRP were issued on 30.09.2020, and the final assessment order was passed on 29.09.2021, exceeding the extended deadline of 30.06.2021 provided by TOLA.
Application of Law to Facts: By applying the statutory timeline and considering TOLA's extension, the Tribunal determined that the assessment order was issued after the permissible period had lapsed.
Treatment of Competing Arguments: The Tribunal acknowledged the department's admission of the timeline but found no justification for the delay, reinforcing the order's invalidity due to being time-barred.
Conclusions: The Tribunal quashed the assessment order dated 29.09.2021 for being issued beyond the statutory time limit, thus lacking jurisdiction.

SIGNIFICANT HOLDINGS

Core Principles Established: The Tribunal reaffirmed the mandatory nature of procedural requirements under section 144C, emphasizing that non-compliance renders orders invalid and without jurisdiction. It also underscored the importance of adhering to statutory timelines, even with statutory extensions.
Final Determinations on Each Issue: Both the assessment orders dated 12.12.2019 and 29.09.2021 were quashed. The former was invalidated for bypassing the draft order stage, and the latter for being issued beyond the statutory time limit, even after considering TOLA's extensions.

The Tribunal's decision highlights the critical importance of adhering to procedural mandates and statutory timelines in the assessment process, reinforcing the principles of due process and jurisdictional compliance.

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