2020 (12) TMI 820 - AT - Income Tax

Reference to dispute resolution panel u/s 144C - time period prescribed within which only the AO can frame the final order u/s. 144C(3) - final assessment order u/s 144C(3) only within the time period as prescribed in section 144C(4) - jurisdiction of AO to frame the final assessment order u/s. 144(3) - HELD THAT - In this case the draft assessment order as per section 144C (1) of the Act was passed on 28.12.2019 and the assessee had time of 30 days from the date of receipt of draft order to file objection before the DRP as per sub-section (2)(b) of the Act or acceptance of the draft assessment order as per sub-section (2)(a) - In any case, this period of time i.e. 30 days gets over on 27.01.2020. We note that the assessee had preferred an objection before the DRP (Delhi) within 30 days of receipt as per sub-section (2)(b) of section 144C on 24.01.2020 which fact was intimated to the AO by physically filing the letter dated 27.01.2020 at the office of AO (On query the Ld. AR explained that the reference/objection had to be filed before DRP (Delhi) on 24.01.2020 which was Friday and 25th January 26th January being Saturday and Sunday, the assessee physically filed the acknowledgment of filing objection at DRP before AO on 27.01.2020). AO ought to have awaited the decision of the DRP as envisaged under sub-section (5) of section 144C of the Act and which direction of DRP was binding on the AO as per sub-section (13) of section 144 and it is to be noted that after the direction of DRP, the AO could have framed the assessment without providing any opportunity to the assessee as envisaged in sub-section (13) of section 144C. In this case, the AO failed to await for the direction of the DRP and has arbitrarily framed the final assessment order which vitiates the final assessment order passed by him. AO had no jurisdiction to frame the final assessment order on 27.01.2020 u/s. 144(3) of the Act, since he was divested of jurisdiction to pass final order between 27.01.2020 to 31.01.2020. Even the AO could not have framed the final order u/s. 144C(3) on 27.01.2020 because the assessee had filed its objection before the DRP on 24.01.2020, the DRP is in seisn of the case of assessee and between 24.01.2020 and till the DRP gives direction as per section 144C(5) AO does not enjoy jurisdiction over the assessee s case for AY 2016-17. Therefore, the assessee succeeds in its challenge which it has raised against the jurisdiction of AO to frame the final assessment order u/s. 144(3) dated 27.01.2020 along with demand notice u/s. 156 of the Act is therefore, null in the eyes of law and is quashed. - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) to pass the final assessment order under section 143(3) read with section 144C(3) of the Income-tax Act, 1961 without awaiting the direction of the Dispute Resolution Panel (DRP).

Issue-wise Detailed Analysis:

1. Jurisdiction of the AO to Pass Final Assessment Order Without Awaiting DRP Directions:

The assessee company challenged the final assessment order passed by the AO under section 143(3) read with section 144C(3) of the Income-tax Act, 1961, dated 27.01.2020, arguing that it was issued without awaiting the directions of the DRP, despite the assessee having filed objections before the DRP within the prescribed time.

The assessee received a draft assessment order on 28.12.2019 and filed objections before the DRP on 24.01.2020. The assessee also notified the AO of this filing on 27.01.2020. The AO, however, issued the final assessment order on the same day, 27.01.2020, without waiting for the DRP's directions.

Legal Framework:

- Section 144C of the Act outlines a complete code for the assessment of eligible assessees, providing them with the option to object to a draft assessment order before the DRP or to accept it.
- Sub-section (2) of section 144C allows the assessee 30 days to file objections before the DRP from the date of receiving the draft order.
- Sub-section (5) mandates that the AO must await the DRP's directions before passing the final assessment order.
- Sub-section (13) specifies that the AO must complete the assessment in conformity with the DRP's directions.

Arguments and Findings:

- The assessee argued that the AO's action to pass the final assessment order on 27.01.2020 was without jurisdiction as it failed to follow the mandatory procedure prescribed under section 144C, which requires awaiting the DRP's directions.
- The revenue contended that the AO acted within the law by passing the final order within 30 days of the draft order, suggesting that the assessee might have filed the objections after the final order was issued.

Tribunal's Analysis:

- The Tribunal emphasized that section 144C sets a mandatory procedure that must be followed by the AO, providing a valuable right to the assessee to object to the draft order before the DRP.
- The Tribunal noted that the AO is required to wait for the DRP's directions if objections are filed within the prescribed 30 days.
- The Tribunal found that the AO erroneously issued the final assessment order on 27.01.2020, despite being notified of the objections filed before the DRP on 24.01.2020.
- The Tribunal highlighted that even if the assessee had not filed any objections, the AO could only pass the final assessment order within the time frame specified in sub-section (4) of section 144C, i.e., between 01.02.2020 and 28/29.02.2020.

Conclusion:

The Tribunal concluded that the AO lacked jurisdiction to pass the final assessment order on 27.01.2020 without awaiting the DRP's directions. The final assessment order dated 27.01.2020 was declared null and void in the eyes of law and was quashed.

Result:

The appeal of the assessee was allowed, and the final assessment order passed by the AO dated 27.01.2020 was quashed.

Order Pronouncement:

The order was pronounced in the open court on 18th December 2020.