2021 (2) TMI 287 - HC - Income Tax

Rectification of mistake - Validity of assessment order u/s 144C(2) - instead of being titled a draft order is titled as order or final order - whether the same is an irregularity or an illegality'? - HELD THAT - Though we have heard the counsels for some time but the counsel for the petitioner is unable to satisfy, under which provision the income tax return can be deemed to be accepted, for the reason of the mistake in non labelling the assessment order as a draft. Though it is contended that the Assessing Officer becomes functus officio but we would prefer to hear further. In the present case, the Assessing Officer, immediately after issuing the impugned order and within the time prescribed, issued a corrigendum to the effect that the same is not a final order but a draft order. In this case it was open to the assessee to, immediately on receipt of the corrigendum, prefer the objections to the Dispute Resolution Panel (DRP). The petitioner states that the order was also followed by the demand notice and the penalty notice.

Summary

Issues:
Challenge to assessment order and corrigendum for assessment year 2016-17 under Section 144C(2) of the Income Tax Act, 1961.

Analysis:
The petition challenges the assessment order dated 6th December, 2019, and the corrigendum dated 29th December, 2019, for the assessment year 2016-17. The main issue for adjudication is whether an assessment order under Section 144C(2) of the Income Tax Act, 1961, titled as 'order' or 'final order' instead of 'draft order', constitutes an 'irregularity' or an 'illegality'. The petitioner argues it is an illegality, seeking to quash the order and have the income tax return accepted without further proceedings. The petitioner relies on previous judgments, including The Pr. Commissioner of Income Tax-4 Vs. Headstrong Services India Pvt. Ltd, to support this position. The contention is that once an order is not labeled as a draft, the return should be deemed accepted, precluding the department from raising objections. However, the court notes the petitioner's failure to specify the provision under which the return can be deemed accepted due to the labeling mistake. The Assessing Officer issued a corrigendum promptly, clarifying the order as a draft, allowing the assessee to raise objections with the Dispute Resolution Panel (DRP).

The court acknowledges the issuance of demand and penalty notices following the order. Additionally, the court has scheduled a hearing for this case and related petitions on 8th February, 2021, summoning advocates representing the department for further consideration of the issue. The matter remains unresolved, pending clarification on the legal basis for deeming the return accepted in cases of mislabeling assessment orders.