2023 (12) TMI 1419 - HC - Income Tax

Reference to dispute resolution panel - Order u/s 144C bound to comply with the time frame stipulated u/s 144C(13) - whether the impugned order passed by the assessing authority was without jurisdiction? - HELD THAT - Admittedly Ext. P3 is dated 09.12.2013. Hence the assessing officer was bound to pass the assessment order in conformity with the direction of the DRP before 31.01.2014. However the assessing officer has passed Ext. P4 assessment order only on 27.03.2014 which was served on the petitioner on 31.03.2014. The respondents could not produce any document before this Court to prove receipt of Ext. P3 directions dated 09.12.2013 issued by the DRP. According to the petitioner they received Ext. P3 on 27.12.2013. Ext. P4 assessment order was passed by the assessing authority on 27.03.2014 which is beyond the period stipulated in Section 144C(13) of the Act. Whether the provisions in Section 144C are only procedural or not? - Section 144C is inserted in the Finance Act 2009 with a view to provide a speedy disposal to create an alternative dispute resolution mechanism within the Income Tax Department. If the provisions of Section 144C as mandated by the statute are not strictly adhered to the entire object of providing an alternative dispute resolution mechanism in the form of DRP would stand defeated. The legislature had clear intention while the said provision was inserted in 2009 to facilitate an expeditious resolution of disputes on a fast track basis. If the assessing officer fails to pass any order in accordance with the statutory provisions as mandated under Section 144C it will defeat the entire exercise and render the same futile. The directions in Ext. P3 given by the DRP are binding on the assessing officer who has to finalize the assessment order even without affording the assessee an opportunity of being heard. There was nothing more to do by the assessing officer than to pass an assessment order on receipt of Ext. P3. Once the statute has prescribed limitation period for passing a final order the officers of the Department should act accordingly in order to provide the assessee an expeditious resolution of the disputes. The impugned orders were passed by the assessing authority beyond the time prescribed under Section 144C(13). Therefore impugned order passed by the assessing officer cannot be sustained.

Summary

The core issue considered in this judgment is whether the assessing authority complied with the time frame stipulated under Section 144C(13) of the Income Tax Act, 1961, while passing the assessment order. The petitioner challenged the assessment order on the grounds of being issued beyond the prescribed period, making it ultra vires and without jurisdiction.

Section 144C of the Act provides a mechanism for resolving disputes through the Dispute Resolution Panel (DRP). The petitioner, a 100% export-oriented unit, claimed deductions under Section 10B, which were initially accepted for prior assessment years. However, for the assessment year 2009-10, the Transfer Pricing Officer made adjustments, leading to a draft assessment order issued by the assessing officer. The petitioner filed objections with the DRP, which issued directions on 09.12.2013. The assessing officer was required to pass the final assessment order by 31.01.2014, but did so only on 27.03.2014, prompting the petitioner to seek judicial intervention.

The petitioner argued that the assessment order was non-est due to its issuance beyond the statutory time frame, relying on precedents that emphasize adherence to procedural timelines in tax assessments. The petitioner contended that Section 144C is a non-obstante provision, mandating strict compliance with its procedural requirements, and any deviation renders the order void. The petitioner further argued that the absence of evidence showing when the DRP's directions were received by the assessing officer supports their claim of the order being ultra vires.

The respondents argued that the petitioner had an alternative remedy through an appeal before the Income Tax Appellate Tribunal. They contended that the assessment order was a procedural formality in line with the DRP's directions and not a quasi-judicial order. They suggested that Section 144C is procedural, similar to the repealed Section 144B, and non-compliance does not invalidate the assessment.

The Court examined whether Section 144C is procedural or substantive. It noted that Section 144C, introduced to provide a fast-track dispute resolution mechanism, prescribes specific time limits for each step in the assessment process. The Court emphasized that these time limits are crucial to the provision's purpose and object, and any dilution would defeat its intent. The exclusion of Section 153, which provides longer time limits, from Section 144C's framework underscores the legislature's intention for strict adherence to the prescribed timelines.

The Court found that the respondents failed to provide evidence of the date the DRP's directions were received, and no reasons were given for the delay in issuing the assessment order. The Court held that Section 144C is not merely procedural but a substantive provision requiring strict compliance with its time limits. The Court referenced precedents that support the view that non-compliance with such statutory provisions results in illegality, not mere procedural irregularity.

Significant holdings include the Court's determination that Section 144C mandates strict adherence to its procedural timelines, as it is a substantive provision. The failure to comply with these timelines renders the assessment order void. The Court concluded that the impugned assessment order was issued beyond the prescribed period, making it unsustainable. Consequently, the writ petition was allowed, and the assessment order was set aside.