Delhi High Court Quashes Final Assessment Order Passed By AO Without Waiting For DRP's Directions Mandated U/s 144C

The Delhi High Court has set aside the final assessment order and the consequent notices and computations that were passed without waiting for the directions issued by the Dispute Resolution Panel (DRP) as per the mandate of Section 144C of the Income Tax Act.

The bench of Acting Chief Justice Manmohan and Justice Mini Pushkarna has observed that once the objections have been filed by the assessee against a draft assessment order within the time limit prescribed under Section 144C(2)(b), the rest of the procedure should be followed as prescribed, and the final assessment order ought to be passed by the Assessing Officer in accordance with the directions issued by the DRP.

The petitioner/assessee has challenged the order passed by the respondent/department under Section 143(3) read with Section 144C(4) of the Income Tax Act, 1961, for Assessment Year 2020–21, as well as the computation sheet and demand notice issued under Section 156 of the Income Tax Act. The petitioner has assailed the notice issued under Section 274 read with Section 270A, which initiates penalty proceedings against the petitioner. The petitioner sought directions from the Dispute Resolution Panel (DRP) to decide the objections in accordance with the law.

The assessee stated that though the petitioner had preferred its objections against the draft assessment order before the DRP within limitation as provided under Section 144C(2)(b)(i) read with Section 144B(1)(xxiv)(b)(I), the petitioner inadvertently failed to intimate the Assessing Officer regarding the objections in terms of Section 144C(2)(b)(ii). Due to the inadvertent lapse on behalf of the petitioner, the Assessing Officer passed the final assessment order by closing the assessment for the year under consideration.

The assessee contended that since the petitioner had exercised its statutory remedy of filing its objections before the DRP, the final assessment order should not have been passed by the Assessing Officer before the DRP issued its directions for framing of the assessment.

The department contended that under Section 144C(2)(b)(ii), the petitioner, upon receipt of the draft assessment order, was statutorily required to file its objections before the Assessing Officer in addition to the DRP. Under Section 144C(3)(b), the Assessing Officer was obligated to complete the assessment on the basis of the draft assessment order if no objections were received within the time period specified under Section 144C(2), i.e., within thirty days of the receipt of the draft order. The assessing officer was well within his right to pass the assessment order, and he cannot be faulted for finalizing the assessment in accordance with the prescribed procedure.

The court held that no prejudice will be caused to the Department if the petition is allowed and the assessment order is set aside, as the Department would be well within its rights to pass a fresh assessment order after receiving direction from the DRP.

Counsel For Petitioner: Deepak Chopra

Counsel For Respondent: Aseem Chawla

Case Title: Pepsico India Holdings Private Limited Versus Assessment Unit Income Tax Department National Faceless Assessment Centre

Citation: 2023 LiveLaw (Del) 1277

Case No.: W.P.(C) 15322/2023 & CM APPL.61469/2023

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