2021 (5) TMI 1022 - HC - Income Tax

Court invalidates orders for lack of Draft Assessment Order issuance under Income Tax Act, stresses procedural safeguards

The court held that the Assessing Officer was not justified in passing orders without issuing a Draft Assessment Order under specified sections of the ... Validity of assessment u/s 144C - Validity of order without passing Draft Assessment Orders as contemplated u/s 143(3) r.w.s 92 CA (4) and 144 C (1) - HELD THAT:- As decided in M/S DURR INDIA PRIVATE LIMITED [2021 (6) TMI 830 - MADRAS HIGH COURT]once the case was remitted back to the respondents, it was incumbent on the part of the 1st respondent to have passed a draft Assessment Order under section 143 (3) read with Section 92CA (4) and Section 144C (1) of the Income Tax Act, 1961. It was not open for the 1st respondent to bypass the statutory safeguards prescribed under the Act and thereby deny the right of the petitioner to approach the Dispute Resolution Panel. It is only thereafter, Final assessment order can be passed by the 1st respondent to Assessing Officer. Since the dispute in the present case to the assessment years 2010-11 and 2011-12, respondent shall endeavour pass Draft Assessment Order under section 143 (3) read with Section 92 CA(4) and 144 C (1) of the Income Tax Tax Act, 1961 within a period of 3 months from the date of receipt of a copy of this order. Issues Involved:1. Justification of the Assessing Officer in passing the impugned orders dated 6.3.2017 before passing a Draft Assessment Order under Section 143(3) read with Section 92CA(4) and Section 144C(1) of the Income Tax Act, 1961.2. Right of the petitioner to approach the Dispute Resolution Panel under Section 144C of the Income Tax Act, 1961.3. Compliance with statutory safeguards prescribed under the Income Tax Act, 1961.Detailed Analysis:Issue 1: Justification of the Assessing Officer in passing the impugned orders dated 6.3.2017 before passing a Draft Assessment Order under Section 143(3) read with Section 92CA(4) and Section 144C(1) of the Income Tax Act, 1961.The core issue in these writ petitions was whether the Assessing Officer was justified in passing the impugned orders dated 6.3.2017 without first issuing a Draft Assessment Order. The petitioner argued that the respondent erred in bypassing the Draft Assessment Order, which is a mandatory requirement under the specified sections of the Income Tax Act, 1961. This procedural lapse was highlighted as an attempt to deny the petitioner the right to approach the Dispute Resolution Panel (DRP).Issue 2: Right of the petitioner to approach the Dispute Resolution Panel under Section 144C of the Income Tax Act, 1961.The petitioner contended that by directly passing the impugned assessment orders, the respondent denied the petitioner the statutory right to approach the DRP. This right is crucial for the petitioner to challenge the assessment and seek redressal. The petitioner cited several precedents, including the Division Bench decision in Assistant Commissioner of Income Tax and Another Vs. Vijay Television Private Limited, and other judgments from the Delhi High Court and the Supreme Court, which reinforced the necessity of following the due process.Issue 3: Compliance with statutory safeguards prescribed under the Income Tax Act, 1961.The court emphasized that when the law mandates a particular procedure, it must be followed. The judgment referenced the decision in Nazir Ahmed Vs. King Emperor and subsequent Supreme Court rulings, which established that statutory safeguards cannot be bypassed. The court noted that once the case was remitted back, it was incumbent upon the respondent to issue a Draft Assessment Order as per the statutory requirements. The failure to do so was deemed a jurisdictional error, rendering the impugned orders invalid.Conclusion:The court found merit in the petitioner’s arguments and ruled that the impugned orders were passed without jurisdiction and in violation of statutory safeguards. Consequently, the court quashed the impugned orders dated 06.03.2017 and remitted the case back to the respondent to issue a Draft Assessment Order within three months from the date of receipt of the court’s order. The court underscored that the procedural safeguards prescribed under the Income Tax Act, 1961, must be strictly adhered to, ensuring the petitioner’s right to approach the DRP is preserved. The writ petitions were allowed, and the connected miscellaneous petitions were closed.