2019 (11) TMI 1755 - AT - Income Tax

Tribunal stresses statutory compliance for valid tax assessments

Basware Corporation India Versus The D.C.I.T., Circle-Shimla.

The Tribunal allowed both appeals, emphasizing the importance of complying with statutory provisions, particularly regarding the Dispute Resolution ... Violation of the provisions of section 144C (13) - As argued AO erred in passing the final assessment order u/s 143(3) r/w 144C without giving effect to the binding directions of the DRP within a period of one month as stipulated u/s 144C(13) - HELD THAT:- AO had failed to frame the assessment order as per the directions of the DRP. The AO fully conscious of the fact that the DRP had issued directions, however, noted that the concerned TPO i.e. DCIT since had failed to comply with the directiuons within stipulated period, he, therefore, framed the impugned assessment order without complying with the directions of the DRP. Hence, the order passed by the AO had no sanctity of law and was nothing but a waste paper. AO observed that when any order from TPO would be received after passing of the impugned assessment order, the impugned assessment order would be rectified. This type of action is neither recognized, nor justifiable in the eyes of law. Only because the concerned TPO had failed to follow the directions of the DRP and failed to frame assessment order as per statutory provisions, that does not entitle the AO to frame the assessment order, for the sake of formality and leave the issue open so as to get it rectified as and when the order from the TPO as per directions of DRP will be received and thereby opening the limitation period to frame the assessment order for indefinite period, which, in our view, is not mandate of the Statute. The assessment order passed by the Assessing Officer u/s 143(3) r.w.s. 144C is, therefore, quashed. Issues:1. Condonation of delay in filing appeal due to limitation period.2. Validity of assessment order passed by Assessing Officer.3. Compliance with directions of the Dispute Resolution Panel (DRP).4. Rectification order passed under section 154 of the Income Tax Act.Issue 1: Condonation of Delay in Filing Appeal:In ITA No. 1289/Chd/2019, the appeal was filed 133 days beyond the limitation period. The assessee sought condonation of delay, citing reasons for the delay. The delay was attributed to the non-communication of the assessment order and a misunderstanding regarding the appeal timeline. The Tribunal, after reviewing the application and evidence, found the delay unintentional and condoned it in the interest of justice.Issue 2: Validity of Assessment Order:The assessee challenged the assessment order, alleging that it was void ab initio due to non-compliance with section 144C(13) of the Income Tax Act. The order was passed without following the DRP's directions within the stipulated time frame. The Tribunal observed that the Assessing Officer's failure to adhere to DRP's directions rendered the assessment order invalid and lacking legal sanctity. The Tribunal quashed the assessment order as it was not in conformity with statutory provisions.Issue 3: Compliance with DRP Directions:The Tribunal highlighted that the Assessing Officer's disregard for the DRP's directions, leading to the invalid assessment order, was a violation of statutory provisions. The AO's decision to proceed with the assessment despite non-compliance with DRP's directions was deemed unlawful and against the mandate of the Statute. The Tribunal emphasized the importance of adhering to DRP's directions in framing assessment orders to maintain legal validity.Issue 4: Rectification Order under Section 154:In ITA No. 123/Chd/2017, the Tribunal declared the rectification order passed under section 154 of the Act as null and void since the original assessment order was deemed void ab initio. The Tribunal's decision to invalidate the rectification order was based on the earlier finding that the assessment order lacked legal sanctity due to non-compliance with DRP's directions.In conclusion, the Tribunal allowed both appeals, emphasizing the significance of complying with statutory provisions, particularly regarding DRP's directions, in ensuring the validity of assessment orders and subsequent rectification orders under the Income Tax Act. The judgments highlighted the necessity of procedural adherence and timely compliance to maintain the integrity and legality of tax assessments.