2021 (12) TMI 1415 - HC - Income Tax

Court quashes Assessment Order, Demand Notice, & DRP's Order, remits for lawful reconsideration.

The court allowed the petition, quashing the Assessment Order, Demand Notice, and the DRP's Order. The matter was remitted back to the DRP for ... Validity of Assessment Order - Necessity of following the mandatory procedure prescribed u/s 144C and 144C(5) to C(13) and without awaiting directions from the DRP - HELD THAT:- The material on record indicates that the year 2021 being a non-leap year comprising of only 28 days and the Draft Assessment Order having been issued on 16.02.2021, the petitioner had time upto a period of 30 days i.e., upto 18.03.2021 to file objections as required u/s 144C(2)(b) - petitioner filed objections before both the DRP as well as the Assessing Officer on 16.03.2021 i.e., within the prescribed period of 30 days. Respondent No.1 – AO clearly fell in error in neither considering the objections nor awaiting directions from the DRP and has erroneously proceeded to pass the impugned Assessment Order dated 26.04.2021, which is clearly in violation and contravention to the mandatory procedure prescribed under Section 144(C)5 to (C)13 of the IT Act and without awaiting further directions from the DRP and as such, the impugned Assessment Order dated 26.04.2021 deserves to be quashed. Petitioner is also right in his contention that during the pendency of the present petition, the DRP has passed the impugned order at Annexure – Q dated 24.11.2021 disposing of the case on the sole / simple ground that the matter is pending before this Court, which is clearly erroneous in as much as in view of my finding above that the impugned Assessment Order itself is illegal, arbitrary and deserves to be quashed, the subsequent order at Annexure – Q passed by the DRP also deserves to be quashed and DRP be directed to proceed further in accordance with law as contemplated under Section 144(C)5 to (C)13 of the IT Act by considering the objections dated 16.03.2021 filed by the petitioner. Issues:1. Quashing of Assessment Order and Demand Notice by Assessing Officer.2. Compliance with mandatory procedures under Sections 144C and 144C(5) to C(13) of the IT Act.3. Actions of the Dispute Resolution Panel (DRP) during the pendency of the petition.4. Legal validity of subsequent order passed by the DRP.Analysis:1. The petitioner sought the quashing of the Assessment Order and Demand Notice issued by the Assessing Officer, along with the Order passed by the DRP. The petitioner contended that the Assessing Officer proceeded to pass the Assessment Order without following the mandatory procedures under the IT Act and without awaiting directions from the DRP, despite the petitioner filing objections within the prescribed period. The petitioner argued that the Assessment Order deserved to be quashed due to non-compliance with statutory provisions.2. The court noted that the petitioner had filed objections within the specified time frame before both the Assessing Officer and the DRP. It was observed that the Assessing Officer erred in not considering the objections and in passing the Assessment Order in violation of the prescribed procedures under the IT Act. The court held that the Assessment Order was illegal and arbitrary, warranting quashing. The petitioner's compliance with the statutory timeline for filing objections was acknowledged, emphasizing the importance of adherence to procedural requirements.3. During the pendency of the petition, the DRP issued an order stating that it would not pass a decision due to the matter being before the court. The court found this reasoning erroneous, highlighting that the legality of the Assessment Order was already in question. Consequently, the subsequent order by the DRP was deemed flawed and also subject to being quashed. The court directed the DRP to proceed in accordance with the law after considering the objections filed by the petitioner.4. Ultimately, the court allowed the petition, quashing the Assessment Order, Demand Notice, and the DRP's Order. The matter was remitted back to the DRP for reconsideration in compliance with the law and provisions of the IT Act. Upon the DRP issuing necessary directions, the Assessing Officer was instructed to proceed and conclude the proceedings lawfully. The judgment emphasized the importance of following statutory procedures and ensuring procedural fairness in tax assessments.