Assessment order passed two years after DRP directions under Section 144C ruled time-barred and unsustainable

The HC held that an assessment order passed by FAO two years after DRP directions under Section 144C was time-barred and unsustainable. The court ruled that Section 144C is a self-contained provision with prescribed limitation periods that must be strictly followed. The department's claim that DRP directions were received late despite being uploaded on the portal earlier was rejected. The procedural failure constituted illegality vitiating the entire proceeding. Consequently, the return of income was accepted, and the petitioner was entitled to refund with interest within 30 days, without precluding revenue from reopening assessment through due process.

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Issues Involved
1. Refund of excess tax paid for AY 2016-2017.
2. Compliance with Section 144C(13) of the Income Tax Act, 1961.
3. Interpretation of the E-assessment Scheme and its procedural requirements.
4. Responsibility and accountability of the Faceless Assessing Officer (FAO).

Summary of Judgment

Refund of Excess Tax Paid for AY 2016-2017:
The petitioner sought a refund of excess tax paid for AY 2016-2017, claiming that the amount paid exceeded the legitimate tax due. The petitioner argued that the failure of the Assessing Officer (AO) to pass a final order within the statutory period as prescribed by Section 144C(13) of the Income Tax Act, 1961, entitled them to a refund.

Compliance with Section 144C(13) of the Income Tax Act, 1961:
The court observed that the AO failed to pass the final order within the prescribed period of one month from the end of the month in which the Dispute Resolution Panel (DRP) directions were received. The court emphasized that the AO is duty-bound to complete the assessment within this statutory period. The assessment order dated 31st August 2023, passed by the FAO, was deemed time-barred and unsustainable.

Interpretation of the E-assessment Scheme and its Procedural Requirements:
The judgment highlighted the procedural aspects of the E-assessment Scheme, 2019, noting that all communications are deemed received by the assessment units once available to the National e-Assessment Centre (NeAC). The court rejected the Revenue's argument that the limitation period began only when the FAO noted the DRP directions in the Case History Noting (CHN) on 23rd August 2023. The court held that the period of limitation runs from the day the NeAC receives the DRP directions.

Responsibility and Accountability of the Faceless Assessing Officer (FAO):
The court criticized the FAO for the delay and lack of diligence in passing the final order. The affidavits filed by officials indicated that the DRP directions were available on the ITBA portal since 25th March 2021 and were accessible to the FAO. The court found no acceptable explanation for the FAO's inaction for over two years. The court recommended a detailed inquiry and strict action against the responsible officials for the laxity and lethargy displayed.

Conclusion:
The court ruled in favor of the petitioner, directing the Revenue to accept the Return of Income (ROI) as filed and refund the excess tax paid along with applicable interest within 30 days. The court also refused to stay the judgment and recommended that a copy of the order be circulated to the CBDT and the Principal Secretary, Ministry of Finance, GOI, for necessary action.

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