Delay beyond s.144C(13) deadline voids assessment; DRP directions trigger limitation, end TPO powers under s.92CA(4)

HC held that under s.144C(13) the AO has no discretion and must frame the assessment strictly in conformity with DRP directions within the prescribed limitation period, without any further hearing. Once the DRP's directions were uploaded on the ITBA portal, valid service stood effected and limitation commenced from that date under the faceless assessment regime. The TPO's jurisdiction ended upon issuance of the order under s.92CA(4), and there was no authority to resume proceedings after DRP directions. Since the AO failed to complete the assessment by 31.07.2022, the assessment order and consequential penalty proceedings were quashed. Writ petition was allowed in favour of the assessee.

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Issues Involved:
1. Validity of the assessment order dated 24 August 2022.
2. Validity of the penalty show cause notice issued under Section 270A read with Section 274 of the Income Tax Act, 1961.
3. Validity of the directions issued by the Dispute Resolution Panel (DRP) under Section 144C(5) of the Act.

Summary:

1. Validity of the Assessment Order:
The petitioner challenged the assessment order dated 24 August 2022 on the grounds that it was contrary to Section 144C(13) of the Income Tax Act, 1961. The petitioner argued that the Assessing Officer (AO) was required to frame the assessment order within one month from the end of the month in which the DRP's directions were received. The DRP's directions were issued on 20 June 2022 and uploaded on the ITBA portal on 24 June 2022. Thus, the AO should have framed the assessment order by 31 July 2022. However, the assessment order was framed on 24 August 2022, beyond the prescribed time frame.

2. Validity of the Penalty Show Cause Notice:
The penalty show cause notice issued under Section 270A read with Section 274 of the Act on 24 August 2022 was also challenged as a consequential proceeding to the impugned assessment order. Since the assessment order was framed beyond the mandatory time frame, the penalty proceedings initiated in terms thereof were also assailed.

3. Validity of the DRP Directions:
The DRP issued its directions on 20 June 2022, which were uploaded on the ITBA portal on 24 June 2022. The petitioner contended that the AO was bound by these directions and was required to frame the assessment order within one month from the end of June 2022. The respondents argued that the one-month period should be computed from 25 July 2022, when the TPO passed an order giving effect to the DRP's directions. However, the court found that the DRP's directions were binding on the AO and the period of limitation should be computed from the date the directions were uploaded on the ITBA portal.

Court's Findings:
The court held that the AO is mandated to complete the assessment in conformity with the DRP's directions within one month from the end of the month in which such directions are received, as per Section 144C(13) of the Act. The court noted that the DRP's directions were uploaded on the ITBA portal on 24 June 2022, and thus, the AO was required to frame the assessment order by 31 July 2022. The court found that the assessment order was framed beyond the prescribed time frame, rendering it invalid.

Conclusion:
The court allowed the writ petition, quashing the assessment order dated 24 August 2022 and the penalty show cause notice dated 24 August 2022. The court held that the return submitted by the petitioner would be deemed to have been accepted due to the failure of the respondents to implement the DRP's directives within the mandatory timelines.

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