2024 (5) TMI 500 - HC - Income Tax

NRI's Challenge to Income Tax Assessment for 2018-19 Dismissed; Court Upholds Extended Timeline Validity.

The HC dismissed the petition challenging the assessment order under Section 144C of the Income Tax Act, 1961, for the assessment year 2018-19. The ... Section 144C as a machinery provision governing faceless assessment of an eligible assessee including NRI - applicability of faceless assessment procedure to assessments initiated after inclusion of NRI within 'eligible assessee' w.e.f. 01.04.2020 - limitation for completion of assessment and applicability of statutory extension under TOLA and Notification S.O. 2580(E) - requirement of raising objection before the assessing authority as a procedural defenceSection 144C as a machinery provision governing faceless assessment of an eligible assessee including NRI - applicability of faceless assessment procedure to assessments initiated after inclusion of NRI within 'eligible assessee' w.e.f. 01.04.2020 - requirement of raising objection before the assessing authority as a procedural defence - Validity of completing assessment proceedings under Section 144C in respect of the petitioner who is an NRI for assessment year 2018-19. - HELD THAT: - The Court held that Section 144C is a machinery provision introduced for faceless assessment and that the inclusion of Non-Resident Indians within the definition of 'eligible assessee' w.e.f. 01.04.2020 brings assessments of NRIs within the procedural scheme. The provision is not substantive or prejudicial to an NRI; rather it is beneficial and prescribes the procedure for finalisation. The petitioner did not raise the objection before the assessing authority that Section 144C should not apply; the Court found no merit in the contention that proceedings under Section 144C were without jurisdiction in the circumstances of this case and upheld the validity of finalising the assessment under Section 144C. [Paras 6]Assessment under Section 144C in respect of the NRI for AY 2018-19 was valid and not void for lack of jurisdiction.Limitation for completion of assessment and applicability of statutory extension under TOLA and Notification S.O. 2580(E) - Section 144C timeline for draft assessment, referral to Dispute Resolution Board and finalisation - Whether the final assessment order dated 22.07.2022 for AY 2018-19 was barred by limitation. - HELD THAT: - The Court examined the timeline of events and accepted the Revenue's account that the draft assessment under Section 144C was passed within the extended limitation period and that the matter was referred to the Dispute Resolution Board which acted within the period prescribed by Section 144C. The Taxation and Other Laws (Amendment) Act extension notified by S.O. 2580(E) (25.06.2021) extended the limitation for AY 2018-19, and the departmental procedure culminating in the final order complied with the timelines under Section 144C and the statutory extension. Consequently, the general limitation provisions (Section 153/153B) did not render the final order time-barred. [Paras 7]The assessment order dated 22.07.2022 was not barred by limitation and was validly finalised in accordance with Section 144C and the applicable statutory extension.Final Conclusion: The writ petition was dismissed; the Court upheld the validity of the assessment finalised under Section 144C in respect of the petitioner (an NRI) for AY 2018-19 and held the assessment not to be time-barred. Issues involved:The issues involved in this case are (1) Jurisdiction of assessment under Section 144 C of the Income Tax Act, 1961 for a Non-Resident Indian (NRI) for the assessment year 2018-19, and (2) Barred by limitation assessment order dated 22.07.2022.Jurisdiction of assessment under Section 144 C:The petitioner challenged the assessment order dated 22.07.2022, arguing that as an NRI, the assessment should not have been completed under Section 144 C for the assessment year 2018-19. The petitioner contended that the final assessment order was beyond the limitation prescribed under the statute, as it was dated after the 18-month period from the end of the assessment year. However, the Senior Standing Counsel for the Income Tax Department argued that Section 144 C is a procedural provision introduced from 01.04.2020, including NRIs as 'eligible assessees' and providing a machinery for faceless assessment. The legislation's intention was clarified in the Explanatory Memorandum of the Finance Bill, 2020, stating that any variation after 01.04.2020 affecting the assessee's interest would be applicable.Barred by limitation assessment order:The Revenue's counsel provided a timeline indicating that the assessment process was duly followed, with notices issued, personal hearings conducted, objections filed, and the final assessment order passed within the prescribed time frame. The Taxation and Other Laws Amendment Act extended the limitation for finalizing the assessment order for the assessment year 2018-19 up to 30th September 2021. The final assessment order was passed within the extended timeline, complying with the provisions of Section 144 C. The court found that Section 144 C is a machinery provision beneficial to assessees, including NRIs, and dismissed the petitioner's objections regarding jurisdiction and limitation, as they lacked merit and substance.Separate Judgment by Judge:No separate judgment was delivered by the judge in this case.