2025 (9) TMI 1436 - AT - Income Tax

Third-member finds AO's final assessment under s.144C(13) time-barred as DRP directions deemed received on 13 Apr 2022

ITAT DELHI - AT divided on limitation for a final assessment under s.144C(13); matter referred to a third member. The third member agreed with the ... Validity of final assessment order u/s 144C on the ground of limitation - Contention of the assessee is that the assessment order is time barred, hence, without jurisdiction - Difference of opinion among members of bench - Matter referred to third member Order as per JM - The provisions of section 144C were inserted by the Finance (No. 2) Act, 2009. The provisions of section 144C are unambiguous qua time line for passing the final assessment order by the AO after the DRP directions are received by him. As evident from the case history notings, the DRP directions which were uploaded on ITBA portal on 01.04.2022 were communicated to the assessment unit on 13.04.2022. As per the provisions of section 144C(13) of the Act, the AO had time up to 31st May 2022(i.e. within one month from the end of month in which such directions are received by the AO to pass final assessment order. The impugned assessment order has been passed on 30.06.2022 which is clearly beyond the time prescribed by the statue. Hence, impugned assessment order is without jurisdiction and is liable to be quashed. We hold and direct accordingly. The assessee succeeds on ground no.1 of appeal. Order as per AM - JAO i.e. DCIT, Circle-16(1), Delhi had the effective jurisdiction to pass the assessment order u/s 143(3) r.w.s. 144C(13) and the DCIT, Circle-16(1), Delhi, is considered to be the AO for the purpose of passing of the order u/s 143(3) r.w.s. 144C(13) of the Act and not the Faceless Assessment Unit(FAU)/FAO. The DRP directions u/s 144C(5) of the Act dated 23.03.2022 was received by the JAO i.e. DCIT, Circle-16(1), Delhi, on 20.05.2022 and therefore the assessment order u/s 143(3) r.w.s. 144C(13) of the Act passed by the JAO i.e. DCIT, Circle-16(1), Delhi in this case on 30.06.2022 is held to be passed within the limitation period as per the provisions of section 144C(13) of the Act. Since, the assessment order u/s 143(3) r.w.s. 144C(13) of the Act passed by the JAO i.e. DCIT, Circle-16(1), Delhi in this case on 30.06.2022 is held to be passed within the limitation period as per the provisions of section 144C(13) of the Act and as per law, therefore, dismiss the ground no.1 of the appeal of the assessee. Order as per third member - what date is to be considered as receipt of the DRP’s order by the JAO in terms of the provisions of Section 144C(13)? - In this case, the DRP directions are not automatically reflected in the case history noting of pending assessment work of the Assessing Officer i.e., FAO or JAO. Admittedly, the DRP entered the details manually as per records. Hence, the Assessing Officer was not having the facility to view directions of DRP merely upon uploading of the same on ITBA portal on 1st April, 2022. A perusal of the ITBA technical team report reveals that DRP directions were visible to the Assessment Unit when it was manually entered into the system by DC/ACIT(NESE)2(1)(1), Delhi dated 13th April, 2022. It means that the DRP order/directions were available or is visible to the Assessment Unit on 13th April, 2022. It means that the receipt of DRP directions to the Assessment Unit was on 13th April, 2022. Now, going back to the jurisprudence evolved on the communication through information technology tools which was made applicable from the year 2000 with introduction of Section 13 of the Information Technology Act read with Section 130 and 144B of the Act. This issue has been discussed by the Coordinate Bench in assessee’s own case for assessment year 2018-19, which is reproduced above in Paragraph 15 above that a cohesive reading of provision of section 130 and 144B of the Act read with section 13 of the Information Technology Act, 2000, the moment document is uploaded by the originator (which in the present case DRP) in ITBA portal that dispatch from the side of the DRP is complete and since the entire documents are uploaded through electronic mode, the same happens seamlessly and accordingly, the receipt of the said document also becomes instantaneously. Hence, on the date of receipt of DRP direction, the due date in terms of section 144C(13) would start reckoning from that date. Thus, the final assessment order passed by the DCIT, Circle-36(1), Delhi dated 30th June, 2022 is barred by limitation as agreed with the view of learned Judicial Member accordingly, ISSUES PRESENTED AND CONSIDERED 1. Whether the final assessment order dated 30.06.2022 under section 143(3) read with section 144C(13) of the Income-tax Act is barred by limitation arising from the date on which directions under section 144C(5) (DRP directions) were 'received' by the Assessing Officer for the purpose of computing the one-month period prescribed by section 144C(13). 2. If the date of 'receipt' is contested, whether uploading of DRP directions on the ITBA portal (by the DRP) amounts to receipt by the Assessing Officer, or whether receipt must be reckoned from (a) the date the DRP directions became visible in the Assessment Unit via DIN/PAN-AY functionality, or (b) the date the jurisdictional Assessing Officer (JAO) actually had the DRP directions in its case history/notings. 3. Whether the nascent/faceless assessment regime and the Supreme Court's direction in Automotive Manufacturers (granting 'leverage' to Revenue in relation to faceless scheme glitches) permit curing procedural/limitation defects that would otherwise render the assessment order void for want of jurisdiction. 4. Ancillary question: applicability and effect of (i) section 13 of the Information Technology Act (time/place of dispatch and receipt of electronic records) and (ii) section 144B/144C read together with ITBA workflows on the computation of limitation under section 144C(13). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Date of 'receipt' of DRP directions for computation of limitation under s.144C(13) Legal framework: Section 144C(13) mandates that upon 'receipt' of DRP directions under s.144C(5) the Assessing Officer shall complete assessment in conformity with those directions 'within one month from the end of the month in which such direction is received.' Section 144B prescribes faceless assessment architecture; section 13 of the Information Technology Act fixes rules for dispatch/receipt of electronic records. Precedent treatment: Coordinate decisions differ. Some High Court/Tribunal decisions (e.g., Louis Dreyfus (Delhi HC), Madras HC in Ramco Cements, certain ITAT benches) have held that uploading on ITBA (NeAC/DRP upload) constitutes valid service/receipt for limitation computation. Other Tribunal benches (and decisions in the present litigation context) have taken receipt to be when the DRP directions became visible/available in the Assessing Unit's case history or when the JAO actually obtained the directions. Interpretation and reasoning (Majority: Judicial Member and Third Member): The ITBA technical report identified two upload methods: (A) initiating DRP proceedings by selecting 'Draft Order u/s 144C' which links with assessment module and causes automatic reflection in AO case history; and (B) manual entry by DRP user where upload does not automatically reflect in assessment case history. In the present matter DRP used the manual method; the DRP order was uploaded on ITBA on 01.04.2022 but did not automatically appear in the AO case history. The Case History Notings show the DRP directions became visible to the Assessment Unit when uploaded via the 'Uploading of document based on DIN/PAN-AY' functionality on 13.04.2022. Once the directions entered the Assessment Unit system and were visible in case history, they were deemed to be served on the Assessing Officer; limitation under s.144C(13) therefore runs from 13.04.2022 and the Assessing Officer had until 31.05.2022 to pass the final order. The order dated 30.06.2022 therefore exceeded statutory limitation and was without jurisdiction; assessment quashed. This view treats the actionable 'receipt' as the earliest date on which the AO/Assessment Unit could access the directions in its case history (not merely the DRP's upload timestamp when that upload did not result in AO visibility). Interpretation and reasoning (Dissenting view: Accountant Member): The Accountant Member accepted that DRP uploaded on 01.04/communication dispatched by speed post on 04.04/2022, but placed emphasis on the fact that the jurisdiction to pass the assessment was transferred to the JAO and that the JAO received the DRP directions on 20.05.2022 (as per case history entry when JAO uploaded the DRP directions into the AO Assessment Unit). Drawing upon the Supreme Court's Automotive Manufacturers decision (which acknowledged giving the Revenue leverage due to nascent faceless scheme errors), the dissent held that (a) system transition and amended section 144B changes made FAU incapable of completing assessment within time, (b) the effective 'receipt' for the JAO should be treated as 20.05.2022, and (c) in those circumstances the final order dated 30.06.2022 was within the limitation period. The dissent therefore treated the operative receipt date as the date the jurisdictional Assessing Officer actually received/was assigned the directions and emphasized equitable considerations and non-prejudice to the assessee. Ratio vs. Obiter: The controlling legal ratio in the majority opinion is that 'receipt' for the purpose of s.144C(13) is the date the DRP directions become visible/accessible in the Assessment Unit/Assessing Officer's case history (here 13.04.2022), not merely the date of DRP upload where that upload did not render the directions visible to the AO. The dissent's ratio is narrower: where jurisdiction was formally transferred and the JAO only received the directions later (20.05.2022), the final order was within the statutory period; additionally, the Supreme Court's guidance to afford the Revenue corrective leverage in the early faceless regime is pertinent. Observations about IT Act s.13 and absolute effect of DRP upload are treated as interpretative support but not as overriding the majority's linkage to AO visibility in the assessment workflow. Conclusion: By a majority (Judicial Member + Third Member), limitation runs from 13.04.2022 (date directions were visible in Assessment Unit via DIN/PAN-AY), making the 30.06.2022 order time-barred and void for want of jurisdiction; assessment quashed. The Accountant Member dissented, holding the order within limitation because the JAO had effective receipt on 20.05.2022 and the faceless-scheme transition justified giving Revenue leverage. Issue 2 - Does mere uploading by DRP on ITBA portal constitute 'receipt' by the Assessing Officer? Legal framework: Section 144B/144C operating with ITBA workflows govern faceless communications; section 13 IT Act addresses electronic dispatch/receipt. E-assessment Scheme provisions require communications through National e-assessment Centre (NeAC) and prescribe 360-degree visibility features. Precedent treatment: Conflicting authorities. Delhi and Madras High Courts have held uploading on ITBA can constitute valid service/receipt where system functionalities make documents visible to AO (Louis Dreyfus; Ramco). Some ITAT benches have taken a view that actual availability/visibility to AO matters; differences have arisen depending on ITBA workflow particulars and whether NeAC/FAO is to be treated as assessing authority post-amendment. Interpretation and reasoning: The majority declined to accept a blanket rule that DRP upload equals receipt; it applied a fact-sensitive, systems-aware approach: where DRP used manual entry that did not cause automatic reflection in AO case history, the AO cannot be treated as having 'received' the directions on the mere DRP upload date. The majority held receipt occurs when the directions enter the Assessment Unit's system/case history and become accessible to the AO. The dissent emphasised the policy of electronic receipt under IT Act s.13 and prior Tribunal authority treating upload/dispatch by NeAC as effective dispatch/receipt, but still concluded the operative receipt for JAO was later when JAO obtained the directions. Ratio vs. Obiter: Majority ratio: receipt requires AO accessibility/visibility in the assessment workflow; internal ITBA upload modalities matter. Obiter: observations about 360-degree screen, advisory notes, and general desirability of treating uploads as effective service where system-wide visibility exists. Conclusion: Uploading on ITBA does not automatically equal receipt in all cases; the determining fact is whether the upload rendered the DRP directions accessible/visible to the Assessing Officer in the assessment work-item or case history. In the present facts, majority treats 13.04.2022 (visibility via DIN/PAN-AY) as receipt; dissent treats JAO's receipt on 20.05.2022 as operative. Issue 3 - Effect of faceless scheme nascent stage and Supreme Court guidance (Automotive Manufacturers) on remedy for limitation/ jurisdictional defects Legal framework and precedent: The Supreme Court in Automotive Manufacturers recognised that procedural defects under the faceless regime may warrant giving Revenue limited corrective opportunity (remand) rather than outright nullification in appropriate cases; that decision concerned breach of natural justice (s.144B), not directly limitation under s.144C(13). Treatment in this judgment: The Accountant Member relied on Automotive Manufacturers to justify remand/leverage and to uphold the assessment as within time when systems transition impeded FAU performance. The Judicial Member (and Third Member in majority) rejected the submission that systemic teething troubles should defeat the clear statutory timeline in s.144C(13); they held that the statutory timeline is unambiguous and must be enforced where AO is shown to have had the directions in its Assessment Unit by a specified date. The majority distinguished Automotive Manufacturers (natural justice defect) from the present pure limitation/jurisdiction issue and declined to import a remedial relaxation aimed at natural-justice defects into a case where strict statutory limitation resulted in lack of jurisdiction. Ratio vs. Obiter: Majority ratio: supervisory indulgence permitted in Automotive Manufacturers for procedural/natural justice lapses does not automatically extend to curing jurisdictional defects created by statutory limitation timelines under s.144C(13). Dissent was of the view that the Supreme Court's recognition of giving the Revenue leverage is a relevant consideration and justified upholding the assessment in the specific administrative circumstances. Conclusion: The majority did not apply Automotive Manufacturers to save the impugned order from limitation; the dissent would have applied the Supreme Court's remedial approach to allow the Department corrective space given no mala fide and no prejudice to assessee. Issue 4 - Role of IT Act s.13 and procedural advisories in construing 'receipt' Legal framework: Section 13 IT Act sets rules for time/place of dispatch and receipt of electronic records; internal ITBA advisories (360-degree screen, upload functionalities) explain practical visibility and accessibility mechanics. Interpretation and reasoning: The majority used ITBA technical inputs and the Case History Notings (shows DIN/PAN-AY uploads on 13.04/19.04/20.05) to determine the earliest date the Assessment Unit/AO could access the DRP directions; it treated the IT Act as informative but subordinated to the practical fact of AO accessibility in the faceless architecture. The dissent emphasised IT Act principles and prior decisions holding that upload/dispatch equates to receipt in electronic communications, and stressed systemic realities and NeAC's coordinating role. Conclusion: IT Act s.13 and internal ITBA advisories are relevant to the inquiry but must be applied to the factual ITBA workflow in each case; the majority's factual finding on when the AO could access the directions controlled the outcome. FINAL CONCLUSIONS 1. By majority opinion (Judicial Member and Third Member), the DRP directions became effectively 'received' by the Assessing Officer on 13.04.2022 when the directions were uploaded into the Assessment Unit's case history via the DIN/PAN-AY functionality and became visible to the AO; limitation under s.144C(13) therefore expired on 31.05.2022 and the final assessment order dated 30.06.2022 is time-barred and without jurisdiction - assessment quashed (majority holding; ratio). 2. The Accountant Member dissented, holding that the JAO effectively received the DRP directions on 20.05.2022 (after transfer of jurisdiction) and, applying the Supreme Court's guidance to grant limited corrective leverage to Revenue in the faceless regime, concluded the 30.06.2022 order was within limitation and valid. This constitutes a reasoned dissent. 3. The Court's decision is fact-sensitive and hinges on ITBA workflow evidence as to when DRP directions became visible to the Assessing Officer; general propositions about upload = receipt are not accepted as absolute and must be tested against system functionality and case history notings in each matter.