2024 (2) TMI 1382 - HC - Income Tax

Validity of Assessment u/s 144C as exceeded the statutory limitation period - order passed evidently beyond the 30 day period as prescribed - HELD THAT - As decided in LOUIS DREYFUS COMPANY INDIA PRIVATE LIMITED 2024 (3) TMI 62 - DELHI HIGH COURT in terms of sub-section (13) of Section 144C of the Act the AO is mandated to complete the assessment in conformity with the directions as framed by the DRP. That very provision commands the AO to complete the assessment within one month from the end of the month in which such a direction is received. Undisputedly the DRP had framed its directions in terms of the order dated 16 December 2021. A final order of assessment ultimately came to be framed on 26 March 2022 and thus evidently beyond the 30 day period as prescribed.

Summary

The Delhi High Court considered the appeal challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 13 March 2023. The ITAT upheld the view of the Dispute Resolution Panel (DRP) that the assessment made under Section 144C of the Income Tax Act, 1961 exceeded the statutory limitation period. The High Court noted that a similar issue had been addressed in a previous case, "Louis Dreyfus Company India Private Limited vs. Deputy Commissioner of Income Tax Circle 13(1), Delhi & Ors.," where it was held that the Assessing Officer (AO) must complete the assessment within the timeframe specified in the Act after receiving directions from the DRP.The High Court emphasized that the AO is required to adhere to the directions issued by the DRP without any further opportunity for the assessee to be heard. The court cited judgments from the Bombay High Court in Vodafone Idea and Shell India, which interpreted the timelines in Section 144C as mandatory. The High Court agreed with this interpretation, stating that it aligns with the legislative intent behind the provision.Furthermore, the High Court clarified that once the DRP issues directives, the Transfer Pricing Officer's (TPO) role ends, and there is no need for the TPO to resume proceedings after the DRP's direction. The court highlighted the importance of uploading orders, notices, and decisions on the ITBA portal as part of the faceless assessment regime under the E-assessment Scheme, 2019.In this case, the DRP's directive was uploaded on the ITBA portal on 24 June 2022 and dispatched to the relevant parties on 27 June 2022. However, the order by the TPO was passed on 25 July 2022, which was beyond the prescribed timeline. The High Court concluded that the failure to comply with the mandatory timelines in Section 144C rendered the order of assessment and penalty proceedings invalid. Consequently, the appeal was dismissed as the court found no merit in it.