2023 (11) TMI 449 - HC - Income Tax

Validity of assessment order passed u/s 144C - assessment order passed by FAO two years after the DRP directions - Refund of amount paid in excess of the legitimate tax due on the returned income along with applicable interest - HELD THAT - Section 144C of the Act is a self contained provision which carves out a separate class of assessees i.e. eligible assessee . Section 144C was inserted in the Finance Act of 2009 and came into effect from 1st October 2009. When a Statute prescribes the power to do a certain thing in a certain way then the thing must be done in that way and other methods of performance are forbidden. Once the statute has prescribed a limitation period for passing the final order it is expected that the internal procedure of the department should mould itself to give meaning to and act in aid of the provision. Any procedural defect (there is none in this case) in the internal mechanism of the working of E-assessment Scheme cannot operate against the interest of assessee. Hence the FAO cannot be believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part of department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity but is an illegality and vitiates the entire proceeding. The assessment order passed by FAO two years after the DRP directions is time barred and cannot be sustained. Consequently the ROI as filed has to be accepted. Petitioner is entitled to receive the refund together with interest in accordance with law. The procedure to be completed within 30 days of this order being unloaded. This would however not preclude revenue should the need arise from reopening the assessment by following due process and in accordance with law.

Summary

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.