Facts of the Case

The petitioner was a non-resident assessee for the relevant Assessment Year.

The Assessing Officer passed a final assessment order directly.

No Draft Assessment Order (DAO) under Section 144C(1) was issued.

Demand notice under Section 156 and penalty proceedings were initiated simultaneously.

The petitioner challenged the action as jurisdictionally void.

 

Issues Involved

Whether issuance of a Draft Assessment Order under Section 144C is mandatory for an eligible assessee.

Whether a final assessment order passed without following Section 144C is void ab initio.

Whether such procedural violation can be cured or treated as a mere irregularity.

 

Petitioner’s Arguments

The petitioner contended that Section 144C is a mandatory statutory safeguard, not a procedural formality.

Being a non-resident, the petitioner was statutorily entitled to receive a draft assessment order and raise objections before the DRP.

Bypassing the DRP mechanism deprived the petitioner of substantive rights.

Reliance was placed on settled Delhi High Court precedents holding that non-issuance of a DAO renders the assessment null and void.

 

Respondent’s Arguments

The Revenue sought to justify the final assessment order, arguing that the assessment proceedings were otherwise complete.

It was contended that the omission, if any, was procedural and did not vitiate the assessment.

The Revenue attempted to distinguish earlier precedents on factual grounds.

 

Court’s Findings / Observations

The Delhi High Court categorically rejected the Revenue’s stand and held:

Section 144C is mandatory, and its non-compliance goes to the root of jurisdiction.

An Assessing Officer cannot bypass the draft assessment stage, even in remand or consequential proceedings.

Failure to issue a DAO cannot be cured retrospectively.

The right to approach the DRP is a valuable statutory right, denial of which violates principles of natural justice.

The Court reaffirmed earlier rulings, including:

Turner International India Pvt. Ltd. v. DCIT

Headstrong Services India Pvt. Ltd.

and held that the legal position is no longer res integra

ADITYA TALWAR Vs DEPUTY COMMISS…

 

Court Order

The final assessment order,

Demand notice under Section 156, and

Penalty initiation notices

were quashed and set aside for want of jurisdiction.

 

Important Clarification by the Court

Even in remand proceedings, issuance of a draft assessment order is mandatory where the assessee qualifies under Section 144C(15).

Administrative convenience or faceless assessment procedures cannot override statutory safeguards.

Compliance with Section 144C is not optional, irrespective of the stage of proceedings.

 

Final Outcome

Writ Petition Allowed
 Final Assessment Order Declared Void ab Initio
 Demand and Penalty Proceedings Quashed

The Court granted relief solely on jurisdictional grounds, without examining the merits of the additions.

link to download the order - https://www.mytaxexpert.co.in/uploads/1770191434_ADITYATALWARVsDEPUTYCOMMISSIONEROFINCOMETAXCENTRALCIRCLE19.pdf  

 

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