Facts of the Case

The petitioner challenged the final assessment order dated 09.06.2021 passed for AY 2017–18 along with consequential demand and penalty proceedings. The petitioner had filed objections to the draft assessment order before the DRP via email on 31.05.2021, which were duly acknowledged. However, due to the inoperative e-filing portal, the objections could not be uploaded before the Assessing Officer (AO).

Despite this, the AO proceeded to pass the final assessment order without considering the objections. Subsequently, even during the subsistence of a stay granted by the High Court, the DRP issued directions dated 21.01.2022 and another assessment order dated 25.02.2022 was passed, allegedly in violation of court orders.

Issues Involved

  1. Whether the final assessment order is valid when objections filed before the DRP were not considered.
  2. Whether objections must be filed simultaneously before both DRP and AO under Section 144C.
  3. Whether passing assessment orders during subsistence of a court stay order is legally sustainable.
  4. Whether procedural lapses due to non-functional e-filing portal can prejudice the assessee.

Petitioner’s Arguments

  • The petitioner duly filed objections before the DRP within the prescribed time.
  • The inability to upload objections before the AO was due to technical failure of the e-filing portal.
  • The AO passed the final assessment order without considering objections, violating statutory procedure.
  • Subsequent actions of DRP and AO were in direct violation of the High Court’s interim stay orders.

Respondent’s Arguments

  • The objections were required to be filed with both DRP and AO under Section 144C(2)(b).
  • Since objections were not filed with the AO, the assessment order was validly passed.
  • The DRP proceedings were not stayed, leading to continuation of proceedings and passing of subsequent orders.

Court’s Findings / Order

  • The Court held that although objections are to be filed with both DRP and AO, there is no requirement that they must be filed simultaneously.
  • The inability to file objections before the AO due to technical issues cannot prejudice the assessee.
  • The Court found that subsequent assessment orders and DRP directions were passed due to misunderstanding of the Court’s stay order.
  • Accordingly, the Court quashed:
    • Assessment order dated 09.06.2021
    • DRP directions dated 21.01.2022
    • Assessment order dated 25.02.2022
  • The matter was remanded back to DRP for fresh adjudication on merits.

Important Clarification

  • Filing of objections before DRP and AO need not be simultaneous.
  • Technical glitches in the faceless assessment system cannot defeat substantive rights.
  • Authorities must strictly comply with court orders; failure indicates systemic issues in faceless regime implementation.
  • Proceedings conducted in violation of a subsisting stay order are unsustainable in law.

Sections Involved

  • Section 143(3), Income Tax Act, 1961
  • Section 144C(2), 144C(3), Income Tax Act, 1961
  • Section 144B, Income Tax Act, 1961
  • Section 156, Income Tax Act, 1961
  • Section 270A, Income Tax Act, 1961
  • Article 226/227, Constitution of India

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3282-DB/RAS22082022CW63692021_164824.pdf

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