Facts of the Case

The petitioner filed its return of income for Assessment Year 2017–18, which was selected for scrutiny under Computer Aided Scrutiny Selection. Subsequently, the matter was referred to the Transfer Pricing Officer under Section 92CA(3), resulting in a transfer pricing adjustment of approximately ₹20.22 crore concerning international transactions including import of goods and interest on external commercial borrowings.

A Draft Assessment Order was issued under Section 144C. The petitioner filed objections before the Dispute Resolution Panel (DRP) within the extended time limit granted by CBDT Circulars. However, the Assessing Officer proceeded to pass the Final Assessment Order dated 30.06.2021 without awaiting DRP directions.

Issues Involved

  1. Whether the Final Assessment Order passed without awaiting DRP directions is valid in law.
  2. Whether filing objections within extended limitation under CBDT Circulars protects the assessee from premature final assessment.
  3. Whether such an order violates the mandatory procedure under Section 144C of the Income Tax Act.

Petitioner’s Arguments

  • The petitioner contended that objections were filed within the extended time permitted by CBDT Circulars.
  • Once objections are filed, the Assessing Officer is bound to await directions of the DRP before passing the final order.
  • Passing the Final Assessment Order without DRP directions renders the order without jurisdiction.
  • Reliance was placed on judicial precedents including:
    • SRF Ltd. v. National Faceless Assessment Centre
    • Anand NVH Products Pvt. Ltd. v. National E-Assessment Centre
    • Lexmark International (India) Pvt. Ltd. v. Union of India
  • Also relied on Supreme Court orders extending limitation due to COVID-19.

Respondent’s Arguments

  • The respondent argued that the petitioner failed to inform the Assessing Officer about filing objections before the DRP.
  • Therefore, the Assessing Officer was justified in completing the assessment based on the Draft Assessment Order.
  • The Final Assessment Order was claimed to be valid and within jurisdiction.

Court Findings / Judgment

  • The Court held that the objections filed by the petitioner were within the extended limitation period granted by CBDT.
  • The DRP had already heard the objections on merits.
  • Under the scheme of Section 144C, the Assessing Officer is required to await DRP directions before passing the final order.
  • Passing the Final Assessment Order without following this procedure is contrary to law.

 Result:
The Delhi High Court set aside the Final Assessment Order dated 30.06.2021 and directed the respondent to proceed in accordance with Section 144C of the Income Tax Act.

Important Clarification

  • Filing objections within extended timelines (CBDT Circulars / Supreme Court limitation orders) is legally valid.
  • The Assessing Officer cannot bypass DRP proceedings once objections are filed.
  • Section 144C procedure is mandatory, not procedural formality.
  • Any assessment order passed in violation of DRP mechanism is liable to be quashed.

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2021:DHC:4207-DB/NAC15122021CW116092021_221203.pdf

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