Facts of the Case

The Petitioner, Smart Cube India Pvt Ltd, filed a writ petition challenging the assessment order dated 30 March 2022 passed under Sections 143(3) read with 254 of the Income Tax Act for AY 2011–12.

The Assessing Officer determined the income at ₹3,29,33,145/- and simultaneously issued a demand notice under Section 156 and penalty notice under Section 271(1)(c).

The primary grievance of the Petitioner was that the assessment order was passed without issuing a draft assessment order, thereby depriving the Petitioner of the statutory right to raise objections before the Dispute Resolution Panel (DRP) under Section 144C.

Issues Involved

  1. Whether passing a final assessment order without issuing a draft order under Section 144C is legally sustainable?
  2. Whether denial of the opportunity to approach the DRP renders the assessment order void?
  3. Whether such procedural lapse constitutes a jurisdictional defect?

Petitioner’s Arguments

  • The Respondent violated mandatory provisions of Section 144C by not issuing a draft assessment order.
  • This omission deprived the Petitioner of the statutory right to file objections before the DRP.
  • The defect is incurable and renders the entire assessment null and void.
  • Reliance was placed on judicial precedents including:
    • Turner International India (P) Ltd. [2017] 398 ITR 177 (Del)
    • JCB India Ltd. [2017] 398 ITR 189 (Del)
    • Pr. CIT vs Headstrong Services India (P) Ltd. [2021] 278 Taxman 224 (Del)

Respondent’s Arguments

  • The Respondent accepted notice and submitted that similar connected matters were already listed before the Court.
  • No substantive rebuttal on merits was recorded at this stage.

Court’s Findings / Order

  • The Delhi High Court issued notice in the matter.
  • Recognizing the prima facie procedural defect, the Court granted interim relief.
  • The Court ordered that:
    • The impugned assessment order,
    • The demand notice, and
    • The penalty notice
      shall remain stayed till further orders.

Important Clarification

  • The Court reaffirmed that non-compliance with Section 144C is a jurisdictional defect, not a mere procedural irregularity.
  • Failure to issue a draft assessment order invalidates the final assessment, as it deprives the assessee of a statutory remedy.
  • The DRP mechanism is mandatory in eligible cases and cannot be bypassed.

Sections Involved

  • Section 143(3) – Assessment
  • Section 254 – Orders of Appellate Tribunal
  • Section 144C – Dispute Resolution Panel (DRP) Procedure
  • Section 156 – Demand Notice
  • Section 271(1)(c) read with Section 274 – Penalty Proceedings

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:1443-DB/MMH21042022CW63652022_215224.pdf

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