Assessment Order can not be passed if objections are pending before DRP – High Court

Assessment Order can not be passed if the objections filed by the assessee are pending before the DRP – High Court

In a recent judgment, the Hon’ble Delhi High Court has held that notwithstanding the lack of information with the AO, if an objection has been filed and is pending before the Dispute Resolution Panel (DRP), the Assessment Order passed in ignorance of the said objections, is required to be set-aside.

ABCAUS Case Law Citation:
4349 (2024) (12) abcaus.in HC Delhi

In the instant case, the assessee had filed a Writ Petition challenging the Final Assessment Order passed under Section 143(3) read with 144C(3) of the Income Tax Act, 1961 (the Act)  on it being without jurisdiction as the same was passed without waiting for the decision of Dispute Resolution Panel (DRP).

The case of the assessee was reopened and show cause notice under Section 148A(b) of the Act was issued calling upon the Assessee to show cause as to why the receipts should not be taxed as interest income during the year under consideration.

The Assessee submitted its response to the said show cause notice. The AO subsequently passed the Draft Assessment Order proposing an addition on account of treating lease rentals received by the Assessee as interest income and proposed penalty as well.

Aggrieved by the Draft Assessment Order, the Assessee filed its objections in Form No.35A with the DRP.

Notwithstanding that the Assessee’s objections were pending before the DRP, the AO passed the impugned Final Assessment Order re-computing the income of the Assessee in line with draft assessment order.

Before the Hon’ble High Court, the assessee contended that the AO had no jurisdiction to pass the impugned Final Assessment Order keeping in view the pendency of the objections before the DRP. The Assessee further contended that the AO could not have extinguished the right of the assessee to get its objections disposed of by the DRP by passing the impugned Final Assessment Order. The Assessee also contended that no real time alert was sent to its registered e-mail Id.

In support of its contentions, the assessee relied upon several judgments whereby in identical situation this Court had remitted the matter to the DRP for consideration as per procedure laid out in terms of Section 144(C) of the Act. According to the Assessee, it was no more res integra that the respondent department is mandated to act in accordance with the procedure stipulated in Section 144(C) of the Act and await the decision of the DRP before passing the Final Assessment Order, even in cases where the AO has not been notified by the Assessee, as long as the objections before the DRP have been submitted within time.

The Hon’ble High Court opined that it is an admitted position that, notwithstanding the lack of information with the AO, if an objection has been filed and is pending before the DRP, the Assessment Order passed in ignorance of the said objections, is required to be set-aside.

Accordingly, the petition was allowed and the impugned Final Assessment Order was set-aside.

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