The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has held that assessment order passed under Section 144C(3) read with Section 144C(4) of the Income Tax Act 1961 beyond one month on failure to file an objection within the period as per Section 144C was invalid.
The assessee, Dilipkumar Jashbai Patel, was an individual and non-resident for the purpose of the provisions of the Act. The assessee during the year under consideration sold an ancestral immovable property for consideration of Rs. 2.3 crores against which the assessee claimed cost of acquisition as on 1st April 2001 at Rs. 86.38 Lacs in accordance with the valuation report. Accordingly, the assessee claimed long term capital loss on the sale of the property.
The AO during the year assessment proceedings referred the valuation of the property to the Government valuation officer under Section 55A of the Income Tax Act who valued the property as on 1st April 2001 at Rs. 45.34 Lacs only. Accordingly, the AO worked out the long-term capital gain. Thus, the AO in the draft assessment order dated 14th June 2021 proposes to make an addition on account of capital gain to the total income of the assessee.
The assessee filed objection against the draft assessment order before the DRP as on 1st September 2021. The DRP vide order 22ndMarch 2022 dismissed the objection of the assessee by holding that the last date to file the objection against the draft order was 31st August 2021 whereas the assessee filed objection on 1st September 2021 which got delayed by one day only. Thus, the AO after dismissal of objection of the assessee, DRP passed final assessment order as on 23rd March 2022.
Now the assessee has challenged the validity of the assessment framed under Section 143(3) read with Section 144C of the Income Tax Act.
Tushar Hemani, on behalf of the assessee contended that the order passed by the AO was time barred. Once the objection against the draft order was not filed within the prescribed limit or the time limit to file objection expires, the AO was under the obligation to complete the assessment within a month from the end of month in which period of filing of objection expires.
Thus, the AO was required to complete the assessment under Section 143(3) read with Section 144C of the Income Tax Act on or before 30th September 2021 whereas the AO completed the assessment vide order dated 23rd March 2022 which was invalid and the same needed to be quashed.
Ashok Kumar Suthar, on behalf of the revenue vehemently supported the assessment order passed under Section 143(3) read with Section 144C of the Income Tax Act.
The two-member Bench of Waseem Ahmed, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) observed that the provisions of section 144C(3) read with Section 144C(4) of the Income Tax Act provided that the AO will complete the assessment as per draft assessment order within a month if the assessee has initiated the AO about acceptance of draft order or the assessee failed to file the objection within the period as per subsection 2 to Section 144C of the Income Tax Act. Thus, the AO as per the provisions of Section 144C(3) read with Section 144C(4) of the Income Tax Act was required to complete the assessment on or before 30thSeptember 2021 as the assessee failed to file an objection on before 31st August 2021.
The Bench allowed this ground of appeal holding that the order passed by the AO under Section 143(3) read with Section 144C(13) of the Income Tax Act on 23rd March 2022 instead of 30th September 2021 was ultra vires and quashed the same.
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