Madras HC quashes Income Tax Assessment Order issued when Objections Pending before Dispute Resolution Panel [Read Order]

In a recent ruling, the Madras High Court invalidated the income tax assessment order issued amidst objections filed before the dispute resolution panel. The high court emphasised that assessment orders should not be issued while the matter is pending before the panel.

The petitioner filed its income tax return for the assessment year 2021-22. Following this, a notice was issued under Section 143(2) of the Income Tax Act, 1961 on June 28, 2022. The petitioner responded to this notice. Subsequently, after a show cause notice was issued regarding proposed variations on December 13, 2023, a draft assessment order under Section 144C(1) of the Income Tax Act was issued on December 28, 2023.

The petitioner then filed objections to this draft assessment order before the Dispute Resolution Panel on January 12, 2024. However, it appeared that the petitioner failed to communicate the filing of objections to the National Faceless Assessment Centre.

On February 6, 2024, a notice was issued to the petitioner, asking them to confirm whether objections had been filed before the Dispute Resolution Panel within five days. However, the petitioner did not respond within the stipulated time frame, leading to the issuance of the impugned assessment order.

During the hearing, the petitioner's counsel highlighted the objections filed before the Dispute Resolution Panel and provided evidence of the panel acknowledging receipt of these objections on January 12, 2024. It was argued that since the objections were pending consideration before the panel, the impugned assessment order was not sustainable.

Mr. V. Mahalingam, senior standing counsel for the respondents, acknowledged the notice and argued that according to statute, a person filing objections before the Dispute Resolution Panel should inform the assessing officer of such objections. He further pointed out that a notice had been issued to the petitioner on February 6, 2024, seeking confirmation of objections, which went unanswered, leading to the issuance of the assessment order.

The court noted that the Income Tax Act allowed individuals who received draft assessment orders under Section 144C of Income Tax Act to file objections before the Dispute Resolution Panel. In this case, the petitioner had filed objections, and there was evidence of the panel receiving them on January 12, 2024. The issuance of the impugned assessment order while objections were pending before the panel was deemed prejudicial to the petitioner, especially considering the directions for variations in income issued by the transfer pricing officer.

Therefore, the bench of Justice Senthilkumar Ramamoorthy quashed the impugned assessment order and directed the assessing officer to await the decision of the Dispute Resolution Panel before issuing a fresh assessment order. The writ petition was disposed of accordingly, and connected miscellaneous petitions were also closed.

To Read the full text of the Order CLICK HERE

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