Case Note & Summary
The petitioner, Shell India Markets Private Limited, a company engaged in retailing petroleum products and supplying lubricants, challenged an assessment order dated 30th September 2021 passed under Section 143(3) read with Section 144C(13) and Section 144B of the Income Tax Act, 1961 for Assessment Year 2016-17. The petitioner had filed its return on 30th November 2016, and scrutiny was initiated via notice under Section 143(2) on 19th September 2017. The Assessing Officer passed a draft assessment order on 26th December 2019 under Section 143(3) read with Section 144C(1), incorporating adjustments proposed by the Transfer Pricing Officer (TPO) under Section 92CA(4) on 29th October 2019, amounting to Rs. 375,65,17,639/-. The petitioner filed objections before the Dispute Resolution Panel (DRP) on 24th January 2020. Under Section 144C(11), the DRP was required to issue directions under Section 144C(5) within nine months from the end of the month in which the draft assessment order was received by the petitioner. Since the draft order was received on 26th December 2019, the deadline was 30th September 2020. However, the DRP issued directions on 29th September 2021, nearly a year later. The petitioner argued that the directions were time-barred and the subsequent assessment order was void. The respondents contended that the time limit was directory and that the directions were valid. The court held that the time limit under Section 144C(11) is mandatory, relying on the principle that statutory timelines for quasi-judicial authorities must be adhered to. The DRP directions issued beyond the prescribed period were invalid, and the assessment order based on those directions was quashed. The court allowed the writ petition, setting aside the assessment order.
Headnote
A) Income Tax - Dispute Resolution Panel - Time Limit - Section 144C(11) of the Income Tax Act, 1961 - The DRP is required to issue directions under Section 144C(5) within nine months from the end of the month in which the draft assessment order is received by the assessee. In this case, the draft order was received on 26th December 2019, so the deadline was 30th September 2020. The DRP issued directions on 29th September 2021, which was beyond the prescribed period. Held that the directions were invalid and the consequent assessment order was void ab initio. (Paras 1-10)
B) Income Tax - Assessment Order - Validity - Section 143(3) read with Section 144C(13) and Section 144B of the Income Tax Act, 1961 - The assessment order passed on 30th September 2021 was based on directions issued by the DRP beyond the statutory time limit. Since the DRP directions were invalid, the assessment order could not be sustained. Held that the assessment order was quashed. (Paras 1-10)
Issue of Consideration
Whether the Dispute Resolution Panel (DRP) can issue directions under Section 144C(5) of the Income Tax Act, 1961 beyond the nine-month period prescribed under Section 144C(11) and whether an assessment order passed pursuant to such belated directions is valid.
Final Decision
The court allowed the writ petition and quashed the assessment order dated 30th September 2021 passed under Section 143(3) read with Section 144C(13) and Section 144B of the Income Tax Act, 1961 for Assessment Year 2016-17, holding that the DRP directions issued beyond the nine-month period under Section 144C(11) were invalid.
Law Points
- Time limit under Section 144C(11) of the Income Tax Act
- 1961 is mandatory
- DRP directions issued beyond nine months are invalid
- assessment order based on such directions is void ab initio
Case Details
2022 LawText (BOM) (02) 30
Writ Petition No.3298 of 2021
K. R. Shriram, N. J. Jamadar
J. D. Mistri (Senior Advocate), Madhur Agrawal, Sheeja John, Radhika Nair for Petitioner; Suresh Kumar for Respondents
Shell India Markets Private Limited
Additional/Joint/Deputy/Assistant Commissioner of Income Tax/Income Tax Officer, National Faceless Assessment Centre, New Delhi; Deputy Commissioner of Income-tax, Circle 3(4), Mumbai; Union of India
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Nature of Litigation
Writ petition challenging an assessment order under the Income Tax Act, 1961 on the ground that the Dispute Resolution Panel issued directions beyond the statutory time limit.
Remedy Sought
Petitioner sought quashing of the assessment order dated 30th September 2021 passed under Section 143(3) read with Section 144C(13) and Section 144B of the Income Tax Act, 1961 for Assessment Year 2016-17.
Filing Reason
The Dispute Resolution Panel issued directions under Section 144C(5) on 29th September 2021, which was beyond the nine-month period prescribed under Section 144C(11) from the end of the month in which the draft assessment order was received (26th December 2019). The petitioner contended that the directions were time-barred and the consequent assessment order was illegal.
Previous Decisions
The Assessing Officer passed a draft assessment order on 26th December 2019 under Section 143(3) read with Section 144C(1). The petitioner filed objections before the DRP on 24th January 2020. The DRP issued directions on 29th September 2021, and the final assessment order was passed on 30th September 2021.
Issues
Whether the Dispute Resolution Panel (DRP) can issue directions under Section 144C(5) of the Income Tax Act, 1961 beyond the nine-month period prescribed under Section 144C(11)?
Whether the assessment order passed pursuant to such belated directions is valid?
Submissions/Arguments
Petitioner argued that the DRP directions were issued beyond the statutory time limit of nine months from the end of the month in which the draft assessment order was received, making the directions invalid and the assessment order void ab initio.
Respondents argued that the time limit under Section 144C(11) is directory and not mandatory, and therefore the directions were valid.
Ratio Decidendi
The time limit under Section 144C(11) of the Income Tax Act, 1961 for the Dispute Resolution Panel to issue directions under Section 144C(5) is mandatory. Directions issued beyond the prescribed period are invalid, and any assessment order based on such directions is void ab initio.
Judgment Excerpts
Petitioner is challenging an assessment order dated 30th September 2021 passed by respondent No.1 under Section 143(3) read with Section 144C(13) and Section 144B of the Income Tax Act, 1961 (the Act) for Assessment Year 2016-17.
As per the provisions of sub-section (11) of Section 144C of the Act, the DRP is required to issue directions under Section 144C(5) of the Act within a period of nine months from the end of the month in which the draft assessment order is received by petitioner.
Petitioner had received the draft assessment order on 26th December 2019 and, therefore, the DRP had time upto 30th September 2020 to issue directions.
The DRP issued directions on 29th September 2021, which was beyond the prescribed period.
Procedural History
Petitioner filed return for AY 2016-17 on 30th November 2016. Scrutiny notice under Section 143(2) issued on 19th September 2017. Draft assessment order under Section 143(3) read with Section 144C(1) passed on 26th December 2019. Petitioner filed objections before DRP on 24th January 2020. DRP issued directions on 29th September 2021. Final assessment order under Section 143(3) read with Section 144C(13) and Section 144B passed on 30th September 2021. Petitioner filed writ petition challenging the assessment order.
Acts & Sections
- Income Tax Act, 1961: 143(3), 144C(1), 144C(5), 144C(11), 144C(13), 144B, 92CA(4), 143(2)
