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November 20, 2023

It is time-barred to pass an assessment order two years following a directive from a dispute resolution panel

It is time-barred to pass an assessment order two years following a directive from a dispute resolution panel

Fact and issue of the case

Rule made returnable forthwith. By consent, the petition is taken up for final hearing at the admission stage.

Petitioner has called in question the failure of Respondent Nos. 1 & 2 to refund the amount paid by Petitioner for Assessment Year (“AY”) 2016-2017, which Petitioner claims to have paid in excess of the legitimate tax due on the returned income of Petitioner and seeks a refund of the said amount along with applicable interest.

The case of Petitioner is quite elementary and we are constrained to observe the complete apathy and negligent approach of the assessing officer concerned in discharging his duties, in accordance with the provisions of Income Tax Act, 1961 (“the Act”). Any dereliction and remissness on the part of officers entrusted with a duty to act within the strict contours of law affects the exchequer and has far reaching consequences on the prosperity and economic stability of the nation. Laxity in this regard has a propensity to destroy and bring to naught any effective system put in place by the Government for efficient and transparent administration of taxation laws and its regulations. Such an adverse effect on the exchequer is revealed in the present case.

The present proceedings emerge from a Return Of Income (“ROI”) filed by Petitioner for Assessment Year (“AY”) 2016-2017. The ROI disclosed a loss of Rs. 47,50,07,95,276/- under the normal provisions of the Act and loss of Rs. 292,80,62,889/- under Section 115JB of the Act. There was a claim of refund of prepaid taxes of Rs. 1128.47 crores, comprising of Tax Deducted at Source and Advance Tax. The assessment was selected for scrutiny and notice under Section 143(2) of the Act was issued. Since transactions of Petitioner involved international and specified domestic transactions with its associated enterprises, a reference was made under Section 92CA(1) of the Act to the Transfer Pricing Officer (“TPO”) for determination of Arms Length Price for the relevant AY. There is a history of proceedings filed by Petitioner for refund of various AYs including the subject year before the Delhi High Court as well as the Supreme Court. The same, however, is not directly relevant to determine the issue under consideration in the present proceedings, save and except a direction of the Apex Court dated 29thApril 2020 passed in Civil Appeal No. 2377 of 2020 directing the Revenue to conclude the assessment proceedings for AY 2016-2017 at the earliest.

In the meantime, the TPO passed an order proposing an adjustment to the value of the international transaction of Petitioner. The Assessing Officer (“AO”) passed a draft order dated 29thDecember 2019 under Section 144C(1) of the Act for the relevant AY and proposed various additions/disallowances. Petitioner filed objections under Section 144C(2)(b) of the Act before the Dispute Resolution Panel (“DRP”) on 27th January 2020. A notice was issued by the DRP and Petitioner responded by filing relevant documents/evidence in support of objections raised by it. Finally the DRP issued directions dated 25th March 2021 under Section 144C(5) of the Act. The directions of DRP were uploaded on the Income Tax Business Application (“ITBA”) portal on the same date and the said directions were served on Petitioner vide e-mail dated 6th April 2021. The grievance of Petitioner essentially is that the AO failed to pass the final order in terms of the directions of DRP within 30 days, the period of limitation prescribed by Section 144C(13) of the Act and consequently prays that the ROI as filed originally has to be accepted and excess tax paid be refunded with interest.

Observation of the court

In view of the aforesaid discussion, we have no hesitation in holding that the assessment order dated 31stAugust 2023 passed by FAO two years after the DRP directions, is time barred and cannot be Consequently, the ROI as filed has to be accepted. Petitioner is entitled to receive the refund together with interest, in accordance with law. The procedure to be completed within 30 days of this order being unloaded. This would, however, not preclude revenue, should the need arise, from reopening the assessment by following due process and in accordance with law.

Rule is thus made absolute in terms of prayer clause (A) which reads as under :

“A. that this Hon’ble Court be pleased to issue a Writ of Mandamus or any other writ in the nature of Mandamus, order or direction under Article 226 of the Constitution of India calling for the records of the case so as to examine the failure of Respondent Nos. 1 and 2 to give refund of tax paid by the Petitioner for the assessment year 2016-2017 which is in excess of legitimate tax due on the returned income of the Petitioner and directing Respondent Nos. 1 and 2 to forthwith grant the refund for the assessment year 2016-2017 along with the applicable rate of interest.”

Before we part, we strongly recommend that a detailed enquiry be initiated on the failure on the part of the Faceless Assessing Officer concerned to act in accordance with the provisions of the Act and the lack of diligence on the part of officials concerned and the system itself insofar as it relates to the present assessment. Strict action should be taken against persons responsible for the laxity and lethargy displayed which has caused a huge loss to the exchequer and in turn to the citizens of this country. A copy of this order be circulated to the CBDT and the Principal Secretary, Ministry of Finance, GOI.

Singh seeks stay of the judgment. Stay refused.


1 [2022]139 335(Bombay).

2 2017 SCC OnLine DEL 8441.

Read the full order from here


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