The New Delhi Income Tax Appellate Tribunal (ITAT) has held that a final assessment order passed under Section 144C(13) of the Income Tax Act without giving effect to binding DRP directions is itself bad in law. Such non-compliance goes to jurisdiction and cannot be cured later by issuing a corrigendum after the limitation period has expired. Also, a corrigendum cannot validate an assessment order that was defective and unlawful at the time it was passed.
The Tribunal also affirmed that in the special assessment mechanism under Section 144C, the Assessing Officer is bound to strictly follow the DRP directions while passing the final assessment order. Failure to do so is not a mere procedural irregularity but a fatal legal defect. Applying the said legal position, the Delhi ITAT held that the final assessment order was bad in law because it did not follow the DRP directions, and that the later corrigendum was beyond jurisdiction.
The Division Bench comprising Raj Kumar Chauhan (Judicial Member) and S. Rifaur Rahman (Accountant Member) noted that the Assessing Officer had originally passed the draft assessment order on Sep 17, 2021, after which the assessee approached the DRP. The DRP, by its order dated April 25, 2022, directed the Assessing Officer/TPO to suitably incorporate its findings on the objections while framing the final assessment order. The Tribunal also recorded that the TPO had in fact passed the order giving effect to the DRP directions on June 17, 2022.
The crucial defect, according to the Tribunal, was that despite having the TPO’s order giving effect to the DRP directions before the limitation date, the Assessing Officer passed the final assessment order on June 30, 2022 without incorporating those directions. The Tribunal found that the Assessing Officer should have framed the final order by taking the DRP-compliant TPO order into account within the statutory time limit prescribed under Section 144C.
The Tribunal observed that the subsequent corrigendum dated July 27, 2022 was merely an attempt to cover up the failure to perform the statutory obligation under Section 144C. It held that once the final assessment order had been passed without following the DRP directions, the Assessing Officer could not later repair that jurisdictional defect through a corrigendum issued after limitation had already expired. The Tribunal also reiterated that where the Assessing Officer ignores clear DRP directions and simply reproduces or persists with the draft assessment approach, the resulting final assessment order is not in conformity with Section 144C(13) and is liable to be treated as bad in law.
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Briefly, the appeal arose from the assessment order dated June 30, 2022 passed by the ACIT, Circle 3(1), Gurgaon. During hearing, the assessee pointed out the sequence of relevant documents: the intimation for the order under Section 144C(5) was dated May 05, 2022; the TPO passed the order giving effect to the DRP directions on June 17, 2022; and the Assessing Officer thereafter passed the final assessment order on June 30, 2022. The assessee’s core objection was that the final assessment order did not incorporate the DRP directions at all, and that the draft assessment order and final assessment order were materially the same.
The assessee further argued that June 30, 2022 was the last date of limitation for passing the final assessment order, but instead of issuing a compliant final order within time, the Assessing Officer later issued a corrigendum dated July 27, 2022 under Section 144C(13). According to the assessee, once the Assessing Officer had passed a final order without giving effect to the DRP directions, the subsequent corrigendum was beyond jurisdiction and could not cure the defect. The Revenue did not dispute the dates on record. It accepted that the DRP-related intimation was dated May 05, 2022, the DRP order was dated April 25, 2022, and the corrigendum was issued on July 27, 2022, but still supported the validity of the final assessment order as being in line with Section 144C.
