Facts of the Case

The petitioner, Jackson Square Aviation Ireland Limited, a tax resident of Ireland, filed its return of income for Assessment Year 2022–23 on 25.10.2022. The case was selected for scrutiny, and the Assessing Officer issued a show cause notice proposing to tax lease rentals received from aircraft leasing as interest income.

Subsequently, the Assessing Officer passed a Draft Assessment Order dated 31.03.2024 under Section 144C(1) proposing an addition of ₹499,99,19,251/- by treating aircraft lease rentals as interest income and also proposing penalty proceedings. Being an eligible assessee under Section 144C(15)(b)(i), the petitioner filed objections before the Dispute Resolution Panel on 29.04.2024 within the statutory time limit.

Despite the objections being pending before the DRP, the Assessing Officer proceeded to pass the Final Assessment Order dated 20.05.2024 under Section 143(3) read with Section 144C(3), recomputing the income at ₹499,99,19,251/-.

Issues Involved

Whether the Assessing Officer could pass a final assessment order under Section 144C while objections filed by an eligible assessee were pending before the Dispute Resolution Panel, and whether such an order is without jurisdiction.

Petitioner’s Arguments

The petitioner contended that once objections were duly filed before the DRP within the prescribed period, the Assessing Officer was statutorily barred from passing a final assessment order until the DRP issued its directions. It was argued that passing the final assessment order extinguished the petitioner’s statutory right to have objections adjudicated by the DRP and violated the mandatory procedure under Section 144C.

Reliance was placed on earlier Delhi High Court decisions in Fiberhome India Private Limited, Pepsico India Holding (P.) Ltd., and De Diamond Electric India Private Limited, where final assessment orders passed without awaiting DRP directions were set aside.

Respondent’s Arguments

The Revenue argued that communications had been issued informing the petitioner of the draft assessment order and contended that the Assessing Officer was not aware of the filing of objections before the DRP at the time of passing the final assessment order.

Court Order / Findings

The Delhi High Court held that the controversy was no longer res integra. The Court observed that once objections are filed before the DRP and are pending, the Assessing Officer lacks jurisdiction to pass a final assessment order, irrespective of whether the Assessing Officer had knowledge of such objections.

The Court held that lack of information or system alerts cannot justify bypassing the mandatory statutory procedure under Section 144C. The pendency of objections before the DRP automatically bars the Assessing Officer from finalising the assessment.

Important Clarification

The Court clarified that compliance with Section 144C is mandatory and not procedural. Any final assessment order passed during the pendency of objections before the DRP is without jurisdiction and liable to be set aside, even if the Assessing Officer claims lack of notice of such objections.

Final Outcome

The writ petition was allowed. The Delhi High Court set aside the Final Assessment Order dated 20.05.2024 passed for Assessment Year 2022–23 and held it to be without jurisdiction. The matter was left to proceed in accordance with law after disposal of objections by the Dispute Resolution Panel. All pending applications were disposed of accordingly.

 

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769840961_JACKSONSQUAREAVIATIONIRELANDLIMITEDVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLEINTTAX212ANR..pdf

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