It has been a subject matter of debate in the past whether, in absence of specific provisions under the Income-tax Act, 1961 (the Act), can an authority condone delay in filing a statutory form? Whether power to condone the delay is an inherent power of an authority before whom the form / return / application has to be filed?

In a case where no objections are filed before the Dispute Resolution Panel (DRP) within 30 days of receipt of a draft assessment order, as per provisions of Section 144C(2) of the Act, the AO shall complete the assessment on the basis of draft order. Further, provisions of section 144C(4) of the Act prescribe a time limit of one month from the end of the month in which the period of filing of objections under section 144C(2) of the Act expires.

Now the question arises that in a case where DRP objections have been filed beyond 30 days of receipt of draft assessment order and the Assessing Officer (AO) does not pass the order within a month from the end of the month in which the assessee is supposed to file objections before the DRP, whether such an assessment order can be held to be valid.

Recently the Chennai Bench of Income-tax Appellate Tribunal (ITAT) has delivered a ruling explaining the time barring provisions under section 144C of the Act.

In the said scenario, the assessee, Aalaya Jewel Industry Private Limited [TS-243-ITAT-2018(CHNY)-TP] was engaged in the business of precision machining of components for various industries. For the purpose of clarity, we would like to set out the sequence of events as they took place during the assessment proceedings for AY 2013-14:

In the given scenario, DRP was of the opinion that:

  - There was a delay of 3 days in filing the application containing objections of the assessee with the DRP;

 - Condonation of delay in filing of objections, if granted, would result in curtailing the time available to the DRP for dealing with the objections of the assessee;

 - It had no power under the Act for condoning the delay unlike Commissioner of Income-tax (Appeals) [CIT(A)] who had power of condonation under section 249(3) and the ITAT under section 253(5) of the Act.

Hence, DRP held that assessee had failed to file an application comprising of its objections to the draft assessment order within the time period of 30 days stipulated under the Act and thereby rejected the assessee’s application.

At this junction, it would be interesting to compare the power of condonation vested with the DRP vis-à-vis CIT(A) and the ITAT

In the given scenario, on receipt of final assessment order passed by the AO, an appeal was filed by the assessee against such order with the ITAT. Considering the facts of the scenario, the ITAT:

 - Upheld DRP order rejecting assessee’s objections against draft assessment order filed beyond 30-day time limit prescribed under section 144C(2) of the Act;

 - Set aside final assessment order passed beyond time prescribed u/s 144C(4) of the Act stating that assessee has to choose one of two options, either to file acceptance or to file his objection against draft assessment order u/s 144C(2) of the Act;

 - Clarified that in any event, such choice has to be made within 30 days of the receipt of the draft assessment order and DRP has no power to condone delay in filing of objections;

 - Further clarified that, if an assessee chooses to file objections, it has to be filed before the DRP and AO and delayed filing of objections gives rise to the same consequence as non-filing of the objections;

 - Rejected Revenue’s contention that DRP’s order rejecting the application filed by the assessee, was a direction of DRP and opined that order passed by the DRP rejecting an application of objections, due to belated filing, cannot be equated with a direction coming within the meaning of sub-sections (5) of section 144C of the Act.

Conclusion

In case of delay by an assessee eligible to file an application before the DRP, it is of utmost importance to adhere to timelines prescribed under section 144C(2) of the Act, failing which there is no remedy of condonation of delay in filing of such application. Also it is important that the application is filed with the DRP as well as the AO simultaneously within 30 days of receipt of the draft assessment order.

In a scenario wherein the assessee has failed to file an application with the DRP, filling an appeal with the CIT(A) could be considered as the CIT(A) has power to condone the delay in filing of appeal on the condition of establishment of a sufficient cause of such delay.