Final Assessment Order Barred by Limitation: Karnataka HC Dismisses Revenue’s Appeal in Yokogawa India Case
In a significant ruling for corporate taxpayers, the Karnataka High Court has dismissed the Revenue’s appeal challenging the Income Tax Appellate Tribunal’s (ITAT) decision regarding the validity of a final assessment order in the case of Yokogawa India Ltd v. ACIT for Assessment Year (AY) 2012–13. The court clarified the importance of diligence in determining the correct service date of the draft assessment order under Section 144C of the Income Tax Act.
Background of the Case
Yokogawa India Ltd, engaged in the manufacturing and distribution of process control instruments, faced scrutiny over the timing of its objection to a draft assessment order issued by the Assessing Officer (AO). The draft was served via speed post, and the dispute revolved around whether the final assessment order was valid, given the timing of the objection filing under Section 144C(2).
The Revenue argued that the draft order was served on 12 March 2016, and thus the objection filed on 13 April 2016 was within the 30-day period. The AO proceeded without passing a final order under Section 144C(4), assuming the objection to be timely.
Core Legal Issue
The core issue was whether the AO could rely solely on the date provided by the assessee (14 March 2016) for computing the 30-day window for filing objections with the Dispute Resolution Panel (DRP), without independently verifying the actual service date of the draft order. This verification is crucial because if the objection is time-barred, the AO can finalize the assessment directly.
High Court’s Observations and Ruling
The High Court emphasized the dual responsibilities of the AO upon issuance of a draft assessment order:
1. To verify if an objection was filed before the DRP.
2. To confirm whether the objection was filed within the 30-day period from the date of receipt of the draft order, as required under Section 144C(2).
The Court noted that the AO in this case failed to verify the actual date of service, which was 12 March 2016 as evidenced by the speed post records. Instead, the AO relied on the service date (14 March 2016) as stated by the assessee without cross-checking the delivery records. The objection filed on 13 April 2016 was therefore beyond the 30-day statutory limit.
Highlighting this lapse, the Court ruled that mere pendency of an objection before the DRP does not prevent the AO from completing the assessment if it was not filed within the prescribed period. However, since the AO incorrectly assumed the objection to be within time and did not pass the final order in accordance with Section 144C(4), the ITAT rightly held the assessment order to be barred by limitation.
As the judgment subtly reminds us, “Ignorantia juris non excusat”—ignorance of the law is no excuse; and in this context, neither is procedural complacency.
Key Takeaways for Tax Professionals
This ruling reinforces the importance of adhering strictly to procedural timelines under the Income Tax Act. For taxpayers, it underscores the need to document and communicate service dates accurately, while for AOs, it stresses the duty to verify such dates diligently before finalizing assessments.
Tax professionals and Chartered Accountants should take note that under Section 144C, the 30-day deadline from the date of receipt of the draft order is critical. Any lapse—whether in filing objections or in the AO’s verification process—can impact the validity of the final assessment order.
By upholding the ITAT’s ruling, the Karnataka High Court has clarified that procedural diligence is non-negotiable, and the interpretation of Section 144C must be guided by its plain language and legislative intent.
The copy of the order is as under:
