AO's Final Order Quashed as Assessee's Failure to Inform AO of DRP Filing is a Curable Defect.

AO’s Final Order Quashed as Assessee’s Failure to Inform AO of DRP Filing is a Curable Defect.

Issue

Is a final assessment order passed by an Assessing Officer (AO) under Section 144C(3) legally valid if the AO was unaware that the assessee had filed timely objections with the Dispute Resolution Panel (DRP), due to the assessee’s own failure to furnish a copy of the objections to the AO?

Facts

The assessee’s case for Assessment Year 2022-23 was subject to the DRP procedure.
The assessee filed its objections (under Section 144C(2)(b)) with the DRP within the prescribed time limit.
However, the assessee committed a procedural error: it failed to intimate or furnish a copy of these objections to the Assessing Officer (AO).
The AO, being unaware that any objections had been filed with the DRP, proceeded to pass the final assessment order as per the provisions of Section 144C(3).
The assessee challenged this final order, admitting its procedural lapse but arguing that its right to the DRP process was still valid.

Decision

The High Court (implied) ruled in favour of the assessee and remanded the matter.
It held that the assessee’s failure to inform the AO was a “procedural irregularity” and not a fatal defect that would invalidate the (otherwise timely) DRP application.
The impugned final assessment order, which was passed by the AO while the DRP proceedings were validly pending, was set aside.
The matter was remitted back to the Assessing Officer with a direction to wait for the DRP to dispose of the assessee’s objections and then pass a fresh assessment order in accordance with the DRP’s directions.

Key Takeaways

Substance Over Form: The court prioritized the assessee’s substantive right to the DRP dispute resolution process (which was secured by filing on time with the DRP) over a secondary procedural lapse (failing to inform the AO).
Filing with DRP is the Key: The primary, jurisdictional act is the timely filing of objections with the DRP. The requirement to intimate the AO is a secondary, procedural step.
AO’s Order Was Premature: Although the AO acted in good faith (believing no objections were filed), the resulting final order was legally premature because valid DRP proceedings were, in fact, pending.
Curable Defect: A failure to inform the AO of a DRP filing is a curable defect, not a fatal one that extinguishes the assessee’s right to the DRP process.

HIGH COURT OF MADRAS

American megatrends International India (P.) Ltd.

Assessment Unit Income-tax Department Ministry of Finance Government of India, New Delhi^*

C.Saravanan, J.

W.P. No. 20517 of 2025
W.M.P. No. 23170 of 2025

OCTOBER 6, 2025

Ms. Hema Muralikrishnan for the Petitioner. B.Ramanakumar, Senior Standing Counsel for the Respondent.

ORDER

1. In this Writ Petition, the petitioner has challenged the Impugned Assessment order dated 27.05.2025 passed under Section 143(3) read with Section 144C(3) read with Section 144B of the Income Tax Act, 1961. The dispute pertains to the assessment order 2022-2023.

2. Since the petitioner had some international transaction, the transfer Pricing Officer had earlier passed an order under Section 92CA(3) on 17.01.2025. Pursuant to the said order of the Transfer Pricing Officer, the respondent herein, namely, Assessment Unit under the faceless assessment Scheme under the Act passed a Draft Assessment Order on 19.03.2025.

3. Aggrieved by the aforesaid Draft Assessment Order dated 19.03.2025, the petitioner has filed an application before the Dispute Resolution Panel under Section 144C(2)(b). However, while filing objection before the Dispute Resolution Panel, the petitioner failed to intimate the same to the respondent and thus, the respondent has passed the Impugned Assessment Order on 27.05.2025.

4. The learned counsel for the petitioner submits that it is only a procedural irregularity committed as the petitioner failed to intimate to the respondent Assessing Officer regarding the file of objection before the Dispute Resolution Panel on 17.04.2025 under Section 144C(2)(b).

5. The learned Senior Standing Counsel for the respondent would however submit that the petitioner ought to have filed copy of such application not only before the Dispute Resolution Panel but also before the respondent Assessing Officer. Since no objection was received within the period specified in Sub-section (2) of Section 144C of the Act by the respondent, the Impugned Assessment Order has been passed and therefore, no interference is warranted. He further submits that it is for the petitioner to work out the remedy before the Appellate Authority under Section 246A of the Income Tax Act 1961 against the Impugned Assessment Order.

6. Having considered the submissions made by the learned counsel for the petitioner and the learned Senior Standing Counsel for the respondent and taking note of Section 144C(2) and (3) of the Income Tax Act, 1961 and the law settled by this Court in Multicoreware India (P.) Ltd. v. Assessment Unit, Income-tax Department (Madras) and the decisions of the Karnataka High Court in Open Silicon Research (P.) Ltd. v. Assessment Unit, National Faceless Assessment Centre, Income-tax Department, New Delhi (Karnataka)/[2023] 456 ITR 546 (Karnataka) and also the decision of the Delhi High Court in Pepsico India Holdings (P.) Ltd. v. Assessment Unit Income-tax Department National Faceless Assessment Centre (Delhi), W.P.(C). 15322/2023 & CM APPL.61469 of 2023, I am inclined to set aside the impugned order and remit the matter back to the respondent to pass a fresh order after the Dispute Resolution Panel disposes petitioner’s application filed under Section 144C(2) of the Act.

7. Accordingly, the matter is remitted back to the respondent to pass appropriate orders after orders are passed by the Dispute Resolution Panel. In the result, the Impugned Assessment Order is set aside with the above direction. The Writ Petition stands allowed with the above observation. Consequently, connected Miscellaneous Petition stands closed. No costs.

8. The petitioner shall endeavour to pursue the remedy before the Dispute Resolution Panel and intimate the same to the respondent.