Delhi High Court sets aside assessment order, tax demand, and penalty under Section 144C

The Delhi High Court delivered a comprehensive ruling setting aside an assessment order, the consequential tax demand, and a penalty notice, all of which were issued without waiting for the Dispute Resolution Panel's decision under Section 144C. The bench found that the tax administration breached statutory protocol by finalizing the assessment while the dispute panel was still required to issue its binding directions on the disputed draft order.

This decision highlights judicial intolerance for administrative shortcuts in complex tax litigation, where assessing officers attempt to circumvent the multi-tier dispute resolution process meant for eligible assessees. Penalties and demands flowing from such legally flawed assessments cannot stand, as they deny the taxpayer the statutory opportunity to contest adjustments before an independent panel.

The ruling halts the immediate recovery of the contested tax demand and wipes out the premature penalty notice. Affected corporations must ensure their compliance teams monitor Section 144C proceedings closely to prevent tax authorities from executing similar unauthorized orders.