Delhi High Court Rules In Favour Of Microsoft, Sumitomo Over Tax Department's Lapses
In a significant relief for Indian arms of multinational corporations such as Sumitomo Corp., Microsoft Corp., and JCB, the Delhi High Court has quashed final tax assessment orders that were passed without the issuance of draft assessment orders as envisaged in the Income Tax Act.
Section 144C of the Act says that an assessing officer must issue a draft assessment order before a final assessment can be passed. This provision allows the taxpayer to mull over the assessment order and take corrective measures before a final order is passed.
Citing previous rulings, the high court held that a failure to frame a draft assessment order would clearly be violative of the mandatory prescriptions of Section 144C, and the final order of assessment framed in violation thereof is to be viewed as a nullity.
The court has said that Section 144C erects a special mechanism of assessment in respect of eligible taxpayers in as much as it essentially entails two separate components coming together to form a composite assessment of the taxpayer.
