Punjab & Haryana High Court on undated Section 143(3) assessment, CBDT approval and limitation

The Punjab & Haryana High Court, in FinDoc Finvest Private Limited Vs DCIT (Punjab and Haryana High Court), examined the legality of an undated assessment order purportedly framed under Section 143(3) of the Income Tax Act 1961, along with penalty notices issued under Section 270A and Section 271AAC. The assessee invoked the writ jurisdiction of the Court to challenge:

  • The very validity of the assessment order,
  • The accompanying penalty notices, and
  • All consequential proceedings.

The decision addresses three core legal issues:

  1. Whether an Assessing Officer (AO) can, consistent with law, consult or act under the influence of superior officers while exercising quasi‑judicial powers under Section 143(3), particularly in light of the CBDT Circular dated 15.07.2022 and Section 119;
  2. Whether the assessment was barred by limitation under Section 153 as amended by the Finance Act, 2022; and
  3. Whether the assessment proceedings violated principles of natural justice, particularly the requirement of reasonable opportunity and personal hearing when demanded.

The High Court ultimately quashed the assessment order as non est in law, set aside the penalty notices, and allowed the writ petition, holding that:

  • The AO had abdicated his independent quasi‑judicial function by repeatedly consulting the Joint Commissioner and acting under his effective guidance and participation;
  • The assessment was time-barred as there was no demonstrable order “made” on or before 31.03.2024, the last permissible date under Section 153 for the relevant assessment year; and
  • The assessee was denied fair opportunity and personal hearing despite having specifically requested it, thereby breaching the principles of natural justice.

Background of the writ petition

The assessee challenged:

  • An undated assessment order (Annexure P/1) for AY 2023, allegedly passed under Section 143(3),
  • Penalty notices dated 04.04.2023 under Section 270A and Section 271AAC (Annexures P/2 and P/3), and
  • All actions arising out of the said order and notices.

The principal grounds were:

  • Improper and unlawful intervention of superior officers in the assessment process;
  • Bar of limitation under Section 153 as amended; and
  • Denial of natural justice, especially non‑grant of personal hearing.

Assessee’s submissions

1. AO’s quasi‑judicial independence and superior interference

Counsel for the assessee drew the Court’s attention to the statutory framework under:

  • Section 143(3) – regular assessment provision;
  • Section 144A – power of Joint Commissioner to issue directions in certain cases;
  • Section 151 – sanction for issue of notice under Section 148;
  • Section 153D – prior approval for assessment in certain cases.

The argument was:

  • The AO, when acting under Section 143(3), performs a quasi‑judicial function and must independently apply his mind.
  • Unlike Section 144A, Section 151, or Section 153D, there is no statutory requirement under Section 143(3) to obtain prior approval or directions from a superior officer for framing the assessment.
  • Even where the Act expressly mandates approval (e.g., Section 144A, Section 151, Section 153D), such approvals are subject to judicial scrutiny if alleged to be mechanical, inappropriate or issued by a non‑competent authority.
  • Where the Act is silent, active consultation or approval from a superior, going beyond mere administrative oversight, vitiates the quasi‑judicial exercise, because the AO is expected to act on his own discretion.

The assessee highlighted that:

  • The AO himself recorded in the assessment order that he had consulted the Joint Commissioner (respondent No. 2) on 26.10.2023, 11.01.2024 and 14.03.2024.
  • These consultations took place before finalization of the assessment, and the order was stated to have been passed “after due approval” of the superior.

On this basis, it was argued that the AO had surrendered his statutory discretion to the Joint Commissioner.

2. CBDT Circular dated 15.07.2022 and scope of Section 119

The Revenue relied on the CBDT Circular dated 15.07.2022 which required the AO to obtain approval of assessments from the Joint Commissioner.

The assessee countered by relying on Section 119, contending that:

  • Section 119(1) empowers CBDT to issue instructions only for “proper administration” of the Act and specifically prohibits directions requiring completion of any “particular assessment” or disposal of a case “in a particular manner”, or interference with appellate discretion.
  • While Section 119(2)(a) permits the Board to lay down guidelines, principles or procedures, such directions cannot cross the line into controlling or dictating the AO’s quasi‑judicial decision‑making.
  • The Circular dated 15.07.2022, to the extent it mandates approval in a way that practically subordinates the AO’s discretion to the superior, was argued to be inconsistent with proviso (a) to Section 119(1).

3. Limitation under Section 153 and delayed uploading

On limitation, the assessee submitted that, for the concerned assessment year:

  • Due to the amendment to Section 153(1) by the Finance Act, 2022 (effective 01.04.2022), the time limit for completing assessment for assessment years commencing on or after 01.04.2022 is twelve months from the end of the relevant assessment year.
  • For the year in question, this meant the assessment order under Section 143(3) had to be made on or before 31.03.2024.

The assessee relied on:

  • Screen shots of the e‑filing portal as on 01.04.2024 (Annexures P/20 and P/21), showing that the assessment proceedings were still open and no assessment order was reflected on that date;
  • Another screen shot dated 04.04.2024, showing for the first time the presence of the completed assessment on the portal;
  • The fact that no email communication containing the assessment order was received on or before 01.04.2024;
  • Rule 127 of the Income Tax Rules, CBDT Notification No. 02/2016, and communication of the assessee’s email ID in terms of Rule 127(2)(b)(4);
  • Annexure R/1, where the system record showed delivery status as “sending failed”, email ID “not specified”, particulars of documents “not specified”, and assessment reflected on portal on 04.04.2024.

Further, the assessee pointed to:

  • Annexure P/22, an email confirmation relating to tax/return filing, showing no orders dispatched before 04.04.2024;
  • No physical despatch of the assessment order;
  • Penalty notices dated only 04.04.2024.

On ITNS-150A, the assessee argued that: