Statutory DRP Remedy Cannot Be Defeated by Misfiling Objections: Fresh Limitation from Refiling Before the Faceless Assessing Officer

1. Introduction

In MILACRON INDIA PRIVATE LIMITED v. THE ASSESSMENT UNIT, INCOME TAX DEPARTMENT (Gujarat High Court, decided on 22-12-2025), the petitioner-assessee challenged a final assessment order passed under Section 143(3) read with Sections 144C(3) and 144B of the Income Tax Act, 1961, for AY 2022-23.

The dispute arose in a transfer pricing scrutiny where the Transfer Pricing Officer proposed an upward adjustment of Rs. 12,68,130 (notional interest on alleged delayed realization from AEs), which was carried into a draft assessment order under Section 144C(1).

The central issue was procedural but decisive: the assessee filed objections within time before the Dispute Resolution Panel (DRP), but (by admitted inadvertence) filed the parallel copy of objections to the Jurisdictional Assessing Officer (JAO) rather than the Faceless Assessing Officer/NFAC. Without awaiting DRP directions, the Faceless Assessing Officer proceeded to pass a final assessment order. The DRP later dismissed the objections as non est for want of jurisdiction because a final order had already been passed.

2. Summary of the Judgment

  • The High Court quashed the final assessment order dated 02.05.2025 and the DRP order dated 25.06.2025.
  • The matter was remanded to the DRP to adjudicate objections afresh.
  • The Court permitted the assessee to file objections before the Faceless Assessing Officer within two weeks, and directed that the 30-day limitation would run afresh from such filing.
  • If objections were not filed within the permitted time, the earlier final assessment order would stand revived.

3. Analysis

3.1 Precedents Cited

The judgment, as provided, does not cite any judicial precedents. The Court’s reasoning is grounded primarily in the statutory scheme of Section 144C, the admitted factual matrix, and the need to preserve the assessee’s statutory DRP remedy where timely invocation is not in dispute.

3.2 Legal Reasoning

The Court’s analysis turns on the structure and purpose of Section 144C, especially Section 144C(2), which mandates that an eligible assessee, within 30 days of receipt of the draft order, may file objections:

  • with the DRP (Section 144C(2)(b)(i)); and
  • with the Assessing Officer (Section 144C(2)(b)(ii)).

The Court treated the following as determinative:

  1. Timely filing before the DRP was undisputed. The assessee lodged Form 35A objections within 30 days, acknowledged by the DRP. Thus, the substantive statutory right to DRP adjudication was properly invoked within time.
  2. The “AO-copy” error was bona fide and acknowledged. The assessee mistakenly filed the objections before the JAO instead of the Faceless Assessing Officer. The Court accepted that the JAO “did not have any jurisdiction to entertain such objections” in the faceless regime, but still acknowledged and did not guide the assessee while limitation was running.
  3. Finalization without DRP directions defeated the statutory design. Once objections are filed, the DRP mechanism is meant to culminate in DRP directions under Section 144C(5), after which (and only then) the final order is to be framed in terms of Section 144C(13). The Court viewed the final assessment order as having been passed prematurely, thereby undermining the statutory process.
  4. The DRP’s “functus officio” approach flowed from the premature final order, not from the assessee’s default. The DRP dismissed objections as non est because the final order already existed. The Court effectively reversed the chain: since the final order ought not to have been passed in the first place given the timely DRP objections, the DRP’s dismissal could not stand.
  5. Equitable structuring of relief without erasing statutory discipline. The Court did not treat the assessee’s misfiling as a free pass. It granted a short refiling window and explicitly provided for revival of the final assessment order if the assessee failed to comply, thereby balancing procedural fairness with administrative finality.

A notable normative observation appears in paragraph 7.4: once the JAO acknowledged an objection that the JAO had no jurisdiction to entertain, the JAO “ought to have communicated” that the assessee must approach the Faceless Assessing Officer, especially because limitation was running. This indicates a judicial expectation of procedural guidance and administrative fairness within the faceless system where jurisdictional lines are less intuitive for taxpayers.

3.3 Impact

The ruling is likely to influence DRP/faceless assessment disputes in three significant ways:

  • Protection of the DRP remedy where timely DRP filing is clear: Where an assessee files objections before the DRP within time, courts may be more willing to prevent that right from being neutralized by a parallel misfiling or administrative rigidity, particularly in faceless processes.
  • Administrative duty to prevent “limitation traps”: The judgment signals that when an authority acknowledges filings it lacks jurisdiction to accept, it should guide the taxpayer promptly. This can be invoked in future writs to argue that the system must not profit from avoidable procedural confusion.
  • Remedial model (quash + remand + conditional revival): The Court’s structured remedy— quashing the final order, remanding to DRP, granting a narrow refiling window, and reviving the order upon non-compliance—may become a template for resolving similar faceless/DRP procedural breakdowns without permanently unsettling completed assessments.

4. Complex Concepts Simplified

Draft Assessment Order (Section 144C(1))
A preliminary assessment order issued to eligible assessees (commonly involving transfer pricing), which cannot be finalized immediately if the assessee chooses to object to proposed variations.
DRP (Dispute Resolution Panel)
A specialized panel that adjudicates objections to variations in the draft order; its directions bind the Assessing Officer for passing the final order.
Faceless Assessing Officer / NFAC
The assessment function carried out electronically through the faceless framework (Section 144B), often creating functional separation from the traditional jurisdictional assessing officer.
Functus officio
A legal expression meaning the authority has exhausted its power over the matter. Here, the DRP considered itself unable to proceed because a final assessment order had already been issued.
Non est / Void ab initio
Treated as legally non-existent from the outset. The assessee argued the final order was non est as it bypassed the mandatory DRP route after objections were filed.

5. Conclusion

The Gujarat High Court’s decision establishes a practical procedural safeguard: when an assessee has timely filed objections before the DRP, the statutory DRP mechanism should not be defeated merely because the assessee (in the faceless regime) misfiled the parallel objection copy before the wrong assessing authority. By quashing both the final assessment order and the DRP’s dismissal, and by permitting refiling before the Faceless Assessing Officer with a reset limitation window (backed by a conditional revival clause), the Court preserved the integrity of Section 144C’s mandatory process while maintaining procedural discipline.