Improve ITBA portal: Delhi High Court to IT department after glitch causes incorrect tax demand from Boeing India

The Delhi High Court on Monday dismissed an appeal filed by the Income Tax Department against Boeing’s Indian subsidiary, while criticising the former for blaming a technical glitch in its internal tax portal to issue an assessment order in the name of a non-existent company. [Principal Commissioner of Income Tax v. Boeing India Pvt Ltd].A Bench of Justices V Kameswar Rao and Vinod Kumar held that the Revenue cannot rely on limitations in the Income Tax Business Application (ITBA) portal to justify a legally invalid assessment order. The Court emphasised that the functioning of the department’s digital systems is the responsibility of the government, not taxpayers. It held,"Regarding the issue of glitches in the ITBA portal, the Revenue ought to take this opportunity to improve the system so that such technical problems do not hinder/vitiate the assessment process.".The case relates to Assessment Year 2016–17. Boeing International Corporation India Pvt Ltd (BICIPL) had filed its income tax return on November 29, 2016, declaring income of about ₹60.55 crore.Later, under a scheme of amalgamation approved on February 27, 2018, BICIPL merged with Boeing India with effect from April 1, 2017. The tax authorities were informed about the merger through a letter dated April 10, 2018. Despite this, the assessing officer issued the final assessment order on March 30, 2021 in the name of BICIPL, the amalgamating entity that had already ceased to exist.The order assessed the company’s income at about ₹1.21 crore, resulting in an addition of roughly ₹61 crore over the income originally declared. Boeing challenged the assessment before the ITAT, which quashed the order on the ground that it had been passed in the name of a non-existent company..Before the High Court, the Revenue argued that the mistake occurred because of limitations in the ITBA portal, the department’s electronic system used for processing tax proceedings.According to the department, since the scrutiny proceedings had been initiated under the PAN of the predecessor company, the system automatically generated the name of the old entity while issuing the final order. The Revenue contended that the defect was merely procedural and curable under Section 292B of the Income Tax Act, which protects tax proceedings from invalidation due to technical mistakes..The High Court rejected this argument. It noted that the tax authorities had been informed about the merger years before the final assessment order was issued. Despite this, the final assessment order referred only to the predecessor company and even carried its PAN.The Court observed that the order did not mention the amalgamation or explain that the use of the predecessor company’s name was due to any technical limitation in the ITBA portal.“An assessee cannot be held accountable for the glitches or the functioning or malfunctioning of the ITBA portal, which would be the sole responsibility of the Revenue,” the Court observed..The Court reiterated that framing an assessment against a company that has ceased to exist is a jurisdictional defect and not a mere procedural irregularity. Such a defect, the Court said, cannot be cured under Section 292B..It thus dismissed the Revenue’s appeal and upheld the ITAT’s order..The Revenue was represented by Advocates Debesh Panda with Zehra Khan, Vikramaditya Singh, Nivedita, Delphina Shinglai, Harshpreet Singh, A Shankar and Ravicha Sharma..Boeing India was represented by Senior Advocate Sachit Jolly with Advocates Sherry Goyal, Viyushti Rawat, Devansh Jain, Sohum Dua and A Shankar Bajpai..[Read Judgment].Follow Bar and Bench channel on WhatsAppDownload the Bar and Bench Mobile app for instant access to the latest legal news.