2014 (1) TMI 1272 - AT - Income Tax

Validity of order u/s 143(3) r.w section 144C of the Act - Application withdrawn from Dispute Resolution Panel Held that - The assessee had filed a letter before DRP for withdrawing the objections - If DRP was of the view that assessee did not have option to withdraw the objections once they have been filed then as per rules of natural justice it was required to adjudicate objections filed by the assessee - The action of DRP has prevented the assessee from availing the other alternative of filing the appeal before CIT(A) - If that door is closed then matter has to be first adjudicated either by DRP or by CIT(A) and then appeal can be filed before the Tribunal - the order of DRP which has not adjudicated the issues on merits - The direction of DRP to AO is binding on AO so assessee also could not represent before AO against the additions made in the draft order thus, the request of the assessee has to be accepted in the interest of justice - the matter restored to the DRP to adjudicate all the issues on the objections filed by the assessee as per law by way of speaking order after giving the assessee a reasonable opportunity of hearing Decided in favour of Assessee.

Issues:
1. Validity of the order passed by the Assessing Officer under section 143(3) of the Income Tax Act.
2. Direction given by the Dispute Resolution Panel (DRP) under section 144C(5) of the Act.
3. Adequacy of consideration of objections raised by the Appellant by the DRP.
4. Adjustments made by the Assessing Officer and DRP on arm's length price, disallowance under section 14A, business-related expenses, and sales discount.

Analysis:

Issue 1: Validity of the order passed by the Assessing Officer under section 143(3) of the Income Tax Act.
The Appellant contended that the Assessing Officer erred in passing the order under section 143(3) read with section 144C of the Act. The Appellant withdrew the application before the Dispute Resolution Panel (DRP), arguing that the assessment order should have been passed under section 143(3) of the Act. The Tribunal found that the DRP's direction to the Assessing Officer to pass the assessment order based on the draft assessment order was not in line with natural justice principles. The Tribunal concluded that the Appellant should be given an opportunity to contest the additions on merits, leading to the restoration of the issue to the file of the DRP for further adjudication.

Issue 2: Direction given by the Dispute Resolution Panel (DRP) under section 144C(5) of the Act.
The Appellant raised concerns regarding the DRP's direction under section 144C(5) of the Act, arguing that the DRP should have permitted the withdrawal of objections and directed the Assessing Officer to pass the order under section 143(3) of the Act. The Tribunal noted that the DRP's failure to pass any order on the merits of the objections prevented the Appellant from contesting the additions before the Tribunal. The Tribunal, in the interest of justice, restored the issue to the file of the DRP for a detailed adjudication of all objections raised by the Appellant.

Issue 3: Adequacy of consideration of objections raised by the Appellant by the DRP.
The Appellant contended that the DRP did not address the objections filed on their merits, thereby hindering the Appellant from contesting the additions on their substance. The Tribunal acknowledged the Appellant's argument and directed the DRP to provide a reasonable opportunity for the Appellant to support its objections and pass a speaking order on the raised issues. The Tribunal emphasized the importance of adjudicating objections on their merits before any further appeal process.

Issue 4: Adjustments made by the Assessing Officer and DRP on arm's length price, disallowance under section 14A, business-related expenses, and sales discount.
The Appellant challenged various adjustments made by the Assessing Officer and DRP, including adjustments to the arm's length price, disallowance under section 14A, business-related expenses, and sales discount. The Tribunal found discrepancies in the actions taken by the authorities and emphasized the need for a thorough examination of these adjustments on their merits. The Tribunal directed the DRP to adjudicate all issues raised by the Appellant by way of a speaking order after providing a reasonable opportunity for the Appellant to present their case.

In conclusion, the Tribunal allowed the appeal filed by the Appellant for statistical purposes and restored the issues to the file of the DRP for a comprehensive review and adjudication in accordance with the law.

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