2016 (9) TMI 601 - HC - Income Tax

Reference to Dispute Resolution Panel - DRP jurisdiction to pass an order - Held that - Sub-section (12) of Section 144C, on the face of it, appears to pose an obstacle. Under sub-section (12), no direction can be issued by the DRP under sub-section (5), after the expiry of nine months from the end of the month in which the draft assessment order was forwarded to the eligible assessee. In this case we have found the date of forwarding of the draft assessment order to be 22-8-2014. Hence, the period stipulated under sub-section (12) would expire by 31-5-2015. But the DRP passed an order on 22-6-2015 holding that it had lost jurisdiction to pass an order on 31-12-2014 itself. Even though the date mentioned is not correct, the fact remains that the DRP could not have issued any direction after 31-5-2015, even on undisputed facts. It is possible for this Court to set aside the order of the Dispute Resolution Panel and remit the matter back to them for a consideration on merits, inspite of the fact that the period stipulated in sub-section (12) would have expired by 31-5-2015. In view of the above, the writ petition is allowed, the order of the Dispute Resolution Panel, Bengaluru, dated 22-6-2015 is set aside and the DRP, Bengaluru is directed to take up Form 35A filed by the petitioner along with the annexures and the evidence for a consideration on merits. The DRP shall give opportunity of hearing to both parties, follow the procedure prescribed in Section 144C and issue appropriate directions under sub-section (5), within a period of three months from the date of receipt of a copy of this order. As a consequence of our setting aside the DRPs order dated 22-6-2015, the final assessment order passed by the Assessing Officer on 28-8-2015 is set aside. The Assessing Officer shall pass a final assessment order, after and on the basis of the directions issued by the DRP, as per our directions. The miscellaneous petitions, if any, pending in this writ petition shall stand closed. There will be no order as to costs.

Summary

Issues Involved:

1. Validity of the period for filing objections under Section 144C.
2. Jurisdiction of the Dispute Resolution Panel (DRP).
3. Service of the draft assessment order.
4. Validity of the final assessment order.
5. Applicability and interpretation of Section 144C.

Detailed Analysis:

1. Validity of the period for filing objections under Section 144C:

The petitioner argued that the nine-month period stipulated in sub-section (12) of Section 144C should be calculated from the date the draft assessment order is received by the assessee, not the date it was passed. The court accepted this argument, noting that the word "forward" in sub-section (1) must mean actual service to the assessee, aligning with the term "receipt" used in sub-section (2). Thus, the period for filing objections starts from the date the assessee receives the draft order.

2. Jurisdiction of the Dispute Resolution Panel (DRP):

The DRP, Bengaluru, claimed it lacked jurisdiction as the nine-month period expired before it assumed jurisdiction on 1-1-2015. However, the court found that the DRP, Hyderabad, had indicated that the time limit extended to June 2015. The court concluded that the DRP, Bengaluru, miscalculated the expiry date, which should have been 31-5-2015, based on the actual service date of 22-8-2014.

3. Service of the draft assessment order:

The court scrutinized the service of the draft assessment order, noting discrepancies in the Department's claims. The draft order was purportedly forwarded on 26-3-2014, but evidence showed it was actually received by the petitioner on 22-8-2014. The court found the Department's claim of earlier service unsubstantiated, emphasizing that the period for filing objections begins upon actual receipt by the assessee.

4. Validity of the final assessment order:

Given the DRP's erroneous rejection of the petitioner's objections on jurisdictional grounds, the court set aside the final assessment order dated 28-8-2015. It directed the DRP, Bengaluru, to reconsider the objections on merits and issue appropriate directions under sub-section (5) of Section 144C within three months.

5. Applicability and interpretation of Section 144C:

The court delved into the legislative intent and historical context of Section 144C, emphasizing its role as an alternative dispute resolution mechanism aimed at expeditious resolution. The court noted that the bar under sub-section (12) does not go to the root of jurisdiction but is intended to ensure timely resolution. The court referenced the Supreme Court's understanding in Additional CIT v. HCL Technologies Ltd., indicating flexibility in applying the time limits under Section 144C.

Conclusion:

The court allowed the writ petition, setting aside the DRP's order dated 22-6-2015 and the final assessment order dated 28-8-2015. It directed the DRP, Bengaluru, to reconsider the petitioner's objections on merits and issue directions within three months, after which the Assessing Officer should pass a final assessment order based on the DRP's directions. The court emphasized the importance of actual service of the draft assessment order and clarified the interpretation of Section 144C's time limits.