2024 (9) TMI 368 - HC - Income Tax

Validity of Order u/s 144C (3) r.w.s.144B - petitioner had filed its objections to the Draft Assessment Order before the Dispute Resolution Panel (DRP) - HELD THAT - Taking note that the objections have been filed before the DRP and in light of the observations made in the case of Open Silicon Research (P) Ltd 2023 (8) TMI 825 - KARNATAKA HIGH COURT referred to here in above, it is clear that the Assessment Order passed disregarding the objections filed, requires to be interfered with. AO ought to have waited till directions are passed by DRP. Taking note that objections have been filed before the DRP, it would meet the ends of justice by allowing the petition by setting aside the order at Annexure-'A' dated 20.11.2023 with a further direction that the AO must follow the directions of DRP and proceed thereafter, while DRP would issue necessary directions taking note of the objections filed by the petitioner filed, copy of which is enclosed at Annexure-'G' - WP Allowed.

Summary

Issues:
Challenge to order under Section 144C of Income Tax Act for Assessment Year 2021-2022.

Analysis:
The petitioner sought a writ of certiorari to quash an order passed under Section 144C (3) read with Section 144B of the Income Tax Act for the Assessment Year 2021-2022. The petitioner filed its objections before the Dispute Resolution Panel (DRP) after a transfer pricing adjustment was made by the Transfer Pricing Officer (TPO). However, there was a lapse in not filing objections before the assessing officer within the prescribed time. The petitioner argued that objections filed before the DRP should suffice. The petitioner relied on a previous court decision regarding the procedure under Section 144C of the Act.

The court acknowledged the petitioner's objections filed before the DRP and referred to a previous court decision that highlighted the importance of following the procedure under Section 144C. The court emphasized that once objections are filed before the DRP, the assessing officer should not proceed further until directions are issued by the DRP. In this case, the assessing officer proceeded with the assessment order despite objections filed before the DRP. The court held that the assessment order should be set aside, along with related documents.

The court further discussed that once the DRP issues directions, the assessing officer must adhere to them, and the DRP withdrawing its directions is not permissible. The court set aside a communication related to the assessing officer's action in light of the DRP's directions. The court disposed of the petition, restoring the matter to the stage of Section 144C (13) for the assessing officer to proceed following the directions issued by the DRP. The court clarified that filing objections before the assessing officer under Section 144C(2)(b)(ii) is mandatory, not optional.

The court concluded that since objections were filed before the DRP, the assessment order passed without waiting for DRP directions needed interference. The court allowed the petition, setting aside the order and directing the Assessing Officer to follow the DRP's directions. The court emphasized that the Assessing Officer must wait for DRP directions before proceeding further, ensuring compliance with the procedure under Section 144C of the Income Tax Act.