2015 (1) TMI 309 - AT - Income Tax

Validity of order passed by DRP - Objections of assessee not properly dealt by DRP - Held that - where the DRP has directed the AO u/s 144C(5) to pass the assessment order in consonance with the draft order made by the AO without adjudicating the objections and contentions of the assessee in a proper manner, then the order of the DRP suffers from the bias of being contrary to the record as well as non-application of mind - DRP has not decided and adjudicated the objections of the assessee as per letter and spirit of the provisions of the Act as well as procedural requirement of proper adjudication for a quasi-judicial authority. The order of the DRP suffers from lack of application of mind as the DRP has not passed any speaking order and the objections of the assessee have been rejected at the threshold without any proper reasoning thereon. In this situation, we are inclined to hold that the DRP has passed a cryptic order which is not a speaking one and which has been passed without application of mind. Therefore, the impugned order of the DRP and consequential assessment order passed by the AO deserve to be quashed and we quash the same.- Case restored to DRP - Following decision of AIA Engg. Ltd. vs Dispute Resolution Panel & Others 2010 (8) TMI 743 - Gujarat High Court - Decided in favour of assesse.

Summary

Issues:
Appeal against assessment order under Income Tax Act, 1961 - Proper adjudication of objections by Dispute Resolution Panel (DRP) - Compliance with relevant laws and provisions.

Analysis:
The appellant filed an appeal against the assessment order passed under section 143(3) r/w section 144C of the Income Tax Act, 1961 for AY 2006-07. The appellant raised nine grounds in the appeal, arguing that the DRP did not properly adjudicate the objections raised against the draft assessment order. The appellant contended that the DRP's order lacked detailed discussion and findings on the objections raised, citing a decision of the Hon'ble High Court of Gujarat. The appellant emphasized the need for a juridical adjudication of objections and an opportunity for a proper hearing.

In response, the respondent supported the impugned order, stating that the objections were similar to those submitted before the Assessing Officer (AO), who had already adjudicated them. However, the respondent expressed willingness to remit the case to the DRP for fresh adjudication if deemed necessary. After considering the submissions and the Gujarat High Court decision, the Tribunal concluded that the DRP's direction to the AO to pass the assessment order without adjudicating the objections properly was biased and lacked application of mind.

The Tribunal observed that the DRP's order merely reproduced the objections without detailed discussion, leading to a lack of proper adjudication. Consequently, the Tribunal held that the DRP's order was cryptic, lacking a speaking order and proper reasoning, and passed without due application of mind. Therefore, the Tribunal quashed the impugned order of the DRP and the consequential assessment order passed by the AO.

Following the Gujarat High Court decision, the Tribunal directed the DRP to consider and adjudicate the appellant's objections on merits in accordance with relevant laws and provisions. As a result of restoring the case to the DRP for proper consideration, the Tribunal dismissed the other grounds of the appeal without detailed findings. Ultimately, the appeal of the appellant was deemed allowed for statistical purposes.

In conclusion, the Tribunal emphasized the importance of proper adjudication of objections by the DRP in compliance with the procedural and legal requirements, ensuring a fair hearing and reasoned decision-making process.