2021 (8) TMI 256 - HC - Income Tax

Assessment u/s 144C - non-consideration of the objections by the DRP - violation of natural justice - HELD THAT - This Court is of the considered opinion that principles of natural justice and its violation with regard to certain disputed issues need not be gone into by the High Court in the writ proceedings, so also the jurisdictional issues, if relatable to the disputed facts, then also the aggrieved person may be granted liberty to prefer an appeal for effective adjudication of such disputes - if the principles of violation of natural justice or the jurisdiction directly hitting the provisions of the Statute is established, then the High Court has to look into the seriousness of such violations for the purpose of restoring the right of the aggrieved persons and issue suitable orders to provide such opportunities as contemplated. Pertinent point that the Assessee would get an opportunity to raise all the points raised in the objections before the Assessing Officer as well as before the Appellate Authority. However, such a submission has no force as the valuable right conferred under the Act to the Assessee can never be taken away. In the event of glaring violation of the provisions of the Act, the High Court has to provide an appropriate relief to the aggrieved persons.In the event of failure, the High Court would be failing in its constitutional duty to restore the valuable right of an Assessee conferred under the Income Tax Act. The principles of natural justice being an integral part of Article 14 of the Constitution of India, the direct violation of the provisions in this regard is a ground for entertaining a writ petition. Where the violation of principles of natural justice is raised and interpretation of the provisions of the Income Tax Act is imminent, then it is necessary to entertain the writ petition to ascertain the nature of rights conferred to an Assessee or the Assessing Officer under the provisions of the Act. While doing so, if the rights violated are patent and caused infringement of right to either of the parties, then the aggrieved person is entitled for an appropriate relief.Thus, the objections raised by the learned Senior Standing Counsel appearing on behalf of respondents, stand rejected. Petitioner, fairly made a submission that all such disputes are to be adjudicated before the Competent Authority as the point of jurisdiction as well as the manner in which an order must be passed by the Dispute Resolution Panel, which is under challenge in the present writ petition. This Court is of the considered opinion that the DRP had failed to act in the manner as contemplated, more specifically, under sub-sections (5) and (6) of Section 144-C of the Income Tax Act and therefore, the order passed, rejecting the objections submitted by the Assessee, merely on the ground that the Assessee has not appeared on the hearing date, is infirm and liable to be quashed and accordingly, the same is quashed.

Summary

Issues Involved:
1. Competency of the Dispute Resolution Panel (DRP) to reject objections due to non-appearance of the Assessee.
2. Compliance with mandatory provisions under Section 144-C of the Income Tax Act by the DRP.
3. Violation of principles of natural justice and statutory rights of the Assessee.

Issue-wise Detailed Analysis:

1. Competency of the Dispute Resolution Panel (DRP) to reject objections due to non-appearance of the Assessee:
The primary issue raised was whether the DRP is competent to reject objections solely based on the non-appearance of the Assessee on the hearing date. The court noted that the DRP rejected the objections because the Assessee did not appear for the hearing on 20.11.2015. It was emphasized that the DRP did not consider the objections on file or provide any discussion or findings on the merits of those objections. The court held that the DRP's rejection of objections due to non-appearance resulted in the denial of an opportunity for adjudication, which is a violation of the Assessee's rights under the Income Tax Act.

2. Compliance with mandatory provisions under Section 144-C of the Income Tax Act by the DRP:
The court examined the provisions of Section 144-C, particularly subsections (5) and (6), which mandate the DRP to issue directions after considering various factors, including the draft order, objections filed by the Assessee, evidence furnished, and reports from relevant authorities. The court concluded that the DRP is bound to adjudicate objections on merits and cannot reject them merely due to non-appearance. The DRP's failure to comply with these mandatory provisions was deemed a violation of the Assessee's statutory rights.

3. Violation of principles of natural justice and statutory rights of the Assessee:
The court highlighted that the principles of natural justice require that an opportunity of being heard must be given to the Assessee and the Assessing Officer before issuing any directions under subsection (5) of Section 144-C. The DRP's rejection of objections without considering them on merits and without providing a fair hearing was a violation of these principles. The court emphasized that the DRP, being a quasi-judicial authority, must pass orders on merits and cannot reject objections solely on the ground of non-appearance.

Conclusion:
The court found that the DRP had failed to act in accordance with the mandatory provisions of subsections (5) and (6) of Section 144-C of the Income Tax Act. Consequently, the order passed by the DRP rejecting the objections due to non-appearance was quashed. The court also quashed the consequential assessment order passed by the Assessing Authority. The proceedings before the DRP were restored, and the DRP was directed to consider the objections afresh in compliance with the relevant provisions of the Act and Rules, affording an opportunity to both the Assessee and the Assessing Officer. Both writ petitions were allowed without any order as to costs.