2022 (10) TMI 727 - AT - Income Tax

Rectification of mistake - Final assessment order and Dispute Resolution Panel ('DRP) directions passed without application of mind - Dispute Resolution Panel apparently on account of a word-processing cut-paste error, the directions so contained in the DRP‟s order incorporated directions relating to another group concern with a somewhat similar name, i.e. Michael Page International Pte Ltd- as against the assessee i.e. Michael Page International Recruitment Pvt Ltd. - HELD THAT - DRP Rules prescribes that After the issue of directions under rule 10, if any mistake or error is apparent in such direction, the panel may, suo motu, or on an application from the eligible assessee or the AO, rectify such mistake or error, and also direct the Assessing Officer to modify the assessment order accordingly . In the present case, the rectification has been done suo motu and the assessee has taken no objection to the rectification proceeding either. To this extent also, there is no infirmity in the rectification order passed by the learned DRP. Whether the rectification proceedings were carried out well within the permissible time?- AO even as of now, has the powers under section 154 to rectify the impugned assessment order since four years have not yet elapsed from the end of the financial year in which the assessment order was passed. It is so given the legal position under section 154(7), which provides that save as otherwise provided in section 155 or sub-section (4) of section 186, no amendment under this section (i.e. 154) shall be made after the expiry of four years from the end of the financial year in which the order sought to be amended was passed . When AO being an income tax authority under section 116, is allowed a certain time frame for the rectification of mistakes apparent on record in his orders, that time frame cannot be diluted, curtailed or otherwise narrowed down by us. It cannot thus be said that no useful purpose will be served by remitting the matter to the file of the AO even at this stage. To that extent, the plea of the assessee is incorrect. Quite contrary to what has been argued by the learned counsel for the assessee, if we are to quash the assessment order, as being urged by the learned counsel, these rectification powers will be preempted in the sense that once the assessment order itself is quashed, there will be nothing left to be rectified, as a consequence to rectification order passed by the DRP, even though the Assessing Officer has the time, permitted under the statute, to rectify the glaring mistake apparent on record in the impugned assessment order passed by him. We deem it fit and proper to reject the assessee's plea seeking quashing of the impugned order. The impugned order is erroneous inasmuch as it does not give effect to the rectification order passed by the Dispute Resolution Panel, and the right course of action to be followed, therefore, is that the impugned assessment order is to be modified, and subjected to rectification of mistake apparent on the record, in the light of rectification order passed by the Dispute Resolution Panel. In our considered view, therefore, the matter deserved to be remitted to the file of the AO for carrying out necessary rectifications of the impugned order by taking rectified and corrected DRP directions into account. Appeal is allowed for statistical purposes

Summary

Issues Involved:
1. Application of Mind in Final Assessment Order and DRP Directions
2. Timeliness of Revised DRP Directions
3. Opportunity of Being Heard

Detailed Analysis:

1. Application of Mind in Final Assessment Order and DRP Directions:
The assessee-appellant challenged the final assessment order dated April 3, 2021, arguing it was passed without application of mind. The DRP directions incorporated in the order pertained to a different taxpayer, Michael Page International Pte Ltd, instead of Michael Page International Recruitment Pvt Ltd. This error was acknowledged by the DRP and rectified on April 22, 2021. The appellant argued that the Assessing Officer should have noticed the error and not implemented the incorrect directions. The Tribunal agreed that the DRP's directions were incorrect but held that the Assessing Officer was bound to implement the DRP's directions as issued. The Tribunal found that the DRP had the power to rectify its directions under Rule 13 of the Income Tax (Dispute Resolution Panel) Rules 2009, and the rectification was done within a reasonable time frame. Therefore, the assessment order was not quashed but was to be modified to reflect the rectified DRP directions.

2. Timeliness of Revised DRP Directions:
The appellant contended that the revised DRP directions dated April 22, 2021, were passed beyond the due date of March 31, 2021, as specified under section 144C(12) of the Act, and thus should be considered time-barred. The Tribunal noted that while Rule 13 allows the DRP to rectify mistakes, it does not specify a time limit for such rectification. The Tribunal inferred a reasonable time limit for rectification, similar to the six months allowed under section 254(2) for the ITAT. Since the rectification was done within one month, it was considered within a reasonable time frame. The Tribunal also noted that the Assessing Officer still had the power to rectify the assessment order under section 154 within four years from the end of the financial year in which the order was passed.

3. Opportunity of Being Heard:
The appellant argued that the order was in violation of the principles of natural justice as they were not provided an opportunity for a personal hearing regarding the transfer pricing adjustment. The Tribunal did not specifically address this issue in detail but focused on the procedural aspects of the rectification and the application of mind in the assessment order. The Tribunal's primary concern was ensuring that the rectified DRP directions were correctly implemented in the assessment order.

Conclusion:
The Tribunal rejected the plea to quash the assessment order but directed that it be modified to reflect the rectified DRP directions. The matter was remitted to the Assessing Officer for necessary rectifications. The appeal was allowed for statistical purposes, and the Tribunal suggested that specific time limits for rectification orders and their implementation should be provided in the statute for clarity.