2023 (2) TMI 511 - AT - Income Tax

Assessment u/s 144C - Addition u/s 69A - direction of learned DRP is to delete the addition made in the draft assessment order - HELD THAT - Sub-section (10) of section 144C makes it clear that every direction issued by learned DRP shall be binding on the AO. Sub-section (13) of section 144C provides that after receiving the direction of learned DRP, AO shall in conformity with the direction complete the assessment without providing any further opportunity of being heard to the assessee. The requirement of providing a personal hearing to the assessee at the final assessment stage has been dispensed with only for the reason that the AO has no other scope but to implement the direction of learned DRP. In the facts of the present appeal, the only direction of learned DRP is to delete the addition made in the draft assessment order. Therefore, the clear mandate given to the AO by learned DRP is to restrict himself to delete the addition - Whereas, the Assessing Officer has travelled beyond the direction given by learned DRP and made addition which he himself accepted as explained in the draft assessment order. Thus, the impugned assessment order has been passed in clear violation of the directions of learned DRP. Therefore, the assessment order is a nullity in the eyes of law as it is against the provisions contained under sub-section (10) and (13) of section 144C of the Act. That being the factual and legal position, we quash the final assessment order.

Summary

Issues Involved:
1. Addition of Rs. 26,56,35,337/- under section 69A of the Income-tax Act, 1961.
2. Non-compliance with statutory notices by the assessee.
3. Duplication of transactions leading to an addition of Rs. 53,14,19,634/-.
4. Jurisdiction of the Assessing Officer in implementing Dispute Resolution Panel (DRP) directions.

Detailed Analysis:

1. Addition of Rs. 26,56,35,337/- under section 69A of the Income-tax Act, 1961:
The primary dispute in the appeal is the addition of Rs. 26,56,35,337/- under section 69A of the Act. The assessee, a non-resident corporate entity incorporated in the USA, did not file a return of income for the assessment year 2012-13. Based on information from the Annual Information Report (AIR) and the Non-Filers Monitoring System (NMS), the Assessing Officer (AO) noticed transactions involving sale and purchase in National/Multi-commodity exchange and foreign remittances totaling Rs. 79,70,54,971/-. The AO identified Rs. 26,56,35,337/- as the source of the remittances but treated the balance amount of Rs. 53,14,19,634/- as unexplained money under section 69A.

2. Non-compliance with statutory notices by the assessee:
The assessee did not respond to notices issued under sections 148 and 142(1) of the Act, leading the AO to issue notices under section 133(6) to various entities. The information received from DSP Merrill Lynch Ltd. indicated that the assessee had sold shares of Rain Commodities and Rain Industries Ltd. for Rs. 26,57,84,295/-. The AO added Rs. 53,14,19,634/- as unexplained money due to the assessee's non-furnishing of details.

3. Duplication of transactions leading to an addition of Rs. 53,14,19,634/-:
The assessee raised objections before the DRP, explaining that it had sold 92,50,000 equity shares for Rs. 26,57,84,297/- and that the other transactions were duplications. The DRP admitted additional evidence and forwarded it to the AO for verification. The AO did not comment on the merits of the evidence but reiterated the stand taken in the draft assessment order. The DRP, after verifying the evidence, concluded that the transactions aggregating Rs. 53,14,19,634/- were duplications and directed the AO to delete the addition.

4. Jurisdiction of the Assessing Officer in implementing DRP directions:
The AO, while implementing the DRP's directions, deleted the addition of Rs. 53,14,19,634/- but added Rs. 26,56,35,337/-, which was accepted in the draft assessment order. The Tribunal found this action unacceptable, as the AO exceeded his jurisdiction. The DRP's direction was to delete the addition, and the AO's action violated sections 144C(10) and 144C(13) of the Act. The Tribunal quashed the final assessment order, emphasizing the need for the AO to comply with DRP directions.

Conclusion:
The Tribunal allowed the appeal, quashing the final assessment order for non-compliance with DRP directions. The Tribunal also highlighted the issue of non-implementation of DRP directions by AOs and directed higher authorities to issue guidelines to ensure compliance. The judgment underscores the importance of adhering to statutory procedures and maintaining taxpayer confidence.