2023 (9) TMI 1306 - AT - Income Tax

Validity of final assessment order - AO has not implemented the directions of DRP in letter and spirit as per the mandate of section 144C(13) - HELD THAT - As could be seen from the aforesaid observations of learned DRP, it has issued a specific direction to the AO to verify from his records whether he has asked for further details/query from the assessee during the remand proceeding, which the assessee did not furnish. In case, it is so, the addition to be retained. DRP had further directed, in case, AO has not asked for any clarification or conducted any inquiry during the remand proceeding, AO must record, as to why and under what circumstances, he did not conduct any inquiry relating to the manner of delivery of services or proof of employees visiting India for rendering such services, that too, without providing any opportunity to the assessee. DRP also directed the AO to pass a speaking order. On a reading of the final assessment order, more particularly, the observations of the AO in paragraphs 8 and 9, we are of the view that the AO has completely disregarded the specific directions of learned DRP and has passed the final assessment order in a perfunctory and cavalier manner. Thus, in our view, the Assessing Officer has disobeyed the statutory mandate. We are inclined to set aside the final assessment order and restore the matter back to the AO for fresh adjudication of the issues contested by the assessee in course of proceeding before DRP and before us, as well. AO is directed to consider the additional evidences furnished by the assessee before DRP on their own merits and pass assessment order with proper reasoning in the light of the directions issued by DRP. Before passing the order, AO must provide reasonable opportunity of being heard to the assessee. Grounds are allowed for statistical purposes.

Summary

Issues involved:
The judgment involves the failure of the Assessing Officer to implement the directions of the Dispute Resolution Panel (DRP) while passing the final assessment order under the Income-tax Act, 1961 for the assessment year 2014-15.

Details of the Judgment:

1. Background and Grievance: The appeal was filed against the final assessment order passed under section 147 read with section 144C(13) of the Act. The main grievance was that the Assessing Officer did not follow the directions of the DRP as mandated by the Act.

2. Factual Background: The assessee, a non-resident corporate entity from Switzerland, had received amounts from its Indian Associated Enterprise and Mumbai Airport Lounge Services Pvt. Ltd. The assessment was reopened under section 147, and the assessee filed its return of income later, claiming benefits under the India-Switzerland Double Taxation Avoidance Agreement.

3. Proceedings before DRP: The assessee submitted additional evidences such as Tax Residency Certificate, no Permanent Establishment Certificate, and contract documents before the DRP. The DRP issued directions to the Assessing Officer based on these additional evidences.

4. Non-Compliance with DRP Directions: The Assessing Officer passed the final assessment order without implementing the directions of the DRP, leading to the appeal.

5. Jurisdiction of DRP: The Tribunal noted that the DRP has the authority to admit additional evidences and issue binding directions to the Assessing Officer. The Assessing Officer's objections to the admission of additional evidences were deemed to be beyond his jurisdiction.

6. Disregard of DRP Directions: The Assessing Officer failed to follow the specific directions of the DRP in passing the final assessment order, leading to a violation of the statutory mandate.

7. Decision and Directions: The Tribunal set aside the final assessment order and directed the Assessing Officer to reconsider the issues based on the additional evidences submitted by the assessee before the DRP. The Assessing Officer was instructed to provide a reasonable opportunity for the assessee to be heard before passing the order.

8. Outcome: The appeal was allowed for statistical purposes, and the matter was remanded back to the Assessing Officer for fresh adjudication in accordance with the directions of the DRP and the Tribunal.

This summary provides a detailed overview of the issues involved in the judgment and the key points discussed in each issue, maintaining the legal terminology and significant phrases from the original text.