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TMI Blog2022 (1) TMI 1353X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the objections raised by the petitioner. 4. The petitioner is a company engaged in the business of manufacturing active pharmaceutical ingredients, finished dosage formulations, injectable formulations, besides conducting research and development activities. It is an assessee under the Income-tax Act, 1961 (briefly, "the Act" hereinafter). 5. For the assessment year 2018-19, the petitioner filed return of income on November 27, 2018 declaring a loss of Rs. 458,26,55,237. The case of the petitioner was selected for scrutiny under the computer aided scrutiny selection (CASS) system of the Income-tax Department. 6. Pursuant thereto, a notice dated September 23, 2019 was issued to the petitioner under section 143(2) of the Act which was responded to by the petitioner vide its letters dated October 15, 2019 and July 20, 2020. Further, notice dated December 10, 2020 was issued by respondent No. 1 to the petitioner under section 142(1) of the Act. This was also responded to by the petitioner on December 24, 2020. 7. The petitioner was asked to justify the liability of depreciation on good- will by further notices dated August 13, 2021 and August 24, 2021 issued under section 142(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... x Appellate Tribunal, Hyderabad "A" Bench, Hyderabad in I. T. A. No. 2335/HYD./ 2018 for the assessment year 2014-15 dated November 13, 2019. The further contention of the petitioner is that such disallowance of depreciation on goodwill is contrary to the judgment of the Supreme Court in CIT v. Smifs Securities Ltd. [2012] 348 ITR 302 (SC). 13. When the matter was being heard, this court passed an order on October 29, 2021 that the Dispute Resolution Panel shall not pass final order on the draft assessment order, which order has been continued since then. 14. The respondents have filed counter-affidavit contending that the writ petition is premature, it being directed against the draft assessment order. Even after the draft assessment order is finalised, there is a hierarchy of appeals for the petitioner to avail of if it is aggrieved. Interference at this stage would not be justified. That apart, disallowance of depreciation on goodwill has been justified on merit. 15. In the reply-affidavit, the petitioner has reiterated the averments made in the writ petition besides contending that the impugned draft assessment order is in contravention of the principles of natural justice a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, at this stage, no interference is called for. He has also filed a compilation of judgments wherefrom he has referred to the case of CIT v. Chhabil Dass Agarwal [2013] 357 ITR 357 (SC) to contend that the High Court would not interfere in writ jurisdiction if there is an adequate and efficacious alternative remedy available to the person aggrieved and he has approached the High Court without availing of such alternative remedy. 19. Responding to the above contention of Mr. J. V. Prasad, Mr. Eashwar, learned counsel for the petitioner has referred to section 144C of the Act, more particularly, to sub-section (2) thereof, and submits that the Dispute Resolution Panel does not have the mandate to set aside the draft assessment order and remand the same to the Assessing Officer for fresh consideration. He has also highlighted what was extracted by the Bombay High Court in BA Continuum (supra) the observations of Megarry, J in Leary v. National Union of Vehicle Builders [1911] 1 Ch. 34 that : "if the rules and the law combine to give the member the right to a fair trial and the right of appeal, why he should be told that he ought to be satisfied with an unjust trial and a fair ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely :- (a) draft order ; (b) objections filed by the assessee ; (c) evidence furnished by the assessee ; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority ; (e) records relating to the draft order ; (f) evidence collected by, or caused to be collected by, it ; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any direc tions referred to in sub-section (5),- (a) make such further enquiry, as it thinks fit ; or (b) cause any further enquiry to be made by any Income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub- section (5) for further enquiry and passing of the assessment order. Explanation.-For the removal of doubts, it is hereby d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... introducing a mechanism with dynamic jurisdiction for issu ance of directions by dispute resolution panel. (14C) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (14B), by notification in the Official Gazette direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification : Provided that no direction shall be issued after the 31st day of March, 2022. (14D) Every notification issued under sub-section (14B) and sub- section (14C) shall, as soon as may be after the notification is issued, be laid before each House of Parliament. (15) For the purposes of this section,- (a) 'Dispute Resolution Panel' means a collegium comprising of three Principal Commissioners or three Commissioners of Income-tax constituted by the Board for this purpose ; (b) 'eligible assessee' means,- (i) any person in whose case the variation referred to in sub-sec tion (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA ; and (ii) any non-res ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s an oversight body for the guidance of the Assessing Officer. The object behind constitution of the Dispute Resolution Panel appears to be to ensure that the assessment proceedings are kept within the bounds of law while adhering to the principles of natural justice. Though the Assessing Officer has been empowered under section 144C to frame draft assessment order, the same is however subject to confirmation by the Dispute Resolution Panel. 30. We have already noticed that under sub-section (5), the Dispute Resolution Panel has the mandate to issue directions for guidance of the Assessing Officer while framing the assessment and under sub-section (8) the Dispute Resolution Panel may confirm or reduce or enhance the variations proposed in the draft assessment order. Both sub-sections (5) and (8) have to be read together, and from a conjoint reading of the two provisions it is clearly discernible that the final say, in so far as the assessment is concerned, rests with the Dispute Resolution Panel. This has been made further clear by sub-section (10) which says that every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. The words used in su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether goodwill is an asset within the meaning of section 32 of the Income-tax Act which the court answered in the affirmative. However, it may be noted that the decision in Smifs Securities was without considering the provi sions which were relevant to the issue on hand, such as sixth proviso to section 32, as the same were not argued before the court. Hence, the decision of the hon'ble court in Smifs Securities case cannot be extended on the points which were not argued or evaluated at all. In other words, while the court has decided that goodwill is a depre ciable asset, it is to be noted that there was no contention before the court as to whether difference arising out of amalgamation was good will eligible for depreciation. (c) In its submissions, the assessee has also relied on the hon'ble Income-tax Appellate Tribunal judgment in its own case for the assessment year 2014-15. A fine reading of the hon'ble Income-tax Appellate Tribunal judgment in the assessee's own case for the assessment year 2014-15 reveals that the Tribunal has not specifically concluded on the applicability of sixth proviso to section 32(1) of the Act in the case of goodwill arising on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Clearly, the rate of depreciation/amor tisation is different as per Accounting Standards and as per Income- tax Act. In view of the above discussions, depreciation claimed on goodwill at Rs. 414,62,02,004 is disallowed." 33. The approach of the Assessing Officer, as manifest in clauses (a) to (d) as extracted above, to our mind is problematic. In so far as the decision of the Income-tax Appellate Tribunal, Hyderabad "A" Bench, Hyderabad in respect of petitioner's own case for the assessment year 2014-15 is concerned, the Assessing Officer has stated that the Department has not accepted the said decision. The views of the Income-tax Appellate Tribunal is not acceptable to the Department, and therefore, it has been appealed before the High Court. As such, the issue of addition of depreciation claimed on goodwill has not attained finality. 34. We are afraid such a view taken by the Assessing Officer can be justified. Rather, it is highly objectionable for an Assessing Officer to say that the decision of the Income-tax Appellate Tribunal is not acceptable ; and that since it has been appealed against, the issue of allowability of depreciation on goodwill has not attained fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Assessing Officer that since the decision of the Income-tax Appellate Tribunal in the case of the petitioner itself for the assessment year 2014-15 has been appealed against the issue in question has not attained finality, is not only wrong but is required to be deprecated in strong terms being highly objectionable. 40. The second view expressed by the Assessing Officer vis-a-vis the decision of the Supreme Court in Smifs (supra) is still more problematic. It is not open to the Assessing Officer to try to evade from the binding effect of a Supreme Court decision by trying to find out "distinguishing features". Though unnecessary, we are still compelled to refer to article 141 of the Constitution of India which says that the law declared by the Supreme Court shall be binding on all courts within the territory of India. Therefore, it is the bounden duty of all authorities whether administrative or quasi judicial or judicial to follow the law declared by the Supreme Court. 41. While we agree with the learned standing counsel that the draft assessment order has not yet attained finality as it still has to be placed before the Dispute Resolution Panel and therefore, in the cir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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