2015 (3) TMI 108 - HC - Income Tax

Remitting the matter to higher forum for decision on merits - Remand of matter to the (AO) for reconsideration - whether the matter is to be remitted to the ITAT rather than to the AO? - Held that - The DRP s determination in these circumstances concerning the AY 2010-11 made earlier on 30.10.2013 stood. It is a matter of record that the revenue did not choose to either reopen the assessment in any manner nor call into question the decision of the DRP in terms of Section 253(2A) which enables revenue to approach the ITAT in respect of any of its grievances against the order of the DIT. This provision was supported by Finance Act 2012 w.e.f. 1.7.2012 - i.e. before the draft assessment order was made in respect of AY 2010-11. In these circumstances we are of the opinion that the restricted remand to the AO was not justified. At the same time this Court is not persuaded to the submissions of the revenue that since the assessee considered the entirety of circumstance for the other years in its order dated 28.11.2014 which led to the final assessment order dated 4.12.2014 which is in turn is the subject matter of the assessee s appeal before the ITAT the latter course is the most appropriate one. This is because the ITAT s impugned order in this case followed by the DRP was cryptic in its order and had nothing to say in respect of draft assessment order initially framed on 28.3.2013. Thus going through circumstance at two stages i.e. when the first draft assessment was made and subsequently under Section 263 the course of action urged by the revenue given that it also did not articulate grievance of the DRP s order is not appropriate. It would be in the fitness of things that the matter is remitted to the DRP rather than AO which would consider the matter referred to it and after hearing the submissions of the parties deal with them with proper reasoned order but in accordance with law.

Summary

Issues:
1. Question of law regarding ITAT's order remitting the matter to the AO for reconsideration based on three agreements forming the basis of DRP exercise.
2. Scope and merits of three agreements considered by AO for AY 2010-11 leading to reassessment notices for other years.
3. Objections filed before DRP, directions made, final assessment order framed, and subsequent proceedings for other years.
4. Argument for remitting the matter to ITAT rather than AO based on contracts scrutiny by statutory authorities.
5. Revenue's objection to unrestricted remand, AO's scrutiny of six contracts, and potential DRP involvement.
6. Assessment process, DRP's determinations, restricted remand to AO, and appropriateness of remitting matter to DRP.
7. Consideration of entirety of circumstances, course of action, and remittance to DRP for proper reasoned order.
8. Disposal of the appeal with directions for DRP proceedings and final assessment by AO.

Analysis:
1. The judgment addresses the question of law concerning the ITAT's order remitting the matter to the Assessing Officer (AO) for reconsideration based on three agreements forming the basis of the Dispute Resolution Panel (DRP) exercise. The AO had considered the scope and merits of these agreements for the assessment year (AY) 2010-11, leading to reassessment notices for other years, and objections filed before the DRP, which issued directions and framed final assessment orders.

2. The appellant argued for remitting the matter to the ITAT rather than the AO, emphasizing the scrutiny of six contracts by statutory authorities. The revenue objected to an unrestricted remand, advocating for AO's scrutiny of all contracts and potential DRP involvement. The court noted the assessment process, DRP's determinations, and the need for a proper reasoned order, ultimately deciding to remit the matter to the DRP for further consideration.

3. The judgment highlighted the importance of considering the entirety of circumstances, evaluating the course of action, and directing the remittance to the DRP for a proper reasoned order. The court emphasized the need for the DRP to complete its proceedings promptly and for the AO to pass the final assessment in accordance with the Income Tax Act. The appeal was disposed of accordingly, with directions for the DRP proceedings and final assessment by the AO.