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2016 (9) TMI 601 - ANDHRA PRADESH HIGH COURT

2016 (9) TMI 601 - ANDHRA PRADESH HIGH COURT - [2017] 392 ITR 253 - Reference to Dispute Resolution Panel - DRP jurisdiction to pass an order - Held that:- Sub-section (12) of Section 144C, on the face of it, appears to pose an obstacle. Under sub-section (12), no direction can be issued by the DRP under sub-section (5), after the expiry of nine months from the end of the month in which the draft assessment order was forwarded to the eligible assessee. In this case we have found the date of forw .....

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d remit the matter back to them for a consideration on merits, inspite of the fact that the period stipulated in sub-section (12) would have expired by 31-5-2015. - In view of the above, the writ petition is allowed, the order of the Dispute Resolution Panel, Bengaluru, dated 22-6-2015 is set aside and the DRP, Bengaluru is directed to take up Form 35A filed by the petitioner along with the annexures and the evidence for a consideration on merits. The DRP shall give opportunity of hearing to .....

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he miscellaneous petitions, if any, pending in this writ petition shall stand closed. There will be no order as to costs. - Writ Petition No.33342 of 2015 - Dated:- 31-8-2016 - SRI V.RAMASUBRAMANIAN AND SMT ANIS, JJ. For The Petitioner: Mr. Deepak Chopra For The Respondents: Mr. B.Narasimha Sarma, Senior Standing Counsel Order: (per V.Ramasubramanian, J.) The petitioner has come up with the above writ petition seeking a declaration that the proceedings issued by the Deputy Commissioner of Income .....

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Petroleum Coke and Power Generation in the State. 4. The petitioner filed its return of income on 30-9-2008 for the Assessment Year 2008-09 declaring a loss of ₹ 23,71,90,124/- after claiming exemption of an amount of ₹ 84,87,05,352/- under Section 10B. The petitioner was liable to pay taxes under Section 115JB on its book profits. 5. The case of the petitioner was taken up for scrutiny and after considering the documents, an order under Section 143(3) was passed on 25-01-2012. By t .....

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file its return of income. The petitioner submitted a letter dated 16-4-2013 requesting the Department to treat the return of income filed on 30-9-2008 as the return. Thereupon, the Assessing Officer sent a communication dated 31-7-2013, stating the reasons for reopening of assessment. The petitioner submitted its objections on 19-8-2013. 8. Thereafter the Deputy Commissioner, passed a draft assessment order dated 26-3-2014 computing the total income at ₹ 34,62,48,597/-, as against the los .....

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2) (b). 11. When the objections of the petitioner were pending before the Disputes Resolution Panel, at Hyderabad, the Central Board of Direct Taxes issued instructions dated 01-01-2015, reconstituting the jurisdiction of the Disputes Resolution Panel. As per these instructions, the Disputes Resolution Panel, Bengaluru assumed jurisdiction over the States of Andhra Pradesh and Telangana. Therefore the objections raised by the petitioner were transferred to the Disputes Resolution Panel, Bengalur .....

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on the objections of the petitioner. 14. Immediately the Assessing Officer passed a final assessment order dated 28-8-2015. Aggrieved by the final assessment order and the decision of the Disputes Resolution Panel, Bengaluru, the petitioner is before us. 15. The main grounds on which the petitioner challenges the decision of the Disputes Resolution Panel, and the consequential order of assessment are as follows: (1) that the period of nine months stipulated in sub-section (12) of Section 144-C .....

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wrongly thought that the time limit expired on 31-12-2014, (3) that the Disputes Resolution Panels order to the effect that Form 35A was not filed, was factually incorrect, (4) that the Assessing Officer complicated matters by presuming the order of the Disputes Resolution Panel dated 22-6-2015 to be a direction under sub-section (5), and (5) that if the petitioner had not filed their objections to the draft assessment order within time, the Assessing Officer could have passed the final assessm .....

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ution Panel as well as the Assessing Officer. Therefore it is necessary to extract Section 144-C. It reads as follows: 144C. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is .....

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g Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 or section 153B, pass the assessment order under sub-section (3) within one month from the end of the month in which, (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection .....

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ity; (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 directions 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 .....

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der, notwithstanding that such matter was raised or not by the eligible assessee. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on s .....

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, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub- section (2) by the eligible assessee. 48b[(14A)The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Off .....

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of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any foreign company. History and object behind Section 144-C:- 18. Section 144-C was inserted in the Income Tax Act by Finance (No.2) Act, 2009 with effect from 01-4-2009. The reason for the insertion of Section 144-C was given in the Notes on Clauses, Finance Bill, 2009, as under: The subjects of transfer pricing audit and the taxation of foreign companies are at nascent stage in India. Often the Assessing O .....

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nism. 19. It appears that from the time Section 144-C was inserted, there have been some misgivings and misunderstandings. The Government notified the Dispute Resolution Panel Rules by S.O. No.2958 (E), dated 20-11-2009. Thereafter, an Explanatory Circular for Finance (No.2) Act, 2009 was issued in Circular No.5/2010, dated 03-6-2010. Paragraph 45 of the said Circular explained the new Section 144-C and the consequential amendments made in the other Sections of the Act. While doing so, the Circu .....

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assessment year to which it pertains. 21. Nevertheless, paragraphs 45.1 to 45.4 of Circular No.5/2010, dated 03-6-2010, sought to explain the substance of the provisions of Section 144-C. In brief, the contents of paragraphs 45.1 to 45.4 can be summarised as follows: (1) The Dispute Resolution Mechanism presently in place, is time consuming and finality in high demand cases is attained after long drawn litigation to the Supreme Court. Therefore in order to address the concern of the multi- nati .....

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ppellate Tribunal. It means a finality was sought to be attached to the directions issued by the Dispute Resolution Panel. (4) Since the Dispute Resolution Panel is provided as an alternative mechanism for the resolution of disputes, the choice is upon the assessee whether to file an objection against the draft assessment order before the DRP or to pursue the normal channel of filing of appeal against the assessment order before the Commissioner (Appeals). 22. An interesting aspect to be taken n .....

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remedy to go before the DRP, would take away the right of appeal. Therefore, it is clear that the option exercised by an assessee to avail the alternative mechanism of dispute resolution, by going before the DRP, cannot be rendered an exercise in futility, by throwing the objections out, on flimsy grounds. 23. As a matter of fact, the Central Board of Direct Taxes had already issued a set of rules known as Income Tax (Dispute Resolution Panel) Rules, 2009, in exercise of the powers conferred by .....

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g to the assessee, as per Rule 6 the Panel should call for the records and as per Rule 7 the Panel should hear both parties and thereafter pass an order. Rule 9 empowers the Panel to call for or permit any additional evidence. 24. Interestingly Rule 8 of these Rules stipulates that if the eligible assessee dies or adjudicated as insolvent or wound up (in the case of a limited company) after the filing of objections, the proceedings before the Panel shall not abate. 25. With regard to the power o .....

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der Rule 14 of these Rules, an appeal against the assessment order passed in pursuance of the directions issued by the Panel under sub-section (5), should be filed before the Appellate Tribunal in Form No.36B. Therefore para 45.4 of Circular No.5/2010, has to be understood to convey a limited meaning that an assessee is not entitled to file an appeal against the draft assessment order. But once a final assessment order is made as per the directions issued by DRP, the same can be the subject matt .....

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of service of the draft order. Therefore the DRP has wondered in para 3 as to how it could have taken five long months for the draft assessment order to be served on the assessee. 30. But unfortunately, the Tribunal, in our considered view, misdirected the above question to the assessee. We have already extracted Section 144C. Sub-section (1) of Section 144C makes it mandatory for the Assessing Officer to forward a draft assessment order to the assessee. What is the meaning of the expression fo .....

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he draft order. The word receipt is used twice in sub-section (2). Sub-section (2) begins with the words on receipt of the draft order, the eligible assessee shall, within 30 days of the receipt by him of the draft order. 32. Therefore the word forward appearing in sub-section (1) cannot have a meaning that is completely contrary to the words and expressions found in sub-section (2). Unless the word forward is understood to mean actual service of the copy of the draft assessment order on the ass .....

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le objections, would start running only from the date on which the assessee receives the draft assessment order. 34. In the case on hand, the Department has no doubt produced a letter dated 26-3-2014, by which the draft assessment order was purportedly forwarded to the assessee. But it is not indicated anywhere as to how the service of the same on the assessee was sought to be effected. In an Additional Counter Affidavit filed by the Joint Commissioner of Income Tax, she has indicated that the o .....

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taiah does not even contain a date. Even the Tear off acknowledgment slip that contains the endorsement of the Notice Server on the reverse, does not bear a date. On the contrary, the Tear off acknowledgment slip relating to the copy of the draft assessment order actually served on the writ petitioner, contains the date 22-8-2014. Therefore the claim made in the Additional Counter Affidavit by the Assessing Officer that the draft assessment order was sent on 26-3-2014, is completely contrary to .....

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on the objections filed by the petitioner to the draft assessment order. 37. Therefore it is clear (1) that even as per the Tear off acknowledgment slip produced by the Department, the draft assessment order was received by the assessee only on 22-8-2014 (2) that even as per the Secretary of the DRP, Hyderabad, the time prescribed under sub-section (12) of Section 144-C, was to expire only in June or August, 2015 and (3) that therefore the stand taken by DRP, Bengaluru in its impugned communica .....

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rity, on pure technicalities (and not on merits) is found to be not in accordance with law, then the normal course to be adopted by a Court would be to send the matter back to the same Authority for a consideration on merits. Therefore once we find that the DRP, Bengaluru had wrongly rejected the objections of the petitioner without going into the merits, the logical consequence of such a finding would be to set aside the order of rejection of the DRP and to send the matter back to the DRP for a .....

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e period stipulated under sub-section (12) would expire by 31-5-2015. But the DRP passed an order on 22-6-2015 holding that it had lost jurisdiction to pass an order on 31-12-2014 itself. Even though the date mentioned is not correct, the fact remains that the DRP could not have issued any direction after 31-5-2015, even on undisputed facts. 41. The question that then arises is as to whether this Court can now issue a direction to the DRP to consider the matter on merits and pass an order. 42. W .....

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rescription contained in sub- section (12) is mandatory that goes to the root of the jurisdiction of the DRP to pass an order. If what is prescribed by sub-section (12) is a jurisdictional issue, then the Court cannot ask the DRP to do something for which they have no jurisdiction. 43. But the bar under sub-section (12) of Section 144C does not appear to be one that goes to the root of the jurisdictional issue. The reasons are two-fold. The first is that as per the scheme of Section 144C, the DR .....

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tter. 44. The second reason as to why we opine so is that the Supreme Court itself has understood Section 144C to be of such nature. In Additional CIT v. HCL Technologies Ltd., decided on 07-9-2009 and reported in (2010) 188 Taxmann 303, the Supreme Court disposed of an appeal filed by the Revenue, directing the authorities to take recourse to the alternative dispute resolution mechanism suggested under Section 144C. Though the said order of the Supreme Court is a brief order, which did not lay .....

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