Case Law Details
Sulzer Pumps India Private Limited Vs DCIT (Bombay High Court)
Bombay High Court has set aside an assessment order issued to Sulzer Pumps India Private Limited for the Assessment Year 2017-18. The company had challenged the order, arguing that the Assessing Officer (AO) had proceeded to finalize the assessment despite the company having filed a reference with the Dispute Resolution Panel (DRP).
Sulzer Pumps contended that under Section 144C(2) of the Income Tax Act, 1961, an assessee has 30 days to file objections with the DRP and inform the AO. The company believed that with the advent of faceless assessments, the DRP would automatically communicate the reference to the AO. However, this did not occur, leading the AO to pass the assessment order after the 30-day period expired, unaware of the pending DRP reference.
The High Court acknowledged that while the company failed to directly inform the AO, the reference to the DRP was indeed filed and is still pending. The court emphasized that Section 144C(4) mandates the AO to pass a final order after considering the DRP’s views. Consequently, the court quashed the assessment order, the demand notice, and the penalty notice dated June 28, 2021. The High Court directed the AO to take further action only after the DRP issues its order on Sulzer Pumps’ reference. This ruling highlights the importance of the DRP process in assessment proceedings.
FULL TEXT OF THE JUDGMENT/ORDER OF BOMBAY HIGH COURT
1. Petitioner is impugning the Assessment Order dated 28th June, 2021 passed by Respondent No.2 under Section 143 (3) read with Section 144C (3) read with Section 144 B of the Income Tax Act, 1961 (the Act) for the Assessment Year 2017-18 and the consequential Notice of Demand and Show Cause Notice for penalty both dated 28th June, 2021 issued under Section 156 and 270 A respectively of the Act.
2. Petitioner’s case is that Section 144C (2) of the Act, inter alia, requires assessee to choose to file reference before the Dispute Resolution Panel (DRP) to file such objection before DRP within 30 days from the receipt of Draft Assessment Order. The section also requires assessee to file a copy of the reference with the Assessing Officer within the time limit prescribed. Section 144C (4) of the Act requires Assessing Officer to pass a final order within one month from the end of the month in which the period of filing of objections before DRP and Assessing Officer expires.
3. According to petitioner though Section 144C of the Act requires petitioner to communicate the reference filed it before the DRP to the Assessing Officer, petitioner was under a reasonable belief that, with the assessments being faceless and completely electronic, the reference filed by it would automatically communicated to Respondent No.2 by Respondent No.5 which is the DRP. Unfortunately, petitioner’s belief was not correct and the Assessing Officer not being aware of petitioner having filed reference before DRP, after expiry of prescribed period of 30 days proceeded to pass the Assessment Order dated 28th June, 2021 which is impugned in this petition.
4. The reference before DRP is still pending. It is also not disputed that petitioner had filed to directly communicate the reference to DRP to the Assessing Officer.
5. We have considered the petition, reply, rejoinder, sur-rejoinder and sur-sur-rejoinder and also heard Mr. S. Sriram and Mr. Suresh Kumar.
6. In our view since petitioner had already filed a reference raising his objections to the DRP and Section 144C (4) of the Act requires the Assessing Officer to pass the final order including the view expressed by the DRP, we will be justified in setting aside the order of the Assessing Officer dated 28th June, 2021 which is impugned in this petition. We would also observe that the Assessing Officer cannot be faulted for passing the impugned order. At the same time, the Assessing Officer will also have benefit of considering the views of DRP while passing a fresh Assessment Order.
7. Accordingly, petition is allowed in terms of prayer clause “a” which reads as under :-
a. That this Hon’ble Court be pleased to issue a writ of Certiorari or a writ in the nature of Certiorari or any other appropriate writ, order or direction under Article 226 of the Constitution of India calling for the records of the Petitioner’s case and after examining the legality and validity thereof quash and set aside :
(i) the impugned assessment order dated 28th June 2021 passed by Respondent No.2 under section 143(3) r.w.s. 144C(3) read with section 144B of the Act for the AY 2017-18 (Exhibit “R”) ;
(ii) the notice of demand dated 28th June 2021 issued under section 156 of the Act for AY 2017-18 (Exhibit “S”) ;
(iii) the show cause penalty notice dated 28th June 2021 issued under section 270A of the Act for AY 2017-18 (Exhibit “T”)
8. The Assessing Officer shall take further steps in the matter after the DRP passes its order on the reference filed by petitioner in accordance with law.
9. Petition stands disposed.
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