Motichand S Gupta

CBDT through its notification no. 84/2009 dated 20.11.2009 formed Dispute Resolution Panel (DRP). Assessee  whose case, there is variation in the income or loss returned which is arises as a consequence of the order of the Transfer Pricing  Officer (TPO) passed under 92CA(3) or any foreign company. In above case, Assessing Officer (AO) in the   first instance, forward a draft of the proposed order of assessment to the assessee before making any final order. On receipt of the direction from DRP U/s 144C(5), the AO will pass an order which is called as a order passed U/s 143(3) rws 144C(13) of the said Act. It implies that where there is variation in the income or loss returned other than 92CA(3), assessee can not approach to DRP. The advantage of approaching to DRP route is that AO can not press for demand if any arising in the draft order till the final order is passed U/s 143(3) rws 144C(13) and the assessee can approach to ITAT for further relief at faster.

Under sub section 2 of 144C, on receipt of the draft order, assessee shall within thirty days of the receipt of the order  –

  • File his acceptance of the variation to the AO, or
  • File his objection , if any, to such variation with –
  • the DRP ; and

DRP, on receipt of any objection is received, shall issue such directions, as it think fit, for guidance of the AO to enable him to complete the assessment. On receipt of the directions , the AO shall, compete the assessment order within one month from the end of the month in which such direction is issued. Assessee has an option not to press any objection raised originally,  in DRP hearing. Any demand arises on account of draft order will not be pressed by the AO during this period. On receipt of the assessment order, if assessee has still some grievance or want further relief can approach to 2nd appellate level ie ITAT at a faster level.

However, question arises as what will happen once the assessee could not able to file his objection within 30 days as prescribed U/s 2 of section 144C of the Act. Whether assessee can take up his grievance at CIT(A) or ITAT level.

The above intricacy was settled in case of M/s Inno Estate Private limited V/s DRP 2, ITO (Madras High Court). The issue is related to AY 2012-13 & briefly discussed as below –

The applicant is a private limited company engaged in the business of Real Estate Development of Residential plots. The applicant company filed its return of income as on 29.09.2012 with Nil income. The case was selected for scrutiny and a notice U/s 143(2) was issued well within time limit. During the assessment proceeding, it was noticed that applicant company had entered into an international transaction with it’s  Associated Enterprises  abroad and the value of same exceed Rs. 15 crore. Hence, the case was referred to the Transfer Pricing Officer (TPO) for determining the arms length price of the said transactions. The TPO vide its order dated 27.01.2016, calculated the arms length price of the said transactions of Rs. 3,67,55,978/- . Adopting the said order of TPO, the AO issued a draft assessment order under sec. 144C(1) of the said Act on 29.03.2016. The said draft order was served on the assessee on 29.03.2016. As per the provisions contained under section 144C(2) of the said act, the applicant is required to file their objections before DRP within 30 days of receipt of the draft order. However, the applicant filed their objections to DRP on 29.04.2016 ie delay of one day. Since, their was delay of one day, the DRP by order dated 10.11.2016 refused to condone the delay and thus, rejected  the objections. The DRP is this case did not issue any direction to AO as contemplated in sec. 144C(5) of the said Act. Pursuant of the said Order issued by the DRP, the AO passed a final assessment order U/s 143(3) r.w.s. 144C(13) of the said Act dated 18.11.2016 by making the adjustment as proposed by the TPO. Thus, consequently, a demand of Rs. 176,32,760/- was made. As against the impugned order, the applicant filed a Writ petition in this High Court seeking relief stated above.

The Hon’ble High Court ruled that in case of above situation where Order is passed U/s 143(3) 144C(13) of the said Act, the remedy available to applicant is to file first level appeal  ie before the Appellate Authority U/s 246(1)(a).

The Hon’ble Court held that rejection of objection filed be the petitioner, on the ground that it is barred by limitation, is in deed a direction under sub section (5) of the said provision. Once, the DRP has chosen to reject the objections either on merits or on the ground of delay, it goes without saying that resultant position of such rejection is nothing but confirmation of the draft order passed by the AO as contemplated 144C(8) of the said provision. Consequently, the final order passed by the AO on 18.11.2016 is certainly an order passed under section 144C (13) of the said Act, more particularly, when the DRP in its order dated 10.11.2016 clearly stated that the directions are communication to the assessee and the departmental authorities as per the provisions of section 144C (5) of the said Act.

The Hon’ble Court held that if objection is filed in time , then the DRP alone shall proceed to decide the matter as provided under section  144C(5) & (6) of the Said Act. Therefore, the AO can not proceed to pass the final order till the DRP passes an order as stated above, once the objection is filed within the period of limitation and, consideration of the same is vested only with the DRP as provided U/s 144C(5), (6) ,(7) & (8) of the said act and as such the AO can not decide such objection , therefore, filing of such objection before the AO within the time itself will not get over the period of limitation , if such filing before the DRP was after such period.

The Hon,ble Court ruled that the dismissal or rejection of the objection and communication of the same has to be treated and construed as a direction given to the assessing officer to complete the assessment as per draft order. Only when the panel chooses to reduce or enhance the variation proposed , it can give any specific direction. Therefore, the option available to the applicant in this case is to approach first appellate authority ie CIT(A) for relief U/s 246(1)(a) of the Act.

The extract of the 246(1)(a) provision is as follow –

(a) an order against the assessee, where the assessee denies his liability to be assessed under this Act, or an intimation under sub-section (1) or sub-section (1B) of section 143, where the assessee objects to the making of adjustments, or any order of assessment under sub-section (3) of section 143 or section 144, where the assessee objects to the amount of income assessed, or to the amount of tax determined, or to the amount of loss computed, or to the status under which he is assessed;

The Court ruled that when such statutory provision appellate remedy is available to the applicant, this Court is not inclined to entertain this write petition  by going into the contentions raised on the merits of the matter by either parties. It is well settled that when a statutory appellate remedy is available, more particularly in fiscal matters , parties should not be permitted to resort to the remedy under Article 226 of the Constitution of India. Accordingly, Writ petition was dismissed by the Court.

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June 2021