Brief:- The DRP, being an authority created under a statute and conferred with the powers, has the obligation to act as a body living to the expectations which the law mandates. The DRP has to afford adequate opportunity for personal hearing and deal with the issues urged by a speaking order which would reflect cogent reasons. This is apt to say so that no assessee can have any kind of apprehension that the approach to the DRP is perfunctory.
Citation:- Ericsson AB versus Additional Director Of Income Tax Range 1, International Taxation New Delhi – W.P.(C) 689/2011
Court :- Delhi High Court
By this writ petition preferred under Article 226 of the Constitution of India, the petitioner has prayed for issue of a writ of certiorari for quashment of the draft assessment dated 31st December, 2010 passed under Section 144C(1) of the Income Tax Act, 1961 (for brevity, the Act) for assessment year 2007-08. Mr. S. Ganesh, learned senior counsel criticizing the said order has raised two-fold contentions:-
(a) The Assessing Officer while proceeding to frame the draft assessment order has not kept in view the proviso to sub section 3(d) of the Section 92C of the Act, which is mandatory in view of the decision rendered by this Court in Moser Baer India Ltd. and Others Vs.Additional Commissioner of Income-Tax and Another  316 ITR 1 (Delhi).
(b) When the Transfer Pricing Officer had accepted the transfer pricing and had directed that no transfer pricing adjustment was required to be done, it was incumbent on the part of the Assessing Officer to follow the same in letter and spirit and that being binding on him as per the provision contained in Section 92CA(4) of the Act.
2. Mr. Anupam Tripathi, learned counsel appearing for the Revenue submitted that the petitioner can file objection before the Assessing Officer as well as the Dispute Resolution Panel raising the said issue as postulated under Section 144C (2) and (5) so that the said authority, namely, Dispute Resolution Panel can advert to the same in proper perspective. It is contended by him that a complete proposal has been prescribed by the legislature to deal with such a situation and, therefore, it would be advisable in the facts and circumstances that the assessee must take recourse to the said remedy in spite of assailing the same in a writ petition.
3. To appreciate the rivalised submissions at Bar, we have carefully perused the scheme enshrined under Section 92C, 92CA(4) and Section 144C of the Act in entirety. Section 144C (2) to (7) read as follows:-
“(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,-
(a) file his acceptance of the variations to the Assessing Officer; or
(b) file his objections, if any, to such variation with,-
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if-
(a) the assessee intimates to the Assessing 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, 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 is received under sub-section(2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.
(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 inquiry 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 inquiry, as it thinks fit; or
(b) cause any further inquiry to be made by any income-tax authority and report the result of the same to it.”
4. On a perusal of the aforesaid provisions, we find the Dispute Resolution Panel on receipt of the objection has power to issue such directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. Sub-section 6 and 7 provide the guidelines and the manner in which the Dispute Resolution Panel shall carry the proceedings before it under the said provision.
5. We are of the considered opinion the said provisions cannot be treated as totally redundant or absolutely inefficacious remedy to the assessee. When a statute has provided a remedy as an intermediate stage, we are disposed to think, the assessee is under obligation to take recourse to the same.
6. In view of the aforesaid, we are inclined to grant liberty to the petitioner to file the objections within one week from today in accordance with the provisions contained in sub-section 2 of Section 144, thereafter the Dispute Resolution Panel shall proceed in accordance with the postulates laid down in sub-sections (5) to (7) of Section 144Cof the Act.
The Dispute Resolution Panel shall afford adequate opportunity for personal hearing to the appellant and deal with the issues urged by a speaking order which would reflect cogent reasons. We may hasten to add, when an authority is created under a statute conferred with the powers, it has the obligation to act as a body living to the expectations which the law mandates. We have thought it apt to say so, so that no assessee can have any kind of apprehension that the approach to the Dispute Resolution Panel is a perfunctory.
7. With the aforesaid directions, the writ petition stands disposed of with no order as to costs.
Dasti under signature of the Court Master.
SANJIV KHANNA, J.
FEBRUARY 04, 2011
e have ?l cm0P3(?on the correctness or otherwise of the said decision of the Tribunal as that was not the issue before us. The reason for taking note of this fact was that the learned counsel for the Revenue justified the protective assessment in the case of these assessees as his plea was that when it was not clearly ascertainable as to whether the addition should be made in the case of sood or these assessees, it was very well within the powers of the AO to make substantive addition in the case of Shri P.K. Sood and protective addition in these cases.
12. Coming to the powers of the AO to make addition on protective basis, the learned counsel referred to the judgment of the Supreme Court in the case of Lalji Haridas Vs. Income Tax Officer & Another and Chhotalal Haridas Vs. M.D. Karnik and Another [43 ITR 387] wherein the Court delineated the following principle justifying the reason for making protective addition:
“In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B. That being so, we do not think that Mr. Nambiar would be justified in resisting the inquiry which is proposed to be held by respondent No. 1 in pursuance of the impugned notice issued by him against the appellant.”
13. Following the aforesaid judgment, Gauhati High Court in the case of Jagannath Bawri and Others Vs. Commissioner of Income Tax and Others [234 ITR 464] has explained the concept of protective assessment in the following manner:
“As regards the contention of Ms. Hazarika, learned counsel for the petitioners about income-tax returns, on perusal of annexure-A series it can only be said that those documents are only intimation which is sent to the assessee specifying the sum so payable under section 143(1)(a). At any rate, the assessments made are only protective assessments. Under the law it is open to the department to make assessments on two persons in respect of the same income, where there is some ambiguity as to the liability to charge, Such assessments are made to protect the interest of the revenue so much so, unless such protective or alternate assessment is made, assessment proceedings against the party finally found to be liable may become barred by time. It has now become an established practice that in the case of doubt as to the person who will be and deemed to be in receipt of the income, it is open to the department to make protective or alternative assessment. “
14. What clearly emerges from the discussion in the aforesaid judgments is that even when there is no specific provision in the Income Tax Act for protective assessment, power lies with the AO to make such an assessment on protective basis under certain circumstances. When there is such a power to make the protective assessment while carrying out the normal assessment proceedings even in the absence of specific provision, we fail to understand how the absence of provision should be a ground to preclude the AO for making protective assessment in block assessment proceedings under Section 158BC/BD of the Act. Principle of law laid down by the Supreme Court holding that the AO has power to make protective assessment even when there is no specific provision under the Act would equally apply to the block assessment also.
15. We, therefore, are not in agreement with the approach of the Tribunal. We answer the question of law as formulated in the affirmative, i.e., in favour of the Revenue and against the assessee. As a result, these appeals are allowed and the impugned order passed by the Tribunal is set aside. Since the appeals were not disposed on merits, the matters are remitted back to the Tribunal for deciding the appeals on merits.
JANUARY 31, 2011