Case Law Details

Case Name : Bank of America NA Vs Assistant Director of Income-tax (IT) (ITAT Mumbai)
Appeal Number : IT Appeal No. 7100 (Mum.) of 2010
Date of Judgement/Order : 30/10/2012
Related Assessment Year : 2006-07
Courts : All ITAT (4274) ITAT Mumbai (1425)

IN THE ITAT MUMBAI BENCH ‘L’

Bank of America NA

Versus

Assistant Director of Income-tax (IT)

IT Appeal No. 7100 (Mum.) of 2010

[Assessment year 2006-07]

OCTOBER 30, 2012

ORDER

Vijay Pal Rao, Judicial Member

This appeal by the assessee is directed against the assessment order dated 20.8.2010 passed u/s 144C(143) r.w.s 143(3) in pursuant to the directions of the DRP u/s 144C(5) of the IT Come dated 13th July 2010 for the Assessment Year 2006-07.

2. The assessee has raised various grounds in this appeal. However, first we will take up the issue of validity and maintainability of the assessment order dated 20th Aug 2010 as raised in the ground no.1 of the assessee’s appeal.

3. We have heard the ld Sr counsel Shri P J Paridiwala as well as the ld DR Shri Narendra Kumar and considered the relevant material on record. Ld Sr counsel Shri Paridiwala has narrated the facts of the case and submitted that the draft order in this case was passed by the Assessing Officer on 29th Dec 2009 which was served on the assessee on 30th Dec 2009. The assessee filed its objections to the draft order before the DRP on25th Jan 2010. Subsequent to the filing the objection, the assessee came to know about the CBDT circular dated 20th Jan 2010 whereby it was clarified that the assessee has the option to either file objections before the DRP or to challenge the assessment framed as per the normal appellate channel. The ld Sr counsel has referred para 4 of the said clarification at page 33 of the paper book and submitted that prior to this notification, this position was not clear to the tax payers.

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3.1 Consequently, the assessee decided to opt the normal appellate channel and accordingly filed a letter dated 29.1.2010 before the DRP withdrawing its objections filed on 25.1.2010. Thus, the ld Sr counsel has submitted that the assessee made it clear that in view of the clarifications of the CBDT, the assessee desired to exercise the option of filing an appeal before the Commissioner of Income Tax (Appeals) against the assessment order instead of filling objections before the DRP.

3.2 The assessee has also filed a letter dated 29.1.2010 with the Assessing Officer on that very date informing him about the objections filed before the DRP have been withdrawn and requesting him to pass an assessment order within the prescribed time. The Assessing Officer passed an order dated 10.2.2010 u/s 144C(3) r.w.s 143(3), which was served on the assessee on 16.2.2010. The ld Sr counsel has pointed out that the Assessing Officer has also raised a tax demand of Rs. 36,34,74,134/- as per the order dated 10.2.2010 at page 63 of the paper book. After adjusting the refund, the assessee paid the balance tax demand of Rs. 1,23,45,994/- vide challan dated 26.3.2010.

3.3 The assessee filed appeal against the assessment order dated 10.2.2010 before the Commissioner of Income Tax(Appeals) which was pending for disposal. In the meantime, the assessee received a letter dated 20.4.2010 from the DRP for fixing the hearing on 28.4.2010. In response to the said letter, the assessee submitted a letter dated 23.4.2010 to the DRP informing them about the withdrawal of the application/objections and filing of appeal to the Commissioner of Income Tax(Appeals). The assessee has also filed a detailed note before the DRP explaining all the facts and submitted that in view of the clarification issued by the CBDT, the assessee withdrawn its objections filed before the DRP and also requested the Assessing Officer to pass an order as per the provisions of sec. 144C(3), which was passed by the Assessing Officer within the prescribed period and the assessee has already filed an appeal before the Commissioner of Income Tax(Appeals) against the said assessment order. Thereafter, the DRP has passed the directions dated 13.7.2010 whereby the objections filed before the DRP have been dismissed as withdrawn and the Assessing Officer was directed to complete the assessment as proposed in the draft order.

3.4 The ld Sr counsel has submitted that when the Assessing Officer has already passed the order u/s 144C(3) r.w.s 143(3) after the clarification issued by the CBDT, then the application/objection before the DRP is to be treated as non-est and the DRP became functus offico. He has further submitted that the objections were withdrawn by the assessee prior to the issue of notice of hearing in the matter and also prior to the expiry of 30 days from the date of receipt of the draft order from the Assessing Officer. Therefore, no direction ought to have been issued by the DRP.

3.5 The ld Sr counsel has further submitted that the Assessing Officer has again passed an order dated 20.8.2010 in pursuant to the directions of the DRP, which is bad in law in view of the facts that the objections filed before the DRP stands infrucutuous and withdrawn as well as the subsequent assessment order passed by the Assessing Officer under the provisions of sec. 144C(3) and within the permissible time limit as prescribed u/s 144C(4). Further, the assessee preferred an appeal before the Commissioner of Income Tax(Appeals) against the assessment order dated 10.2.2010. Thus, ld Sr counsel has submitted that the directions passed by the DRP as well as the assessment order dated 20.8.2010 passed in pursuant to the directions are bad in law and liable to be quashed.

3.6 On the other hand, the ld DR has fairly accepted the factual position that there are two assessment orders passed in this case, one u/s 144C(3) and another one u/s 144C(13) of the I T Act and accordingly, the second assessment order may be quashed.

3.7 The ld Sr counsel has pointed out that the Commissioner of Income Tax(Appeals) has dismissed the appeal filed by the assessee by taking note of the fact that the DRP has already passed the directions; therefore, the directions may be issued for reviving of the appeal of the assessee before the Commissioner of Income Tax(Appeals).

4. Having considered the rival submissions and carefully perusal of the relevant material on record, we find that the Assessing Officer has passed two orders in this case one u/s 144C(3) dt 10.2.2010 and another u/s 144C(13) dt 20.8.2010. Both these orders are identical and with same demand of tax. There is no dispute about the fact as explained by the ld Sr counsel that against the draft order dt 29.12.2009 passed u/s 144C(1), the assessee filed its objection dt 25.1.2010 before the DRP. However, in the meantime, the CBDT issued a clarification dt 20.1.2010 regarding the option of an assessee either to go before the DRP or to prefer the normal appellate channel. It was further clarified by the CBDT that it is the choice of the assessee whether to file an objection before the DRP against the draft assessment order or to exercise the option and file an appeal later before the Commissioner of Income Tax(Appeals) against the assessment order passed by the Assessing Officer. When the clarification came to the knowledge of the assessee it had immediately filed a letter dated 29.1.2010 before the DRP for expressing the exercise of the option of filing an appeal before the Commissioner of Income Tax(Appeals) and withdrawing the objections filed u/s 144C(2).

4.1 Though, the assessee had an option to exercise either to file the objection before the DRP against the proposed draft assessment order or to opt for an appeal before the Commissioner of Income Tax(Appeals) against the assessment order passed u/s 144C(3). However, once the assessee has filed the objection before the DRP, even though the assessee has liberty to withdraw the same, the proceedings before the DRP would not automatically close because the DRP is having the powers of enhancement of the variation as proposed in the draft order. Therefore, without permission of the DRP, the application/objection, once filed, cannot be withdrawn by the party in view of sub. Sec. (7) & (8) of section 144C of the I T Act which read as under:

“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 the various proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub section (5) for further enquiry and passing of the assessment order.”

4.2 Since in the case in hand, the DRP after taking note of the fact that the assessee desires to exercise the option to file the appeal before the Commissioner of Income Tax(Appeals) against the assessment order, accepted the request of the assessee for withdrawal of the objection while passing the order dt 13.7.2010 and therefore, no direction per-se were passed by the DRP as per sub. Sec. (5) of sec 144C of the Act. We quote the order of the DRP as under:

“In this case, draft assessment order dated 29.12.2009 was issued by the Assesing Officer against which the assessee has filed following objections before the Dispute Resolution Panel vide its letter dated 25.1.2010.

** ** **

Subsequently, vide letter dated 29th January, 2010, the assessee made a request for withdrawal of the objections filed before the DRP mentioning that they intend to opt to proceed to the normal appellate authority i.e. the CIT(A). Assessee was given opportunity of being heard and Shri Virendra A. Mittal, partner Deloitte Harkins & Sells, the authorized representative and Mr. Saurabh Doshi, Asst. Vice President, Country Tax & Finance Bank of America NA attended the proceedings on 28.4.2010. Assessee confirmed its request for withdrawal of objection. In view of the request of the assessee, the objections filed before the Panel are dismissed as withdrawn. The Assessing Officer is directed to complete assessment as proposed in the draft order.”

5. Even otherwise, when the objections filed by the assessee were allowed to be withdrawn on the ground that the assessee intend to exercise the option to proceed to file appeal before the Commissioner of Income Tax(Appeals), then there cannot be any direction under sub-sec. (5) in the absence of any objection as required under sub-Sec. (2) of sec. 144C of the Act. It is clear from the order dated 13.7.2010 of the DRP that the DRP has not issued any direction on merits of the proposed draft assessment order; therefore, the Assessing Officer got no jurisdiction to pass any order u/s 144C(13). Hence, the order dated 20.8.2010 passed u/s 144C(13) r.w.s 143(3) by the Assessing Officer is without jurisdiction and accordingly is not sustainable.

5.1 Even otherwise, when the Assessing Officer has already passed an assessment order dt 10.2.2010 u/s 144C(3), then the second order would result multiplicity of litigation.

6. In view of the facts and circumstances of the case, we hold that the order dated 20.8.2010 is invalid for want of jurisdiction and accordingly the same is quashed. Since the order of the Commissioner of Income Tax(Appeals) whereby the appeal of the assessee against the assessment order dt 10.2.2010 was allegedly dismissed is not a subject matter before us in the present proceedings; therefore, we do not propose to pass any direction in that respect. However, the assessee otherwise is at liberty to take legal remedy as per law.

7. In the result, the appeal filed by the assessee is allowed.

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