Introduction
The process of assessment proceeding always surrounds around vigilant taxpayer and a prudence officer, while the proceedings travels along various forums such as Commissioner of Income Tax (Appeals), Dispute Resolution Panel (‘DRP’) and other appellate authorities, the onus is on the taxpayer to keep a watch on the orders passed do comply with the power conferred to the office and is as per the provisions of the Income Tax Act (‘the Act’).
The revenue over the years is vehemently passing assessment orders not giving effect to the appellate authority’s directions. The action of revenue looks malicious yet might be a mistake apparent on records, in such case, arguably rectification application may be filed under section 154 of the Act, if it seen as a mistake, the AO can take preventive steps to rectify the same, held in the case of Hexaware Technologies Ltd[1].
Assessment order qualifies to be erroneous when not in line with DRP direction
The bigotry of revenue against the taxpayers continues even after the rectification application, rectification application can be initiated against the assessment order as well as the DRP directions when there exists a mistake apparent from record, held in the case of Stanley Black & Decker India Pvt Ltd[2] where the Hon’ble High Court of Karnataka held that the DRP was justified in assuming jurisdiction under Section 154 of the Act by virtue of rule 13 of DRP rules[3] and notes that section 154 empowers the tax authorities to rectify the mistake apparent from record.
DRP / CIT(A) shall be the last resort for the taxpayers to present their pleas before revenue authorities. Since they are first appellate authority in terms of hierarchy, the directions passed by them forms a major basis for deciding future disputes and adjustments, however, it is on the revenue to keep an eye on the DRP directions while passing the final assessment order and the duty of the taxpayer to act vigilantly while verifying the same.
The DRP shall pass the direction after hearing of the objections from the taxpayer, upon receipt of direction from DRP, the AO has to pass the assessment order in accordance with the procedure laid out under section 144C(13) and rule 10 of DRP rules. There are cases where the assessing officer has failed to follow the DRP direction and shall violate the provisions of the Act and make the order not in line with section 144C of the Act, a similar order was witnessed before the Hon’ble Income Tax Appellate Tribunal (‘ITAT’) of Delhi in the case of Comparex India (P.) Ltd. Vs. ITO[4], where the AO passed the assessment order by not giving effect to DRP directions (‘OGE’), however, the order was not rectified suo moto by the AO, consequently made the order invalid which was contrary to the provisions of Act and contrary to law, subsequently when the appeal is filed before ITAT, the order passed by AO was quashed.
Conclusion and way forward
The taxpayer are jittery and faces hardship when such clerical errors exists even after relief are granted by appellate authority. The error of not adhering to rule of law continues when the AO or the revenue authorities forego the provisions of the Act, when the rectification is not taken up by the AO in the case of OGE, the ITAT of Delhi case (supra) and Hexaware Technologies Ltd[5] case forms a clear precedent of granting relief to the taxpayer who are aggrieved from the order under similar circumstances.
[1] Hexaware Technologies Ltd. v. ACIT in Writ Petition No.1778 of 2023 order dated 3-5-2024 (para 13) followed
[2] [TS-387-HC-2024(KAR)-TP]
[3] Income-tax (Dispute Resolution Panel) Rules, 2009
[4] IT APPEAL NO. 2151 (DELHI) OF 2022
[5] Hexaware Technologies Ltd. v. ACIT in Writ Petition No.1778 of 2023 order dated 3-5-2024 (para 13) followed
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