2014 (5) TMI 590 - HC - Income Tax

Petitioner can refer draft assessment to DRP for international transactions. Penalty orders not enforced during DRP appeal.

SIS Live Versus Union of India Through Ministry of Finance and Another

The Court held that the petitioner could validly refer the draft assessment order to the Dispute Resolution Panel (DRP) under Section 144C for ... Validity of order u/s 144C of the Act – Recommendation of TPO – Maintainability of objections – Held that:- Upon the assessee’s availing of the remedy of a reference to the DRP – it shall be considered on its merits unhindered by any question of limitation - the AO may make the reference order within the time permitted by law - the penalty orders should be separately appealed - orders appear to be prima facie consequent to the draft assessment order - Revenue is directed not to enforce it during the pendency of the reference before the DRP – Decided in favour of Assessee. Issues: Validity of draft assessment order under Section 144C, Maintainability of objections, Eligibility for reference to Dispute Resolution Panel (DRP), Penalty orders under Section 92D and related sections, Enforcement of penalty orders during pendency of reference.In this case, the petitioner challenged a draft assessment order dated 10.03.2014 issued by the Assessing Officer under Section 144C based on Transfer Pricing Officer (TPO) recommendations. Initially, the petitioner contended that no objections could be made regarding this order. The respondents clarified that the Assessee was eligible for reference to the DRP under Section 144C due to international transactions with its Associated Enterprise. The Court held that a valid reference could be made to the DRP in respect of the draft assessment order. Additionally, penalty orders for alleged violations of Section 92D leading to penalties under Sections 271G, 271AA, and 271BA of the Act were also passed (annexure P-2, 3, and 4). The Court directed that the petitioner could approach the DRP within two weeks, and the AO should frame the assessment order within the prescribed time. The penalty orders were to be separately appealed, and the Revenue was directed not to enforce them during the DRP reference, provided the assessee approached the appellate authority within two weeks. The Court emphasized that the question of limitation would not arise in such appeals.The judgment highlighted the importance of the Assessee's eligibility for reference to the DRP under Section 144C, the necessity of timely framing the assessment order by the AO, and the separate appeal process for penalty orders. It also addressed the enforcement of penalty orders during the pendency of the DRP reference, emphasizing the need for the assessee to approach the appellate authority promptly. The Court's decision aimed at ensuring a fair and unhindered consideration of the petitioner's case before the DRP and emphasized compliance with legal procedures and timelines in assessing penalties related to international transactions.