Order sets aside DRP order under s.144C(12), remits Form 35A for fresh merits hearing and directions under sub-s.(5)

HC set aside the DRP order of 22-6-2015 for lack of proper exercise of jurisdiction under s.144C(12) and remitted the matter for fresh consideration of Form 35A and annexures on merits. DRP is directed to give both parties a hearing, follow s.144C procedure and issue appropriate directions under sub-s.(5) within three months of receipt of this order. Consequentially, the final assessment dated 28-8-2015 is set aside and the AO shall pass a fresh final assessment in accordance with the DRP's directions. Miscellaneous petitions are closed; no order as to costs.

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Issues Involved:

1. Validity of the period for filing objections under Section 144C.
2. Jurisdiction of the Dispute Resolution Panel (DRP).
3. Service of the draft assessment order.
4. Validity of the final assessment order.
5. Applicability and interpretation of Section 144C.

Detailed Analysis:

1. Validity of the period for filing objections under Section 144C:

The petitioner argued that the nine-month period stipulated in sub-section (12) of Section 144C should be calculated from the date the draft assessment order is received by the assessee, not the date it was passed. The court accepted this argument, noting that the word "forward" in sub-section (1) must mean actual service to the assessee, aligning with the term "receipt" used in sub-section (2). Thus, the period for filing objections starts from the date the assessee receives the draft order.

2. Jurisdiction of the Dispute Resolution Panel (DRP):

The DRP, Bengaluru, claimed it lacked jurisdiction as the nine-month period expired before it assumed jurisdiction on 1-1-2015. However, the court found that the DRP, Hyderabad, had indicated that the time limit extended to June 2015. The court concluded that the DRP, Bengaluru, miscalculated the expiry date, which should have been 31-5-2015, based on the actual service date of 22-8-2014.

3. Service of the draft assessment order:

The court scrutinized the service of the draft assessment order, noting discrepancies in the Department's claims. The draft order was purportedly forwarded on 26-3-2014, but evidence showed it was actually received by the petitioner on 22-8-2014. The court found the Department's claim of earlier service unsubstantiated, emphasizing that the period for filing objections begins upon actual receipt by the assessee.

4. Validity of the final assessment order:

Given the DRP's erroneous rejection of the petitioner's objections on jurisdictional grounds, the court set aside the final assessment order dated 28-8-2015. It directed the DRP, Bengaluru, to reconsider the objections on merits and issue appropriate directions under sub-section (5) of Section 144C within three months.

5. Applicability and interpretation of Section 144C:

The court delved into the legislative intent and historical context of Section 144C, emphasizing its role as an alternative dispute resolution mechanism aimed at expeditious resolution. The court noted that the bar under sub-section (12) does not go to the root of jurisdiction but is intended to ensure timely resolution. The court referenced the Supreme Court's understanding in Additional CIT v. HCL Technologies Ltd., indicating flexibility in applying the time limits under Section 144C.

Conclusion:

The court allowed the writ petition, setting aside the DRP's order dated 22-6-2015 and the final assessment order dated 28-8-2015. It directed the DRP, Bengaluru, to reconsider the petitioner's objections on merits and issue directions within three months, after which the Assessing Officer should pass a final assessment order based on the DRP's directions. The court emphasized the importance of actual service of the draft assessment order and clarified the interpretation of Section 144C's time limits.

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