Court quashes DRP's decision for unfair treatment of Assessee's objections

The court held that the Dispute Resolution Panel (DRP) acted improperly by rejecting the Assessee's objections solely based on non-appearance, violating the Assessee's rights under the Income Tax Act. The court emphasized that the DRP must consider objections on their merits and provide a fair hearing, in compliance with mandatory provisions. Consequently, the court quashed the DRP's order and the subsequent assessment, directing the DRP to reconsider the objections properly, affording both parties a fair opportunity. Both writ petitions were allowed without costs.

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Issues Involved:
1. Competency of the Dispute Resolution Panel (DRP) to reject objections due to non-appearance of the Assessee.
2. Compliance with mandatory provisions under Section 144-C of the Income Tax Act by the DRP.
3. Violation of principles of natural justice and statutory rights of the Assessee.

Issue-wise Detailed Analysis:

1. Competency of the Dispute Resolution Panel (DRP) to reject objections due to non-appearance of the Assessee:
The primary issue raised was whether the DRP is competent to reject objections solely based on the non-appearance of the Assessee on the hearing date. The court noted that the DRP rejected the objections because the Assessee did not appear for the hearing on 20.11.2015. It was emphasized that the DRP did not consider the objections on file or provide any discussion or findings on the merits of those objections. The court held that the DRP's rejection of objections due to non-appearance resulted in the denial of an opportunity for adjudication, which is a violation of the Assessee's rights under the Income Tax Act.

2. Compliance with mandatory provisions under Section 144-C of the Income Tax Act by the DRP:
The court examined the provisions of Section 144-C, particularly subsections (5) and (6), which mandate the DRP to issue directions after considering various factors, including the draft order, objections filed by the Assessee, evidence furnished, and reports from relevant authorities. The court concluded that the DRP is bound to adjudicate objections on merits and cannot reject them merely due to non-appearance. The DRP's failure to comply with these mandatory provisions was deemed a violation of the Assessee's statutory rights.

3. Violation of principles of natural justice and statutory rights of the Assessee:
The court highlighted that the principles of natural justice require that an opportunity of being heard must be given to the Assessee and the Assessing Officer before issuing any directions under subsection (5) of Section 144-C. The DRP's rejection of objections without considering them on merits and without providing a fair hearing was a violation of these principles. The court emphasized that the DRP, being a quasi-judicial authority, must pass orders on merits and cannot reject objections solely on the ground of non-appearance.

Conclusion:
The court found that the DRP had failed to act in accordance with the mandatory provisions of subsections (5) and (6) of Section 144-C of the Income Tax Act. Consequently, the order passed by the DRP rejecting the objections due to non-appearance was quashed. The court also quashed the consequential assessment order passed by the Assessing Authority. The proceedings before the DRP were restored, and the DRP was directed to consider the objections afresh in compliance with the relevant provisions of the Act and Rules, affording an opportunity to both the Assessee and the Assessing Officer. Both writ petitions were allowed without any order as to costs.

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