Court confirms DRP's jurisdiction under Income Tax Act, directs petitioner to exhaust appellate remedies

M/s Delphi-TVS Diesel Systems Limited Versus ITO (OSD) / Secretary Dispute Resolution Panel - 2, Assistant Commissioner of Income-tax (OSD), Deputy Commissioner of Income-tax - 1 (2), Chennai

M/s Delphi-TVS Diesel Systems Limited Versus ITO (OSD) / Secretary Dispute Resolution Panel - 2, Assistant Commissioner of Income-tax (OSD), Deputy ... Issues Involved:
1. Jurisdiction of the Dispute Resolution Panel (DRP) under Section 144C(8) of the Income Tax Act.
2. Validity of the enhancement notice issued by the DRP.
3. The necessity for the petitioner to exhaust appellate remedies.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Dispute Resolution Panel (DRP) under Section 144C(8) of the Income Tax Act:
The petitioner challenged the jurisdiction of the DRP to issue an enhancement notice under Section 144C(8) of the Income Tax Act. The petitioner argued that the DRP's power to enhance variations should be limited to issues already considered in the Draft Assessment Order. The court examined the provisions of Section 144C and its sub-sections, emphasizing that the DRP is a specialized panel consisting of three Commissioners of Income Tax. The court noted that the DRP has the power to confirm, reduce, or enhance variations proposed in the Draft Assessment Order, and this power includes considering any matter arising out of the assessment proceedings, even if not initially raised by the eligible assessee. The court concluded that the explanation to Section 144C(8) clarifies the DRP's power to consider any matter arising out of the assessment proceedings, thereby supporting the DRP's jurisdiction in this case.

2. Validity of the Enhancement Notice Issued by the DRP:
The petitioner contended that the enhancement notice issued by the DRP was beyond its powers, as the issues raised were not considered in the Draft Assessment Order. The court referred to several judgments, including those of the Supreme Court, to establish that the DRP's power to enhance variations includes considering any matter arising out of the assessment proceedings, even if not initially raised. The court found that the issues of Employee Secondment Charges and Reimbursement of Expenses were related to the assessment proceedings and the Draft Assessment Order. The DRP followed due process by issuing a notice, receiving objections, and disposing of them before passing the final assessment order. Thus, the court upheld the validity of the enhancement notice issued by the DRP.

3. The Necessity for the Petitioner to Exhaust Appellate Remedies:
The respondents argued that the writ petition had become infructuous as the final Assessment Order had been passed, and the petitioner should approach the Appellate Authority for any grievances. The court agreed, stating that the petitioner must exhaust the available appellate remedies before seeking judicial intervention. The court directed the petitioner to file an appeal against the final Assessment Order within four weeks and instructed the Appellate Authority to condone any delay considering the pendency of the writ petition and to dispose of the appeal on merits.

Conclusion:
The court rejected the petitioner's request for relief, upheld the DRP's jurisdiction and the validity of the enhancement notice, and directed the petitioner to pursue appellate remedies. The writ petition was disposed of with no costs.