Section 144C proceedings against resident assessee held incompetent as petitioner not eligible assessee under statute

The Bombay HC held that proceedings under Section 144C against a resident assessee were incompetent. The petitioner initially filed returns as resident, then revised claiming non-resident status, but later withdrew the revised return. The DRP rejected jurisdiction objections and maintained the draft order. The HC ruled that unless an assessee qualifies as "eligible assessee" under Section 144C, no DRP reference is permissible. Since the department's own draft order categorically found the petitioner was a resident in India, not a non-resident, the petitioner could not be considered an eligible assessee under Section 144C(15). Consequently, the HC set aside the draft order and proceedings under Section 144C as incompetent.

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Issues Involved:
The issues involved in the judgment are the validity of the Draft Order issued under Section 144C(1) of the Income Tax Act, determination of the petitioner's residential status, the applicability of Section 144C to the petitioner, and the rejection of petitioner's objections by the Dispute Resolution Panel.

Validity of Draft Order:
The petitioner challenged the Draft Order dated 26.12.2022 issued under Section 144C(1) of the Income Tax Act, claiming it was illegal, improper, and unreasonable. The petitioner contended that despite claiming non-resident status in a revised return, the Draft Order categorized the petitioner as a resident in India. The petitioner argued that the provisions of Section 144C should not have been applied, citing precedents to support the contention.

Residential Status Determination:
The petitioner initially filed tax returns as a resident of India but later submitted a revised return claiming non-resident status. The Draft Order determined the petitioner to be a resident in India, leading to a discrepancy between the petitioner's claim and the Department's finding. The petitioner accepted the resident status during the proceedings, withdrawing the claim of non-resident status and seeking a refund based on the original return.

Applicability of Section 144C:
The petitioner objected to the application of Section 144C proceedings, arguing that as a resident in India, he did not qualify as an "eligible assessee" under Section 144C(15) of the IT Act. The petitioner's objections were rejected by the Dispute Resolution Panel, leading to the challenge in the High Court. Precedents were cited to support the argument that proceedings under Section 144C were incompetent in the petitioner's case.

Rejection of Objections by DRP:
The Dispute Resolution Panel rejected the petitioner's objections and upheld the Draft Order, prompting the petitioner to file the present petition challenging the decision. The High Court analyzed the provisions of Section 144C, the petitioner's residential status, and the precedents cited to conclude that the proceedings under Section 144C against the petitioner, who was deemed a resident in India, were incompetent. As a result, the Draft Order and the DRP's decision were set aside.

Conclusion:
The High Court held that the proceedings under Section 144C against the petitioner, determined to be a resident in India, were incompetent. The Draft Order initiating such proceedings and the DRP's decision were set aside. The Court directed the Assessing Officer to assess the original return filed by the petitioner and make an appropriate assessment order in accordance with the law. The petitioner's withdrawn revised return claiming non-resident status could not prevent the assessment based on the original return. The rule was disposed of with no order for costs.

Judges' Names:
M. S. SONAK & VALMIKI SA MENEZES, JJ.

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