Assessment under s.143(3) r.w.s.144C(13) set aside for failing to follow DRP directions; s.80C life insurance claim remitted for verification

ITAT MUMBAI held the AO's final assessment under s.143(3) r.w.s.144C(13) is vitiated for failing to follow DRP directions; the impugned assessment and the related addition were quashed. The tribunal directed the AO to pass a fresh order in conformity with the DRP. Claim under s.80C for payment of life insurance premium was remitted to the AO for verification of documentary evidence relating to premiums paid to the insurer during the assessment year.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1. Whether the Assessing Officer's final assessment order passed under section 143(3) read with section 144C(13) of the Income-tax Act is valid where it does not conform to directions issued by the Dispute Resolution Panel (DRP) under section 144C(5) and where additions sustained in the final order are inconsistent with DRP's directions.

2. Whether the claim for deduction under section 80C (payment of life insurance premium) requires remand for verification where documentary proof was not on record at the time of assessment but the assessee offers to produce evidence on appeal.

3. Whether an addition not pressed by the appellant during hearing should be treated as not pressed and dismissed.

2. ISSUE-WISE DETAILED ANALYSIS

ISSUE 1: Validity of final assessment order vis-à-vis DRP directions under section 144C

Legal framework: Section 144C(5) empowers the DRP to make directions on proposed variations in draft assessment; section 144C(10) renders DRP directions binding on the Assessing Officer; section 144C(13) requires the Assessing Officer to complete the assessment in conformity with DRP directions within the prescribed time without further hearing to the assessee.

Precedent treatment: Coordinate benches have held that a final order of assessment must incorporate and be in conformity with DRP directions and that failure to do so renders the final order bad in law and liable to be quashed (decisions of coordinate benches cited by the Tribunal were followed).

Interpretation and reasoning: The DRP had accepted sources for two of three fixed deposits but had confirmed a variation only in respect of the FD opened 09/10/2019 (Rs.15,00,000). The Assessing Officer's final order, however, made additions in respect of all three FDs aggregating Rs.56,99,950/-, contrary to DRP directions. The statutory scheme mandates that once the DRP issues directions under section 144C(5), the Assessing Officer must pass the final assessment in conformity with those directions (and within the time limit) without altering the relief granted by the DRP or introducing additional disallowances not directed by the DRP. The Tribunal found no lawful exercise of power by the Assessing Officer to deviate from DRP directions or to propose an alternate disallowance consistent with the statutory requirements of section 144C.

Ratio vs. Obiter: Ratio - Final assessment order that does not conform to binding DRP directions under section 144C is illegal and liable to be quashed. Obiter - Reliance on coordinate bench decisions to the same effect supports the statutory interpretation but the instant decision applies the principle as binding ratio.

Conclusions: The final assessment order is not in conformity with DRP directions and is therefore bad in law; the additions of Rs.56,99,950/- relating to the fixed deposits are quashed. The AO is required to pass a fresh final assessment order in strict conformity with DRP directions and within the statutory framework of section 144C.

ISSUE 2: Remand for verification of deduction under section 80C (life insurance premium)

Legal framework: Section 80C permits deduction for eligible payments subject to documentary proof and verification by the assessing authority; procedural fairness requires giving reasonable opportunity to an assessee to produce evidence in support of claimed deductions.

Precedent treatment: It is established practice that where an assessee undertakes to produce supporting documents on appeal and the Revenue raises no objection to such production, the matter may be remitted to the Assessing Officer for verification and decision on merits.

Interpretation and reasoning: The assessee claimed deduction for payment of life insurance premium to a specified insurer but failed to place documentary receipts before the Assessing Officer. During the appellate hearing the assessee offered to file and produce the necessary evidence; the Revenue did not oppose the remand. The Tribunal therefore directed remand to the Assessing Officer for verification, with an express requirement that the assessee be afforded reasonable opportunity to submit evidence and that the AO decide the claim as per law after verification.

Ratio vs. Obiter: Ratio - Where an assessee offers to furnish primary documentary evidence in support of a statutory deduction and the Revenue does not object, the appellate forum may remit the matter to the AO for verification and decision; such a remand is appropriate to secure compliance with section 80C requirements. Obiter - Procedure for the AO's verification and framing of questions is routine and ancillary to the remand.

Conclusions: The matter is remitted to the Assessing Officer for verification of payment of life insurance premium of Rs.1,50,000/- (claim under section 80C). The assessee must be given reasonable opportunity to submit evidence; after due verification the claim shall be allowed or disallowed in accordance with law.

ISSUE 3: Treatment of an addition not pressed at hearing

Legal framework: Appellate practice and principles permit treating grounds or additions not pressed before the appellate forum as waived or not pressed; adjudicatory economy and procedural fairness allow dismissal of unpressed grounds.

Precedent treatment: Tribunals routinely treat unpressed grounds as abandoned and dismiss them accordingly.

Interpretation and reasoning: The addition of Rs.18,725/- (ground 3) was not pressed by the appellant's counsel during the hearing; accordingly the Tribunal treated the ground as not pressed and dismissed it.

Ratio vs. Obiter: Ratio - Where a ground of appeal is not pressed before the Tribunal, it is competent to treat the ground as not pressed and dismiss it. Obiter - No further directions were necessary as the ground was abandoned.

Conclusions: Ground relating to addition of Rs.18,725/- is treated as not pressed and dismissed.

---