DRP procedure compliance: final assessment order quashed for failing to follow directions and transfer pricing effect order.

The final assessment order under the DRP mechanism was quashed because the Assessing Officer failed to incorporate the DRP directions and the order giving effect passed by the Transfer Pricing Officer before issuing the final order. That omission was treated as contrary to the mandatory procedure under section 144C of the Income-tax Act, 1961, and the defect was held to match the earlier coordinate bench ruling relied upon. The issue was decided in favour of the assessee.

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Issues: Whether the final assessment order was liable to be quashed for failure to give effect to the Dispute Resolution Panel directions and the order giving effect passed by the Transfer Pricing Officer before passing the final order.

Analysis: The assessment record showed that the draft assessment order was followed by DRP directions requiring suitable incorporation in the final order. The Transfer Pricing Officer thereafter passed the order giving effect to the DRP directions, but the Assessing Officer proceeded to pass the final assessment order without incorporating that order and without following the statutory mandate under the DRP mechanism. The resulting order was treated as being contrary to the procedure prescribed under section 144C of the Income-tax Act, 1961, and on the facts the defect was held to be identical to the earlier coordinate bench decision relied upon.

Conclusion: The final assessment order was quashed and the issue was decided in favour of the assessee.

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