TaxTMI 
TaxTMI 
2021 (8) TMI 1188
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.... of income on 28th November, 2011 declaring a total income of 'Nil'. Along with the return of income, the international and specified domestic transactions of the petitioner were duly reported in the Accountant's Report in Form No.3CEB filed in accordance with the provisions of Indian Transfer Pricing Regulations. 3. The second respondent passed a Draft Assessment Order on the petitioner under Section 143(3) read with Section 144C(1) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for the Assessment Year 2013-14. In the said Draft Assessment Order, there was no proposal for variation in income return by the petitioner by disallowing of any expenditure under Section 40(a)(i) of the Act, the second respondent however had proposed variations in respect of other issues. 4. The petitioner filed its objections before the first respondent in respect of the proposal for variation of income made in the Draft Assessment Order. The first respondent, during the course of proceedings before it, issued a notice for enhancing the income of the petitioner. Hence, the enhancement notice was issued in respect of Employee Secondment Charges and Reimbursement o....
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....tion Panel has no powers to issue notice and reject the objections filed by the petitioner. 8. In support of the said contention, the learned counsel for the writ petitioner relied on the judgment of the Hon'ble Supreme Court of India in the case of Commissioner of Income-tax V. Shapoorji Pallonji Mistry reported in [1962] 44 ITR 891 (SC) wherein the Hon'ble Apex Court held as follows: "In Gajalakshmi Ginning Factory v. CIT [1952] 22 ITR 502, it has been held by the Madras High Court that it would not be open to the AAC to introduce into the assessment new sources, as his power of enhancement is restricted only to income which was the subject-matter of consideration for purposes of assessment by the ITO. In view of the provisions of sections 34 of the 1922 Act and 33B of the 1922 Act by which escaped income can be brought to tax, there is reason to think that the view expressed uniformly about the limits of the powers of the Appellate Assistant Commissioner to enhance the assessment has been accepted by the legislature as the true exposition of the words of the section. If it were not, one would expect that the legislature would have amended section 31of the 1922 Act a....
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....s a result of the authorities of this Court is that the Appellate Assistant Commissioner has no jurisdiction, under section 31(3) of the Act, to assess a source of income which has not been processed by the Income- tax Officer and which is not disclosed either in the returns filed by the assessee or in the assessment order, and therefore. the Appellate Assistant Commissioner cannot travel beyond the subject- matter of the assessment. .......... There must be something in the assessment order to show that the Income-tax Officer applied Ms mind to the particular subject-matter or the particular source of income with a view to its taxability or to its non-taxability and not to any incidental connection. In the present case it is manifest that the Income-tax Officer has not considered the entry of Rs. 5,85,000 from the point of view of its taxability and therefore the Appellate Assistant Commissioner had no jurisdiction, in an appeal unders. 31 of the Act, to enhance the assessment." 11. In the case of Commissioner of Income-tax V. Scindia Steam Navigation Co. Ltd. reported in [(1961) 42 ITR 589 (SC)], the Constitution Bench of the Hon'ble Supreme Court of India summed up the ....
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....to confirm or to reduce or to enhance the variations. When subsection (8) provides power to the Dispute Resolution Panel to enhance the variations proposed in the Draft Order and explanation also is provided, the Dispute Resolution Panel has the power to consider any matter arising out of the assessment proceedings, then, there is no reason to interfere with the order passed by the Dispute Resolution Panel and inference offered by the petitioner is not in consonance with the spirit of the provisions of the Income Tax Act. 14. The learned Senior Standing Counsel further contended that the writ petition itself became infructuous, in view of the fact that the final Assessment Order has been passed pursuant to the Draft Assessment Order and the order passed by the Dispute Resolution Panel. When a final Assessment Order is passed, then, the petitioner has to approach the Appellate Authority if at all any grievance exists and thus the writ petition is to be rejected on that ground also. 15. The learned Senior Standing Counsel relied on the Judgment of this Court in the case of Hyundai Motor India Limited V. Secretary, Income-tax Department reported in [2017] 86 taxmann.com 284 (Madras)....
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.... But, it was to take effect retrospectively from 01.04.2009. The Dispute Resolution Panel's directions were issued after the Explanation had come into operation. In any event, the Explanation is clarificatiory. Reading the Explanation with sub-section 144C(8), it is evident that the Dispute Resolution Panel could examine the issues arising out of the assessment proceedings even though such issues were not part of the subject matter of the variations suggested by the Assessing Officer. In this light, it is significant that though the draft order had not proposed any addition with regard to the restructuring and the said transaction, yet, the DRP had asked for details of the restructuring and had examined the matter. After such examination, the DRP did not direct any addition to be made in this regard. It is evident that the DRP formed an opinion that the transaction was not exigible to capital gains tax and, to contend otherwise, in the purported reasons for re-opening of the assessment, would be nothing but a 'change of opinion' which is not permissible in law." 16. Relying on the above judgments, the learned Senior Standing Counsel summed up by stating that the Disput....
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....he issues as contemplated under sub-section (6) of Section 144C of the Act. 20. Sub-section (7) contemplates that the Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5), make such further enquiry, as it thinks fit, or cause any further enquiry to be made by the Income Tax Authority and report the result of the same to it. 21.As far as the present case is concerned, sub-section (8) is more relevant as the learned counsel for the petitioner states that the Dispute Resolution Panel has no power to enhance based on the variations which were not identifiable in the Draft Assessment Order. 22.In this context, close reading of sub-section (8) would reveal that "the Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order." 23. Explanation to sub-section (8) reads as under: "Inserted by the Finance Act, 2012, w.e.f. 1-4-2009 [Explanation.- For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enha....
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.... on the Dispute Resolution Panel to confirm enhance or reduce is certainly guided under the provisions of the Act. Explanation to sub-section (8) of Section 144C of the Act, stipulates that enhancement is to be made with reference to the matter arising out of the assessment proceedings relating to the Draft Assessment Order. Responsibility of the Dispute Resolution Panel, once an objection is raised by the eligible assessee, to scrutinise the Draft Assessment Order and verify the correctness or otherwise and thereafter, issued suitable directions as it deems thought fit for the purpose of incorporation in the assessment order. Thus, the Explanation contemplates that any variation arising out of the assessment proceedings relating to the Draft Assessment Order shall be proposed and on such proposal, an opportunity is to be provided to the eligible assessee to defend their case. Thus, the requirement as contemplated is that the Dispute Resolution Panel is to provide pre-decisional hearing to the assessee in order to comply with the principles of natural justice. Once a Dispute Resolution Panel identified and picked up such variations arising out of the assessment proceedings relating....
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....ssion or commission or excessive exercise, the Dispute Resolution Panel is empowered under sub-section (8) to confirm or reduce or enhance the variations. The explanation is provided only to remove the doubts and therefore, the explanation cannot be read in isolation and certainly in consonance with the main provision in the present case. The Explanation undoubtedly fulfils the purpose and object of sub-section (8) to Section 144C of the Income Tax Act. Thus, there is no impediment as such for the Dispute Resolution Panel to consider any matter arising out of the assessment proceedings relating to the Draft Assessment Order and no matter, such an issue was discussed in the Draft Assessment Order or not, but it should not be totally unconnected with the assessment proceedings or the Draft Assessment Order. This being the purposive interpretation to be adopted for the purpose of defining Section 144C and sub-section (8) as well as the Explanation, this Court is of the considered opinion that proposed notice issued to the writ petitioner is relatable to the assessment proceedings and to the Draft Assessment Order. Thus, there is no infirmity in respect of exercise of powers by the Dis....