DRP Can’t Give Directions Once an Assessment Order is Passed Irrespective of Fact That It is Right or Wrong | HC

Case Details: Undercarriage and Tractor Parts (P.) Ltd. vs. Dispute Resolution Panel-3 - [2023] 156 taxmann.com 79 (Bombay)

Judiciary and Counsel Details

• • K.R. Shriram & Dr. N. K. Gokhale, JJ.
  • Riyaz Padvekar, Tanzil Padvekar & Ms Tejal Kharkar for the Petitioner.
  • Suresh Kumar for the Respondent.

Facts of the Case

Assessee filed its return of income for the relevant assessment year along with the auditor’s report in respect of international and domestic transactions entered into with the Associate Enterprises (AE).

During the scrutiny proceedings, the Transfer Pricing Officer (TPO) passed an order under section 92CA(3) proposing an adjustment to the reported international and domestic related parties transactions after working out arms-length price (ALP). The Dy. CIT passed the draft assessment order dated 3-12-2018 under section 143(3), read with section 92CA(3), read with section 144C(1).

The assessee, by a letter dated 14-12-2018, informed Dy. CIT that it was in the process of filing an objection before the Dispute Resolution Panel (DRP) and requested not to pass an assessment order under section 143(3) till the disposal of the objections by the DRP. However, on 24-12-2018 the Dy. CIT passed the final assessment order. Unaware of said order, the assessee filed its objections before DRP. DRP proceeded to issue directions dated 16-9-2019, based on which another assessment order came to be passed.

Subsequently, a writ petition was filed to the Bombay High Court contending that the directions passed by the DRP were in gross violation of the provisions of the Act, as the DRP can hear and pass directions only in pending assessment proceedings.

High Court Held

The High Court held that the DRP could give directions only in pending assessment proceedings. Once the assessment order is passed, rightly or wrongly, the assessment proceedings come to an end. Therefore, the DRP would have no power to pass any directions contemplated under sub-section (5) of section 144C.

Notwithstanding, the DRP issued the directions, which it should not have done. Therefore, the directions issued by DRP and the consequent assessment order were quashed and set aside.

List of Cases Referred to

• • Sudesh Taneja v. ITO [2022] 135 taxmann.com 5/286 Taxman 284/442 ITR 289 (Raj.) (para 11).