Rejection Of Belated Objections By DRP Does Not Extend Limitation Of Passing Final Assessment U/s 144(4): Delhi ITAT

However, the ITAT clarified that such rejection by DRP on ground of delay in no way extends the limitation of passing the final assessment order u/s 144(4) of the Act.

The ITAT held so while finding that though the DRP has rejected the objections, but did not issue any directions for the guidance of the assessing officer for enabling him to complete the assessment.

Section 144C(8) of the Income tax Act states that the Dispute Resolution Panel (DRP) 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.

The Bench of Dr. B.R.R Kumar (Accountant Member) and Anubhav Sharma (Judicial Member) observed that “the Assessing Officer cannot proceed to pass the final order till the Dispute Resolution Panel passes an order. Once the objection is filed within the period of limitation, consideration of the same is vested only with the Dispute Resolution Panel as provided under Section 144C(5), (6), (7) & (8) of the said Act and as such the Assessing Officer cannot decide such objection”. (Para 4)

Facts of the case:

Finding reasons to believe that income chargeable to tax had escaped assessment, additions were made on account of short-term capital gains by rejecting benefit of DTAA by holding that assessee was into treaty shopping and there was fiscal evasion. However, in respect of the income alleged to have escaped assessment, the assessee company filed its detailed reply as to why such income was not offered by them for taxation in India. The Assessee challenged the final assessment order passed by AO as being barred by limitation being in contravention of the provisions of Sec 144C(4) to mandatorily pass the assessment order within one month from the end of the month in which the statutory period of filing the objections expired.

Observations of the Tribunal:

The Bench found that the case of assessee was flagged on Non-filers Management System of the Income Tax Department as it had not filed the return of income for the relevant A.Y.

The Bench found from a perusal of Section 144C(2) that the assessee, on receipt of the draft order, shall file his objections within 30 days of the receipt of the draft order with Dispute resolution Panel and the Assessing officer.

Only when no objections are received within the period specified under Sub- Section 2, the Assessing Officer shall complete the assessment on the basis of the draft order, as contemplated u/s 144(C)(3), added the Bench.

Therefore, the Bench explained that what is contemplated u/s 144C(2), is the filing of the objections by the assessee with the Dispute Resolution Panel, if he is not accepting the draft assessment order.

The Bench stated that Sec 144C also contemplates filing of such objection before the Assessing Officer as well, and clarified that if such objection is filed in time, then the Dispute Resolution Panel alone shall proceed to decide the matter as provided u/s 144C(5) & 6 of the Act.

The Bench also clarified that filing of such objection before the Assessing Officer within time itself will not get over the period of limitation, if such filing before the Dispute

Resolution Panel was after such period. At the same time, if objections are filed before the DRP, and AO is merely informed of filing of the objections before the DRP, and no objections as filed before DRP, are provided to the AO, then AO is supposed to pass the final assessment order, added the Bench.

The ITAT therefore allowed the assessee's appeal and concluded that the final order passed of AO u/s 144C(13) is devoid of jurisdiction.

Counsel for Appellant/ Assessee: Ishita Farsaiya and Ravi Gupta

Counsel for Respondent/ Revenue: Vizay B. Vasanta

Case Title: Ares Diversified vs. ACIT

Case Number: ITA No.2370, 2371& 2372/Del/2023

Click here to read/ download the Order