Section 144C of the Act provides that where in case of an eligible assessee a variation is proposed by the Assessing Officer (AO) which is prejudicial to the interest of such assessee, a draft order is to be made and forwarded to the assessee. The assessee in terms of section 144C may seek to file objections before the Dispute Resolution Panel (DRP). The procedure to be followed by the DRP and the directions to be issued by the DRP are also provided for in section 144C of the Act.
Where the assessee chooses to file his objections with the DRP, the same is to be done within 30 days from the date of receipt of the draft assessment order. The section further requires that within the said 30 day period the objections filed with the DRP are to be filed with the AO. A question arises as to whether the said objections are to be filed with the Jurisdictional Assessing Officer (JAO) or with the National Faceless Assessment Centre (NaFAC). It is made clear in section 144B(xxiv) that where the draft assessment order is served on the assessee by the NaFAC, theobjections filed with the DRP are also to be filed with the NaFAC.
Thus, it is clear that where the draft assessment order is passed by the JAO, the objections filed before the DRP are to be filed with the JAO and where the draft assessment order is passed by the NaFAC, the objection filed before the DRP are to be filed with the NaFAC.
A question arises as to what happens if within the 30 day period from the date of receipt of the draft order the concerned JAO or the NaFAC has not been intimated about the filing of the objections before the DRP. Recently there have been a number of decisions where the Courts have held that even if inadvertently, the assessee has failed to inform the AO being the JAO or NaFAC as the case may be, such inadvertence should not come in the way of the DRP considering the assessee’sobjections.
The Karnataka High Court in Open Silicon Research (P) Ltd v DCIT TS-457-HC-2023 (Kar) – TP has held that even where the AO has passed an order before the DRPs directions due to non filing of objections before the AO, the same is to be set aside with a direction to the AO to consider the directions of the DRP in finalising the order. In fact, the High Court observed that the AO ought not to have proceeded and should have waited till directions were passed by the DRP and only thereafter passed the final order of assessment. A similar view has been taken in the following cases
Google India Pvt Ltd v NaFAC[2024] 158 taxmann.com 9 (Karnataka)
Pepsico India Holdings Pvt Ltd v NaFAC[2023] 157 taxmann.com 143 (Delhi)
An interesting question arises in a case where the assessee chooses to file an appeal before the CIT(A) against the final order of the AO and not to file a writ as was the case before the Karnataka High Court / Delhi High Court referred to supra. If the assessee chooses only to file an appeal against the final assessment order and not a writ, in a case where the final order has been passed by the AO before the DRP issues its directions, it can be understood that the CIT(A) before whom the proceedings are pending in an appeal cannot set aside the order of the AO directing a fresh order to be framed since such a power doesnot vest with the CIT(A).
The only course open to him therefore will be to adjudicate the appeal which is before him. The directions of the DRP if any issued after the passing of the final order cannot be given effect to or implemented since the AO has already passed a final assessment order and cannot pass one more final assessment order.
Therefore, it can be seen that though the Karnataka High Court set aside the final assessment order of the AO and directed a fresh order to be passed by the AO after considering the directions of the DRP, the same may not be the consequences if the assessee chooses the appeal route instead of availing of the remedy by way of filing a writ petition before the High Court.
# Income Tax, # Objections, # DRP, # Intimation to AO, # JAO, # NaFAC, # final assessment order, # draft assessment order, # section 144C
