Section 92C read with section 144C of the Income Tax Act, 1961 — Transfer Pricing — Computation of Arm's Length Price — If DRP was of the view that assessee did not have option to withdraw the objections once they have been filed then as per rules of natural justice it was required to adjudicate objections filed by the assessee - DRP has directed the AO to pass assessment order in consonance with the draft assessment order which prevented the assessee from availing the other alternative of filing the appeal before CIT(A) which was not correct as per law —
FACTS: Assessee filed an application before DRP to withdraw the objection. DRP observed that withdrawal of objection after filing the objections before DRP was not permissible. DRP directed the AO to pass assessment order in consonance with draft assessment order which was subject matter of objection before DRP. Being aggrieved, assessee went on appeal before Tribunal and submitted that manner in which DRP had passed the order had prevented the assessee from contesting the additions on merits even before Tribunal as none of the issues had been decided by way of speaking order.
HELD, That assessee had filed a letter before DRP for withdrawing the objections. If DRP was of the view that assessee did not have option to withdraw the objections once they have been filed then as per rules of natural justice it was required to adjudicate objections filed by the assessee. Instead DRP has directed the AO to pass assessment order in consonance with the draft assessment order. This action of DRP has prevented the assessee from availing the other alternative of filing the appeal before CIT(A). If that door was closed then matter has to be first adjudicated either by DRP or by CIT(A) and then appeal can be filed before the Tribunal. Now what was available before Tribunal was the order of DRP which has not adjudicated the issues on merits. The direction of DRP to AO was binding on AO so assessee also could not represent before AO against the additions made in the draft order. Request of the assessee has to be accepted in the interest of justice. Therefore, issue was restored on the merits of additions to the file of DRP with a direction to adjudicate all the issues on the objections filed by the assessee as per law by way of speaking order after giving the assessee a reasonable opportunity of hearing. In the result, appeal was treated as allowed for statistical purposes.
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I.P. Bansal, Judicial Member - This is an appeal filed by the assessee. It is directed against the order passed by the A.O under section 143(3) of the Income Tax Act, 1961 (the Act) dated 22/9/2010 in pursuance to directions issued by DRP vide their order dated 1/9/2010. The grounds of appeal read as under:
| "1. |
Learned Assessing Officer (AO) has erred in passing order under section 143(3) read with section 144C of the Act. Appellant having withdrawn application before the Dispute Resolution Panel, the assessment order ought to have been passed u/s 143(3) of the Act. |
2. |
While giving direction u/s 144C(5) of the Act, the Honourable Dispute Resolution Panel (DRP) has erred in directing the AO to pass the assessment order in consonance with the draft assessment order already framed. DRP ought to have permitted the assessee to withdraw the objections filed and directed the AO to pass the order u/s 143(3) of the Act. |
3. |
Without prejudice to 1 above, the Honourable DRP has erred in not dealing with the objections filed by the Appellant on the merits of various objections raised. In the event, DRP not permitting the appellant to withdraw the objections, it ought to have passed directions on various objections filed by the Appellant on merits and directed the AO to delete the additions made. |
4. |
Without prejudice to the above, the AO/DRP has erred in - |
(i) |
making adjustment of Rs. 3,84,640/- to arm's length price determined by the Appellant in respect of sale of HP card machine to Truetzscheler Textile Machinery (Shanghai) Co. Ltd., an Associate Enterprise (AE). On the facts and circumstances of the case, the price charged to AE being arm's length price, addition of Rs. 3,84,640 made ought to be deleted. |
(ii) |
disallowing a sum of Rs.18,02,161/- u/s.14A as against Rs.3,37,293/- disallowed by the appellant. On the facts and in the circumstances of the case, the additional disallowance of Rs.14,64,868/- ought to be deleted. |
(iii) |
disallowing discount of Rs. 8,00,975/- on the ground that it is not related to the business. On the facts and circumstances of the case, the addition made ought to be deleted. |
(iv) |
not dealing with the claim of assessee on allowing sales discount of Rs. 6,15,516/. The said claim made by the appellant during the course of assessment, being allowable as expenses, ought to be allowed." |
2. At the outset addressing to Ground No.1,2 & 3, it was submitted by Ld. A.R that before DRP the assessee has filed an application to withdraw the objection. However, DRP referring to the letter issued by CBDT has observed that the withdrawal of objection after filing the objections before DRP is not permissible. With these observations DRP has directed the AO to pass assessment order in consonance with the draft assessment order which was subject matter of objection before DRP.
3. It was submitted by Ld. AR that as DRP did not pass any order on merits on the objections filed by the assessee, the matter may be sent back to DRP with a direction to give an opportunity to the assessee to support its objections and then pass a speaking order on the objections raised by the assessee. He submitted that the manner in which DRP has passed the order has prevented the assessee from contesting the additions on merits even before Tribunal as none of the issue has been decided by way of speaking order. The AO is under an obligation to pass order as per directions of DRP, therefore, in the interest of justice the matter may be restored back to the file of DRP.
4. On the other hand, Ld. DR relied upon the orders passed by A.O and Ld. DRP.
5. We have heard both the parties on this issue and their contentions have carefully been considered. The assessee had filed a letter before DRP for withdrawing the objections. If DRP was of the view that assessee did not have option to withdraw the objections once they have been filed then as per rules of natural justice it was required to adjudicate objections filed by the assessee. Instead Ld. DRP has directed the AO to pass assessment order in consonance with the draft assessment order. This action of DRP has prevented the assessee from availing the other alternative of filing the appeal before Ld. CIT(A). If that door is closed then matter has to be first adjudicated either by DRP or by Ld. CIT(A) and then appeal can be filed before the Tribunal. Now what is available before the Tribunal is the order of DRP which has not adjudicated the issues on merits. The direction of DRP to AO is binding on AO so assessee also could not represent before AO against the additions made in the draft order.. Considering all these facts and circumstances of the case we are of the opinion that the request of the assessee has to be accepted in the interest of justice. Therefore, we restore the issue raised in the present appeal on the merits of additions to the file of DRP with a direction to adjudicate all the issues on the objections filed by the assessee as per law by way of speaking order after giving the assessee a reasonable opportunity of hearing. With these directions the matter is restored back to the file of DRP.
6. In the result, appeal filed by the assessee is treated as allowed for statistical purposes. |