Assessment – Draft assessment order – Objections – Powers of DRP – DRP must consider merits of objections – Objections cannot be rejected for mere non-appearance of party at time of hearing

Assessment – Draft assessment order – Objections – Powers of DRP – DRP must consider merits of objections – Objections cannot be rejected for mere non-appearance of party at time of hearing

The issue raised in this writ petition is whether the Dispute Resolution Panel (DRP) is competent to reject the objections on account of non-appearance of the assessee on the hearing date. The Madras High Court allowed the writ petition and held as under:

‘i) Under section 144C, on receipt of the draft order the assessee gets a right to file his objections, if any, to such variations with the DRP and the A.O. The DRP consists of three Commissioners of the Income-tax Department. They undoubtedly have certain expertise in the tax regime. Thus, adjudication before the DRP is a valuable opportunity provided both to the assessee as well as to the A.O. Either of the parties may get guidance for the purpose of completion of the assessment proceedings. Thus, the importance attached to the DRP under the Act can in no circumstances be undermined.

ii) When the Act contemplates a right to the assessee, such right must be allowed to be exercised in the manner prescribed under it. The manner in which objections are to be considered by the DRP are well defined both under the Act as well as under the Income-tax (Dispute Resolution Panel) Rules, 2009. Sub-section (6) of section 144C unambiguously states that the DRP is bound to consider the materials denoted as the case may be and issue suitable directions as it thinks fit. Therefore, the DRP has no option but to deal with objections, if any, filed by an eligible assessee on merits and, in the event of non-consideration, it is to be construed that the right conferred to an assessee has not been complied with.

iii) The language employed is “shall” both under sub-sections (5) and (6) of section 144C. Therefore, the DRP has no option but to strictly follow sub-sections (5) and (6) of section 144C which are mandatory provisions as far as the DRP is concerned; sub-sections (7) and (8) of section 144C are discretionary powers. Sub-section (11) is to be linked with sub-section (2)(b)(i) and (ii) of section 144C because an opportunity is bound to be given to the assessee as well as to the A.O. Sub-section (11) is also significant with reference to the opportunities to be granted to the parties before the DRP. The DRP is a quasi-judicial authority. This being the case, the DRP is bound to pass orders as it thinks fit only on the merits and such quasi-judicial authorities are not empowered to reject the objections merely by stating that the assessee had not appeared before the DRP. The DRP is legally bound to adjudicate the objections and pass orders on the merits, even in case of the assessee or the A.O. failing to appear for personal hearing.

iv) An order passed rejecting the objections submitted by the assessee, merely on the ground that the assessee has not appeared on the hearing date, is infirm and liable to be quashed.’