LI Network
Published on: 29 July 2023 at 13:27 IST
The Karnataka High Court, in the case of Open Silicon Research Private Limited, held that the Assessing Officer (AO) should have waited for the Dispute Resolution Panel (DRP) to pass its directions before finalizing the assessment order.
The High Court, presided over by Justice S. Sunil Dutt Yadav, set aside the assessment order while considering the case of Open Silicon Research Private Limited, an eligible assessee under Sec. 144C(15)(b)(i) of the Income Tax Act, 1961.
The Court noted that although there was a lapse on the part of the petitioner in not intimating the AO under Sec. 144C(2)(b)(ii) about the objections filed before the DRP, the correct interpretation of the procedure is that once objections are filed with the DRP, the AO should not proceed further until the DRP decides on the directions to be passed.
The Bench observed that the draft order was issued and communicated to the assessee, who had filed its objections before the DRP within the stipulated time, as indicated in the Acknowledgment at Annexure-H.
The Court raised the question of whether the non-filing of objections before the AO empowered the AO to conclude the proceedings when the assessee had filed objections before the DRP but failed to inform the AO.
Advocate Bharadwaj Sheshadri represented the assessee, while the Revenue was represented by Advocate M. Dilip.
The High Court explained that once objections are filed with the DRP, as per Sec. 144C(5), the DRP may issue directions to guide the AO in completing the assessment.
The Court clarified that the power of the DRP is provided for under Sections 144C(6) to 144C(10) of the Income Tax Act, and once the DRP exercises its power and issues directions, the AO must act in accordance with those directions without any discretion.
Considering that the objections were indeed filed before the DRP, and directions were later passed, the High Court concluded that the AO should not have proceeded with the assessment and should have waited for the DRP’s directions.
Consequently, the High Court set aside the assessment order in favor of the taxpayer, Open Silicon Research Private Limited.
