AIA Engineering Ltd vs. Dispute Resolution Panel (Gujarat High Court)

Assessee’s request for permission to file appeal to CIT(A) cannot be treated by DRP as “no objection” to draft assessment order

The AO passed a draft assessment order u/s 144C on 29.12.2009 in which he stated that the assessee could either accept the variations suggested in the order or file objections before the Dispute Resolution Panel (DRP). The assessee exercised the latter choice and filed objections on 29.01.2010. On 20.01.2010, the CBDT issued a Circular clarifying that the assessee had a choice to either go before the DRP or the CIT (A). At the first hearing before the DRP, the assessee addressed a letter dated 22.04.2010 requesting permission to file an appeal before the CIT (A). However, the DRP passed an order dated 08.07.2010 stating that the choice whether to approach the DRP or the CIT (A) had to be taken before filing the objections and not thereafter. It held that as the assessee had already filed the objections, directions u/s 144C (5) had to be issued. However, instead of dealing with the objections, it observed that the assessee had chosen to “withdraw the objections” filed before the DRP and confirmed the draft assessment order as correct. The assessee filed a Writ Petition to challenge the DRP’s order. HELD upholding the challenge:

The DRP’s order suffers from the vice of being contrary to the record as well as non-application of mind and causes immense prejudice to the assessee. The assessee had never sought withdrawal of the objections filed by it but had requested the DRP for consent to approach the AO to issue the final order so as to file an appeal before the CIT (A). If the DRP was of the view that it did not have the jurisdiction to give such consent or that the objections could not be withdrawn, it could have rejected the application but ought to have dealt with the objections on merits. The result of the DRP’s stand was that all doors for the assessee were closed because its objections had not been considered by the DRP, an appeal against the assessment order could not be filed before the CIT (A) and even an appeal against the DRP’s order would be an exercise in futility. This is not sustainable. Accordingly the objections are restored to the DRP with direction to consider on merits within 3 months.