|Pramod Kumar (AM), Rajpal Yadav (JM)
|March 11, 2014 (Date of pronouncement)
|March 19, 2014 (Date of publication)
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|ITAT hauls up AO & DRP for “blatantly frivolous & unsustainable” additions. Suggests that accountability mechanism be set up to put a check on AO. Rationale for existence of ineffective DRP questioned
Pursuant to a scheme of arrangement the assessee transferred its telecom infrastructure assets to Bharti Infratel Ltd for Nil consideration with the result that the WDV of the said assets amounting to Rs. 5,739 crore was written off by debiting the P&L A/c. A corresponding amount was credited to the P&L A/c from the ‘business restructuring reserve’ with the result that there was no net debit to the P&L A/c. The AO & DRP noted that there was no effect on the P&L A/c but still held that an addition of Rs 5,739 crore had to be made to the assessee’s income. On appeal by the assessee to the Tribunal, HELD by the Tribunal allowing the appeal:
… if an action of the AO is so blatantly unreasonable that such seasoned senior officers well versed with functioning of judicial forums, as the learned DRs are, cannot even go through the convincing motions of defending the same before us, such unreasonable conduct of the AO deserves to be scrutinized seriously. At a time when evolving societal pressures demand greater degree of accountability in the governance also, it does no good to the judicial institutions to watch such situations as helpless spectators. If it is indeed a case of frivolous addition, someone should be accountable for the resultant undue hardship to the taxpayer -rather than being allowed to walk away with a subtle, though easily discernable, admission to the effect that yes it was a frivolous addition, and, if it is not a frivolous addition, there has to be reasonable defence, before us, for such an addition.
… Whichever way one looks at these entries, the inescapable conclusion is that the addition made by the AO is wholly erroneous and devoid of any legally sustainable merits.
…. The fact that even such purely factual issues are not adequately dealt with by the DRPs raises a big question mark on the efficacy of the very institution of Dispute Resolution Panel. One can perhaps understand, even if not condone, such frivolous additions being made by the AOs, who are relatively younger officers with limited exposure and experience, but the Dispute Resolution Panels, manned by very distinguished and senior Commissioners of eminence, will lose all their relevance, if, irrespective of their heavy work load and demanding schedules, these forums do not rise to the occasion and do not deal with the objections raised before them in a comprehensive and effective manner.
… While we delete the impugned addition of Rs 5739,60,05,089, we also place on record our dissatisfaction with the way and manner in which this issue has been handled at the assessment stage. Let us not forget that the majesty of law is as much damaged by not rendering justice to the conduct which cannot be faulted as much it is damaged by a wrongdoer going unpunished; not giving relief in deserving cases is as much of a disservice to the cause of justice and the cause of nation as much a disservice it is , to these causes, by granting undue reliefs. The time has come that a strong institutional check is put in place for dealing with such eventualities and de-incentivizing this kind of a conduct.