Facts of the Case
|30.10.2018||The TPO passed proposing adjustment of Rs 11.92 crores|
|03.12.2018||Draft Assessment order was passed by the AO|
|14.12.2018||The Assessee filed a Letter before the AO he it in the process of filing objections before DRP and requested the AO not to pass the final assessment order.|
|24.12.2018||The AO passed final assessment order without waiting for mandatory period of 30 days provided under Section 144C(2) of the Act confirming the draft assessment order. The Assessee received the order on 29.12.2018 by email.|
|28.12.2018||Against the Draft Assessment Order, the Assessee filed objection before DRP. The Assessee was not aware of the Assessment order has been passed.|
|26.08.2019||The Assessee informed the DRP that the assessment order has already been passed and, therefore, DRP has no locus to proceed with the objections filed. The Assessee also informed the DRP that an appeal is filed before the CIT(A) against the impugned the assessment order dated 24th December 2018.|
|16.12.2019||The DRP did not consider the request of the Assessee and issued directions.|
|31.12.2019||Based on the directions of DRP, the AO passed another final assessment order|
Against the DRP direction and consequent final assessment order, the Assessee filed writ petition to the Bombay High Court.
Decision of the High Court
Bombay HC quashed the second assessment order dated 31st October 2019 and DRP’s directions dated 16th September 2019 u/s.144C(5);
The HC observed that Sec.144C(5) provides that directions can be issued to enable AO to complete the assessment. Thus, section 144C(5) presupposes pending assessment proceeding. The HC held that “the DRP could give directions only in pending assessment proceedings. Once assessment order is passed, rightly or wrongly, the assessment proceedings come to an end. Therefore, the DRP would have no power to pass any directions contemplated under subsection 5 of Section 144C”.
The Revenue, in their affidavit, admitted that the assessment order dated 24th December 2018 could not have been passed. The Revenue submitted that the appeal pending before CIT(A) will naturally get allowed/the assessment order would get set aside and this would result in Revenue not being able to pass assessment order u/s.143(3) or u/s.147.
With respect to above arguments of Revenue, the HC referred to the decision of the Rajasthan High Court in Sudesh Taneja V/s. ITO 442 ITR 289 and observed as follows:
(a) taxing statute must be interpreted strictly. Equity has no place in taxation. Nor while interpreting taxing statute intendment would have any place.
(b) There is nothing unjust in the tax payer escaping if the letter of the law fails to catch him on account of the legislature’s failure to express itself clearly.
(c) It is axiomatic that taxation statute has to be interpreted strictly because the State cannot at their whims and fancies burden the citizens without authority of law.
(d) In the matter of interpretation of charging section of a taxation statute, strict Rule of interpretation is mandatory and if there are two views possible in the matter of interpretation of a charging section, the one favourable to the assessee need to be applied.
The HC finally quashed and set aside the directions issued by DRP on 16th September 2019 and the consequent assessment order dated 31st October 2019.