Wp(C)/13860/2021 Of Synthite Industries Private Limited v. The Additional /Joint/Deputy Commissioner Of Incomet Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE MURALI PURUSHOTHAMAN MONDAY, THE 7 DAY OF FEBRUARY 2022 / 18TH MAGHA, 1943 WP(C) NO. 13860 OF 2021 PETITIONER: SYNTHITE INDUSTRIES PRIVATE LIMITED,KOLENCHERRY, ERNAKULAM-682 311, KERALA, VIII 683-A CORPORATE HOUSE, KADAYIRUPPU, REPRESENTED BY ITS MANAGING DIRECTOR, MR.VARGHESE JACOB. BY ADVS.JOSEPH MARKOSE (SR.)V.ABRAHAM MARKOSABRAHAM JOSEPH MARKOSISAAC THOMASALEXANDER JOSEPH MARKOSSHARAD JOSEPH KODIANTHARA RESPONDENTS: 1THE ADDITIONAL /JOINT/DEPUTY/ASSISTANT COMMISSIONER OF INCOME TAX,INCOME TAX OFFICER, NATIONAL E-ASSESSMENT CENTRE, NEW DELHI-110 001. 2THE PRINCIPAL CHIEF COMMISSIONER OF INCOME TAX, NATIONAL E-ASSESSMENT CENTRE, NEW DELHI-110 001. 3DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), KOCHI-682 018.CORPORATE CIRCLE 2(1), KOCHI-682 018. 4THE PRINCIPAL COMMISSIONER OF INCOME TAX, KOCHI-682 018. WP(C) NO. 13860 OF 2021 ..2.. 5THE INCOME TAX OFFICER (OSD) & SECRETARY, DISPUTE RESOLUTION PANEL-2, A WING, 4TH FLOOR, KENDRIYA SADAN, KORAMANGALA, BENGALURU-560 034. BY JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLYHEARD ON 07.02.2022, THE COURT ON THE SAME DAY DELIVEREDTHE FOLLOWING: JUDGMENT The petitioner challenges Ext.P3 assessment order issued by the 1[st] respondent under Section 143(3) ofthe Income Tax Act, 1961 (the 'Act' for short) andExt.P8 order passed by the Dispute Resolution Panel (DRP) under Section 144C (5) of the Act rejectingExt.P4 objections to the Draft Assessment Order. 2. The 1[st] respondent issued Ext.P1 Draft Assessment Order (DAO) dated 16.04.2021 under Section 144C of the Act. As per the provisions ofSection 144 C (2), the assessee has to file objections, ifany, to the variation proposed in the DAO before theDRP within 30 days of receipt of DAO. Thus, thepetitioner had time till 16.05.2021 to file his objectionto Ext. P1 DAO. 3. Taking note of the second wave of Covid-19pandemic, the Central Board of Direct Taxes (CBDT) WP(C) NO. 13860 OF 2021 ..4.. issued Ext.P2 circular extending the time for filingobjections before DRP under Section 144C of the Acttill 31.05.2021. Clause 1 (b) of Ext.P2 Circular reads asfollows: “b) Objections to Dispute Resolution Panel (DRP)under Section 144C of the Income-tax Act, 1961,for which the last date of filing under that Sectionis 1[st] April 2021 or thereafter, may be filed withinthe time provided under that Section or by 31[st]May 2021, whichever is later; 4. As per Ext.P2 Circular, the petitioner had time till 31.05.2021 to file its objection to Ext. P1 DAO. Thepetitioner filed Ext.P4 objection dated 25.05.2021 toDAO before the DRP on 28.05.2021. According to thepetitioner, Ext.P4 objection was filed within the timeprovided by Ext.P2 Circular. However, the 1[st]respondent, without waiting for the expiry of the timefor filing objections before DRP, as extended by theCBDT in Ext.P2 Circular, completed the assessment byExt.P3 order dated 28.05.2021. In paragraph 10 of the Ext.P3 Assessment Order, the 1[st] respondent has statedas follows: 10. The Draft Assessment Order (DAO) waspassed on 16.04.2021. As per the provisions ofsection 144C(2) of the Act, the assessee had theoption of filing objections with the DisputeResolution Panel (DRP) or file acceptance within30 days of DAO. However till date the assesseehas neither filed acceptance nor intimated aboutfiling of Objections with the DRP. Therefore, theassessment is treated as completed u/s 144C(3)within the time allowed u/s 144C(4) of the Act. 5. Challenging Ext.P3, the petitioner approached this Court contending,inter alia,that Ext.P3 Assessment Order is passed in violation of theprovisions of Section 144 C and in disregard to theprinciples of natural justice. 6. At the time of admission of the writ petition,this Court passed interim dated 13.07.2021 staying the 5. Challenging Ext.P3, the petitioner approached this Court contending,inter alia,that Ext.P3 Assessment Order is passed in violation of theprovisions of Section 144 C and in disregard to theprinciples of natural justice. 6. At the time of admission of the writ petition,this Court passed interim dated 13.07.2021 staying the operation and implementation of Ext.P3 includingrecovery of amounts demanded thereunder and the WP(C) NO. 13860 OF 2021 ..6.. initiation of penalty proceedings mentioned therein.The said order was extended from time to time and aStatement dated 31.01.2022 has been filed on behalf ofthe respondents. 7. During the pendency of the writ petition, the DRP considered Ext.P4 objection to Ext.P1 DAO andrejected the objections as per Ext.P8 on the groundthat it has no jurisdiction to entertain the same sinceExt.P3 final Assessment Order has already beenpassed. The petitioner has amended the writ petition,incorporating a prayer to quash Ext. P8. 8. According to the petitioner, Ext.P3 order ispassed in total violation of Section 144 C and theprinciples of natural justice. It is further contendedthat when challenge against Ext.P3 order is pendingconsideration before this Court, the DRP ought nothave disposed of Ext.P4 objections by issuing Ext.P8order. WP(C) NO. 13860 OF 2021 ..7.. 9. In the statement filed on behalf of therespondents, it is contended that the petitioner has aneffective alternate remedy to file an appeal againstExt.P3 before the CIT (Appeals) under Section 246 ofthe Act. It is also contended that though the time limitfor filing objections with the DRP was extended upto31.05.2021, the assessee did not file any responsewithin the time provided under Section 144 C(2) of theAct. It was also contended that there is no violation ofprinciples of natural justice in issuing Ext. P3 order. 10. Heard Sri. Joseph Markos, the learned seniorcounsel instructed by Sri. Abraham Joseph Markos forthe petitioner and Sri. Jose Joseph, the learnedStanding Counsel for the Government of India (Taxes)for the respondents. 11. Though Section 144 C (2) of the Act stipulatesthat on receipt of the DAO, the assessee shall, within30 days of the receipt of the draft order, file his WP(C) NO. 13860 OF 2021 ..8.. objections, if any, to the variations before the DRP, thetime for filing objections to the DRP under Section144 C of the Act was extended till 31.05.2021 byExt.P2 Circular issued by CBDT. Ext.P2 Circular wasissued by CBDT in view of severe Covid-19 pandemicproviding certain relaxation in respect of income taxcompliances by the tax-payers including extension oftime limit to file objections before the DRP. Ext.P2Circular is issued by CBDT in exercise of its powersunder Section 119 of the Act, which provides forpowers of the CBDT to issue Circulars and theAssessing Authority is bound to observe and followsuch circulars and instructions. The Hon'ble SupremeCourt, inCatholic Syrian Bank Ltd.v.Commissioner of Income Tax, Thrissur [2012 (3)SCC 784: 2012 KHC 4121], has held that circularsissued by the CBDT under Section 119 of the Act arebinding on the Income Tax Authorities and the same WP(C) NO. 13860 OF 2021 ..9.. has to be followed for a uniform and properadministration and application of the provisions of the Act. The petitioner filed its objections before the DRP on 28.05.2021, which is well within the extended timefor filing objections as per Ext.P2 Circular issued bythe CBDT. Ext.P2 Circular is binding on therespondents. 12. Section 144C (1) to (3) of the Act reads as under: WP(C) NO. 13860 OF 2021 ..9.. has to be followed for a uniform and properadministration and application of the provisions of the Act. The petitioner filed its objections before the DRP on 28.05.2021, which is well within the extended timefor filing objections as per Ext.P2 Circular issued bythe CBDT. Ext.P2 Circular is binding on therespondents. 12. Section 144C (1) to (3) of the Act reads as under: "144C. (1) The Assessing Officer shall,notwithstanding anything to the contrarycontained in this Act, in the first instance,forward a draft of the proposed order ofassessment (hereafter in this section referredto as the draft order) to the eligible assessee ifhe proposes to make, on or after the 1st day ofOctober, 2009, any variation which isprejudicial to the interest of such assessee. (2) On receipt of the draft order, theeligible assessee shall, within thirty days of thereceipt by him of the draft order,-- (a) file his acceptance of the variationsto the Assessing Officer; or (b) file his objections, if any, to suchvariation with,-- (i) the Dispute Resolution Panel; and WP(C) NO. 13860 OF 2021 ..10.. (ii) the Assessing Officer. (3) The Assessing Officer shall completethe assessment on the basis of the draft order,if- (a) the assessee intimates to theAssessing Officer the acceptance of thevariation; or (b) no objections are received within theperiod specified in sub-section (2). 13. Section 144 C of the Act thus mandates that an assessment order under Section 143 (3) of the Actshall be passed only after the assessee is granted anopportunity to file objections to the Draft AssessmentOrder. The petitioner has filed its objections to Ext.P1DAO, within the extended time as per Ext.P2 Circular,which is binding on the respondents. However, the 1[st]respondent without considering the same, has passedExt.P3 final assessment order. I find that Ext.P3 isissued in violation of the principles of natural justiceand against the provisions of Section 144C and Ext.P2Circular issued by CBDT. Accordingly, Ext.P3 Final WP(C) NO. 13860 OF 2021 ..11.. Assessment Order is set aside. 14. During the pendency of this writ petition, the DRP, by Ext.P8 order, considered and rejected Ext.P4objection to DAO on the ground that it has nojurisdiction to entertain the same since Ext.P3 FinalAssessment Order has already been passed. SinceExt.P3 order is set aside, consequently, Ext.P8 alsostands set aside. The 5[th] respondent shall considerExt.P4 objection afresh in accordance with law, afteraffording an opportunity of hearing to the petitioner. The writ petition is allowed. No order as to costs. Sd/- MURALI PURUSHOTHAMAN JUDGE APPENDIX OF WP(C) 13860/2021 PETITIONER’S EXHIBITS: Exhibit P1 TRUE COPY OF THE DRAFT ASSESSMENTORDER DATED 16.04.2021 ISSUED BY THE1ST RESPONDENT. Exhibit P2 TRUE COPY OF THE CIRCULAR NO.08/2021DATED 30.04.2021 ISSUED BY THE CENTRALBOARD OF DIRECT TAXES. Exhibit P3 TRUE COPY OF THE ASSESSMENT ORDERDATED 28.05.2021 PASSED BY THE 1STRESPONDENT. Exhibit P4 TRUE COPY OF THE OBJECTIONS DATED25.05.2021 FILED BEFORE THE DRP. Exhibit P5 TRUE COPY OF THE CONFIRMATION RECEIVEDREGARDING RECEIPT OF THE EMAIL BY THEDRP.REGARDING RECEIPT OF THE EMAIL BY THEDRP. Exhibit P6 TRUE COPY OF THE PROOF OFDISPATCH/POSTAL RECEIPT ISSUED FOR THESPEED POST. Exhibit P7 TRUE COPY OF THE JUDGMENT DATED08.01.1993 IN WA NO.15 OF 1993 OF THISHON'BLE COURT. Exhibit P8 TRUE COPY OF THE ORDER DATED 10.1.2022PASSED BY THE 5TH RESPONDENT DISPUTERESOLUTION PANEL