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Facts
The assessee's appeal is against the final assessment order which was passed without adhering to the directions of the Dispute Resolution Panel (DRP). The Assessing Officer (AO) made additions based on fixed deposits, despite the DRP partially allowing the assessee's application regarding sources of investment.
Held
The Tribunal held that the final assessment order passed by the AO was not in conformity with the DRP's directions and was therefore bad in law and liable to be quashed. Consequently, the addition made on account of fixed deposits was quashed.
Key Issues
Whether the AO passed the final assessment order in conformity with the DRP directions. Whether the addition made on account of fixed deposits is sustainable.
Sections Cited
143(3), 144C(13), 144C(5), 144C(10), 80C
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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA & SHRI ANIKESH BANERJEE
This appeal of the assessee is directed against the final assessment order of the passed by the Learned Income-tax Officer, Int. Tax Ward 2(3)(1), Mumbai, (in short, ‘Ld.AO’) order passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 (in short, ‘the Act’), date of order 09/12/2024., for Assessment Year 2022-23. The said order was originated by the recommendation of the Learned CIT(DRP)-3, Mumbai-2 [for brevity, ‘Ld. DRP’] order passed under section 144C(5) of the Act, date of order 26/11/2024.
Virendra M Gaidhane 2. The assessee filed the return of income declaring a total income of Rs.10,74,751/-. The Ld. AO thereafter issued a draft assessment order proposing the assessment of total income at Rs.1,72,87,994/-. Being aggrieved by the proposed variation, the assessee preferred an appeal before the Ld. DRP. The Ld. DRP, after considering the submissions, partly allowed the application of the assessee. Pursuant thereto, the Ld. AO passed the final assessment order wherein the additions under three issues were sustained. Being further aggrieved, the assessee has preferred the present appeal before us.
Ground 1 : Related to addition of FD in ICICI Bank account , amount Rs.56,99,950/- which was invested through NRO account by the assesse.
The Ld. AR argued and filed a paper book containing pages 1 to 72 which is kept in record. The Ld. AR proceeded his argument ground wise as below. The details of Fixed Deposits are as follows: - Sr.No. F.D. No. Amount Opening date Closing date 1 001113089957 15,00,000 09/10/2019 07/10/2022 2 001113135033 25,00,000 16/12/2021 15/04/2023 3 036613014230 15,00,000 25/02/2022 06/03/2023 The Ld.DRP, in its order accepted the source of investment related to FD of Rs.25 lakhs and Rs.15 lakhs corresponding opening dates 16/12/2021 & 25/02/2022, respectively. With regard to the other FD related amount of Rs.15 lakhs, opening date 09/10/2019, the Ld.DRP confirmed the variation as nature of source of FD is not provided by the assessee. The Ld.AO, in his final order, without considering the direction of the Ld.DRP, made addition of all the FDs amount to Rs. 56,99,950/- with the total income of the assesse due to the lack of source of investment. The Virendra M Gaidhane Ld. AR argued that the Ld. AO has not followed the directions issued as no alternate disallowance has been proposed or discussed, thereby violating the mandatory provisions of the section 144C(13) of the Act. Thus, the final assessment order dated 09/12/2024 passed by the Ld. AO pursuant to the DRP directions dated 26/11/2024 is bad in law and void as the same has not been passed in conformity with the DRP directions. It is stated that basis the above stated facts and observations of the Ld. AO, it leads to an unmistakable conclusion that the final assessment order has not been passed in compliance to the statutory provisions that mandate in terms of Section 144C(13) of the Act that upon receipt of the directions of the DRP, the Ld. AO shall in conformity with the directions complete the assessment without providing any further opportunity of being heard to the assessee within one month from the end of the month in which such direction is received. Respectfully reliance is placed on the recent decision of the Coordinate bench of ITAT-Delhi in Olympus Medical Systems Pvt. Ltd. Vs ACIT, date of pronouncement 13/01/2022 quashed the final assessment order which was passed without following the directions issued by the Hon'ble DRP. The relevant findings are extracted below: "11 Income of Rs.10,41,53,180/– is the same as computed in the draft assessment order dated 21.12.2019. Considering the aforementioned factual matrix, we are of the opinion that as per the provisions of section 144C(5) of the Act, directions given by the DRP are binding on the Assessing Officer and in terms of section 144C(13) of the Act, the Assessing Officer was obliged to pass final order of assessment in accordance with the directions of the DRP. In the present case, final order of assessment does not incorporate the directions of the DRP and is verbatim repetition of the draft order of assessment. We are of the view that final order of assessment, in conformity with the directions of the DRP, has to be passed within one month from the end of the month in which the directions are issued by the DRP. Since the impugned order is not in conformity with the provisions of section 144C of the Act, the same is to be held as bad in laws."
Virendra M Gaidhane Respectfully reliance is also placed on the coordinate bench of the ITAT-Mumbai in the case of Royal Canin India Pvt Ltd vs. ACIT, date of pronouncement 01/04/2025 held that Final assessment order passed by Assessing Officer without following directions issued by Dispute Resolution Panel under section 144C is null and void and hence was to be quashed.
The Ld. DR argued and relied on the final assessment order.
We have heard the rival contention of both parties in the matter and perused the material on record. The undisputed facts on record, as brought out by the discussions above, is that the Ld. AO, as per law, was required to pass the final order of assessment dated 09/12/2024 for asst. year 2022-23 u/s 143(3) r.w.s 144C (13) of the Act in conformity with the directions issued by the DRP u/s 144C(5) of the Act, which are binding on him as per section 144C(10) thereof and within the time prescribed u/s 144C(13) of the Act. We find that instead of passing the final order of assessment as required by law, the Ld. AO passed the impugned final order of assessment which, as contended by the Ld. AR against the direction of the DRP related the issues source of fixed deposits. In view of the provisions of the Act and respectfully relied on the ruling of the coordinate benches of ITAT in Olympus Medical Systems Pvt Ltd. (supra) and Royal Canin India Pvt Ltd (supra) we find that the Ld. AO is required to pass the final assessment order in conformity with the DRP directions. In the present case, since the final assessment order passed by the Ld. AO is not in conformity with the DRP directions, In the present appeal, since the impugned assessment order passed by the Ld. AO is not in conformity with the DRP
In the result, assessee’s appeal in ground no-1 is allowed. 6.
Ground 2 : Claim of deduction u/s 80C – amount of Rs.1,50,000/- 7. In the final assessment order, we find that the assessee had submitted the bank details for payment of life insurance premium to ICICI Prudential Life Insurance Ltd for claiming deduction u/s 80C of the Act. The assessee was unable to submit the documentary evidence / receipt related to his claim. During the hearing, the Ld.AR prayed that the assesse is able to submit all the relevant documents in support of his claim u/s 80C of the Act. The Ld.DR had not made any objection against the submission of the Ld.AR. Accordingly, we remand the matter to the file of Ld.AO for verification of payment of life insurance premium of Rs.15 lakhs to ICICI Prudential Life Insurance Ltd during this impugned assessment year which is eligible for deduction u/s 80C of the Act. Needless to say, the assesse should get reasonable opportunity for submission of the evidence pertaining to his claim of deduction u/s 80C of the Act and after due verification of the evidence, the claim may be allowed, as per law.
In the result, ground no- 2 of the assessee’s appeal is allowed for statistical purpose.
Ground 3: Addition amount to Rs.18,725/- 9. Since this ground was not pressed by the Ld. AR during the course of hearing, the same is treated as not pressed and accordingly dismissed.