DRP has 6 months to pass rectification order: Mumbai ITAT

Case Details: Michael Page International Recruitment (P.) Ltd. v. DCIT - [2022] 143 taxmann.com 253 (Mumbai-Trib.)

Judiciary and Counsel Details

• • Pramod Kumar, Vice-President & Sandeep S. Karhail, Judicial Member
  • Dhanesh Bafna & Pratik Shah for the Appellant.
  • Vatsala Jha & Chetan M. Kacha for the Respondent.

Facts of the Case

In the instant case, on account of a word-processing cut-paste error, the Dispute Resolution Panel (DRP) in its order, incorporated directions relating to another group concern. The Assessing Officer (AO) incorporated such incorrect directions and passed the assessment order.

Within a month, the DRP detected the mistake and a rectification order was passed. However, no effect to this rectification order was given by AO. The aggrieved assessee filed the instant appeal before the Mumbai Tribunal.

The assessee contended that AO should have applied his mind before passing the order as directions issued by DRP weren’t relatable to the assessee’s facts. Thus, the order should be quashed. Further, the rectification order passed by DRP was beyond the time permissible under section 144C(12). Even if it was considered in time, the AO should have implemented rectified order within one month.

ITAT Held

The Mumbai Tribunal held that Section 144C(13) enjoins the AO to complete the assessment in conformity with the directions issued by DRP. It is not open to him to hold, giving effect to these directions, even if he finds the same to be prima facie incorrect.

Thus, whatever has been directed by the DRP is to be implemented within the permitted time limit; if there are mistakes in the directions of the DRP, that rectification can only be done by the DRP itself.

It is true that rule 13 of the Income-tax (Dispute Resolution Panel) Rules, 2009 doesn’t provide a time limit for rectification of mistakes. However, the Tribunal sees no reason to hold that the time limit permitted to the DRP for the rectification of mistakes apparent on record should be any less than the time permitted to the ITAT for the rectification of mistakes apparent on the record.

Accordingly, any order passed under rule 13 of the DRP rules cannot be held as barred by limitation if it is passed within six months from the end of the month in which the order was passed.

Further, as regards the time frame within which such a rectification order is to be given effect, While the time limit for implementing directions under rule 10, read with section 144C(5), is governed by Section 144C(13), the time limit for “rectification of mistakes” for which specific provisions are set out in Section 154 and is governed by the provisions of Section 154 itself.

Therefore, the AO has powers under section 154 to rectify the assessment order within 4 years from the end of the financial year in which the assessment order was passed.