Delhi High Court
Softwareone India Pvt. Ltd vs National E-Assessment Centre, Delhi on 2 September, 2024
Author: Yashwant Varma
Bench: Yashwant Varma
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment reserved on: 28 August 2024
Judgment pronounced on: 02 September 2024
+ ITA 52/2023 & CM APPL. 3673/2023
PR. COMMISSIONER OF INCOME TAX -7 .....Appellant
Through: Mr. Aseem Chawla, SSC with
Ms. Pratishtha Chaudhary,
Advocate.
versus
SUMITOMO CORPORATION INDIA (P) LTD......Respondent
Through: Mr. Himanshu S. Sinha, Mr.
Prashant Meharchandani & Mr.
Jainender Singh Kataria, Advs
+ ITA 451/2024 & CM APPL. 47709/2024 (10 days delay in
filing)
PR. COMMISSIONER OF INCOME TAX -7 .....Appellant
Through: Mr. Ruchir Bhatia, SSC with
Mr. Anant Mann, Mr.
Pratyaksh, JSCs
versus
WICKWOOD DEVELOPMENT LTD. .....Respondent
Through: Ms. Kavita Jha, Sr. Adv with
Mr. Vaibhav Kulkarni & Mr.
Himanshu Aggarwal, Advs.
+ W.P.(C) 688/2019
MICROSOFT INDIA (R&D) PVT. LTD. .....Petitioner
Through: Mr. Nageswar Rao & Mr.
Parth, Advocates
versus
DEPUTY COMMISSIONER OF
INCOME TAX & ANR. .....Respondents
Through: Mr. Gaurav Gupta, SSC with
Mr.Shivendra Singh & Mr. Yojit
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 1 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Pareek, JSCs for IT Deptt.
+ W.P.(C) 1009/2019
MICROSOFT INDIA (R&D) PVT. LTD. .....Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates
versus
DEPUTY COMMSSIONER
OF INCOME TAX & ANR. .....Respondent
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek, JSCs for IT Deptt.
+ W.P.(C) 991/2019
MICROSOFT INDIA (R&D) PVT. LTD. .....Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates
versus
DEPUTY COMMISSIONER OF INCOME TAX
& ANR. .....Respondents
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek, JSCs for IT Deptt.
+ W.P.(C) 995/2019
MICROSOFT INDIA (R&D) PVT. LTD. .....Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates.
versus
DEPUTY COMMISSIONER OF
INCOME TAX & ANR. .....Respondents
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek, JSCs for IT Deptt.
+ W.P.(C) 993/2019
MICROSOFT INDIA (R&D) PVT. LTD. .....Petitioner
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 2 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates
versus
DEPUTY COMMISSIONER
OF INCOME TAX & ANR. .....Respondents
Through: Mr. Siddharth Sinha, SSC with
Ms. Dacchita Shahi, Ms. Anuja
Pethia, JSCs, Mr. Nring
Chamwibo Zeliang, Ms. Anu
Priya Nisha Minz, Advs.
+ W.P.(C) 12462/2021
JCB INDIA LIMITED .....Petitioner
Through: Mr. Ajay Vohra, Sr. Adv with
Mr. Aditya Vohra & Mr.
Shashwat Dhamija, Advs.
versus
NATIONAL FACELESS ASSESSMENT CENTRE DELHI
&ANR. .....Respondents
Through: Mr. Sanjay Kumar with Ms.
Easha, Advs
+ W.P.(C) 12844/2021
SMART CUBE INDIA PVT LTD .....Petitioner
Through: Mr. Ajay Vohra, Sr. Adv with
Mr. Aditya Vohra, Mr.Neeraj
Jain, Mr. Shashwat, Advs.
versus
JOINT COMMISSIONER OF INCOME TAX .....Respondent
Through: Mr. Siddharth Sinha, SSC with
Ms. Dacchita Shahi, Ms. Anuja
Pethia, JSCs, Mr. Nring
Chamwibo Zeliang, Ms.Anu
Priya Nisha Minz, Advs.
+ W.P.(C) 3444/2021
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 3 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
M/S MICROSOFT INDIA R AND D PVT. LTD .....Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates
versus
PRINCIPAL COMMISSIONER OF INCOME
TAX -4 & ANR. .....Respondents
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek, JSCs for IT Deptt.
+ W.P.(C) 3377/2021
MICROSOFT INDIA R AND D PVT LTD .....Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates.
versus
PRINCIPAL COMMISSIONER
OF INCOME TAX-4 & ANR. .....Respondents
Through: Mr. Siddharth Sinha, SSC with
Ms. Dacchita Shahi, Ms. Anuja
Pethia, JSCs, Mr. Nring
Chamwibo Zeliang, Ms. Anu
Priya Nisha Minz, Advs.
+ W.P.(C) 3389/2021
M/S MICROSOFT INDIA (R AND D) PVT. LTD......Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates
versus
PRINCIPAL COMMISSIONER OF INCOME
TAX -4 & ANR. .....Respondents
Through: Mr. Siddharth Sinha, SSC with
Ms. Dacchita Shahi, Ms. Anuja
Pethia, JSCs, Mr. Nring
Chamwibo Zeliang, Ms. Anu
Priya Nisha Minz, Advs.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 4 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
+ W.P.(C) 3472/2021
MICROSOFT INDIA (R AND D) PVT. LTD. .....Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates
versus
PRINCIPAL COMMISSIONER OF INCOME TAX - 4 & ANR.
.....Respondents
Through: Mr. Siddharth Sinha, SSC with
Ms. Dacchita Shahi, Ms. Anuja
Pethia, JSCs, Mr. Nring
Chamwibo Zeliang, Ms. Anu
Priya Nisha Minz, Advs.
+ W.P.(C) 3539/2021
M/S MICROSOFT INDIA R AND D PVT LTD .....Petitioner
Through: Mr. Nageswar Rao, Mr. Parth,
Advocates.
versus
PRINCIPAL COMMISSIONER
OF INCOME TAX 4 & ANR. .....Respondents
Through: Mr. Siddharth Sinha, SSC with
Ms. Dacchita Shahi, Ms. Anuja
Pethia, JSCs, Mr. Nring
Chamwibo Zeliang, Ms. Anu
Priya Nisha Minz, Advs.
+ W.P.(C) 11896/2021
TELSTRA INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Manuj Sabharwal, Mr.
Drona Negi & Mr. Ayush
Kumar, Advs
versus
NATIONAL FACELESS ASSESSMENT
CENTRE & ORS. .....Respondents
Through: Mr. Sunil Agarwal, SSC with
Mr. Shivansh B.Pandya, Mr.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 5 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Viplav Acharya, JSCs & Mr.
Utkarsh Tiwari, Advocate.
+ W.P.(C) 11949/2021
CONTATA SOLUTIONS PRIVATE LIMITED .....Petitioner
Through: Mr. Amol Sinha, Mr. Kshitiz
Garg & Mr. Sourav Verma,
Advs.
versus
NATIONAL FACELESS ASSESSMENT CENTRE DELHI &
ORS. .....Respondents
Through: Mr. Indruj Singh Rai, SSC, Mr.
Sanjeev Menon, Mr. Rahul
Singh, JSCs, Mr. Anmol Jagga,
Advocates.
+ W.P.(C) 12204/2021 & CM APPL. 38228/2021 (Stay)
SWAROVSKI INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Himanshu S. Sinha, Mr.
Prashant Meharchandani & Mr.
Jainender Singh Kataria, Advs
versus
JOINT COMMISSIONER OF
INCOME TAX OSD .....Respondent
Through: Mr. Sanjay Kumar with Ms.
Easha, Advs.
+ W.P.(C) 12319/2021
AXALTA COATING SYSTEMS
INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya
Kapoor, Mr. Tarun Chawla, Mr.
Sumit Lal Chandani & Mr.
Utkarsa Kr. Gupta, Advocates.
Versus
NATIONAL FACELESS ASSESSMENT CENTRE, -EARLIER
KNOWN AS NATIONAL E-ASSESSMENT CENTRE
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 6 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
.....Respondent
Through: Mr. Sanjay Kumar, SC with
Ms. Easha, Adv.
+ W.P.(C) 4043/2022 & CM APPL. 12064/2022 (stay)
RAMTECH CONSULTING .....Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya
Kapoor, Mr. Tarun Chawla, Mr.
Sumit Lal Chandani & Mr.
Utkarsa Kr. Gupta, Advocates.
versus
NATIONAL FACELESS
ASSESSMENT CENTRE, DELHI. .....Respondent
Through: Mr. Sanjay Kumar with Ms.
Easha, Advs.
+ W.P.(C) 5913/2022 & CM APPL. 17722/2022 (stay)
SOFTWAREONE INDIA PVT. LTD .....Petitioner
Through: Mr. Ajay Vohra, Sr. Adv with
with Mr. Aditya Vohra & Mr.
Shashwat Dhamija, Advocates.
versus
NATIONAL E-ASSESSMENT
CENTRE, DELHI .....Respondent
Through: Mr. Sanjay Kumar with Ms.
Easha, Advs.
+ W.P.(C) 6365/2022 & CM APPL. 19227/2022 (stay)
SMART CUBE INDIA PVT LTD .....Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya
Kapoor, Mr. Tarun Chawla, Mr.
Sumit Lal Chandani & Mr.
Utkarsa Kr. Gupta, Advocates.
versus
DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 22(2)
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 7 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
.....Respondent
Through: Mr. Sanjay Kumar with Ms.
Easha, Advs.
+ W.P.(C) 6786/2022 & CM APPL. 20625/2022 (exemption)
ADITYA TALWAR .....Petitioner
Through: Mr. Salil Kapoor, Ms. Ananya
Kapoor, Mr. Tarun Chawla, Mr.
Sumit Lal Chandani & Mr.
Utkarsa Kr. Gupta, Advocates
versus
DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL
CIRCLE-19, .....Respondent
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek, JSCs for IT Deptt.
+ W.P.(C) 12735/2022 & CM APPL. 38706/2022 (stay)
SWAROVSKI INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Himanshu S. Sinha, Mr.
Prashant Meharchandani & Mr.
Jainender Singh Kataria, Advs
versus
DEPUTY COMMISSIONER
OF INCOME-TAX CIRCLE 22-2 .....Respondent
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek,JSCs for IT Deptt.
+ W.P.(C) 12784/2022 & CM APPL. 38902/2022 (stay)
SWAROVSKI INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Himanshu S. Sinha, Mr.
Prashant Meharchandani & Mr.
Jainender Singh Kataria, Advs
Versus
DEPUTY COMMISSIONER OF
INCOME-TAX CIRCLE 22.2 .....Respondent
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 8 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek,JSCs for IT Deptt.
+ W.P.(C) 12785/2022 & CM APPL. 38904/2022 (stay)
SWAROVSKI INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Himanshu S. Sinha, Mr.
Prashant Meharchandani & Mr.
Jainender Singh Kataria, Advs
versus
DEPUTY COMMISSIONER
OF INCOME-TAX CIRCLE 22.2 .....Respondent
Through: Mr. Gaurav Gupta, SSC with
Mr. Shivendra Singh & Mr.
Yojit Pareek,JSCs for IT Deptt.
+ W.P.(C) 7547/2023
AT KEARNEY INDIA PRIVATE LIMITED .....Petitioner
Through: Ms. Ishita Farsaiya, Mr. Sparsh
Bhargava, Ms. Vanshika
Taneja & Mr. Apurv Shukla,
Advocates.
versus
DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1(1),
DELHI & ORS. .....Respondents
Through: Mr. Indruj Singh Rai, SSC, Mr.
Sanjeev Menon, Mr. Rahul
Singh, JSCs, Mr. Anmol Jagga,
Advocates.
+ W.P.(C) 14314/2023 & CM APPL. 56688/2023 (stay)
KARL STORZ ENDOSCOPY
INDIA PRIVATE LIMITED .....Petitioner
Through: Mr. Vishal Kalra & Mr.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 9 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Saumyendra S. Tomar, Mr.
Ankit Sahni & Ms. Snigdha
Gautam, Advocates.
Versus
NATIONAL FACELESS ASSESSMENT CENTRE, NEW
DELHI & ANR. .....Respondents
Through: Appearance not given.
+ ITA 454/2024
PR. COMMISSIONER OF INCOME TAX -7 .....Appellant
Through: Mr. Ruchir Bhatia, SSC with
Mr. Anant Mann, Mr.
Pratyaksh Gupta, JSCs
versus
WICKWOOD DEVELOPMENT LTD. .....Respondent
Through: Ms. Kavita Jha, Sr. Adv with
Mr. Vaibhav Kulkarni & Mr.
Himanshu Aggarwal, Advs.
CORAM:
HON'BLE MR. JUSTICE YASHWANT VARMA
HON'BLE MR. JUSTICE RAVINDER DUDEJA
JUDGMENT
YASHWANT VARMA, J.
1. This batch of writ petitions impugn the action of the
Jurisdictional Assessing Officer1 who had proceeded to frame a final
order of assessment pursuant to directions of remand framed by the
Income Tax Appellate Tribunal2 and thus having acted in breach of
the procedure prescribed by Section 144C of the Income Tax Act,
19613.
2. Pursuant to the directions issued by the Court, Mr. Rao, learned
1
AO
2
Tribunal
3
Act
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 10 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
counsel who has led submissions on behalf of the writ petitioners, has
placed on the record a chart which succinctly encapsulates the principal
facts obtaining in each of the writ petitions. That collaborative chart has
principally bifurcated matters into Categories A and B and is extracted
hereinbelow:-
“CATEGORY A
Sr. Case title and No. Assessment Brief Background Issues involved
No. Year1 PCIT v. 2003-04 This appeal by the Revenue Whether a final
Sumitomo seeks to assail the order passed assessment order
Corporation India by the Income Tax Appellate passed without
(P) Ltd., Tribunal (ITAT) dated 28th passing a draft
September 2021 wherein the assessment order as
ITA 52/2023 ITAT upheld the action of the mandated under
CIT(A) to set aside the final Section 144C of the
assessment order passed by the Act is
assessing officer without tenable or not?
passing a draft assessment Whether it is order during remand mandatory for the proceedings as mandated under assessing officer to Section 144C of the Act. pass a draft Limitation assessment order The ITAT order remitting the under Section 144C matter back to the file of TPO of the Act during was passed on 11.06.2014 and remand proceedings? therefore, as per fourth proviso to Section 153(2A), prior to its amendment vide Finance Act, 2016, the limitation for passing a legally valid final assessment order expired on March 31, 2017. 2 JCB India Limited 2018-19 On 20.02.2020, the Petitioner Whether a final v. NFAC filed the return of income for assessment order the subject AY declaring a total passed without W.P.(C) income of INR 1395,28,30,270. passing a draft 12462/2021: Petitioner's return of income assessment order as was processed under section mandated under 143(1) of the Act. Section 144C of the On 28.07.2021, the TPO vide Act is tenable or not? Signature Not Verified Digitally Signed ITA 52/2023 & other connected matters Page 11 of 74 By:KAMLESH KUMAR Signing Date:02.09.2024 17:04:21 its order under section 92CA(3) of the Act proposed an upward transfer pricing adjustment of INR 5,93,54,095. On 24.08.2021, the Respondent /AO directly passed the final assessment order under section 143(3) read with section 144B of the Act along with demand notice under section 156 of the Act and penalty notice under section 274 read with section 270A of the Act. The final assessment order passed was also accompanied by a notice of demand issued under section 156 of the Act (along with the computation sheet), and a penalty notice issued under section 274 read with section 270A of the Act, thereby resulting in violation of mandatory provisions of section 144C of the Act. 3 Smart Cube India 2010-11 Income-tax return (ITR) filed In the 2nd round of Pvt Ltd vs Joint by the Petitioner returning proceedings pursuant Commissioner of income of Rs. 3,78,120 was to remand by the Income- tax selected for scrutiny and notice ITAT, despite the was issued under section Petitioner qualifying W.P.(C) 143(2) of the Act. as ‗eligible assessee' 12844/2021 Assessing Officer (AO) passed in terms of section draft assessment order (DAO) 144C(15), draft dated 21.03.2014 under section assessment order was 143(3) read with section 144C, not passed by the making addition of Respondent, instead, Rs.4,70,99,145, which included assessment was transfer pricing adjustment of straightaway finalized Rs.1,91,52,594 and by way of final disallowance of deduction assessment order, under section 10B of the Act of which was Rs.2,79,46,551. accompanied by Objections were filed by the notice of demand and Petitioner against the DAO notice for initiating before the DRP, which issued penalty proceedings directions dated 24.12.2014 under section 144(5), No opportunity was confirming the additions. provided to the Pursuant to the same, the AO Petitioner to file Signature Not Verified Digitally Signed ITA 52/2023 & other connected matters Page 12 of 74 By:KAMLESH KUMAR Signing Date:02.09.2024 17:04:21
passed the final assessment objections before the
order dated 14.01.2015 under DRP, even though the
section 143(3) assessing the Respondent was
total income at Rs.4,74,77,270. mandated by law to
Said final assessment order was first forward draft
challenged before the ITAT, assessment order to
which remanded the issue of the Petitioner under
transfer pricing adjustment to section 144C(1),
the TPO and the issue of thereby violating the
disallowance of deduction substantive rights of
under section 10B of the Act to the Petitioner as
the AO vide order dated codified under
27.04.2018. section 144C of the
In set aside proceedings, TPO Act.
passed order dated 05.01.2021
under section 92CA(3),
proposing to make transfer
pricing adjustment of
Rs.1,80,69,890. The AO passed
the final assessment order dated
29.09.2021 under section
143(3) read with section 254,
assessing the total income of
the Petitioner at
Rs.4,63,94,561, after making
revised transfer pricing
adjustment as proposed by the
TPO and disallowance of
deduction claimed under
section 10B of the Act.
Said final assessment order
was accompanied by notice of
demand issued under section
156 and notice issued under
section 274 read with section
271(1)(c) of the Act for initiating
penalty proceedings.
4 Telstra India 2018-19 That AO has passed a final Whether the AO
Private Limited assessment order dated could have passed
v. NFAC. 18.09.2021 against the final assessment
petitioner without issuing the order without
W.P.(C) Draft Assessment Order as per adherence to the
11896/2021 mandatory provisions of s. mandatory provisions
144C(1). The said action is of Section 144C?
jurisdictionally flawed. To
clarify, there is no corrigendum
in the matter.
Notice of demand under s. 156
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 13 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
was also issued on 18.09.2021.
On the basis of Supreme Court
decision in Kalyan Kumar Ray
v. CIT [1991] 191 ITR 634
(SC), the process of assessment
has culminated
5 Contata 2010-11 12.10.2010- Petitioner Company The final Assessment
Solutions filed its original ITR. Order passed by the
Private 29.08.2011- The case was AO is without
Limited v. selected for scrutiny assessment jurisdiction. This
NFAC through CASS. Hon’ble High Court
24.01.2014- On reference of the has held that the
W.P.(C) Assessing Officer, TPO passed failure by the AO to
11949/2021 an order u/s 92CA(3) of the Act. first pass a draft
10.03.2014- Draft Assessment assessment order
Order under Section 143(3) r/w would result in
Section 144C of the Act, was invalidation of the
passed by the AO. final assessment
16.12.2014- Aggrieved by the order and the
Draft Assessment Order, the consequent demand
Petitioner filed objections notices and penalty
before the Dispute Resolution proceedings.
Panel [‘DRP’]. The DRP issued {Turner International
directions. India (P.) Ltd. v. Dy.
29.01.2015- The TPO proposed CIT [2017] 82
upwards adjustment of INR taxmann.com
52,25,570/- and arrived at the 125/398 ITR 177
arm’s length price of INR (Delhi) &
9,90,41,626/- (Rs.9,38,16,056/- Headstrong Services
+52,25,570/-) in the arm’s India Pvt. Ltd.}
length price for the Limitation has
international transaction. expired since A.Y is
30.01.2015- Final Assessment 2010-11.
Order was passed by the
Assessing Officer.
15.01.2019- In the appeal
preferred by the Petitioner
against the final Assessment
Order, dated 30.01.2015,
passed by the Assessing
Officer, the Income Tax
Appellate Tribunal ('ITAT')
granted some relief to the
Petitioner by directing
inclusion/exclusion of some
comparables. Further, ITAT
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 14 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
also directed to TPO to carry
out fresh comparability
analysis as per Rule 10D(2) of
the Income-Tax Rules, 1963
and also to carry out FAR
Analysis in respect of some
comparables rejected by merely
applying filers by the TPO.
21.01.2021- TPO passed a
fresh order under section
92CA(3) of the Act, proposing
even higher upwards
adjustment of INR
1,16,23,102/- and arrived at the
arm's length price of INR
10,54,39,158/-
(Rs.9,38,16,056/- +
1,16,23,102/-).
09.09.2021- Without passing
the Draft Assessment Order
contrary to the mandate of
Section 144C(1) of the Act, the
AO passed final Assessment
Order under section
254/143(3)/144C(13) r/w
Section 92CA(4) of the Act.
6 Swarovski 2010-11 Present writ petition has been Whether a final
India Private filed challenging the assessment order
Limited v. assessment order dated 29th passed without
DCIT, September 2021 passed by the passing a draft
assessing officer in remand assessment order as
W.P.(C) proceedings and the consequent mandated under
12204/2021 demand and penalty notices Section 144C of the
without passing a draft Act is tenable or not?
assessment order as mandated
under Section 144C of the Act.
The petition was filed on the Whether it is
ground that the assessing mandatory for the
officer erred in issuing a assessing officer to
demand notice u/s 156 despite pass a draft
the fact that the addition made assessment order
in the final assessment order under Section 144C
was protective in nature. of the Act during
This Hon’ble Court vide its remand proceedings?
order dated 28th October 2021,
restrained the Respondent from
taking any action pursuant to
the impugned assessment
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 15 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
orders, notice of demand and
penalty notices.
Limitation
The order of ITAT remitting
the matter was passed on April
02, 2018, and therefore, the
limitation of passing a legally
valid final assessment order
expired on December 31, 2020,
as per Section 153(3) r.w.
Section 153(4) of the Act. The
assessment order was passed on
September 29, 2021, which is
beyond limitation.
7 Axalta Coating 2018-19 The Respondents have illegally
Systems India proceeded to pass the final
Private Limited assessment order (Annexure P-
v. NFAC 3). The TPO passed the order
on 31.07.2021 (Annexure P-2)
W.P.(C) and the Respondents instead of
12319/2021 following the binding mandate
of Section 144C and instead of
issuing the draft assessment
order, have directly proceeded
to pass the impugned final
assessment order and have
raised the demand as well and
initiated penalty proceedings.
8 Ramtech 2017-18 The Respondents have illegally
Consulting v. proceeded to pass the final
NFAC assessment order (Annexure P-
7). The TPO passed the order
W.P.(C) on 29.01.2021 (Annexure P-1)
4043/2022 and the Respondents instead of
following the binding mandate
of Section 144C and instead of
issuing the draft assessment
order, have directly proceeded
to pass the impugned final
assessment order and have
raised the demand aswell and
initiated penalty proceedings.
The Respondents in the first
round had passed the draft
assessment order and also final
assessment order which was
set-aside by this Hon'ble Court
on 14.07.2021 (P-5).
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 16 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Subsequently, the Respondents
have not followed the mandate
of law and have not passed any
draft assessment order.
Thereafter the Petitioner has
also filed a CM application for
amendment of writ for raising
issue of DIN which Hon'ble
Court has taken on record vide
order dated 13.12.2023.
9 Software one 2017-18 The Respondents have illegally
India Pvt. Ltd proceeded to pass the final
v. NeAC assessment order (Annexure P-
3). The TPO passed the order
W.P.(C) on 30.01.2021 (Annexure P-2)
5913/2022 and the Respondents instead of
following the binding mandate
of Section 144C and instead of
issuing the draft assessment
order, have directly proceeded
to pass the impugned final
assessment order and have
raised the demand aswell and
initiated penalty proceedings.
10 Smart Cube 2011-12 Income-tax return (ITR) filed In the 2nd round of
India Pvt Ltd v. by the Petitioner returning proceedings pursuant
JCIT income of Rs.3,19,590 was to remand by the
selected for scrutiny and notice ITAT, despite the
W.P.(C) was issued under section Petitioner qualifying
6365/2022 143(2) of the Act. as ‗eligible assessee'
Assessing Officer (AO) passed in terms of section
draft assessment order (DAO) 144C(15), draft
dated 27.02.2015 under section assessment order was
143(3) read with section 144C, not passed by the
making addition of Respondent, instead,
Rs.7,34,36,867, which included assessment was
transfer pricing adjustment of straightaway finalized
Rs.5,52,01,139 and by way of final
disallowance of deduction assessment order,
under section 10B of the Act of which was
Rs.1,82,35,728. accompanied by
Objections were filed by the notice of demand and
Petitioner against the DAO notice for initiating
before the DRP, which issued penalty
directions dated 14.09.2015 proceedings.
under section 144(5),
confirming the additions. No opportunity was
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 17 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Pursuant to the same, the AO provided to the
passed the final assessment Petitioner to file
order dated 19.10.2015 under objections before the
section 143(3) assessing the DRP, even though the
total income at Rs.7,37,56,457. Respondent was
Said final assessment order was mandated by law to
challenged before the ITAT, first forward draft
which remanded the issue of assessment order to
transfer pricing adjustment to the Petitioner under
the TPO and the issue of section 144C(1),
disallowance of deduction thereby violating the
under section 10B of the Act to substantive rights of
the AO vide order dated the Petitioner as
29.07.2020. codified under
In set aside proceedings, TPO section 144C of the
passed order dated 29.03.2022 Act
under section 92CA(3),
proposing to make transfer
pricing adjustment of
Rs.1,43,77,827. The AO passed
the final assessment order
dated 30.03.2022 under section
143(3) read with section 254,
assessing the total income of
the Petitioner at Rs.
3,29,33,145, after making
revised transfer pricing
adjustment as proposed by the
TPO and disallowance of
deduction claimed under
section 10B of the Act.
Said final assessment order was
accompanied by notice of
demand issued under section
156 and notice issued under
section 274 read with section
271(1)(c) of the Act for
initiating penalty proceedings.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 18 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
11 Aditya Talwar 2017-18 The Respondents have illegally
vs. DCIT- proceeded to pass the final
assessment order (Annexure P-
W.P.(C) 3). The Petitioner is admittedly
6786/2022 a non-resident and the
Respondents instead of
following the binding mandate
of Section 144C and instead of
issuing the draft assessment
order, have directly proceeded
to pass the impugned final
assessment order and have
raised the demand as well and
initiated penalty proceedings.
12 Swarovski 2008-09 Present writ petitions have Whether a final
India Private been filed challenging the assessment order
Limited v. assessment orders dated 22nd passed without
DCIT, March 2022 for the Assessment passing a draft
Years 2008-09 & 2009-10 and assessment order as
W.P.(C) 23rd March 2022 for the mandated under
12735/2022 Assessment Year 2007-08, Section 144C of the
13 Swarovski 2007-08 passed by the assessing officer Act is
India Private in remand proceedings and the tenable or not?
Limited v. consequent demand and
DCIT, penalty notices without passing
a draft assessment order as Whether it is
W.P.(C) mandated under Section 144C mandatory for the
12784/2022 of the Act. assessing officer to
This Hon'ble Court vide its pass a draft
order dated 5th September assessment order
2022, restrained the under Section 144C
Respondent from taking any of the Act during
coercive action pursuant to the remand proceedings?
14 Swarovski 2009-10 impugned assessment orders,
India Private notice of demand and penalty
Limited v. notices.
DCIT, Limitation
For AY 2007-08
W.P.(C) The order of ITAT remitting
12785/2022 the matter was passed on July
25, 2019, and therefore, the
limitation of passing a legally
valid final assessment order
expired on March 31, 2022, as
per Section 153(3) r.w. Section
153(4) of the Act. The final
assessment order was passed
on March 23, 2022.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 19 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
For AY 2008-09
The order of ITAT remitting
the matter was passed on July
25, 2019, and therefore, the
limitation of passing a legally
valid final assessment order
expired on March 31, 2022, as
per Section 153(3) r.w. Section
153(4) of the Act. The final
assessment order was passed
on March 23, 2022.
For AY 2009-10
The order of ITAT remitting
the matter was passed on July
25, 2019, and therefore, the
limitation of passing a legally
valid final assessment order
expired on March 31, 2022, as
per Section 153(3) r.w. Section
153(4) of the Act. . The final
assessment order was passed
on March 23, 2022.
15 Karl Storz 2020-21 On 08.01.2021, the Petitioner Whether a final
Endoscopy filed the return of income for assessment order
India Private the subject year declaring total passed without
Limited v. income of INR 26,27,44,510. passing a draft
NFAC On 30.07.2023, the TPO vide assessment order as
its order under section 92CA(3) mandated under
W.P. (C) No. of the Act, proposed an upward Section 144C of the
14314/2023 adjustment on account of AMP Act is tenable or not?
expenditure of INR
18,61,30,041.
On 30.07.2023, the Respondent
No.1, instead of passing a draft
assessment order as mandated
by the provisions of section
144C(1) of the Act,
straightaway passed the final
assessment order dated
30.07.2023 under section
143(3) read with section 144B
of the Act, confirming the
additions made by the TPO.
The final assessment order
dated 30.07.2023 was
accompanied by a notice of
demand issued under section
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 20 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
156 of the Act (along with the
computation sheet), and a
penalty notice issued under
section 274 read with section
270A of the Act, thereby
resulting in violation of
mandatory provisions of
section 144C of the Act.
16 PCIT vs 2008-09 The assessee is company Whether on the facts
Wickwood incorporated in BVI on and circumstances of
Development 13.05.1991. the case and in law
Limited A search and seizure operations the Ld. ITAT is
under section 132 of the Act justified in allowing
ITA 451/2024 was conducted on 22.03.2012 the objection filed by
in M/s Focus Energy group. the assessee despite
Thereafter, a notice under the fact that section
section 153C of the Act was 144C(l) of the Act is
issued to the assessee on not applicable in the
18.11.2013. case of the assessee
The assessing officer made as the income earned
reference to the Transfer during the assessment
Pricing Officer vide letter dated year only because of
20.12.2013. In order to verify underlying assets or
the correctness of the source of income is in
exploration expenses paid by India?
the assessee for AY 2006-07 to
2012-13.
The assessee filed detailed
objections to the assumption of
jurisdiction vide letter dated Whether on the facts
05.03.2014. and circumstances of
The assessee in response to the case and in law
notice under section 153C filed the Ld. ITAT is
income-tax return (‗ITR’) on justified in allowing
18.03.2014 returning income of the cross objection
Rs.1,55,91,116. filed by the assessee
Assessing Officer (AO) passed despite the fact that
final assessment order dated the section 144C(1)
28.03.2014 under section 153C of the Act is not
read with section 144, making applicable in the case
addition of Rs. 29,82,57,118. of the is eligible
The final assessment order was assessee as defined
challenged before the CIT(A) , under section
which allowed the appeal filed 144C(15) (b) of the
by the assessee vide order Income Tax Act,
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 21 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
dated 26.02.2015. 1961.
The order dated 26.02.2015
was assailed by the Revenue
before the ITAT on merits and
the assessee also filed Cross
Objections being CO No.
360/Del/2015.
The ITAT, following the
decision of this Hon’ble Court
in the case of Turner
International India Pvt. Ltd. vs
DCIT: W.P.(C) 4260/2015 held
that it was obligatory on the
part of the assessing officer to
pass the draft assessment order
in the first instance before
passing of the final assessment
order and no adjudication was
required and done on the merits
of the matter.
17 PCIT vs 2009-10 The assessee is company Whether on the facts
Wickwood incorporated in BVI on and circumstances of
Development 13.05.1991. the case and in law
Limited A search and seizure operations the Ld. ITAT is
under section 132 of the Act justified in allowing
ITA 454/2024 was conducted on 22.03.2012 the objection filed by
in M/s Focus Energy group. the assessee despite
Thereafter, a notice under the fact that section
section 153C of the Act was 144C(l) of the Act is
issued to the assessee on not applicable in the
18.11.2013. case of the assessee
The assessing officer made as the income earned
reference to the Transfer during the assessment
Pricing Officer vide letter dated year only because of
20.12.2013. In order to verify underlying assets or
the correctness of the source of income is in
exploration expenses paid by India?
the assessee for AY 2006-07 to
2012-13
The assessee filed detailed
objections to the assumption of
jurisdiction vide letter dated Whether on the facts
05.03.2014. and circumstances of
The assessee in response to the case and in law
notice under section 153C filed the Ld. ITAT is
income-tax return (‗ITR’) on justified in allowing
18.03.2014 returning income of the cross objection
Rs.6,12,64,160. filed by the assessee
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 22 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Assessing Officer (AO) passed despite the fact that
final assessment order dated the section 144C(1)
28.03.2014 under section 153C of the Act is not
read with section 144, making applicable in the case
addition of Rs. 1,82,53,79,696. of the is eligible
The final assessment order was assessee as defined
challenged before the CIT(A), under section
which allowed the appeal filed 144C(15) (b) of the
by the assessee vide order Income Tax Act,
dated 26.02.2015. 1961.
The order dated 26.02.2015
was assailed by the Revenue
before the ITAT on merits and
the assessee also filed Cross
Objections being CO No.
361/Del/2015.
The ITAT, following the
decision of this Hon’ble Court
in the case of Turner
International India Pvt. Ltd. vs
DCIT: W.P.(C) 4260/2015 held
that it was obligatory on the
part of the assessing officer to
pass the draft assessment order
in the first instance before
passing of the final assessment
order and no adjudication was
required and done on the merits
of the matter.
CATEGORY B
Sr. No. Case Title and No. AY
6 Swarovski India Private Limited v. DCIT, 2010-11
W.P.(C) 12204/2021
Event Date
Date of ITAT order 02.04.2018
(remanding for re-adjudication)
Expiry of Limitation 31.12.2020
[21 months from end of 31.03.2019 as per Section 153(3) r.w.s 153(4)]
Date of TPO order in remand proceedings 31.01.2021
(Beyond Limitation)
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 23 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Date of Final Assessment Order in remand proceedings 29.09.2021
(Beyond Limitation)
MICROSOFT INDIA (R&D) PRIVATE LIMIITED
WP (C) WP (C) WP (C) WP (C) 991/2019 WP (C)
1009/2019 993/2019 688/2019 995/2019
S. No. Particulars AY 2006-07 AY AY 2008-09 AY 2009-10 AY 2010-
2007-08 11
1 Original 16.09.2010 21.10.20 Undated AO 28.02.2014 27.02.2015
Assessment Annexure 11 but notice of Annexure P-4 on Annexure
order P-4 on pg. Annexure demand is dated pg. 43 of WP P-4 on pg.
40 of WP P-4 on 19-11-2012 75 of WP
pg. 33 of Annexure P-4
WP on pg. 41
2 ITAT order 28.06.2016 28.06.20 28.06.2016 28.06.2016 28.06.2016
Annexure 16 Annexure P-5 on Annexure P-5 on Annexure
P-5 on pg. Annexure pg. 53 pg. 55 of WP P-5 on pg.
47 of WP P-5 on 108 of WP
pg. 43 of
WP
3 Consequential 31.08.2016 31.08.20 31.08.2016 31.08.2016 31.08.2016
order passed Annexure P-6 16 Annexure P-6 Annexure P-6 Annexure
u/s 254/143(3) on pg. 70 of Annexur on pg. 76 of on pg. 78 of P-6 on pg.
rws 144C of WP Address: e P-6 on WP Address: WP Address: 131 of WP
the Act 807, New pg. 66 of 807, New Delhi 807, New Address:
recomputing Delhi House, WP House, Delhi House, 807, New
taxable Barakhamba Address: Barakhamba Barakhamba Delhi
income Road, Delhi 807, Road, Delhi Road, Delhi House,
110001 New 110001 110001 Barakhamb
Delhi a Road,
House, Delhi
Barakha 110001
mba
Road,
Delhi
110001
4 Revised TPO 31.10.2018 31.10.20 31.10.2018 31.10.2018 Octob
order passed Annexure 18 Annexure P-11 Annexure P-11 er 2018
u/s 92CA rws P-13 on pg. Annexure on pg. 88 of on pg. 90 of WP Annexure
254 of the Act 83 of WP P-11 on WP P-11 on pg.
pg. 78 of 143 of WP
WP
5 Notice u/s 20.11.2018 20.11.20 20.11.2018 20.11.2018 20.11.2018
142(1) of the Annexure 18 Annexure P-12 Annexure P-12 Annexure
Act issued by P-14 on pg. Annexure on pg. 156 of on pg. 158 of WP P-12 on pg.
AO 138 of WP P-12 on WP 211 of WP
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 24 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
pg. 143
of WP
6 Due date for 31.12.2018 31.12.20 31.12.2018 31.12.2018 31.12.2018
passing 18
assessment
order u/s 153
pursuant to
remand back
7 Final 20.11.2018 Nov 28.12.2018 30.12.2018 25.12.2018
assessment Annexure 2018 Annexure P-1 Annexure P-1 on Annexure
order u/s P-1 on pg. (Undate on pg. 25 of pg. 25 of WP P- 1 on pg.
143(3) rws 24 of WP d) WP 24 of WP
254 of the Act Annexure
P-1 on
pg. 24 of
WP
8.1 Demand 20.12.2018 20.12.20 28.12.2018 30.12.2018 25.12.2018
notice u/s 156 Annexure 18 Annexure P-2 Annexure P-2 on Annexure
of the Act P-2 on pg. Annexure on pg. 30 of pg. 31 of WP P- 2 on pg.
29 of WP P-2 on WP 30 of WP
pg. 26 of
WP
8.2 Address to F-40, NDSE F-40, F-40, NDSE - 807, New Delhi F-40,
which - 1, New NDSE - 1, New Delhi House, NDSE - 1,
demand Delhi 1, New 110049 Barakhamba New Delhi
notice u/s 156 110049 Delhi Pg. 26 of WP Road, New Delhi 110049
has been sent Pg. 29 of 110049 - 110001 Pg. 26 of
in Round II of WP Pg. 26 of Pg. 31 of WP WP
litigation WP
9.1 Date of 22.12.2018 22.12.20 30.12.2018 - 27.12.2018
Dispatch of 18
order u/s 254/
143(3) of the
Act to
incorrect old
address of
Andrewganj
by AO
9.2 Date of 01.01.2019
Dispatch of
order u/s 254/
143(3) of the
Act to correct
address of
Barakhamba
Road
by AO
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 25 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
10 Date of Letter 07.01.2019 07.01.20 07.01.2019 - 07.01.2019
filed with AO 19
requesting for
true copy of
the final
assessment
order.
11 Date of 07.01.2019 07.01.20 07.01.2019 07.01.2019 07.01.2019
receipt of Para 18-19 19 Para 18-19 on Para 19 on pg. 17 Para 19 on
final pg. 16 of Para 18- pg. 16-17 of of WP pg. 16 of
assessment WP 19 on pg. WP WP
order 16 of WP
12.1 Date of filing 23.01.2019 23.01.20 19.01.2019 23.01.2019 25.01.2019
Writ Petition 19
12.2 Limitation 31.12.2018 31.12.20 31.12.2018 31.12.2018 31.12.2018
expired on 18
Grounds in
12.3 Writ Petition Pg. 17-19 of Pg. 17-20 Pg. 18-21 of Pg. 17-21 of WP Pg. 17-20 of
filed by WP of WP WP WP
assessee
Writ Petition-
submission Para 19 on Para 18- Para 18-19 on Para 19 on Para 19 on
12.4 made by pg. 16 of 19 on pg. pg. 16-17 of pg. 17 of WP pg. 16 of
assessee on: WP 16 of WP WP Courier tracking WP
date of Screenshot- 13 on
dispatch and pg. 159 of WP
address of
dispatch
13.1 Date of filing 19.11.2019 28.11.20 19.11.2019 19.11.2019 19.11.2019
Counter 19
Affidavit
13.2 Counter The Revenue The The Revenue The Revenue The
affidavit of dept in para 2 Revenue dept in para 2 dept in para 2 on Revenue
deparment on pg. 6 of dept in on pg. 8 of the pg. 6 of the dept on pg.
does not deny the counter para 2 on counter counter affidavit 6 of the
date of affidavit have pg. 6 of affidavit have have mentioned counter
dispatch and mentioned the mentioned that that these are affidavit
address of that these are counter these are statement of facts have
dispatch statement of affidavit statement of and need no mentioned
facts and have facts and need reply. that these
need no mentione no reply. are
reply. d that statement of
these are facts and
statement need no
of facts reply.
and need
no reply.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 26 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
14.1 Date of filing 17.11.2020 17.11.20 17.11.2020 17.11.2020 17.11.2020
rejoinder 20
14.2 Rejoinder- Para 6 on Para 6 Para 6 on pg. 2- Para 6 on pg. 3- Para 6 on
Submissions pg. 3 - on pg. 2- 3 - Though final assessment pg. 2-3 -
made by Though 3- final order- Round II Though
assessee on - final Though assessment passed on final
date of assessment final order- Round II 30.12.2018, assessment
dispatch and order- assessme was passed on however the order-
address of Round II nt order- 28.12.2018, the same was neither Round II
dispatch was passed Round II same was made dispatched nor was passed
on was available to the received within on
20.11.2018. undated assessee only the statutory time 25.12.2018,
Only after of on 07.01.2019. limit. This fact the same
assessee Novemb This fact has has not been was made
filed er 2018, not been denied denied by the available to
submission assessee by Revenue Revenue Dept in the assessee
dated filed dept. in their their counter only on
18.12.2018 submissi counter affidavit. 07.01.2019.
(Annexure on on affidavit. This fact
R-1 of 18.12.20 has not
rejoinder), 18 and been denied
the order impugne by Revenue
was made d order dept. in
available to has been their
assessee on passed counter
07.01.2019. only affidavit.
This fact after it.
has not been The
denied by FAO -
Revenue Round II
dept. in is
their antedate
counter d and the
affidavit. same
was
made
available
to the
assessee
only on
07.01.20
19.
This fact
has not
been
denied by
Revenue
dept. in
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 27 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
their
counter
affidavit.
MICROSOFT INDIA (R&D) PRIVATE LIMIITED
W.P. (C) W.P. (C) W.P.(C) W.P. (C) W.P. (C) 3539 of
3377/2021 3472/2021 3444/2021 3389/2021 2021
S. No. Particulars AY 2006-07 AY 2007-08 AY 2008-09 AY 2009- AY 2010-11
10
1 Original Assessment 16.09.2010 21.10.2011 19.11.2012 28.02.2014 27.02.2015
order Annexure Annexure P- Annexure P- Annexure Annexure P-4 on
P-4 on pg. 3 on pg. 37 4 on pg. 210 P-4 on pg. pg. 160 of WP
101 of WP of the WP of WP 113 of WP
2 Notice u/s 274 rws
271 of the Act issued 16.09.2010 21.10.2011 19.11.2012 28.02.2014 27.02.2015
by AO
3 Response to sec 274 20.12.2010 30.11.2011 21.12.2012 26.03.2014 26.03.2015
notice filed by the Annexure Annexure P- Annexure P- Annexure Annexure P-5 on
Petitioner before AO P-5 on pg. 4 on pg. 47 5 on pg. 222 P-5 on pg. pg. 193 of WP
108 of WP of WP of WP 125 of WP
4 Notice u/s 271(1)(c) 07.02.2011 03.04.2012 05.08.2015
of the Act issued by Annexure Annexure P- Annexure P-6 on
AO P- 6 on pg. 5 on Pg. 49 – – pg. 197 of WP
116 of WP of WP
5 Application filed by 17.03.2011 12.04.2012 26.08.2015
Petitioner before AO Annexure Annexure P- Annexure P-7 on
for keeping penalty P-7 on pg. 6 on Pg. 50 – – pg. 198 of WP
proceedings in 117 of WP of WP
abeyance
6 ITAT Order 28.06.2016 28.06.2016 28.06.2016 28.06.2016 28.06.2016
Annexure Annexure P- Annexure P Annexure Annexure P-8 on
P-8 on pg. 7 on Pg. 53 – 6 on pg. P-6 on pg. pg. 199 of WP
118 of WP of WP 225 of WP 129 of WP
7 Consequential order 31.08.2016 31.08.2016 31.08.2016 31.08.2016 31.08.2018
passed u/s 254/143(3) Annexure Annexure P- Annexure P Annexure P Annexure P-9 on
rws 144C of the Act P-9 on pg. 8 on pg. 76 – 7 on pg. – 7 on pg. pg. 222 of WP
recomputing taxable 141 of WP 248 of WP 152 of WP
income
8 Revised TPO order 31.10.2018 31.10.2018 31.10.2018 31.10.2018 31.10.2018
passed u/s 92CA rws Annexure Annexure P- Annexure P Annexure P Annexure P-10 on
254 of the Act P-10 on pg. 9 on Pg. 80 – 8 on pg. – 8 on pg. pg. 226 of WP
145 of WP 252 of WP 156 of WP
9 Final assessment 20.11.2018 November 28.12.2018 30.12.2018 25.12.2018
order u/s 143(3) rws Annexure 2018 Annexure P Annexure P Annexure P-11 on
254 of the Act P-11 on pg. (undated) – 9 on pg. – 9 on pg. pg. 294 of WP
200 of WP Annexure P- 320 of WP 224 of WP
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 28 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
11 on pg.
146 of WP
10 Notice u/s 274 rws 17.06.2019 17.06.2019 17.06.2019 17.06.2019 17.06.2019
271(1)(c) of the Act Annexure Annexure P- Annexure P- Annexure Annexure P-12 on
issued by AO P-12 on pg. 12 on pg. 10 on pg. P-10 on pg. pg. 299 of WP
205 of WP 151 of WP 329 of WP 233 of WP
11 Response to sec 274
notice dated 27.06.2019 28.06.2019 27.06.2019 28.06.2019 28.06.2019
17.06.2019 filed by Annexure Annexure P- Annexure P- Annexure Annexure P-13 on
the Petitioner before P-13 on pg. 13 on pg. 11 on pg. P-11 on pg. pg. 300 of WP
AO 206 of WP 152 of WP 330-347 234 of WP
12 Notice u/s 263 of the 04.03.2021 04.03.2021 04.03.2021 04.03.2021 04.03.2021
Act issued by the AO Annexure Annexure P- Annexure P- Annexure Annexure P-1 on
P-1 on pg. 1 on pg. 31 1 on pg. 29 P-1 on pg. pg. 30 of WP
30 of WP of WP of WP 30 of WP
13 Date of filing of Writ 10.03.2021 16.03.2021 15.03.2021 11.03.2021 16.03.2021
Petition
14 Grounds in Writ Pg. 20-25 of Pg. 20-26 of Pg. 19-24 of Pg. 19-25 of Pg. 20-25 of WP
Petition filed by WP WP WP WP
assessee
15 Date of filing of Counter Counter Counter Counter 20.05.2021
Counter Affidavit Affidavit Affidavit Affidavit Affidavit
filed in AY filed in AY filed in AY filed in AY
2010-11, 2010-11, 2010-11, 2010-11,
adopted for adopted for adopted for adopted for
this year. this year. this year. this year.
16 Date of filing of Rejoinder Rejoinder Rejoinder Rejoinder 14.07.2021
rejoinder filed in AY filed in AY filed in AY filed in AY
2010-11, 2010-11, 2010-11, 2010-11,
adopted for adopted for adopted for adopted for
this year. this year. this year. this year.
3. While Category A comprises of matters where the solitary
question which is raised is whether the AO was justified in proceeding
to frame a final order of assessment and thus short circuiting the
requirement of a draft assessment order being drawn in accordance with
the requirement of Section 144C(1), the cases placed in Category B
raise an additional challenge to the final orders of assessment with it
being contended that the same came to be framed after the time
prescribed under Section 153 of the Act had expired and thus being
liable to be quashed on that ground additionally.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 29 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
4. Although the facts have been duly captured in the chart which
has been submitted by and on behalf of the writ petitioners jointly, we
deem it appropriate to notice the following skeletal facts as they obtain
in W.P.(C) 688/2019 (the principal writ petition on which arguments
were addressed by learned counsels appearing for the writ petitioners)
and W.P.(C) 11896/2021 (which was referred to by learned counsels
representing the respondents).
5. Microsoft India (R&D) Pvt. Ltd., the writ petitioner in W.P.(C)
688/2019, is stated to have filed its Return of Income pertaining to
Assessment Year4 2008-09 on 30 September 2008. The said return is
stated to have been selected for scrutiny assessment and pursuant to
which the AO made a reference to the Transfer Pricing Officer5 in
terms contemplated under Section 92CA of the Act.
6. On 27 October 2011, the TPO passed an order recommending an
upward adjustment to the total income of the petitioner. Pursuant to the
aforesaid, a draft assessment order came to be framed on 27 December
2011. Assailing the proposed additions, the petitioner filed objections
before the Dispute Resolution Panel6 in terms envisaged under Section
144C(2) of the Act. The aforenoted objections did not find favour with
the DRP which and in terms of its directions dated 28 September 2012
affirmed the additions which were proposed in the draft assessment
order. Pursuant to those directions, a final assessment order came to be
framed on 19 November 2012.
7. Aggrieved by the aforesaid, the petitioner approached the
Tribunal. The Tribunal in terms of its order dated 28 June 2016 allowed
4
AY
5
TPO
6
DRP
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 30 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
the appeal and framed the following operative directions: –
―19. However, in the present case, it is an admitted fact that the said
Circular was not in existence when the TPO passed the impugned
orders for the respective assessment years i.e. assessment years
2007-08 to 2009-10, under consideration. However, he admitted
while passing the orders u/s 92CA of the Act for the assessment year
2010-11 that TNMM is most appropriate method for determining the
Ann’s Length Price. We, therefore, deem it appropriate to set aside
this issue relating to the assessment years 2007-08 to 2009-10 to the
file of the TPO/ AO to decide as to what is the most appropriate
method by considering the facts and the guidelines available in the
form of circular. As regards to the issue relating to the comparables
for which the information u/s 133(6) of the Act were obtained by the
TPO and which were not confronted to the assessee, we are of the
view that this issue also deserves to be set aside to the file of the
TPO/ AO for fresh adjudication in accordance with law after
providing due and reasonable opportunity of being heard to the
assessee. In the present case, it was also the common contention of
both the parties that the corporate issues if involved in any of the
aforesaid assessment years those should also be decided by the TPO/
AO along with the issues relating to the application of most
appropriate method and the selection of the co1nparables and the
additional ground relating to deduction u/s 10A of the Act. We order
accordingly.
20. As regards to the assessment year 2010-11 is concerned, the ld.
Counsel for the assessee admitted that there is no dispute relating to
the application of most appropriate method. However, the additional
ground relating to deduction u/s 1 0A of the Act was not before the
TPO/ AO. The said grounds are purely legal grounds and raised first
ti1ne before the Tribunal, so this issue raised in the additional
grounds is remanded to the file of the TPO/ AO to be decided along
with another assessment years under consideration. Since the issue
relating to the deduction u/s 10A of the Act is restored to the file of
the TPO/ AO, the another issues relating to corporate matters should
also be decided by the TPO/ AO afresh in accordance with law after
providing due and reasonable opportunity of being heard to the
assessee.
21. As regards to the issues raised on the transfer pricing all matters
in the grounds of appeal relating to assessment year 2010-11, the
contentions of both the parties were sin1ilar as were 1n respect of
the si1nilar grounds in another appeals relating to the other
assess1nent years 2007-08 to 2009-10 which we have already
adjudicated in former part of this order. Therefore, our findings
given therein shall apply with the same force for this assessment
year i.e. 2010-11 also.‖
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 31 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
8. Pursuant to the aforesaid order of the Tribunal, the TPO is stated
to have issued a notice in the second round of proceedings which
ensued on 09 November 2016. On 31 October 2018, the TPO passed its
final order referable to Section 92CA computing the total upward
adjustment of income at INR 106,07,00,458/-. Although the AO is
thereafter stated to have issued a notice on 20 November 2018 under
Section 142(1) of the Act, it proceeded to frame a final order on 28
December 2018. The writ petition was entertained by us on 22 January
2019 and an interim order passed restraining the respondents from
enforcing the consequential demand.
9. Telstra India Private Limited7 is the writ petitioner in the
second matter which had been selected by us for the purposes of
chronicling the facts as they obtained. Its challenge pertains to AY
2018-19 and in connection with which it submitted its Return of
Income on 30 November 2018. During the course of examination of
that return, a notice referable to Section 143(2) came to be issued on 22
September 2019. This was followed by an intimation under Section
143(1) making aggregate disallowances of INR 113,88,283/-. This was
assailed by Telstra before the Commissioner of Income Tax
(Appeals)8 which ultimately allowed the challenge and deleted the
disallowances. On 07 April and 28 July 2021, the petitioner was served
with notices under Section 92CA intimating it of a reference having
been made to the TPO. The TPO issued a show cause notice on 03
September 2021 apprising the writ petitioner of various adjustments
which were proposed to be made. Since the additions proposed would
have been binding on the AO in terms of Section 92CA(4), the
7 Telstra
8 CIT(A)
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 32 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
petitioner chose not to make any further submissions. This led to a final
order of assessment being passed on 18 September 2021. This was
assailed by way of a writ petition before this Court. On 16 December
2021, interim orders came to be passed with it being provided that the
assessment orders as well as consequential demand notices and penalty
proceedings would remain stayed.
10. Since the arguments have revolved around Sections 144C and
153 of the Act, we deem it appropriate to extract those two provisions
hereunder: –
―Reference to Dispute Resolution Panel.
144C.
(1) The Assessing Officer shall, notwithstanding anything to the
contrary contained in this Act, in the first instance, forward a draft of
the proposed order of assessment (hereafter in this section referred to
as the draft order) to the eligible assessee if he proposes to make, on
or after the 1st day of October, 2009, any variation [* * *] which is
prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within
thirty days of the receipt by him of the draft order,–
(a) file his acceptance of the variations to the Assessing Officer;
or
(b) file his objections, if any, to such variation with,–
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis
of the draft order, if–
(a) the assessee intimates to the Assessing Officer the acceptance
of the variation; or
(b) no objections are received within the period specified in
subsection (2).
(4) The Assessing Officer shall, notwithstanding anything contained
in section 153 [or section 153B], pass the assessment order under
sub-section (3) within one month from the end of the month in
which,–
(a) the acceptance is received; or
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 33 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
(b) the period of filing of objections under sub-section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where any
objection is received under sub-section (2), issue such directions, as
it thinks fit, for the guidance of the Assessing Officer to enable him
to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions referred
to in sub-section (5), after considering the following, namely:–
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or
Transfer Pricing Officer or any other authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it; and
(g) result of any enquiry made by, or caused to be made by, it.
(7) The Dispute Resolution Panel may, before issuing any directions
referred to in sub-section (5),–
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any income tax
authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance
the variations proposed in the draft order so, however, that it shall
not set aside any proposed variation or issue any direction under
sub-section (5) for further enquiry and passing of the assessment
order.
[Explanation.– For the removal of doubts, it is hereby declared that
the power of the Dispute Resolution Panel to enhance the variation
shall include and shall be deemed always to have included the power
to consider any matter arising out of the assessment proceedings
relating to the draft order, notwithstanding that such matter was
raised or not by the eligible assessee.]
(9) If the members of the Dispute Resolution Panel differ in opinion
on any point, the point shall be decided according to the opinion of
the majority of the members.
(10) Every direction issued by the Dispute Resolution Panel shall be
binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued unless an
opportunity of being heard is given to the assessee and the Assessing
Officer on such directions which are prejudicial to the interest of the
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 34 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
assessee or the interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued after nine
months from the end of the month in which the draft order is
forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-section (5), the
Assessing Officer shall, in conformity with the directions, complete,
notwithstanding anything to the contrary contained in section 153 or
section 153-B], 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.
(14) The Board may make rules for the purposes of the efficient
functioning of the Dispute Resolution Panel and expeditious disposal
of the objections filed under sub-section (2) by the eligible assessee.
[(14A) The provisions of this section shall not apply to any
assessment or reassessment order passed by the Assessing Officer
with the prior approval of the [Principal Commissioner or]
Commissioner as provided in sub-section (12) of section 144BA.]
[(14-B) The Central Government may make a scheme, by
notification in the Official Gazette, for the purposes of issuance of
directions by the dispute resolution panel, so as to impart greater
efficiency, transparency and accountability by–
(a) eliminating the interface between the dispute resolution panel
and the eligible assessee or any other person to the extent
technologically feasible;
(b) optimising utilisation of the resources through economies of
scale and functional specialisation;
(c) introducing a mechanism with dynamic jurisdiction for issuance
of directions by dispute resolution panel.
(14C) The Central Government may, for the purpose of giving effect
to the scheme made under sub-section (14B), by notification in the
Official Gazette, direct that any of the provisions of this Act shall
not apply or shall apply with such exceptions, modifications and
adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31st day of
March, [2024]
(14D) Every notification issued under sub-section (14B) and sub-
section (14C) shall, as soon as may be after the notification is issued,
be laid before each House of Parliament.]
(15) For the purposes of this section,–
(a) ―Dispute Resolution Panel‖ means a collegium comprising of
three [Principal Commissioners or] Commissioners of Income-
tax constituted by the Board for this purpose;
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 35 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
(b) ―eligible assessee‖ means,–
(i) any person in whose case the variation referred to in sub-
section (1) arises as a consequence of the order of the
Transfer Pricing Officer passed under sub-section (3) of
section 92CA; and
[(ii) any non-resident not being a company, or any foreign
company.]
Time limit for completion of assessment, reassessment and
recomputation.
153. (1) No order of assessment shall be made under section 143 or
section 144 at any time after the expiry of twenty-one months from
the end of the assessment year in which the income was first
assessable:
[Provided that in respect of an order of assessment relating to the
assessment year commencing on the 1st day of April, 2018, the
provisions of this sub-section shall have effect, as if for the words
―twenty-one months‖, the words ―eighteen months‖ had been
substituted:
[Provided further that in respect of an order of assessment relating
to the assessment year commencing on–
(i) the 1st day of April, 2019, the provisions of this sub-section
shall have effect, as if for the words ―twenty-one months‖, the
words ―twelve months‖ had been substituted;
(ii) the 1st day of April, 2020, the provisions of this sub-section
shall have effect, as if for the words ―twenty-one months‖, the
words ―eighteen months‖ had been substituted:]]
[Provided also that in respect of an order of assessment relating to
the assessment year commencing on [* * *] the 1st day of April,
2021, the provisions of this sub-section shall have effect, as if for the
words ―twenty-one months‖, the words ―nine months‖ had been
substituted:]
[Provided also that in respect of an order of assessment relating to
the assessment year commencing on or after the 1st day of April,
2022, the provisions of this sub-section shall have effect, as if for the
words “twenty-one months”, the words “twelve months” had been
substituted.]
[(1A) Notwithstanding anything contained in sub-section (1), where
a return under sub-section (8A) of section 139 is furnished, an order
of assessment under section 143 or section 144 may be made at any
time before the expiry of [twelve months] from the end of the
financial year in which such return was furnished.]
(2) No order of assessment, reassessment or recomputation shall beSignature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 36 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
made under section 147 after the expiry of nine months from the end
of the financial year in which the notice under section 148 was
served:
[Provided that where the notice under section 148 is served on or
after the 1st day of April, 2019, the provisions of this sub-section
shall have effect, as if for the words ―nine months‖, the words
―twelve months‖ had been substituted.]
(3) Notwithstanding anything contained in sub-sections (1) [, (1A)]
and (2), an order of fresh assessment [or fresh order under section
92CA, as the case may be,] in pursuance of an order under section
254 or section 263 or section 264, setting aside or cancelling an
assessment, [or an order under section 92CA, as the case may be]
may be made at any time before the expiry of nine months from the
end of the financial year in which the order under section 254 is
received by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or Commissioner, or, as
the case may be, the order under section 263 or section 264 is passed
by the [Principal Chief Commissioner or Chief Commissioner or
Principal Commissioner or Commissioner, as the case may be,]:
[Provided that where the order under section 254 is received by the
Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner or, as the case may be, the order
under section 263 or section 264 is passed by the [Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner or, as the case may be,] on or after the 1st day of
April, 2019, the provisions of this sub-section shall have effect, as if
for the words ―nine months‖, the words ―twelve months‖ had been
substituted.]
[(3A) Notwithstanding anything contained in sub-sections (1), (1A),
(2) and (3), where an assessment or reassessment is pending on the
date of initiation of search under section 132 or making of
requisition under section 132A, the period available for completion
of assessment or reassessment, as the case may be, under the said
sub-sections shall,–
(a) in a case where such search is initiated under section 132 or
such requisition is made under section 132A;
(b) in the case of an assessee, to whom any money, bullion,
jewellery or other valuable article or thing seized or
requisitioned belongs to;
(c) in the case of an assessee, to whom any books of account or
documents seized or requisitioned pertains or pertain to, or any
information contained therein, relates to,
be extended by twelve months.]
(4) Notwithstanding anything contained in [sub-sections (1), (1A),
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 37 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
(2), (3) and (3A)], where a reference under sub-section (1) of section
92CA is made during the course of the proceeding for the assessment
or reassessment, the period available for completion of assessment
or reassessment, as the case may be, under the said [sub-sections (1),
(1-A), (2), (3) and (3A)] shall be extended by twelve months.
(5) Where effect to an order under section 250 or section 254 or
section 260 or section 262 or section 263 or section 264 is to be
given by the Assessing Officer [or the Transfer Pricing Officer, as
the case may be,] wholly or partly, otherwise than by making a fresh
assessment or reassessment [or fresh order under section 92CA, as
the case may be,] such effect shall be given within a period of three
months from the end of the month in which order under section 250
or section 254 or section 260 or section 262 is received by the
Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, as the case may be, the order under
section 263 or section 264 is passed by [the Principal Chief
Commissioner or Chief Commissioner or Principal Commissioner or
Commissioner, as the case may be,]:
Provided that where it is not possible for the Assessing Officer [or
the Transfer Pricing Officer, as the case may be,] to give effect to
such order within the aforesaid period, for reasons beyond his
control, the Principal Commissioner or Commissioner on receipt of
such request in writing from the Assessing Officer, [or the Transfer
Pricing Officer, as the case may be,] if satisfied, may allow an
additional period of six months to give effect to the order:
[Provided further that where an order under section 250 or section
254 or section 260 or section 262 or section 263 or section 264
requires verification of any issue by way of submission of any
document by the assessee or any other person or where an
opportunity of being heard is to be provided to the assessee, the
order giving effect to the said order under section 250 or section 254
or section 260 or section 262 or section 263 or section 264 shall be
made within the time specified in sub-section (3).]
[(5A) Where the Transfer Pricing Officer gives effect to an order or
direction under section 263 by an order under section 92CA and
forwards such order to the Assessing Officer, the Assessing Officer
shall proceed to modify the order of assessment or reassessment or
recomputation, in conformity with such order of the Transfer Pricing
Officer, within two months from the end of the month in which such
order of the Transfer Pricing Officer is received by him.]
(6) Nothing contained in sub-sections (1) [, (1-A)] and (2) shall
apply to the following classes of assessments, reassessments and
recomputation which may, subject to the provisions of [sub-sections
(3), (5) and (5-A)], be completed–
(i) where the assessment, reassessment or recomputation is made
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 38 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
on the assessee or any person in consequence of or to give effect
to any finding or direction contained in an order under section
250, section 254, section 260, section 262, section 263, or
section 264 or in an order of any court in a proceeding otherwise
than by way of appeal or reference under this Act, on or before
the expiry of twelve months from the end of the month in which
such order is received or passed by the [Principal Chief
Commissioner or Chief Commissioner or] Principal
Commissioner or Commissioner, as the case may be; or
(ii) where, in the case of a firm, an assessment is made on a partner
of the firm in consequence of an assessment made on the firm
under section 147, on or before the expiry of twelve months
from the end of the month in which the assessment order in the
case of the firm is passed.
(7) Where effect to any order, finding or direction referred to in sub-
section (5) or sub-section (6) is to be given by the Assessing Officer,
within the time specified in the said sub-sections, and such order has
been received or passed, as the case may be, by the income-tax
authority specified therein before the 1st day of June, 2016, the
Assessing Officer shall give effect to such order, finding or direction,
or assess, reassess or recompute the income of the assessee, on or
before the 31st day of March, 2017.
(8) Notwithstanding anything contained in the foregoing provisions
of this section, sub-section (2) of section 153A or sub-section (1) of
section 153B, the order of assessment or reassessment, relating to
any assessment year, which stands revived under sub-section (2) of
section 153A, shall be made within a period of one year from the
end of the month of such revival or within the period specified in
this section or sub-section (1) of section 153B, whichever is later.
(9) The provisions of this section as they stood immediately before
the commencement of the Finance Act, 2016, shall apply to and in
relation to any order of assessment, reassessment or recomputation
made before the 1st day of June, 2016:
[Provided that where a notice under sub-section (1) of section 142
or sub-section (2) of section 143 or section 148 has been issued prior
to the 1st day of June, 2016 and the assessment or reassessment has
not been completed by such date due to exclusion of time referred to
in Explanation 1, such assessment or reassessment shall be
completed in accordance with the provisions of this section as it
stood immediately before its substitution by the Finance Act, 2016
(28 of 2016).]
Explanation 1.– For the purposes of this section, in computing the
period of limitation–
(i) the time taken in reopening the whole or any part of the
proceeding or in giving an opportunity to the assessee to be re-
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 39 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
heard under the proviso to section 129; or
(ii) the period during which the assessment proceeding is stayed
by an order or injunction of any court; or
(iii) the period commencing from the date on which the
Assessing Officer intimates the Central Government or the
prescribed authority, the contravention of the provisions of
clause (21) or clause (22B) or clause (23A) or clause (23B) [,
under clause (i) of the first proviso] to sub-section (3) of section
143 and ending with the date on which the copy of the order
withdrawing the approval or rescinding the notification, as the
case may be, under those clauses is received by the Assessing
Officer; or
(iv) the period commencing from the date on which the
Assessing
Officer directs the assessee to get his accounts audited [or
inventory valued] under sub-section (2A) of section 142 and–
(a) ending with the last date on which the assessee is required
to furnish a report of such audit [or inventory valuation]
under that sub-section; or
(b) where such direction is challenged before a court, ending
with the date on which the order setting aside such direction
is received by the Principal Commissioner or
Commissioner; or
(v) the period commencing from the date on which the Assessing
Officer makes a reference to the Valuation Officer under sub-
section (1) of section 142A and ending with the date on which
the report of the Valuation Officer is received by the Assessing
Officer; or
(vi) the period (not exceeding sixty days) commencing from the date
on which the Assessing Officer received the declaration under
sub-section (1) of Section 158-A and ending with the date on
which the order under sub-section (3) of that section is made by
him; or
(vii) in a case where an application made before the Income-tax
Settlement Commission is rejected by it or is not allowed to be
proceeded with by it, the period commencing from the date on
which an application is made before the Settlement Commission
under Section 245-C and ending with the date on which the
order under sub-section (1) of Section 245-D is received by the
Principal Commissioner or Commissioner under sub-section (2)
of that section; or
(viii) the period commencing from the date on which an application is
made before the Authority for Advance Rulings [or before the
Board for Advance Rulings] under sub-section (1) of section
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 40 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
245Q and ending with the date on which the order rejecting the
application is received by the Principal Commissioner or
Commissioner under sub-section (3) of section 245R; or
(ix) the period commencing from the date on which an application is
made before the Authority for Advance Rulings [or before the
Board for Advance Rulings] under sub-section (1) of section
245Q and ending with the date on which the advance ruling
pronounced by it is received by the Principal Commissioner or
Commissioner under sub-section (7) of section 245R; or
(x) the period commencing from the date on which a reference or
first of the references for exchange of information is made by an
authority competent under an agreement referred to in section
90 or section 90A and ending with the date on which the
information requested is last received by the Principal
Commissioner or Commissioner or a period of one year,
whichever is less; or
(xi) the period commencing from the date on which a reference for
declaration of an arrangement to be an impermissible avoidance
arrangement is received by the Principal Commissioner or
Commissioner under sub-section (1) of section 144BA and
ending on the date on which a direction under sub-section (3) or
sub-section (6) or an order under sub-section (5) of the said
section is received by the [Assessing Officer; or
(xii) the period (not exceeding one hundred and eighty days)
commencing from the date on which a search is initiated under
section 132 or a requisition is made under section 132A and
ending on the date on which the books of account or other
documents, or any money, bullion, jewellery or other valuable
article or thing seized under section 132 or requisitioned under
section 132A, as the case may be, are handed over to the
Assessing Officer having jurisdiction over the assessee,–
(a) in whose case such search is initiated under Section 132 or
such requisition is made under Section 132-A; or
(b) to whom any money, bullion, jewellery or other valuable
article or thing seized or requisitioned belongs to; or
(c) to whom any books of account or documents seized or
requisitioned pertains or pertains to, or any information
contained therein, relates to; or]
[(xiii) the period commencing from the date on which the Assessing
Officer makes a reference to the Principal Commissioner or
Commissioner under the second proviso to sub-section (3) of
section 143 and ending with the date on which the copy of the
order under clause (ii) or clause (iii) of the fifteenth proviso to
clause (23C) of Section 10 or clause (ii) or clause (iii) of sub-
section (4) of Section 12-AB, as the case may be, is received by
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 41 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
the Assessing Officer,]
shall be excluded:
Provided that where immediately after the exclusion of the aforesaid
period, the period of limitation referred to in sub-sections (1), [(1A)],
(2), (3) and sub-section (8) available to the Assessing Officer for
making an order of assessment, reassessment or recomputation, as
the case may be, is less than sixty days, such remaining period shall
be extended to sixty days and the aforesaid period of limitation shall
be deemed to be extended accordingly:
Provided further that where the period available to the Transfer
Pricing Officer is extended to sixty days in accordance with the
proviso to sub-section (3A) of section 92CA and the period of
limitation available to the Assessing Officer for making an order of
assessment, reassessment or recomputation, as the case may be, is
less than sixty days, such remaining period shall be extended to sixty
days and the aforesaid period of limitation shall be deemed to be
extended accordingly:
Provided also that where a proceeding before the Settlement
Commission abates under section 245HA, the period of limitation
available under this section to the Assessing Officer for making an
order of assessment, reassessment or recomputation, as the case may
be, shall, after the exclusion of the period under sub-section (4) of
section 245HA, be not less than one year; and where such period of
limitation is less than one year, it shall be deemed to have been
extended to one year; and for the purposes of determining the period
of limitation under sections 149, [* * *] 154, 155 and 158BE and for
the purposes of payment of interest under section 244A, this proviso
shall also apply accordingly:
[Provided also that where the assessee exercises the option to
withdraw the application under sub-section (1) of section 245M, the
period of limitation available under this section to the Assessing
Officer for making an order of assessment, reassessment or
recomputation, as the case may be, shall, after the exclusion of the
period under sub-section (5) of the said section, be not less than one
year; and where such period of limitation is less than one year, it
shall be deemed to have been extended to one year:
Provided also that for the purposes of determining the period of
limitation under sections 149, 154 and 155, and for the purposes of
payment of interest under section 244A, the provisions of the fourth
proviso shall apply accordingly.]
Explanation 2.– For the purposes of this section, where, by an order
referred to in clause (i) of sub-section (6),–
(a) any income is excluded from the total income of the assessee
for an assessment year, then, an assessment of such income forSignature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 42 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
another assessment year shall, for the purposes of section 150
and this section, be deemed to be one made in consequence of
or to give effect to any finding or direction contained in the
said order; or
(b) any income is excluded from the total income of one person
and held to be the income of another person, then, an
assessment of such income on such other person shall, for the
purposes of section 150 and this section, be deemed to be one
made in consequence of or to give effect to any finding or
direction contained in the said order, if such other person was
given an opportunity of being heard before the said order was
passed.]‖
11. It becomes pertinent to note that the issue of whether the AO
could ignore the requirement of drawing up a draft assessment order
and pass a final order and the same being in violation of the procedure
contemplated under Section 144C appears to have arisen before our
Court on previous occasions also. The consistent view which this Court
appears to have taken in that respect was that a failure to frame an
assessment order in draft would clearly be violative of the mandatory
prescriptions of Section 144C and the final order of assessment framed
in violation thereof liable to be viewed as a nullity.
12. This view stands duly expressed in numerous decisions of this
Court including those in JCB India Ltd. v. Deputy Commissioner of
Income-tax and Another9, Turner International India Pvt. Ltd. v.
Deputy Commissioner of Income-tax 25(2), New Delhi10, Nokia
India Private Limited v. Additional Commissioner of Income Tax11,
Control Risks India Pvt. Ltd. v. Deputy Commissioner of Income
Tax12, PR. Commissioner of Income Tax v. CITI Financial
9
2017 SCC OnLine Del 10424
10
2017 SCC OnLine Del 8441
11
2017 SCC OnLine Del 13027
12
W.P.(C) 5722/2017
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 43 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Consumer Finance India Pvt. Ltd.13 as well as Principal
Commissioner of Income Tax v. Headstrong Services India Pvt.
Ltd.14.
13. The decision of Headstrong India, while examining the scheme
of Section 144C in paragraphs 17 and 18 had held as follows: –
―17. In the opinion of this court, section 144C is a self contained
provision which carves out a separate class of assesses, i. e.,
“eligible assessee”, i. e., any person in whose case the variation
arises as a consequence of the order of the Transfer Pricing Officer
passed under sub-section (3) of section 92CA. For this class of
assessees, it prescribes a collegium of three commissioners, once
objections are preferred. The Dispute Resolution Panel’s powers are
coterminous with the Commissioner of Income-tax (Appeals),
including the power to confirm, reduce or enhance the variation
proposed and to consider the issues not agitated by the assessee in
the objections. In fact, under section 144C, the Dispute Resolution
Panel can issue directions as it thinks fit for the guidance of the
Assessing Officer to enable him to complete the assessment and the
Dispute Resolution Panel can confirm, reduce or enhance the
variations proposed in the draft order. It is specifically stipulated in
section 144C that every direction issued by the Dispute Resolution
Panel shall be binding on the Assessing Officer. This is akin to the
Assessing Officer giving effect to an order passed by the appellate
authority or the courts.
18. Consequently, section 144C envisages a change of forum and it
leads to complete cessation of the jurisdiction of the Assessing
Officer on passing of the draft order. Thereafter the Assessing
Officer is to give effect to either the direction of the Dispute
Resolution Panel or pass an order on acceptance by the assessee.
The expression “in the first instance” has been used in section 144C
to signify the first step to be taken by the Assessing Officer in a
series of acts contemplated by the said section. To accept the
appellant’s argument would be to permit the Assessing Officer to
decide the objections filed by the assessee– which power has been
specifically denied by the statute.‖
14. It appears that the respondents in Headstrong India had
contended that the expression “in the first instance” as appearing was
13
2015 SCC OnLine Del 14678
14
2020 SCC OnLine Del 1709
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 44 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
suggestive of the requirement of framing a draft assessment order being
obviated in a situation where the assessment proceedings are to be
renewed consequent to a remit by the Tribunal.
15. This submission came to be rejected with the Court in
Headstrong India observing thus:-
―19. The expression ―in the first instance‖ has been used in section
144C to signify the first step to be taken by the Assessing Officer in
a series of acts contemplated by the said Section while dealing with
the case of an eligible assessee. This Court is further of the view that
if the Assessing Officer under Section 144C can prepare a draft
assessment order only, then by virtue of a remand order which
directs the Assessing Officer to decide the matter de novo, the
Assessing Officer cannot get the power to pass an assessment order,
when there is an objection by the Assessee like in the present case,
without reference of the Dispute Resolution Panel which comprises
of three Principal Commissioners or Commissioners of Income Tax
constituted by the Board.
20. Now to accept the appellant’s argument would be to permit the
Assessing Officer to decide the objections filed by the Assessee –
which power has been specifically denied by the statute.
It is settled law that when a power is given to do certain thing in a
certain way, the thing must be done in that way or not at all and
other methods of performance are forbidden‖
16. The argument of an obligation to frame a draft assessment order
and a failure to abide by that process being a mere irregularity came to
be stoutly rejected by the Court in Headstrong India as would be
evident from the following observations which came to be rendered: –
“22. The appellant has also contended that the failure to follow the
procedure under section 144C of the Act, at the highest, was a
procedural irregularity and not an illegality. This issue is no longer
res integra. It is now settled law that failure to adhere to the
mandatory procedure prescribed under section 144C of the Act
would vitiate the entire proceedings and the same cannot be treated
as an irregularity/curable defect.
23. In ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union
of India [2016] 388 ITR 383 (Delhi) this court, after discussing the
judgments of the Andhra Pradesh High Court, High Court of
Bombay as well as the Madras High Court in Vijay Television Pvt.
Ltd. v. DRP [2014] 369 ITR 113 (Mad) has held that failure to pass
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 45 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
a draft assessment order under section 144C(1) of the Act would
render the final assessment order without jurisdiction, null and void
and unenforceable. The said view was reiterated by this court in
Turner International India Pvt. Ltd. v. Dy. CIT [2017] 398 ITR 177
(Delhi) W. P. (C) Nos. 4260 and 4261 of 2015 as well Nokia India
Pvt. Ltd. v. Addl. CIT WP (C) No. 3629 of 2017. The relevant
portion of the judgment in Turner International India Pvt. Ltd.
(supra) is reproduced hereinbelow (page 180 of 398 ITR) :
―The question whether the final assessment order stands
vitiated for failure to adhere to the mandatory requirements
of first passing draft assessment order in terms of section
144C(1) of the Act is no longer res integra. There is a long
series of decisions to which reference would be made
presently.
In Zuari Cement Ltd. v. Asst. CIT (decision dated
February 21, 2013 in W. P. (C) No. 5557 of 2012), the
Division Bench (DB) of the Andhra Pradesh High Court
categorically held that the failure to pass a draft assessment
order under section 144C(1) of the Act would result in
rendering the final assessment order ‘without jurisdiction,
null and void and unenforceable’. In that case, the
consequent demand notice was also set aside. The decision
of the Andhra Pradesh High Court was affirmed by the
Supreme Court by the dismissal of the Revenue’s SLP (C)
(CC No. 16694 of 2013) on September 27, 2013.
In Vijay Television P. Ltd. v. DRP [2014] 369 ITR 113
(Mad), a similar question arose. There, the Revenue sought
to rectify a mistake by issuing a corrigendum after the final
assessment order was passed. Consequently, not only the
final assessment order but also the corrigendum issued
thereafter was challenged. Following the decision of the
Andhra Pradesh High Court in Zuari Cement Ltd. v. Asst.
CIT (supra) and a number of other decisions, the Madras
High Court in Vijay Television P. Ltd. v. DRP (supra)
quashed the final order of the Assessing Officer and the
demand notice. Interestingly, even as regards the
corrigendum issued, the Madras High Court held that it was
beyond the time permissible for issuance of such
corrigendum and, therefore, it could not be sustained in
law.
Recently, this court in ESPN Star Sports Mauritius
S.N.C. ET Compagnie v. Union of India [2016] 388 ITR
383 (Delhi), following the decision of the Andhra Pradesh
High Court in Zuari Cement Ltd. v. Asst. CIT (supra), the
Madras High Court in Vijay Television P. Ltd. v. DRP
(supra) as well as the Bombay High Court in International
Air Transport Association v. Deputy CIT [2016] 7 ITR-OL
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 46 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
227 (Bom) ; [2016] 290 CTR (Bom) 46, came to the same
conclusion.
Mr. Dileep Shivpuri, learned counsel for the Revenue
sought to contend that the failure to adhere to the
mandatory requirement of issuing a draft assessment order
under section 144C(1) of the Act would, at best, be a
curable defect. According to him the matter must be
restored to the Assessing Officer to pass a draft assessment
order and for the petitioner, thereafter, to pursue the matter
before the Dispute Resolution Panel.
The court is unable to accept the above submission. The
legal position as explained in the above decisions is
unambiguous. The failure by the Assessing Officer to
adhere to the mandatory requirement of section 144C(1) of
the Act and first pass a draft assessment order would result
in invalidation of the final assessment order and the
consequent demand notices and penalty proceedings.‖
17. The Court ultimately opined as follows: –
―24. Consequently, in the present case, in complete contravention of
section 144C, the Assessing Officer wrongfully assumed the
jurisdiction and passed the final assessment order without passing a
draft assessment order and without giving the respondent-assessee
an opportunity to raise objections before the Dispute Resolution
Panel.
25. Keeping in view the aforesaid, this court is of the opinion that no
question of law, let alone a substantial question of law, arises in the
present appeal.
26. This court is of the view that till the Income-tax Department
ensures that the Assessing Officers follow the mandate of law, in
particular, the binding provisions like section 144C and eschew
filing of unnecessary appeals rather than in nearly all matters where
the Assessing Officer has taken a view against the assessee, the
assessments will not achieve finality for a number of years like in
the present case where the case of assessment year 2007-08 stands
remanded and restored to the file of the Assessing Officer.‖
18. We note that the legal position as enunciated by this Court also
finds resonance in the decisions rendered by the Madras, Gujarat and
Bombay High Courts in the decisions rendered in Vijay Television P.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 47 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Ltd. v. Dispute Resolution Panel and Others15, Commissioner of
Income-tax v. C-Sam (India) Pvt. Ltd.16 and Principal
Commissioner of Income-tax v. Andrew Telecommunications P.
Ltd.17 respectively.
19. The relevant extracts from those decisions are reproduced
hereinbelow: –
Vijay Television P. Ltd. v. Dispute Resolution Panel and Others:
―22. As mentioned supra, as per section 144C(1) of the Act, the
second respondent-Assessing Officer has no right to pass a final
order pursuant to the recommendations made by the Transfer Pricing
Officer. In fact, the second respondent-Assessing Officer himself has
admitted by virtue of the corrigendum dated April 15, 2013, that the
order dated March 26, 2013, is only a final order and it was directed
to be treated as a draft assessment order. In this context, it is
worthwhile to refer to the decision of the honourable Supreme Court
in the decision reported in (Deepak Agro Foods v. State of Rajasthan
reported in (2008) 16 VST 454 (SC) wherein in paragraph 10, the
honourable Supreme Court discussed as to when an order could be
construed as a final order (page 458):
“Shri Rajiv Dutta, learned senior counsel appearing on
behalf of the appellant, submitted that in the light of its
afore-extracted observations and a clear finding that the
assessment order for the assessment year 1995-96 had been
anti-dated, the order was null and void. It was urged that
assessment proceedings after the expiry of the period of
limitation being a nullity in law, the High Court should have
annulled the assessment and there was no question of a
fresh assessment. Thus, the nub of the grievance of the
appellant is that in remanding the matter back to the
Assessing Officer, the High Court has not only extended the
statutory period prescribed for completion of assessment, it
has also conferred jurisdiction upon the Assessing Officer,
which he otherwise lacked on the expiry of the said period.”
23. It is evident from the above decision of the honourable Supreme
Court that if an order is passed beyond the statutory period
prescribed, such order is a nullity and has no force of law. In that
case before the honourable Supreme Court, the period for
assessment proceedings expired and, thereafter, fresh assessment15 2014 SCC OnLine Mad 12885
16 2017 SCC OnLine Guj 2651
17 2018 SCC OnLine Bom 21360Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 48 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
orders have been issued by anti-dating it. In those circumstances, it
was held that the High Court ought not to have remanded the matter
back to the Assessing Officer and by doing so, the statutory period
prescribed for completion of the assessment has been extended by
conferring jurisdiction upon the Assessing Officer, which he
otherwise lacked on the expiry of the said period. In that case, the
honourable Supreme Court also held that there is a distinction
between an order which is a nullity and an order which is irregular
and illegal. Where an authority making order lacks inherent
jurisdiction, such an order will be null and void ab initio, as the
defect of jurisdiction goes to the root of the matter and strikes at his
very authority to pass any order and such a defect cannot be cured
even by consent of the parties.
24. This decision squarely applies to the facts of this case. In this
case, the order passed by the second respondent lacks jurisdiction
especially when it is beyond the period of limitation prescribed by
the statute. When there is a statutory violation in not following the
procedures prescribed, such an order cannot be cured by merely
issuing a corrigendum.
xxxx xxxx xxxx
33. The decision of the Division Bench of the Andhra Pradesh High
Court deals with an identical issue as that of the present case. In this
case, against the order passed by the second respondent on March
26, 2013, the petitioner filed objections before the Dispute
Resolution Panel, the first respondent herein and the first respondent
refused to entertain it by stating that the order passed by the second
respondent is a final order and it had jurisdiction to entertain
objections only if it is a draft assessment order. While so, the order
dated March 26, 2013, of the second respondent can only be termed
as a final order and in such event it is contrary to section 144C of the
Act. As mentioned supra, in and by the order dated March 26, 2013,
the second respondent determined the taxable amount and also
imposed penalty payable by the petitioner. According to the learned
senior counsel for the petitioners, even as on this date, the website of
the Department indicate the amount determined by the second
respondent payable by the company in spite of issuance of the
corrigendum on April 15, 2013, as a tax due amount. Thus, while
issuing the corrigendum, the second respondent did not even
withdraw the taxable amount determined by him or updated the
status in the website. In any event, such an order dated March 26,
2013, passed by the second respondent can only be construed as a
final order passed in violation of the statutory provisions of the Act.
The corrigendum dated April 15, 2013, is also beyond the period
prescribed for limitation. Such a defect or failure on the part of the
second respondent to adhere to the statutory provisions is not a
curable defect by virtue of the corrigendum dated April 15, 2013. By
issuing the corrigendum, the respondents cannot be allowed to
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 49 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
develop their own case. Therefore, following the order passed by the
Division Bench of the Andhra Pradesh High Court, which was also
affirmed by the honourable Supreme Court by dismissing the special
leave petition filed thereof, on September 27, 2013, the orders,
which are impugned in these writ petitions are liable to be set aside.
34. Accordingly, the orders, which are impugned in these writ
petitions are set aside and both the writ petitions are allowed. No
costs. Consequently, connected miscellaneous petitions are closed.‖
Commissioner of Income-tax v. C-Sam (India) Pvt. Ltd.:
―5. Section 144C of the Act refers to the Dispute Resolution Panel.
Sub-section (1) of section 144C provides that in case of an eligible
assessee, the Assessing Officer shall notwithstanding anything to the
contrary contained in the Act forward a draft of the proposed order
of assessment to the assessee if he proposes to make on or after the
1st day of October, 2009 any variation in the income or loss returned
which is prejudicial to the interest of the assessee. Under sub-section
(2) of section 144C, the assessee gets an opportunity to file his
objections within thirty days of such variation before the Dispute
Resolution Panel as well as before the Assessing Officer. As per
sub-section (3) of section 144C, the Assessing Officer would
complete the assessment on the basis of the draft order if the
assessee either intimates his acceptance of the variation or does not
raise objections within the time prescribed. Under sub-section (5) of
section 144C, the Dispute Resolution Panel could issue such
directions to the Assessing Officer as it thinks fit for his guidance to
enable him to complete the assessment in case the assessee has
raised an objection. Under sub-section (7) of section 144C, it is open
for the Dispute Resolution Panel to make further inquiries or have
such inquiries made before issuing the directions referred to in sub-
section (5). Sub-section (8) of section 144C recognizes wide powers
of the Dispute Resolution Panel to confirm, reduce or enhance the
variations proposed in the draft order subject to the limitation that it
shall not set aside any proposed variation or issue any direction
under sub-section (5) for further inquiry. As per sub-section (10) of
section 144C, every direction issued by the Dispute Resolution Panel
would be binding on the Assessing Officer. Sub-section (13) of
section 144C further provides that upon receipt of the directions
issued by the Dispute Resolution Panel under sub-section (5), the
Assessing Officer shall in conformity with the directions complete
the assessment without providing any further opportunity of being
heard to the assessee.
6. These statutory provisions make it abundantly clear that the
procedure laid down under section 144C of the Act is of great
importance and is mandatory. Before the Assessing Officer can
make variations in the returned income of an eligible assessee, as
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 50 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
noted, sub-section (1) of section 144C lays down the procedure to be
followed notwithstanding anything to the contrary contained in the
Act. This non obstante clause thus gives an overriding effect to the
procedure “notwithstanding anything to the contrary contained in the
Act. Sub-section (5) of section 144C empowers the Dispute
Resolution Panel to issue directions to the Assessing Officer to
enable him to complete the assessment. Sub-section (10) of section
144C makes such directions binding on the Assessing Officer. As
per sub-section (13) of section 144C, the Assessing Officer is
required to pass the order of assessment in terms of such directions
without any further hearing being granted to the assessee.
7. The procedure laid down under section 144C of the Act is thus of
great importance. When an Assessing Officer proposes to make
variations to the returned income declared by an eligible assessee he
has to first pass a draft order, provide a copy thereof to the assessee
and only thereupon the assessee could exercise his valuable right to
raise objections before the Dispute Resolution Panel on any of the
proposed variations. In addition to giving such opportunity to an
assessee, decision of the Dispute Resolution Panel is made binding
on the Assessing Officer. It is therefore not possible to uphold the
Revenue’s contention that such requirement is merely procedural.
The requirement is mandatory and gives substantive rights to the
assessee to object to any additions before they are made and such
objections have to be considered not by the Assessing Officer but by
the Dispute Resolution Panel. Interestingly, once the Dispute
Resolution Panel gives directions under sub-section (5) of section
144C, the Assessing Officer is expected to pass the order of
assessment in terms of such directions without giving any further
hearing to the assessee. Thus, at the level of the Assessing Officer,
the directions of the Dispute Resolution Panel under sub-section (5)
of section 144C would bind even the assessee. He may of course
challenge the order of the Assessing Officer before the Tribunal and
take up all contentions. Nevertheless at the stage of assessment, he
has no remedy against the directions issued by the Dispute
Resolution Panel under sub-section (5). All these provisions amply
demonstrate that the Legislature desired to give an important
opportunity to an assessee who is likely to be subjected to upward
revision of income on the basis of transfer pricing mechanism. Such
opportunity cannot be taken away by treating it as purely procedural
in nature.‖
Principal Commissioner of Income-tax v. Andrew
Telecommunications P. Ltd.:
―5. Since the appeal raises a question relating to section 144C of the
Income-tax Act, a brief overview of this provision is necessary.
Section 144C lays down a scheme for reference to Dispute
Resolution Panel. The Assessing Officer at the first instanceSignature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 51 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
forwards a draft of the proposed order of assessment to the eligible
assessee if he proposes to make any variation in the income or loss
which is prejudicial to the interest of the assessee. Once such a draft
order is received, the assessee can, within 30 days accept the
variations or file his objections to the Dispute Resolution Panel. If
the assessee accepts the variations or no objections are received
within a period specified, the Assessing Officer proceeds to
complete the assessment on the basis of draft order. When an
objection is lodged with the Dispute Resolution Panel, the Dispute
Resolution Panel issues necessary directions for the guidance of the
Assessing Officer. Before passing any directions, the Dispute
Resolution Panel takes into consideration the draft order, the
objections, evidence furnished by the assessee, report of the Transfer
Pricing Officer, the Assessing Officer or Valuation Officer as the
case may be, the record relating to the draft order, the evidence
collected by the Panel, and the result of the enquiry. The Dispute
Resolution Panel may confirm, reduce or enhance the variations.
Direction issued by the Dispute Resolution Panel is binding on the
Assessing Officer. Before issuing any directions, the Dispute
Resolution Panel is required to give opportunity of hearing. After
such directions are received from the Dispute Resolution Panel, the
Assessing Officer proceeds to complete the assessment under section
144C(13) of the Act. If the Assessing Officer proceeds to complete
the assessment pursuant to the directions issued by the panel under
section 144C(13), he is not required to give further opportunity of
hearing to the assessee. This is broadly the scheme of section 144C.
xxxx xxxx xxxx
17. In the case of International Air Transport Association, the
Division Bench of this court has held that the order passed by the
Assessing Officer without there being any draft assessment order is
illegal and without jurisdiction. The same view has been reiterated in
the case of Zuari Cement Ltd. v. Asst. CIT W. P. (C) No. 5557 of
2012, dated February 21, 2013 (AP) by the Division Bench of the
Andhra Pradesh High Court which also held that the failure to pass a
draft assessment order under section 144C(1) of the Act would result
in rendering the final assessment as one without jurisdiction. This
position of law is settled.
18. Now to consider whether after remand, it was necessary to issue
a draft assessment order. Firstly, the issuance of a draft assessment
order is not an empty formality. When a draft assessment order is
passed and copy is given to the assessee, the assessee can raise
objections before the Dispute Resolution Panel on any of the
proposed variations. There is a right given to the assessee to object,
and to have the objections considered not by the Assessing Officer,
but by the Dispute Resolution Panel.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 52 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
19. The Tribunal, by order dated October 1, 2012, set aside the entire
exercise and the matter was relegated to the Assessing Officer. Once
the matter was sent back to be decided afresh it went back to the
stage of section 144C(1) of the Act. Since the Tribunal set aside the
proceedings on the ground of violation of principles of natural
justice, the first exercise was void and without jurisdiction.
Therefore, nothing remained on the record, including the draft
assessment order. Therefore, issuance of a draft assessment order
was necessary. We do not find from the scheme of section 144C that
if the proceedings were to be started afresh on remand, the draft
assessment order is not required to be given. Non-issuance of the
draft assessment order has thus vitiated the final assessment order.
20. In the case of JCB India, the Division Bench of the Delhi High
Court in identical circumstances has held that after the remand on
facts, the draft assessment order was necessary.‖
20. While we would have thought that the string of decisions
rendered on the subject would have laid to rest the issue which is
sought to be agitated, the respondents have vehemently urged us to
review and revisit the consistent position which emerges from past
precedents seeking to draw sustenance principally from the decision of
this Court in Sarabjit Singh v. Commissioner of Income-tax18.
21. The challenge in Sarabjit Singh emanated from a failure on the
part of the AO to comply with Section 144B (4) and which required it
to forward a draft of the order proposed along with the objections of the
assessee to the Deputy Commissioner. As per the scheme of Section
144B, as it existed at the relevant time, in case the AO was proposing
any variation in the income or loss returned by the assessee and which
would be prejudicial, it was obliged to forward a draft of the proposed
order of assessment to the assessee concerned.
22. The assessee in terms of sub-section (2) was entitled to submit
objections in respect of the proposed variations. In case such objections
were filed, the assessee was required to forward the draft order along
18 1998 SCC OnLine Del 975
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 53 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
with those objections to the Deputy Commissioner in terms of Section
144B(4). That provision empowered the Deputy Commissioner to
frame such directions as it thought fit for the guidance of the AO to
enable it to complete the assessment. A direction issued by the Deputy
Commissioner was made binding on the AO by virtue of sub-section (5)
of Section 144B.
23. The appeal in Sarabjit Singh originally came to be placed before
a Division Bench of the Court and which saw the learned Judges
differing on whether a failure to comply with Section 144B(4) would
amount to a procedural irregularity or would render the final order of
assessment null and void.
24. B.N. Kirpal, J., expressed the view that non-compliance with that
provision would be a mere irregularity and that any final order passed
as a consequence thereof would not be a nullity. Mahinder Narain, J.,
on the other hand, expressed the opinion that an assessment framed
contrary to the procedure prescribed in Section 144B(4) would render
the same void and liable to be viewed as having been passed without
jurisdiction.
25. This led to the appeal being referred for the opinion of a third
learned Judge. D.K. Jain, J., in his opinion, ultimately ruled with B.N.
Kirpal, J. and came to hold that an infraction of Section 144B(4) would
be a mere procedural irregularity.
26. As noted hereinbefore, Sarabjit Singh was rendered in the
context of the erstwhile Section 144B which was duly extracted in
paragraph 13 of the report and is reproduced hereinbelow:-
―13. Section 144B was inserted by the Taxation Laws (Amendment)
Act, 1975, and was brought into force from January 1, 1976. It thus,
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 54 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
applied to all assessments completed after January 1, 1976. The
relevant portion of the section, as it existed at the relevant time,
reads:
―(1) Notwithstanding anything contained in this Act, where, in an
assessment to be made under sub-section (3) of section 143, the
Assessing Officer proposes to make, before the 1st day of
October, 1984, any variation in the income or loss returned
which is prejudicial to the assessee and the amount of such
variation exceeds the amount fixed by the Board under sub-
section (6), the Assessing Officer shall, in the first instance,
forward a draft of the proposed order of assessment (hereafter in
this section referred to as the draft order) to the assessee.
(2) On receipt of the draft order, the assessee may forward his
objections, if any, to such variation to the Assessing Officer
within seven days of the receipt by him of the draft order or
within such further period not exceeding fifteen days as the
Assessing Officer may allow on an application made to him in
this behalf.
(3) If no objections are received within the period or the extended
period aforesaid, or the assessee intimates to the Assessing
Officer the acceptance of the variation, the Assessing Officer
shall complete the assessment on the basis of the draft order.
(4) If any objections are received, the Assessing Officer shall
forward the draft order together with the objections to the
Deputy Commissioner and the Deputy Commissioner shall, after
considering the draft order and the objections and after going
through (wherever necessary) the records relating to the draft
order, issue, in respect of the matters covered by the objections,
such directions as he thinks fit for the guidance of the Assessing
Officer to enable him to complete the assessment:
Provided that no directions which are prejudicial to the assessee
shall be issued under this sub-section before an opportunity is
given to the assessee to be heard.
(5) Every direction issued by the Deputy Commissioner under
subsection (4) shall be binding on the Assessing Officer….‖‖
27. While dealing with the issue of whether such a transgression
would render the assessment illegal or be a mere irregularity, D. K.
Jain, J. in Sarabjit Singh held as follows:-
―18. It is well settled that a proceeding is a nullity when an authority
taking it has no jurisdiction either because of want of pecuniary
jurisdiction or of territorial jurisdiction or of jurisdiction over the
subject-matter of the proceeding. A proceeding is a nullity when theSignature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 55 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
authority taking it has no power to have seisin over the case (see
Sant Baba Mohan Singh v. CIT, [1973] 90 ITR 197 (All).
19. In the present case, it is not the stand of the assessee nor can it be
said that the Income-Tax Officer lacked pecuniary or territorial
jurisdiction or was not competent to have seisin over the assessee’s
case. The assessee’s only grievance is that the Income-Tax Officer
having not complied with the provisions of section 144B, the
assessment order passed by him was rendered void and, therefore,
should have been annulled by the appellate authorities. Having come
to the conclusion that section 144B is procedural in nature, I am
unable to persuade myself to agree with learned counsel for the
assessee that failure on the part of the Income-Tax Officer to follow
the procedure laid down therein renders the order passed by him
void. There is no dispute with the proposition that an assessment
order passed without complying with the provisions of section 144B
cannot be regarded as a valid order but it cannot follow as a
necessary corollary that such an order passed without following the
procedural requirements must be regarded as a nullity. Non-
compliance with the procedural law is merely a procedural
irregularity, which can be cured unlike the defect of inherent lack of
jurisdiction in an authority to pass an order which of course will be a
nullity. Support for this view is lent by a catena of decisions of
various High Courts. It would, however, suffice to refer to
Banarsidas Bhanot and Sons v. CIT, [1981] 129 ITR 488 (MP), G.R.
Steel and Alloys P. Ltd. v. CIT, [1985] 152 ITR 220 (Kar), Ashok
Kumar (K.) v. CIT, [1986] 162 ITR 543 (Kar), Joseph Kuruvila v.
CIT, [1989] 179 ITR 139 (Ker), Des Raj Kul Bhushan v. CIT, [1989]
180 ITR 297 (P&H) and Vishwanath Prasad v. Bhagwati Prasad v.
CIT, [1993] 202 ITR 469 (All).
20. As for the decisions relied on by learned counsel for the
assessee, the decision of the Supreme Court in the case of Dhadi
Sahu, [1993] 199 ITR 610 is clearly distinguishable in that it deals
with altogether a different situation and does not advance the case of
the assessee. The observations of the court that no litigant has any
vested right in the matter of procedural law in fact support the stand
of the Revenue. In that case the issue involved was whether on
account of amendment in section 274(2) of the Act, with effect from
April 1, 1971, the Inspecting Assistant Commissioner was divested
of the jurisdiction to levy penalty because the amount of concealed
income did not exceed Rs. 25,000 as stipulated in the amended
section 274 (2) as against the unamended condition of minimum
imposable penalty exceeding Rs. 1,000, which he had validly
acquired on a reference made by the Income-Tax Officer prior to
April 1, 1971. The apex court observed that where the question is of
change of forum, it ceases to be a question of procedure only. The
forum of appeal or proceedings is a vested right as opposed to pure
procedure to be followed before a particular forum. The right
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 56 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
becomes vested when the proceedings are initiated in the Tribunal or
the court of first instance and, unless the Legislature has, by express
words or by necessary implication, clearly so indicated, that vested
right will continue in spite of the change of jurisdiction of the
Tribunals or forums. It was, therefore, held that since a valid
reference had been made to the Inspecting Assistant Commissioner
before the amendment took effect, he continued to have jurisdiction
to impose the penalty. As noticed above, the procedure prescribed
under section 144B (forwarding of the draft assessment order with
objections by the assessee to the Inspecting Assistant
Commissioner), does not change the forum of assessment.
Jurisdiction to pass the assessment order under section 143(3) of the
Act continues to vest in the Income-Tax Officer. Thus, the ratio of
the decision in Dhadi Sahu’s case, [1993] 199 ITR 610 (SC) does
not apply to the issue in hand. The decisions of the Punjab and
Haryana High Court in Mohinder Lal’s case, [1987] 168 ITR 101
[FB] and this court in Sudhir Sareen’s case, [1981] 128 ITR 445
merely say that the provisions of section 144B are mandatory, with
which proposition there is no quarrel. I am, therefore, of the
considered opinion that section 144B of the Act is only a procedural
provision and the assessment order passed by ignoring the said
provisions cannot be regarded as null and void.‖
28. According to Mr. Agarwal, learned counsel who led submissions
on behalf of the respondents, the decision in Sarabjit Singh since
rendered in the context of a pari materia provision, the principles
enunciated therein should guide the interpretation that we accord upon
Section 144C. Viewed in that light, it was argued that a failure on the
part of the AO to frame a draft assessment order is a curable infraction
and cannot be viewed as a complete nullity.
29. Mr. Agarwal while seeking to sustain the contention of Section
144B being pari materia, drew our attention firstly to the decision of the
Supreme Court in Panchmahal Steel Ltd. v. ITO19. Panchmahal Steel
had dealt with a situation where the AO was served with a revised
return after the draft assessment order had already been forwarded to
the Inspecting Assistant Commissioner in terms of Section 144B. The
19 1996 SCC OnLine SC 8
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 57 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
revised return came to be rejected by the AO who held that once the
draft along with objections of the assessee had been referred to the
Inspecting Assistant Commissioner, no revised return could have been
preferred or entertained. The decision of the AO was upheld by the
High Court. In appeal the Supreme Court in Panchmahal Steel while
affirming the view so taken held as follows: –
―9. A reading of Section 144-B shows that once a draft order is
made and the matter is referred to the Inspecting Assistant
Commissioner on receiving the objections of the assessee, the
function of the Income Tax Officer practically comes to an end.
Thereafter, the only remaining thing to do by him is to pass a final
order of assessment pursuant to and in accordance with the
directions given by the Inspecting Assistant Commissioner. He
cannot vary or depart from the directions given by the Inspecting
Assistant Commissioner. If the assessee’s contention is accepted and
if it is held that even after making such a reference, the assessee is
entitled to file a revised return, it may mean redoing the entire
exercise over again. It may also happen that as a result of such
redoing, the reference already made to the Inspecting Assistant
Commissioner may become unnecessary and has to be called back.
The Act, however, does not provide for such a situation.
10. Sub-section (5) has to be construed and understood in the context
of Section 139, indeed in the context of the entire enactment. It has
to be construed and understood in a reasonable manner. Once the
Income Tax Officer has done all that he has to do under the Act and
makes a draft order and then refers to the Inspecting Assistant
Commissioner as required by Section 144-B, permitting the assessee
to file a revised return would involve duplication of work and
multiplicity of proceedings. By saying so, we are not rendering sub-
section (5) nugatory. All that it means is that the said right has to be
exercised before the making of draft assessment order in cases where
Section 144-B was applicable‖
30. Mr. Agarwal then cited for our consideration the decision of the
Supreme Court in Commissioner of Income Tax, Gujarat Central v.
Saurashtra Cement and Chemical Industries Ltd.20 and where the
ambit of Section 144B was explained in the following terms:-
20 (2016) 11 SCC 762
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 58 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
―9. Section 144-B of the Act deals with a situation where ITO
intends to pass an assessment order which is in variation to the
income or loss that is shown in the return of the assessee and the
amount of such variation exceeds the amount that can be fixed by
the Board under sub-section (6) thereof. In such a situation, ITO is
under obligation to first forward a draft of the proposed order of
assessment to the assessee who can file his objections within 7 days
thereof and if the objections are received, ITO is to forward the draft
order together with the objections to IAC. IAC, after considering the
draft order and the objections, is empowered to issue such directions
as he thinks fit for the guidance of ITO to complete the assessment.‖
31. In view of the aforesaid, Mr. Agarwal submitted that the
procedure as contemplated under Section 144B (4) is similar to that
which obtains under Section 144C. According to learned counsel,
Sarabjit Singh while construing an identical provision had come to the
conclusion that a failure to refer the matter to the Deputy Commissioner
would be a mere procedural irregularity and would not taint the order of
assessment with an invalidity which would be beyond repair.
32. According to learned counsels for the respondents, the judgment
of the Court in Sarabjit Singh is an authority for the proposition that
Section 144B (4) is merely procedural and since the act of the AO
cannot be said to suffer from an inherent lack of jurisdiction, the Court
would be justified in upholding the final order of assessment. They
argued that since Section 144C proceeds along identical lines, the view
as expressed above would merit acceptance.
33. We note that Sarabjit Singh apart from having come to the
conclusion that the provisions of Section 144B were merely procedural,
had also found that the inherent jurisdiction of the AO to assess could
not be doubted. It was thus observed that in the absence of a change of
forum, a failure to abide by the procedure prescribed would be a mere
procedural irregularity.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 59 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
34. It was then contended by the respondents that even if the Court
were to come to the conclusion that the final orders of assessment
would not sustain, it would be well within the realm of its jurisdiction
to remand the matter to the AO for passing an order afresh. It was
contended in this respect that it would be open for the Court to adopt
the aforesaid process notwithstanding the ordinary time frames
constructed by Section 153 being breached bearing in mind sub-section
(6) thereof. It was submitted that no statutory prescription would
preclude the Court from exercising its extraordinary powers so as to
enable the AO to draw proceedings afresh and notwithstanding the
prescription of limitation which applied.
35. To buttress the aforesaid contention, Mr. Agarwal drew our
attention to the following observations as rendered by the Supreme
Court in Grindlays Bank Limited v. Income Tax Officer, Calcutta
and Others21:-
―7. The next point is whether the High Court possessed any power to
make the order directing a fresh assessment. The principal relief
sought in the writ petition was the quashing of the notice under
Section 142 (1) of the Income Tax Act, and inasmuch as the
assessment order dated March 31, 1977 was made during the
pendency of the proceeding consequent upon a purported non-
compliance with that notice, it became necessary to obtain the
quashing of the assessment order also. The character of an
assessment proceeding, of which the impugned notice and the
assessment order formed part, being quasi-judicial, the ―certiorari‖
jurisdiction of the High Court under Article 226 was attracted.
Ordinarily, where the High Court exercises such jurisdiction it
merely quashes the offending order and the consequential legal
effect is that but for the offending order the remaining part of the
proceeding stands automatically revived before the inferior court or
tribunal with the need for fresh consideration and disposal by a fresh
order. Ordinarily, the High Court does not substitute its own order
for the order quashed by it. It is, of course, a different case where the
adjudication by the High Court establishes a complete want of21 (1980) 2 SCC 191
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 60 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
jurisdiction in the inferior court or tribunal to entertain or to take the
proceeding at all. In that event on the quashing of the proceeding by
the High Court there is no revival at all. But although in the former
kind of case the High Court, after quashing the offending order, does
not substitute its own order it has power nonetheless to pass such
further orders as the justice of the case requires. When passing such
orders the High Court draws on its inherent power to make all such
orders as are necessary for doing complete justice between the
parties. The interests of justice require that any undeserved or unfair
advantage gained by a party invoking the jurisdiction of the court, by
the mere circumstance that it has initiated a proceeding in the court,
must be neutralised. The simple fact of the institution of litigation by
itself should not be permitted to confer an advantage on the party
responsible for it. The present case goes further. The appellant
would not have enjoyed the advantage of the bar of limitation if.
notwithstanding his immediate grievance against the notice under
Section 142(1) of the Income Tax Act, he had permitted the
assessment proceeding to go on after registering his protest before
the Income Tax Officer, and allowed an assessment order to be made
in the normal course. In an application under Section 146 against the
assessment order, it would have been open to him to urge that the
notice was unreasonable and invalid and he was prevented by
sufficient cause from complying with it and therefore the assessment
order should be cancelled. In that event, the fresh assessment made
under Section 146 would not be fettered by the bar of limitation.
Section 153(3)(i) removes the bar. But the appellant preferred the
constitutional jurisdiction of the High Court under Article 226. If no
order was made by the High Court directing a fresh assessment, he
could contend as is the contention now before us, that a fresh
assessment proceeding is barred by limitation. That is an advantage
which the appellant seeks to derive by the mere circumstance of his
filing a writ petition. It will be noted that the defect complained of
by the appellant in the notice was a procedural lapse at best and one
that could be readily corrected by serving an appropriate notice. It
was not a defect affecting the fundamental jurisdiction of the Income
Tax Officer to make the assessment. In our opinion, the High Court
was plainly right in making the direction which it did. The
observations of this Court in Director of Inspection of Income Tax
(Investigation) New Delhi v. Pooran Mall & Sons are relevant. It
said : (SCC p. 572, para 6)
The Court in exercising its powers under Article 226 has to
mould the remedy to suit the facts of a case. If in a
particular case a court takes the view that the Income Tax
Officer while passing an order under Section 132(5) did not
give an adequate opportunity to the party concerned it
should not be left with the only option of quashing it and
putting the party at an advantage even though it may be
satisfied that on the material before him the conclusion
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 61 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
arrived at by the Income Tax Officer was correct or
dismissing the petition because otherwise the party would
get an unfair advantage. The power to quash an order under
Article 226 can be exercised not merely when the order
sought to be quashed is one made without jurisdiction in
which case there can be no room for the same authority to
be directed to deal with it. But in the circumstances of a
case the court might take the view that another authority has
the jurisdiction to deal with the matter and may direct that
authority to deal with it or where the order of the authority
which has the jurisdiction is vitiated by circumstances like
failure to observe the principles of natural justice the court
may quash the order and direct the authority to dispose of
the matter afresh after giving the aggrieved party a
reasonable opportunity of putting forward its case.
Otherwise, it would mean that where a court quashes an
order because the principles of natural justice have not been
complied with, it should not while passing that order permit
the tribunal or the authority to deal with it again irrespective
of the merits of the case.
The point was considered by the Calcutta High Court in Cachar
Plywood Ltd. v. ITO and the High Court, after considering the
provisions of Section 153 of the Income Tax Act, considered it
appropriate. while deposing of the writ petition, to issue a direction
to the Income Tax Officer to complete the assessment which, but for
the direction of the High Court, would have been barred by
limitation.‖
36. Having noticed the principal submissions which were addressed,
we at the outset find that the argument of Section 144B being pari
materia to Section 144C is fundamentally misconceived and untenable
for the following reasons. It is pertinent to note that Section 144B as it
stood, constructed an additional check and an oversight mechanism in
respect of variations or additions which were proposed by the AO in a
draft order of assessment. It thus required the AO to forward the record
pertaining to a proposed variation or addition along with any objections
preferred by the assessee to the Deputy Commissioner. It was the
proposed additions or variations which consequently fell for scrutiny of
the Deputy Commissioner in light of the objections preferred by the
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 62 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
assessee.
37. The power of the Deputy Commissioner was, despite being
binding upon the AO, principally contemplated to be a check upon the
adjudicatory function assigned to the AO. The power of the Deputy
Commissioner was quasi-judicial provided it be proposed to be
exercised prejudicial to the interest of the assessee. The power of that
authority was thus essentially confined to an examination of the
tentative decision of the AO to vary the return or propose additions. The
power of the Deputy Commissioner was neither co-terminus nor
intended to be co-equal to that of the AO. The Deputy Commissioner
was essentially contemplated to exercise a power of review, supervise
and aid the process of assessment.
38. In contrast to the above, the powers of the DRP under Section
144C are not only corrective but extend to a power to enhance or
reduce the proposed variation subject to the rider that it is not
empowered to set aside a proposed variation. Mr. Vohra, learned senior
counsel, rightly underscored the distinction between the extent of the
power that stood conferred under Section 144B and 144C by pointing
out that the Deputy Commissioner assumed a quasi-judicial role only if
it were proposing to pass an order prejudicial to the assessee. It was
rightly pointed out by learned senior counsel that the DRP under the
Section 144C regime also stands conferred with the power to call for
additional evidence, take into consideration additional material that
may be introduced by the assessee, collate further evidence or
undertake such further enquiries as may be warranted. The extent of
jurisdiction which stands conferred upon the DRP by virtue of sub-
sections (6), (7) and (8) of Section 144C are thus clearly distinct and
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 63 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
different from those conferred upon the Deputy Commissioner under
the erstwhile Section 144B.
39. The power entrusted in the DRP also cannot be recognised to be
one which seamlessly transformed into one which did not envisage a
change of forum. In Sarabjit Singh, the Court bearing in mind the
limited power of review which stood conferred upon the Deputy
Commissioner, had ultimately come to observe that there was no
change of forum and that the power to assess remained with the AO.
40. While perhaps that may not be wholly sustainable in light of
what the Supreme Court observed in Panchmahal Steel, we are in this
batch essentially concerned with evaluating whether the respondents
are correct in their submission that Sections 144B and 144C are pari
materia.
41. We for reasons assigned hereinafter find ourselves unable to
recognise a basic or fundamental common thread which may be
countenanced to stitch or construct those two provisions. Section 144C
erects a special mechanism of assessment in respect of eligible
asssessees. It essentially entails two separate components coming to be
merged to form a composite assessment. This since it would
incorporate the power of computation and assessment conferred upon
the TPO under Section 92CA as well as the power of the AO to rule
upon other segments of income earned in a particular assessment year.
It thus constructs a separate and distinct regime of assessment which
would, hypothetically speaking, constitute an amalgam of decisions
taken by the TPO and the AO.
42. Undisputedly, the adjudication rendered in the context of Arm’s
Length Pricing by the TPO binds the AO in terms of Section 92CA. The
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 64 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
view that the AO may take with respect to aspects other than an
international transaction constitute a separate and independent exercise.
Since the ultimate assessment made under Section 144C is a fusion of
two views, comprising of decisions taken by two separate authorities
and is a composite blend and merger, it clearly stands on a pedestal
distinct and distinguishable from Section 144B.
43. That Section 144C constitutes a distinct and special assessment
mechanism cannot possibly be disputed. It is multi-tiered and
comprises of various in-built corrective and revisory components which
work together to forge an ultimate order of assessment recognised
under the Act. This in light of the view taken by the AO being
recognised to be a draft which is subject to challenge, the view of the
TPO being binding upon the AO and the directions of the DRP
compelling the AO to frame an order of assessment in terms thereof.
44. Thus, the Section 144C assessment cannot possibly be
countenanced to be one which does not constitute a change of forum
and which aspect formed the bedrock of Sarabjeet Singh. That decision
proceeded on the premise that the reference to the Deputy
Commissioner did not fundamentally alter the hierarchy of the
adjudicatory function since and notwithstanding the guidance provided
by the superior, the assessment remained an order made by the AO.
45. To the contrary, the draft of the assessment order under Section
144C is subject to challenge before the DRP or liable to be assailed in
appellate proceedings. Our view of the Section 144C assessment being
unique and distinct is also fortified by the various decisions rendered in
its context. The limited review which the Deputy Commissioner was
enabled to exercise under Section 144B is liable to be contrasted with
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 65 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
the independent enquiry that the DRP is empowered to undertake under
the Income Tax (Dispute Resolution Panel) Rules, 200922, an aspect
which was duly highlighted by Mr. Vohra.
46. As is manifest from a reading of Section 144C as well as the
Rules aforenoted, the DRP is independently empowered to admit
evidence, call for reports or even direct further enquiries. Its powers
extend to confirming, reducing or even enhancing the variations
proposed in the draft order. Of equal significance is the Explanation to
sub-section (8) of Section 144C which clarifies that the jurisdiction of
the DRP would extend to considering any aspect arising out of the
assessment proceedings and the draft order irrespective of whether the
assessee chose to raise that issue or not.
47. The Deputy Commissioner on the other hand was enabled by
Section 144B to merely review the draft order alongside the objections
preferred and frame a direction for the guidance of the AO. The power
under sub-sections (4) and (5) of Section 144B thus constituted an
additional tier of internal review in respect of proposed variations when
crossing a particular monetary limit.
48. We also find ourselves unable to view Section 144B as enabling
the Deputy Commissioner to enhance the variation proposed since the
expression “……prejudicial to the assessee” as appearing in the
Proviso to sub-section (4) was only intended to imbue a quasi-judicial
flavour to the proceedings and to deal with contingencies where the
Deputy Commissioner were inclined to reject the objections preferred
by the assessee. We thus find ourselves unable to construe the Proviso
as empowering the Deputy Commissioner to enhance the proposed
22 DRP Rules
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 66 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
variation. This too is a facet which carves out a distinction between
Sections 144B and 144C.
49. Regard must also be had to Section 144A and which
independently empowers the superior authority to intervene and guide
ongoing assessments. This, as Mr. Vohra rightly argued, was a power
which always inhered in the supervising authority and existed alongside
Section 144B as it stood at the relevant time. The guidance of the
Deputy Commissioner, which was spoken on in Section 144B, as
noticed hereinabove, though binding on the AO, was more in the nature
of an internal safeguard created by the statute as opposed to the
challenge and corrective procedure constructed by Section 144C.
50. We thus find ourselves to construe or countenance Sections 144B
and 144C as being pari materia or similar. Sarabjit Singh, thus not only
fails to sustain the contentions which were addressed, it also leaves us
unconvinced to doubt the correctness of the unfluctuating position
which precedents have taken with respect to Section 144C.
51. We on an independent analysis, find ourselves equally unable to
view or accept Section 144C when mandating a draft assessment order
being framed as being a mere procedural requirement. As is manifest
from a reading of that section, it not only adopts remedies that may be
pursued to assail an order rendered on adjudication, but the decision is
itself made subject to internal review at more than one level and a
hierarchy of authorities. It creates a right to challenge a decision at
multiple levels be it before the DRP, CIT(A) or the Tribunal. It is in that
sense a self-contained code for assessment in respect of eligible
assessees.
52. A failure to frame a draft order of assessment not only curtails
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 67 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
the right of the assessee to adopt corrective measures, it also deprives it
of a salutary right to challenge the draft in terms of the statutory
mechanism laid in place. We thus find that the imperative of framing an
order in draft was correctly propounded by JCB India Ltd., Nokia India,
C-Sam as well as the host of precedents noticed above as being
mandatory, a legal imperative and not merely a procedural irregularity
as was contended at the behest of the respondents.
53. It would thus be wholly incorrect to accept the contention of
Section 144C being similar or akin to the statutory provision which
formed the subject matter of consideration in Sarabjit Singh. Thus, we
have no hesitation in holding that the decision in Sarabjit Singh, fails to
cast a cloud or shadow of doubt on the decisions rendered in the context
of Section 144C.
54. That then takes us to evaluate the validity of the submission of
the respondents that the Court would be justified in framing a direction
remanding the matter to the AO so as to enable it to draw proceedings
afresh and from the stage of infraction. The acceptance of that
submission, however, hits a serious and perhaps insurmountable
roadblock in light of the statutory prescriptions of limitation created by
Section 153. Undisputedly, the assessment consequent to remand would
be regulated by sub-sections (3) and (4) of Section 153. When read
together and bearing in mind the admitted fact of the Tribunal having
remitted the matter to the desk of the TPO, the assessment was liable to
be concluded within nine months coupled with the additional period of
twelve months as provided. Learned counsels for the respondents fairly
conceded that the said period is no longer available today and has come
to an end by efflux of time. It was in the aforesaid light that Mr.
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 68 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
Agarwal sought to draw sustenance from sub-section (6) of Section 153
to contend that the same would enable the AO to carry out an
assessment by virtue of the ―finding or direction contained in…..an
order or direction of any court…‖.
55. We find ourselves unable to sustain that submission since Section
153(6) essentially seeks to override and overcome the statutory
prescription of limitation created by sub-sections (1), (1A) and (2)
thereof. This is evident from the section itself proclaiming that nothing
contained in those sub-sections would apply to the classes of
assessments specified therein. That power is further cabined with sub-
section (6) stipulating that the invocation of that provision would be
subject to the provisions of sub-sections (3), (5) and (5A). The
provision on a plain reading thus neither lifts the period of limitation
prescribed by sub-sections (3) and (4) nor does it extend the period
which would otherwise be available to the AO to conclude the
assessment.
56. More fundamentally, a direction, in terms as commended for our
consideration by learned counsels appearing for the Revenue, would
also not be a finding or direction as contemplated therein. Mr. Vohra, in
this context, invited our attention to the judgment of the Constitution
Bench in Income Tax Officer, A Ward, Sitapur v. Murlidhar
Bhagwan Das23 where the expression ―finding‖ and ―direction‖ was
explained in the following words: –
―9. Now, let us scrutinize the expressions on which strong reliance is
placed for the contrary conclusion. The words relied upon are
―section limiting the time‖, ―any person‖, ―in consequence of or to
give effect to any finding or direction‖. Pointing out that before the
amendment the word ―sub section‖ was in the proviso but it was23 1964 SCC OnLine SC 18
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 69 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
replaced by the expression ―section‖, it is contended that this
particular amendment will be otiose if it is confined to the
assessment year under appeal, for it is said that under no
circumstances the Income-tax Officer would have to initiate
proceedings for the said year pursuant to an order made by an
Appellate Assistant Commissioner. This contention is obviously
untenable. The Appellate Assistant Commissioner or the Appellate
Tribunal may set aside the notice itself for one reason or other and in
that event the Income-tax Officer may have to initiate the
proceedings once again in which case Section 34(1) will be
attracted. The expression ―finding or direction‖, the argument
proceeds, is wide enough to take in at any rate a finding that is
necessary to dispose of the appeal or directions which Appellate
Assistant Commissioners have in practice been issuing in respect of
assessments of the years other than those before them in appeal.
What does the expression ―finding‖ in the proviso to sub-section (3)
of Section 34 of the Act mean? “Finding” has not been defined in the
Income-tax Act. Order 20 Rule 5 of the Code of Civil Procedure
reads:
―In suits in which issues have been framed, the Court shall
state its finding or decision, with the reasons therefor, upon
each separate issue, unless the finding upon any one or
more of the issues is sufficient for the decision of the suit.‖
Under this Order, a ―finding‖ is, therefore, a decision on an issue
framed in a suit. The second part of the rule shows that such a
finding shall be one which by its own force or in combination with
findings on other issues should lead to the decision of the suit itself.
That is to say, the finding shall be one which is necessary for the
disposal of the suit. The scope of the meaning of the expression
―finding‖ is considered by a Division Bench of the Allahabad High
Court in Pt. Hazari Lal v. Income-tax Officer, Kanpur. There, the
learned Judges pointed out:
―The word “finding’, interpreted in the sense indicated by us
above, will only cover material questions which arise in a
particular case for decision by the authority hearing the case
or the appeal which, being necessary for passing the final
order or giving the, final decision in the appeal, has been the
subject of controversy between the interested parties or on
which the parties concerned have been given a hearing.‖
We agree with this definition of ―finding‖. But a Full Bench of the
same High Court in Lakshman Prakash v. CIT construed the word
―finding‖ in a rather comprehensive way. Desai, C.J., speaking for
the Court, observed:
―A finding is nothing but what one finds or decides and a
decision on a question even though not absolutely necessary
or not called for is a finding.‖Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 70 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
If that be the correct meaning, any finding on an irrelevant or
extraneous matter would be a finding. That certainly cannot be the
intention of the Legislature. The Madras High Court also in A.S.
Khader Ismail v. Income-tax Officer, Salem gave a very wide
interpretation to that word, though it did not go so far as the Full
Bench of the Allahabad High Court. Ramachandra Iyer J., as he then
was, speaking for the Court, observed that the word “finding” in the
proviso must be given a wide significance so as to include not only
findings necessary for the disposal of the appeal but also findings
which were incidental to it. With respect, this interpretation also is
inconsistent with the well-known meaning of that expression in the
legal terminology. Indeed, learned counsel for the respondent
himself will not go so far, for he concedes that the expression
“finding” cannot be any incidental finding, but says that it must be a
conclusion on a material question necessary for the disposal of the
appeal, though it need not necessarily conclude the appeal. This
concession does not materially differ from the definition we have
given, but the difference lies in the application of that definition to
the finding given in the present case. A “finding”, therefore, can be
only that which is necessary for the disposal of an appeal in respect
of an assessment of a particular year. The Appellate Assistant
Commissioner may hold, on the evidence, that the income shown by
the assessee is not the income for the relevant year and thereby
exclude that income from the assessment of the year under appeal.
The finding in that context is that that income does not belong to the
relevant year. He may incidentally find that the income belongs to
another year, but that is not a finding necessary for the disposal of an
appeal in respect of the year of assessment in question. The
expression “direction” cannot be construed in vacuum, but must be
collated to the directions which the Appellate Assistant
Commissioner can give under Section 31. Under that section he can
give directions, inter alia, under Section 31 (3) (b), (c) or (e) or s. 31
(4). The expression “directions” in the proviso could only refer to the
directions which the Appellate Assistant Commissioner or other
tribunals can issue under the powers conferred on him or them under
the respective sections. Therefore, the expression “finding” as well
as the expression “direction” can be given full meaning, namely, that
the finding is a finding necessary for giving relief in respect of the
assessment of the year in question and the direction is a direction
which the appellate or revisional authority, as the case may be, is,
empowered to give under the sections mentioned therein. The words
“in consequence of or to give effect to” do not create any difficulty,
for they have to be collated with, and cannot enlarge, the scope of
the finding or direction under the proviso. If the scope is limited as
aforesaid, the said words also must be related to the scope of the
findings and directions.‖
57. As is manifest from the above, a finding was explained to mean a
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 71 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
conclusion arrived at on a material question necessary for the disposal
of a cause laid before an appellate authority and essential for according
relief in an assessment year. A direction was defined as one which the
appellate authority was empowered to issue under the Act.
58. However, a direction in terms as suggested by the respondents
would clearly not fall within either of those two expressions since what
we are essentially invited to do is to extend the period of limitation that
otherwise stands prescribed under the Act. The finding that we have
arrived at is that it was imperative for the AO to frame an order in draft
as opposed to a final order of assessment. Any consequential direction
that could be framed would have to be in consonance with the aforesaid
finding. That direction would additionally and necessarily have to be in
accordance with the scheme of the Act and the statutory prescriptions
comprised therein. The same would clearly not warrant or justify the
Court enlarging the period of limitation as statutorily prescribed. As is
well settled, while courts may, where legally permissible, consider
condonation of delay, they are not entitled to expand or enlarge a period
of limitation as statutorily prescribed.
59. It becomes relevant to note that Grindlays Bank was a decision
where the Explanation to Section 153 applied and the court was
mandated to exclude the period during which a stay order operated.
That is not the position which obtains in these matters since the only
injunction which operated was with respect to the consequential
demands which stood created. There was no interim order which
restrained the AO from proceeding with assessment.
60. We thus find ourselves unable to accede to the submission
addressed by the respondents on this score. Once it is conceded that the
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 72 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
period for completion of the assessment exercise in terms of sub-
sections (3) and (4) of Section 153 has expired, it would be wholly
impermissible for us to expand or enlarge the period prescribed for
completion of assessment. Concededly, these are also not cases where
the Explanation to Section 153 was asserted to be applicable.
61. In view of our conclusions on the aforesaid aspects, we find it
unnecessary and inexpedient to either examine or rule upon the
additional challenges which were raised to the final orders of
assessment including that of those orders as framed not being compliant
with the time frames created by Section 153 of the Act.
62. Accordingly, and for all the aforesaid reasons, we allow the
instant writ petitions and quash the impugned final orders of assessment
of 28 December 2018 [W.P.(C) 688/2019], 20 November 2018 [W.P.(C)
1009/2019], 30 December 2018 [W.P.(C) 991/2019], 25 December
2018 [W.P.(C) 995/2019], November 2018 (undated) [W.P.(C)
993/2019], 30 September 2021 [W.P.(C) 12462/2021], 29 September
2021 [W.P.(C) 12844/2021], 28 December 2018 [W.P.(C) 3444/2021],
20 November 2018 [W.P.(C) 3377/2021], 30 December 2018 [W.P.(C)
3389/2021], November 2018 (undated) [W.P.(C) 3472/2021], 25
December 2018 [W.P.(C) 3539/2021], 18 September 2021 [W.P.(C)
11896/2021], 09 September 2021 [W.P.(C) 11949/2021], 29 September
2021 [W.P.(C) 12204/2021], 29 September 2021 [W.P.(C) 12319/2021],
14 February 2022 [W.P.(C) 4043/2022], 31 March 2021 [W.P.(C)
5913/2022], 30 March 2022 [W.P.(C) 6365/2022], 31 March 2022
[W.P.(C) 6786/2022], 22 March 2022 [W.P.(C) 12735/2022], 22 March
2022 [W.P.(C) 12784/2022], 23 March 2022 [W.P.(C) 12785/2022], 26
March 2021 [W.P.(C) 7547/2023], 20 September 2023 [W.P.(C)
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 73 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21
14314/2023] and all consequential notices issued pursuant thereto. The
petitioners shall be entitled to all consequential reliefs.
63. For reasons assigned hereinabove, we uphold the view taken by
the Tribunal which stands impugned in ITA Nos. 52/2023, 451/2024
and 454/2024. Those appeals in consequence shall stand dismissed.
YASHWANT VARMA, J.
RAVINDER DUDEJA, J.
SEPTEMBER 02, 2024/neha
Signature Not Verified
Digitally Signed
ITA 52/2023 & other connected matters Page 74 of 74
By:KAMLESH KUMAR
Signing Date:02.09.2024
17:04:21