TaxTMI 
TaxTMI 
2026 (8) TMI 828
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....oner. BRIEF FACTS 2. The petitioner is a company registered under the Companies Act, 1956 and is a wholly owned subsidiary of UC Mobile New World Limited, British Virgin Islands. It is engaged in the distribution and re-selling of designated services of UCWeb Singapore Pte Ltd. in India. On 15.03.2022, for the assessment year 2021-22, the petitioner filed its income tax return. The petitioner's case came under scrutiny resulting in the issuance of a notice to it dated 28.06.2022, under Section 143(2) of the Act, to which notice the petitioner filed a written response dated 13.07.2022. Since the petitioner's scrutiny assessment involved international transactions with associate enterprises, the Assessing Officer (for short, the AO) made a reference under Section 92CA(1) of the Act to the Transfer Pricing Officer (for short-TPO) to determine the arm's length price. Thereafter, an order dated 29.10.2023, under Section 92CA(3) of the Act was passed by the TPO which order was received by the AO on 31.10.2023. Through order dated 29.10.2023, the TPO ordered addition of Rs. 60,09,84,289/- to the petitioner's declared income. Accepting the order of the TPO dated 29.10.2023, the AO....
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....in terms of the directions issued by the DRP through its order dated 27.08.2024 and the order of the TPO dated 17.09.2024, but to no avail. SUBMISSIONS 3. Mr. Nageshwar Rao, learned counsel appearing for the petitioner, submits that the petitioner was an "eligible assessee" in terms of Section 144C(15)(b) of the Act because there was variation in the petitioner's income tax return and the original order of the TPO dated 29.10.2023 as also the TPO's subsequent order dated 17.09.2024; being an "eligible assessee", within 30 days of receipt of the draft assessment order dated 06.11.2023, the petitioner had availed of its remedy under Section 144C(2) of the Act through filing of objections before the DRP; as per Section 144C(10) of the Act directions issued by the DRP are binding on the AO and therefore, the final assessment order dated 15.12.2023, alongwith the consequent notice of demand and notice of initiation of penalty proceedings, are required to be set aside being at variance with the directions issued by the DRP dated 27.08.2024; there was a bona fide lapse on the petitioner's part with regard to not informing the AO with regard to filing of objections to the draft asses....
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....on 144C(2) of the Act. However, the petitioner failed to inform the AO with regard to the filing of its objections and accordingly, as obliged under Sections 144C(3) and (4) of the Act, the AO passed the final assessment order dated 15.12.2023, under Section 143(3) read with Sections 144C(3) and 144B of the Act. Consequent notice of demand under Section 156 of the Act as also notice regarding initiation of penalty proceedings under Section 274 read with Section 270A of the Act, both dated 15.12.2023, were also issued by the AO. It is at that stage that the petitioner knocked the doors of this Court through filing of the instant petition challenging therein the aforesaid final assessment order and the consequent demand notice as also the notice with regard to initiation of penalty proceedings, all dated 15.12.2023. The present petition came up for preliminary hearing before this Court on 26.02.2024, on which date this Court issued notice and stayed the operation of the final assessment order dated 15.12.2023. In the meanwhile, in terms of Section 144C(5) of the Act, the DRP, through its order dated 27.08.2024, partially accepted the petitioner's objections. Such order, passed by the....
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....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....
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....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: (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 Commissioner or] Commissioners of Income-tax constituted by the Board for this purpose; (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 b....
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....ular reference can be made to Sections 144C(10) and 144C(13) of the Act. 11. In the facts of the case in hand, the impugned final assessment order dated 15.12.2023 is found to be at variance with the directions of the DRP dated 27.08.2024, which directions were issued after consideration of the petitioner's objections filed under Section 144C(2) of the Act to the draft assessment order dated 06.11.2023. Therefore, the impugned final assessment order violates Sections 144C(10) and 144C(13) of the Act. It also goes against the spirit behind Section 144C of the Act. 12. Even otherwise, through the impugned final assessment order, the AO made an addition of Rs. 60,09,84,289/- to the petitioner's total income. Such addition is based solely on the order of the TPO dated 29.10.2023. In terms of the directions issued by the DRP dated 27.08.2024, partially accepting the petitioner's objections, filed by the petitioner under Sections 144C(2) of the Act, through order dated 17.09.2024, the TPO revised his earlier order dated 29.10.2023. Thus, the TPO's earlier order dated 29.10.2023, which virtually was the soul of the impugned final assessment order, stands substituted by the subsequen....
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....considering the views of DRP while passing a fresh Assessment Order." 8. This Court is in agreement with the view expressed by the Bombay High Court in the aforesaid decision. Once the objections have been filed by the assessee against a draft assessment order within the time limit prescribed under Section 144C(2)(b), the rest of the procedure should be followed as prescribed and the final assessment order ought to be passed by the Assessing Officer in accordance with the directions issued by the DRP. 9. This Court is further of the view that no prejudice will be caused to the Respondent-Department if the present petition is allowed and the impugned assessment order is set aside as Respondent-Department would be well within its rights to pass a fresh assessment order post the receipt of direction from the Respondent No. 3-DRP." 15. To the same effect are the following observations by a learned Single Judge of the Karnataka High Court in Open Silicon Research Pvt. Ltd. vs. Assessment Unit, National Faceless Assessment Centre, Income-Tax Department- (2023) SCC OnLine Kar 80:- "7. It is not in dispute that the petitioner is an eligible assessee in terms o....