The High Court · 2025

Petition under Section 151 CPC prayjng that in the circumstances stated in the affidavit filed in support of the petition, fie High Court may be pleased to this Hon'ble Court may be pleased to vacate the interim order granted on 22-04-2024 in W.P.No.10372 of 2024 Counsel for the Petitioner: SRI T. SURYA NARAYANA SENIOR COUNSEL REP Ms. K. SRIILATHA Counsel for the Respondents: SRI P. MU RALI KRISHNA The Court made the following: ORDER L / THE HON'BLE SRI JU STICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA WRIT PETITION No.10372 of 2024 gBDEB: (per tr, e Hon'ble Sri tustice P.Sam Koshy) The present writ petition has been filed seeking quashment oF the assessment order dated 22.12.2023 issued by respondent No.1 under Section 1a3(3) read with Section l44C(3) also read with Section 7448 of the Income Tax Act, 1961 (briefly'the Act' hereinafter). The challenge is also the consequent demand notice of the same date i.e. 22.12.2023 issued by respondent No.1 under Section 156 of the Act and also the notice issued under Section 274 read with Section 270A of the Act dated 22.12.2023. The challenge is also to the further notice dated 08.03.2024 issued by respondent No.1 under Section 27OA of the Act.

2. Heard Mr. T. Surya Narayana, learned Senior Counsel, representing Ms. K. Sri Latha, learned counsel for the petitioner, and Mr. P. Murali Krishna, learned Standing Counsel for Income Tax appearing on behalf of the respondents. t \,--*.1 -

3. The brief facts which led to filirlg of the instant writ petition are that in terms of the provisions undqr Section 144C(1) of the Act, a draft assessment order was pasFed by respondent No.1 on L6.17.2023. In terms of the provisions of Section l44C(2), on receipt of the draft assessment ord(r, the assessee if he wants so, within thirty days file his objectlons with the Dispute Resolution Panel (for short, the 'DRP') and tq the Assessing Officer. In the instant case, the petitioner ng the said recourse, filed an objection dated 12.12.2023 (AnnexLttre - P3) within the prescribed thirty days time. The filing of the same stands established from the 'Department on 74.12.2023, acknowledgement received from thE which again is well within the prescriped time. On the same day, i.e. on 12.12.2023 itself the objection filled under Section 144C(2) was informed to the Assessing Officer af well. The petitioner has been able to show proof of the same of having been informed to the Assessing Officer from the acknov{ledgement of the objections having successfully submitted online. The Department also gave an transaction ID to the acknowledg(ment, which establishes the receipt of the obj ections by the Asseqsin g Officer. The screenshot of the said acknowledgement is also enclosed along with the writ petition. However, without considerinP the said objechor+eo filed by the petitioner, the Assessing Officer in contravention to the requirement under Sub-Sections (5) and (6) of Section t44C(2), proceeded and passed the final order dated 22,12.2023. At the stage of admission of the writ petition, vide order dared 22.04.2024, interim protection was granted by this Court which is still in force.

4. It is this passing of the final order assessment order being tn violation of the provisions of Section l44C of the Act; the instant writ petition has been filed.

5. It would be relevant at this juncture to refer to Sub-Sections (2), (3), (5) and (6) of Section l44C of the Act. The said Sub- Sections reads thus: "Reference to dispute resolution panel. L44C, (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 Office r; of the variations to the Assessing his acceptance (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and ( ii) the Assessing Officer. L (3) The Assessing Officer sh;tll complete the assessrnent on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or \ \-- \ - 1 .,i (b) no objections are received within the period specified in sub-section (2). (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 Oiiicer [o enable him to complete the assessment, (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), aftef considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the asselsee; (d) report, if any, of the Assessing Officer, Valuation officer or iransfer Prrcing Officer or any other authority; (e) records relatlng to the draft or(er; (f) evidence collected by, or cause4 to be collected by, iU (g) result of any enquiry made byi or caused to be made by, it." A plain reading of the aforementioned provisions under Section l44C of the Act would make it amP11{ clear that as soon as the draft assessment order is passed, the as$essee gets a right of filing his objections within thirty days which i11 the instant case the Petitioner did comply with. Upon receipt of the objections, the DRP has to consider the objections. and thereaf[er pass approPriate orders by either confirmlng the draft assessmelt order, reducing or enhancing theVariationsproposedinthedraftassessmentorder,andonly a P aBe 7 ot L7 thereafter, can the Assessing Officer pass the assessment order and not otherwise.

6. In the instant case, though the stand of the Department is that the petitioner has not submitted any objection under Section l44C(2) to the Assessing Officer, therefore the Assessing Officer was not aware of the filing of such objection before the DRp. Hence, the assessment order was proper, legal and justified, and the petitioner should now challenge the same by way of an appeal. However, during the course of hearing, upon putting a query to the learned Standing Counsel as regards the acknowledgement received by the Department in the objection filed by the petitioner under Section l44C(2) and the screenshot showing successful submission of the objection to Assessing Officer has not been controverted, which would force this Bench to draw an inference that it was all within the knowledge of the Department when they had passed the assessment order dated 22.12.2023.

7. A plain reading of Sub-Sections (5) and (6) reproduced in the preceding paragraphs, would give a clear indication that upon receipt of an objection under Section l44c(2)(b) within a period of thirty days from the date of passing of the draft assessment order, I eage 8 of i,z it is incumbent upon the DRP to P oceed 4 and decide the same in accordance with law and also in accqrdance with other Sub-Sections stipulated under Section Ma(C) of tl-le Act. The provisions of Section t44(C) also indicates that it is only after the DRP takes a decision on the objections so filed by the assfssee, the Assessing Officer can proceed and pass the final assessment order.

8. In the present case, the filing of the objections with the DRP with information being forwarded t p the Assesslng Offlcer stands established from the cogent proof aqd materials enclosed along with the writ petition. In the absence of the DRP not deciding the objections in accordance with Secti P n l44C and in due course of time, the Assessing Officer also havfng passed the final assessment order, the question croPs uP for co sideration is the effect of such ,i an assessment order and the judicia I precedents on the said issue.

9. Recently, the High Court of dealing with such issue in the ca Karnataka had an occasion of Ie of Open Silicon Research Private Limited vs. The Assess ent Unit, Nationat Faceless Assessment Centre, Income-Tal< Department and Othersl. I Order da ted 79.O1 .2023 in writ Petition No 14541 of 202 ITT 1 a The High Court dealing with the said objection tn paragraph Nos.7, 8 10, 11 and 13 has held as under: "7. It is not in dispute that the petitioner is an eligible assessee in terms of Section 144c (15)(b)(i) of the Act. It is also not in dispute that the draft order was issued and communicated to the oetitioner. It is also not in drspute that the petitioneir has filed its objections before the DRP as is evident from the Acknowledgment at Annexure-H which is within the time stipulated, which is also not controverted.

8. No doubt, there has been lapse in not filing the objections under Section 144C (2)(b)(ii) of the Act before the assessing officer. It is clear from the facts that the DRP has issued directions as per Annexure-N. Though the said direction is dated 15.05.2023 after passing of the assessment order on 26.1O.2022, question as to whether non-filing of objections before the assessing officer will have the effect of assessing officer being empowered to go ahead and conclude the proceedings when in fact the petitioner had filed objections before the DRP and had not intimated the same to the assessing oFficer, req uires consideration.

10. Once such objections have been filed, the DRP in terms of Section 144C (5) may issue directions for guidance of the assessing officer to enable him to complete the assessment. The power oF the ERP is provided for under Sections 144C (6) to 144C (10) of the Act. After the DRP exercises power vested under Section 144C as noticed above and directions are issued, the assessing officer has no discretion except to act in conformity with the directions. \

11. It is not in dispute that iF nq directions are issued, the assessing oFficer need not wait under Section 144C (13). However, the fact remains that once objections are filed before the DRP and till directioni are issued, the assessing offlcer cannot proceed further. this is in light of mandate under Section 144C (13). Accordingly, non- intimation to the assessing offlcer under Section 1q+C (Z)(U)(ii) though is a lapse on the part of the petitioner, the only way of meaningfully and harmoniously inferpreting the obligation of filing objections under section 14iC (2)(b)(ii) is to construe the procedure that once such objPctions are filed before the DRP and till the decision is taken by the DRP regarding directions to be passed, the assEssing officer ought not to proceed further.............. .. , ......Accordingly, the assessment grder is required to be set aside. In light of the above, the assessment order at Annexure-A1 is set aside. Consequently, the computation sheet at Annexure-A2 and the Oer,'lrana notice at Annexure-A3 are set aside. .

13. In light of [he above, petition is disposed off. The matter is restored to the stage of laac(1$) and the assessing officer shall proceed further in terms of tlhe procedure under Section 144C(13) and the time corltemplated under Section 144C(13) is deemed to commence from the date of receipt of certified copy of this order by the assessing oFficer. The assessing oFficer is to follow the directions issued by the DRP at Annexure-N. It is clarified that the observations made above are made in the context of directions being issued by the DRP at a subsequent point of time and will not have the effect of construing the duty 1s file objections before the assesslng officer under Section la C(2)(b)(ii) as being optional and not mandatorY." ,\ a a

10. A similar view has also been taken by the Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. vs. Assessment Unit Income-tax Department National Faceless Assessment Centre2 wherein again the Division Bench of Delhi High Court in paragraph Nos.6 to t has held as under: "6. He submits that under Section 144C(2)(b)(ii), the Petitioner on receipt of the draft assessment order was statutorily required to file its objections before the Assessing Officer in addition to the DRP. He further submits that under Section 144C(3)(b) the Assessing Officer was obligated to complete the assessment on the basis of the draft assessment order if no objections were received wlthin the time period specified under Section l44C(2) i.e. within thirty days of the receipt of the draft order. He statcs that the Assessing Officer was well within his right to pass the impugned assessment order dated 21st November, .1023 and he cannot be faulted for finalising the assessment in accordance with the prescribed procedure.

7. Having heard learned counsel for the parties, this Court is of the view that the issue at hand is no longer res tntegra as it has been decided by the Bombay High Court in Sulzer Pumps (supra) wherein it has been held as under:- L "6. In our view since petitioner had already filed a reference raising his objections to the DRP and Section 144C (4) of the Act requires the Assessing Officer to pass the final order including the view expres5cd by the ' 120)31151 taxmann.com 143 (Delhi) Page 72 of t7 DRP, we will be justifieq in setting aside the order of the Assessing Officer dat$d 28th lune, 2021 which is impugned in this petitiqn. we would also observe that the Assessing Officer cdn ot be faulted for passing the rmpugned order. At the Fame time, the Assessing Officer will also have benefit of considering the views of DRp whrle 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 b the assessee against a draft assessment order within the time limit prescribed under section 144c(2)(b), the rest of the procedure shourd be followed as prescribed and tht! final assessment order ought to be passed by the Assessrnq Officer in accordance with the directions issued by the DRp. Y

9. This Court is further of the view that no prejudice will be caused to the Respondent_Depfftment it the present petition is allowed and the impugned aspessment 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

11. Earlier also a similar stand [vas taken by the Bombay High Court in the case of Sulzer pumps fndia private Limited vs. Dy. Commissioner of fncome Tax, Circle _15(3) (2) and Ors.3 ,l wherein in paragraph No.6 it has belen held as under: I Order dated 27.10.2021 in Writ petition (t) No.15811 of 2021 I l-- a "6. In our view since petitioner had already filed a reference raising his objections to the DRP and Section 144C (4) of the Act requires Assessing Officer to pass the flnal order including the view expressed by the DRP, we will be justified in setting aside the order of the Assessing Officer dated 28th lune, 2021 which is impugned in this petition." L2. Recently again the High Court of Karnataka in the case of ZoomRx Healthcare Technology Solutions (P.) Ltd. vs. Additional/Joint/Deputy/Assistant Commissioner of Income Taxa relying upon its own decision in the case of Open Silicon Research Private Limited (supra) held in paragraph Nos.5 and 6 as under: "5. Taking note that the objections have been filed before the DRP and in light of the observations made in the case oF Open Silicon Research (P) Ltd referred to hercinabove, it is clear that the Assessment Order passed disregarding the objections filed, requires to be interfered with. The Assessing Officer ought to have waited till directions are passed by DRP.

6. Taking note that objections have been filed beforr: the DRP, it would meet the ends of justice by allowing the petrtion by setting aside the order at Annexure-'A' dated 20.11 .2023 with a further direction that the Assessing Officer must follow the directions of DRP and proceed thereafter, while DRP would issue necessary directions taking note of the obje(-tions filed " IZOZa; tO: taxmann.com ,747 (Karnataka) ot !7 by the petitioner filed, copy ot whi h is enclosed at Annexure- 'G'. Accordingly, the petition is a/ F l!we d

13. A similar view was taken by Bombay High Court in the tr, " case of APM Terminals India Priv'ate Limited vs. Assessment Unit,. Income Tax Department-N]FAC & Ors.s whereby the writ petition was allowed in terms of the rder passed in Sulzer Pumps India Private Limited (supra). L4. Even the jurisdictional High C urt in the instant case i.e. the High Court for the State of Telang{ na had an occasion of dealing with a similar question in the ca e of Infor (India) Private Limited vs. Additional/Joint/Dep ty/Assistant Commissioner of Income Tax / Income Assessment Centre, Delhi and pthers 6 wherein in paragraph Officer, National Faceless Tax Nos.3 to 6 it has been held as under "3. Though counter affidavit hfs not been filed by the respondents, nonetheless Ms. K.fvlamata Choudary, Iearned counsel submits on the basis of written instructions. Ms. K.lYamata Choudary has explain$d in her submission that assessing officer could not considfr the obiections raised by the petitioner before the Dispute Resolutlon Panel as those were not p laced before the a ssessi irg officer. 5 u Order dated 12.02.2024 n Writ Petition (L) No.2030 of Order dated 17 06.20)4in Writ Petition No.27596 of 2 a

4. There is a consensus at the Bar that in view of non- compliance of the procedure laid down under Sections l44B and 144C of the Income Tax Act, 1961 (briefly referred to hereinafter as the 'Act'), the impugned assessment order dated 07.10.2021 passed by the 1st respondent and the consequential demand notice dated 07.10.2027 should be set aside and the matter remanded back to the assessing officer i.e., 1st respondent after the Dispute Resolution Panel issues the directions under the aforesaid provision.

5. Consequently order dated 07.LO.2O2L and the consequential notice of demand dated 07.10.2021 are hereby set aside. Matter is remanded back to the 1st respondent For passing fresh order of assessment in accordance with law after affording due opportunity of hearing to the petitioner.

6. Be it stated that the Dispu[e Resolution Panel may issue the necessary directions in accordance with law within a period of six (06) months from the date of receipt of a copy of this order. "

15. Keeping in view the series of ;udiclal precedents narrated in the preceding paragraphs, this Bench has no hesitation in reaching to the conclusion and forming the opinion that the assessment order dated 22.12.2023 would not be sustainable as the Assessing Officer could have passed the assessment order only after the decision of the DRP on the objections so Filed by the petitioner under Section l44C(2). Undisputedly, when the assessment order was passed, the objection before the DRP was pending. It can also not be authentically accepted that the Assessing Officer was not aware of the objections so filed by the pbtitioner before DRP with an intimation to the Assessing Officer, a s the acknowledgement and the transaction ID issued from the Assessing Officer's office also is enclosed along with the writ petition.

16. For all the aforesaid reasons, the assessment order dated

22.12.2023 issued by respondent No. 1 deserves to be and is according set aside and the rejection of the objections by the DRP vide order dated 30.08.2024 also deperves to be and is accordingly set aside. The matter stands remitted back to the DRP for taking a fresh call on the obJections filed by tfie petitioner and the Assessing Officer to proceed only thereafter in terms of the order passed by DRP. L7. With the aforesaid observations and directions, the instant writ petition stands allowed. As a cofsequence, the other orders subsequently passed are also set aside.

18. Though I.A.No.4 of 2025 is filed by the petltioner for impleadment of DRP as a necess4ry party, we do not find it necessary as the learned Standing Cdunsel himself has admitted the o PaBe 17 of 17 I I I I I I i fact that DRP is also another arm of the Income Tax Department itself. Hence, I.A.No.4 of 2025 stands dismissed.

19. As a sequel, miscellaneous petitrons pending if any, shall stand closed. However, there shall be no order as to costs. ,/TRUE COPY// One fair coPY to THE HONOURABLE SRI (For His LordshiP s Kind JUSTI Perusal) SD/. T. JAYASREE PUTY REGISTRAR T '.lsecrtoH oFFlcER P.SAM KOSHY one fair copy to rHE HoNNolJHl?bt 3[' (For His LordshiP's Kind Perusal) JUSTICE NARSING RAO To,

1. The Additional/Joinu Deputy/ Assistant Commissioner of lncome Tax/ lncome- tax Officer, National f'""ril"'nttltsment Centre Assessment Unit' Room No 401,2nd Floor, E-R;;' i;Jarlal Nehru St-a!i.u1 Delhi-110003' 2. The Deputy Commissionei'otlncorne tax' Circle.-2(.1)' Signature Towers' Opposite Botanical C,r.o"ni ionJ'pur' Hyderabad' Telangana-500084' 3 The Principal commissione"r'"ii;;;; i;i -2' signature Towers' opposite " e;irri"ri Grrdens, Kondapur' Hyderabad' Telangana-500084' 1. 11 L.R. CoPies. 2. The Under Secretary, Union of lndia' Ministry of Law Justice and Company Advocates Association Library, High Court 3. The Secretary, Telangana 4 ;;Cd; ilr" r snrr-nruA'Advocate[oPUC]-^^... ; o;; aa io snr p MURALI KRISHNA' Advocate IoPUC] 6. Two CD CoPigs Buildings, HYderabad Affairs, New Delhi' BM YN, HIGH COURT DATED:10 10312025 a J ORDER WP.No.10372 of 2024 , r-l (-)' 1 HF- Sf4 7€ ( 21 AUE 2025 \-: (* \ ALLOWING THE WRIT PETITION WITHOUT COSTS ( A- a4 6 q-)