Writ Petition No. 12339 of 2025 · The High Court
Case Details
- 1 - NC: 2025:KHC:16963 WP No. 12339 of 2025 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 24TH DAY OF APRIL, 2025 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 12339 OF 2025 (T-IT) BETWEEN: GRAB GRECO LLP BLOCK A, 3RD FLOOR, SALARPURIA AURA, SARJAPUR, OUTER RING ROAD, (INCORPATION ULS 12 (1) B) OF ACT 2008. THE LLP KADUBEESANAHALLI, BANGALORE - 560 103 REPRESENTED HEREIN BY ITS DESIGNATED PARTNER NAGARAJA (BY SMT. TANMAYEE RAJKUMAR, ADVOCATE) AND: …PETITIONER 1. ASSESSMENT UNIT INCOME-TAX DEPARTMENT, NATIONAL FACELESS ASSESSMENT CENTRE, 2ND FLOOR, E-RAMP, JAWAHARLAL NEHRU STADIUM, NEW DELHI - 110 003. 2. DEPUTY/ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE 1(1)(1), BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, KORAMANGALA, BANGALORE - 560 095. Digitally signed by CHANDANA B M Location: High Court of Karnataka 3. PRINCIPAL COMMISSIONER OF INCOME-TAX - 1 BMTC BUILDING, 6TH BLOCK, 80 FEET ROAD, KORAMANGALA, BANGALORE 560 095. (BY SRI.M. DILIP, ADVOCATE) …RESPONDENTS - 2 - NC: 2025:KHC:16963 WP No. 12339 of 2025 THIS W.P IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO QUASHING THE ORDER DATED 19.03.2025 (ANNEXURE D) BEARING DIN ITBA-AST-S-143(3)-2024-25-1074701396(1) PASSED BY THE 1 RESPONDENT FOR THE ASSESSMENT YEAR 2022-23 AND ETC. THIS PETITION, COMING ON FOR PRELIMINARY HEARING, THIS DAY, ORDER WAS MADE THEREIN AS UNDER: CORAM: HON'BLE MR JUSTICE S.R.KRISHNA KUMAR ORAL ORDER In this petition, the petitioner seeks the following reliefs: “(a) Quashing the order dated 19.03.2025 (Annexure – D) bearing DIN ITBA/AST/S/143(3)/2024-25/107470 1396(1) passed by the 1st Respondent for the assessment year 2022-23; (b) Quashing the notice dated 19.03.2025 (Annexure-E) bearing DIN ITBA/AST/S/156/2024-25/1074701453(1) issued by the 1st Respondent for the assessment year 2022-23; (c) Quashing the notice dated 19.03.2025 (Annexure-F) bearing DIN ITBA/PNL/S/270A/2024-25/1074701 577(1) issued by the 1st Respondent for the assessment year 2022-23; (d) Pass such other or further orders as this Hon’ble Court may deem fit in the facts and circumstances of the case, in the interest of justice and equity.” - 3 - NC: 2025:KHC:16963 WP No. 12339 of 2025 2. Heard learned counsel for the petitioner and learned
Legal Reasoning
order of this Court in the case of Open Silicon Research (P.) Ltd Vs. Assessment Unit – W.P.No.14541/2023 dated 19.07.2023. - 5 - NC: 2025:KHC:16963 WP No. 12339 of 2025 6. Per contra, learned counsel for the respondents submits that there is no merit in the petition and that the same is liable to be dismissed. 7. In the case of Open Silicon Research (P.) Ltd Vs. Assessment Unit – W.P.No.14541/2023 dated 19.07.2023, a Co- ordinate Bench of this Court held as under: “1. Petitioner has sought for quashing of the assessment order dated 26.10.2022 at Annexure-A1; computation sheet at Annexure-A2; demand notice at Annexure-A3 and the correspondence dated 30.06.2023 issued by respondent No.3 at Annexure-A4. Petitioner has also sought for an allied prayer which is consequential in nature to direct the 1st respondent to pass an order taking NC: 2023:KHC:25192 note of the procedure under Section 144C of the Income Tax Act, 1961 (for short 'the Act'). 2. Petitioner submits that he is an eligible assessee in terms of Section 144C (15)(b)(i) and that in response to the draft order, objections were filed in terms of Section 144C (2)(b) before the Dispute Resolution Panel (fort short 'DRP'), as is evident from Annexure-H. Annexure-H is the acknowledgment for having filed objections to the draft assessment order before the DRP. It is admitted however that copy of the said objections were not filed before the Assessing Officer in terms of Section 144C(2)(b)(ii) of the Act, which was however is a bonafide lapse on the part of - 6 - NC: 2025:KHC:16963 WP No. 12339 of 2025 the assessee. Petitioner submits that in the meanwhile, the Assessing Officer has proceeded to pass an assessment order which has been assailed and copy of which is produced at Annexure-A1. The said order, it is stated was passed on 26.10.2022. 3. It is submitted that subsequently, the DRP has issued directions to the Assessing Officer as per Annexure- N on 15.05.2023. It is submitted that though directions were issued by the DRP at a subsequent point of time, in light of the obligation under Section 144C (13), the assessment order will have to be set aside and directions be taken note of and order be passed in terms of the procedure under Section 144C (13) of the Act. It is further submitted that in terms of Annexure-A4, the DRP has declared that the directions made by it to the Assessing Officer have become infructuous and non-est is required to be set aside. The observations at paragraph No.3.0 at Annexure- A4 is extracted as follows: "In view of the above, the Panel opines that the DRP, according to Section 144C, has jurisdiction only over the Draft Assessment Orders and not over Final Assessment Orders. In the present case as the Final Assessment order predates the DRP directions, the said DRP directions become infructuous and non-est." 4. It is submitted that the assessment order will have to be set aside in light of the directions issued by the DRP at Annexure-N and the matter will have to be proceeded afresh in terms of Section 144C (13) of the Act. - 7 - NC: 2025:KHC:16963 WP No. 12339 of 2025 5. Sri. M. Dilip, learned counsel appearing for the revenue on the other hand would point out that under Section 144C (2)(b)(ii), there is an obligation on the assessee to keep the assessing officer informed regarding filing of objections before the DRP and if such procedure is not adhered to strictly, no fault can be found as regards the assessing officer having proceeded to finalise the proceedings and passing the assessment order on the basis of draft order while construing as if no objections were filed. It is also submitted that the communication at Annexure-A4 ought not to be interfered with, as the directions were issued after the assessment order and the stand taken by the DRP is correct in law. 6. Heard both sides. 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 petitioner. It is also not in dispute that the petitioner 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 26.10.2022, question as to whether non-filing of objections before the assessing officer will have - 8 - NC: 2025:KHC:16963 WP No. 12339 of 2025 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, requires consideration. 9. The scheme at Section 144C is clear and would envisage the procedure as follows: (a) On receipt of the draft order, the assessee within thirty days may file his acceptance of the variations to the Assessing Officer; or (b) In the event he disagrees with such variations, he has to file his objections to such variations with the Dispute Resolution Panel and the Assessing Officer. 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 DRP 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 no 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 directions are issued, the assessing officer cannot proceed further. This is in light of - 9 - NC: 2025:KHC:16963 WP No. 12339 of 2025 NC: 2023:KHC:25192 mandate under Section 144C (13). Accordingly, non- intimation to the assessing officer under Section 144C (2)(b)(ii) though is a lapse on the part of the petitioner, the only way of meaningfully and harmoniously interpreting the obligation of filing objections under Section 144C (2)(b)(ii) is to construe the procedure that once such objections 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. This is the procedure to be followed. In the present case where objections no doubt have been filed before the DRP and directions passed though at a later point of time, in light of the manner of construing the procedure the assessing officer ought not to have proceeded and ought to have waited till directions were passed by the DRP, as the directions have though been subsequently passed on 15.05.2023. Accordingly, the assessment order 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 demand notice at Annexure-A3 are set aside. 12. Insofar as the communication at Annexure-A4 is concerned, once the DRP issues directions, it is not concerned with the action of the Assessing Officer. The passing of directions by the DRP confirms right on the petitioner to have such directions adhered to and even otherwise, in terms of Section 144C(13), the assessing officer has no discretion. If that were to be so, the question of the DRP withdrawing its directions does not arise and - 10 - NC: 2025:KHC:16963 WP No. 12339 of 2025 accordingly, the communication at Annexure-A4 is set aside in terms of the above discussion.
Arguments
counsel for the respondents and perused the material on record. 3. In addition to reiterating the various contentions urged in the petition and referring to the material on record, learned counsel for the petitioner invited my attention to the impugned Order at Annexures-D dated 19.03.2025 and the impugned notices, both dated 19.03.2025 at Annexures-E and F, respectively, in order to point out that without awaiting the resolution of the Dispute Resolution Panel (DRP), respondent No.1 proceeded to pass the said order and notices, which deserve to be quashed in the light of the judgment of this Court in the case of Open Silicon Research (P.) Ltd Vs. Assessment Unit – W.P.No.14541/2023 dated 19.07.2023. 4. Per contra, learned counsel for the respondents submits that there is no merit in the petition and that the same is liable to be dismissed. 5. A perusal of the material on record will indicate that pursuant to the petitioner filing his return of income for the assessment year 2022-23, the Transfer Pricing Officer (TPO) passed an order dated 30.12.2024 under Section 92-CA(3) of the - 4 - NC: 2025:KHC:16963 WP No. 12339 of 2025 Income Tax Act, 1961 (for short “the I.T. Act”), pursuant to which respondent No.1 passed draft assessment order dated 07.02.2025, incorporating adjustment made by TPO. In pursuance of the same, the petitioner took recourse to Section 144(c)(2) and filed objections on 07.03.2025 to the aforesaid draft assessment order before the DRP. It is contended that last date for filing objections was on 07.03.2025 to the aforesaid draft assessment order before the DRP and that the petitioner has filed objections before the last date of hearing and cut off date, which expired on 09.03.2025. It is the grievance of the petitioner that despite filing objections to the Draft Assessment Order and inability and omission on the part of the petitioner to communicate the same to respondent No.1 and due to bonafide reasons, respondent No.1, without waiting for the directions of DRP, proceeded to pass the final assessment order at Annexure-D dated 19.03.2025 followed by the demand notice and penalty notice, aggrieved by which the petitioner is before this Court by way of the present petition by placing reliance upon the
Decision
13. In light of the above, petition is disposed off. The matter is restored to the stage of 144C(13) and the assessing officer shall proceed further in terms of the procedure under Section 144C(13) and the time contemplated 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 to file objections before the assessing officer under Section 144C(2)(b)(ii) as being optional and not mandatory.” 8. A perusal of the material on record indicates that it is an undisputed fact that pursuant to the draft assessment order, the petitioner has filed objections before the DRT before cut off date i.e., 09.03.2025. Further in the light of the specific assertion on the part of the petitioner and its inability and omission to intimate and communicate the same to respondent No.1 was due to bonafide reasons, sufficient case and unavoidable circumstances, I deem it just and appropriate to set aside the impugned order by issuing necessary directions. - 11 - NC: 2025:KHC:16963 WP No. 12339 of 2025 9. In the result, I pass the following: ORDER (i) The petition is hereby allowed. (ii) The impugned order dated 19.03.2025 at Annexure-D and the impugned notices, both dated 19.03.2025 at Annexures-E and F, are hereby quashed. (iii) Respondent No.1 is directed to proceed further after conclusion of the proceedings before the DRP and in accordance with law. Sd/- (S.R.KRISHNA KUMAR) JUDGE BMC List No.: 2 Sl No.: 56