I) Lg Soft India (P) Ltd v. Additional/Joint/Deputy/Assistant Commissioner Of Income-Tax/Income-Tax Officer, National E-Assessment Centre, New Delhi Reported In (2022) 140 Taxmann.com 174

Digitallysigned byNANDINI B GLocation:High Court ofKarnataka IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16 DAY OF APRIL, 2025 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR -WRIT PETITION NO. 11367 OF 2025 (TIT) BETWEEN: INFRRD PRIVATE LIMITED 7 FLOOR, COMMERCE MANTRI 12, 1 AND 2, BANNERGHATTA ROAD BTM LAYOUT, BANGALORE - 560 076 REPRESENTED HEREIN BY ITS (INCORPORATION U/S COMPANIES ACT 213) DIRECTOR LALIT AGRAWAL PAN NO. …PETITIONER (BY SMT. TANMAYEE RAJKUMAR, ADVOCATE) AND: 1. ASSESSMENT UNIT INCOME-TAX DEPARTMENT NATIONAL FACELESS ASSESSMENT CENTRE 2 FLOOR, E-RAMP JAWAHARLAL NEHRU STADIUM NEW DELHI - 110 003. 2. INCOME TAX ASSESSING OFFICER CIRCLE 3(1)(1) BMTC BUILDING 6 BLOCK, 80 FEET ROAD KORAMANGALA BANGALORE - 560 095 3. PRINCIPAL COMMISSIONER OF INCOME-TAX 3 BMTC BUILDING 6 BLOCK, 80 FEET ROAD KORAMANGALA, BANGALORE - 560 095 …RESPONDENTS (BY SRI. M. THIRUMALESH AND SRI. DILIP .M., ADVOCATE) THIS WRIT PETITION IS FILED UNDER ARTICLE 226 OF THE CONSTITUTION OF INDIA PRAYING TO(A) QUASHING THE ORDER DATED 20.03.2025 (ANNEXURE - D) BEARING DIN ITBA/AST/S/143(3)/2024- NC: 2025:KHC:15715WP No. 11367 of 2025 25/1074765838(1) ISSUED BY THE 1 RESPONDENT FOR THE ASSESSMENT YEAR 2022-23 AND ETC., THIS WRIT 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, petitioner seeks the following reliefs: "The Petitioner, therefore, prays that this Hon'ble Court be pleased to issue a writ, order, or direction: (a) quashing the order dated 20.03.2025 (Annexure -'D') bearing DIN ITBA/AST/S/143(3)/2024-25/1074765838(1) issued by the 1st Respondent for the assessment year 2022-23; (b) quashing the notice dated 20.03.2025 (Annexure -'E') bearing DIN ITBA/AST/S/156/2024-25/1074765947(1) issued by the 1st Respondent for the assessment year 2022-23; (c) quashing the notice dated 20.03.2025 (Annexure -'F') bearing DIN ITBA/PNL/S/270A/2024-25/1074766070(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 interests of justice and equity." 2. Heard learned counsel for the petitioner and learned counsel for the respondents and perused the material on record - 3 - NC: 2025:KHC:15715 WP No. 11367 of 2025 3. In addition to reiterating the various contentions urged in the memorandum of petition and referring to the material on record, learned counsel for the petitioner submits that in relation to assessment year 2022-2023, returns of the income filed by the petitioner was selected for scrutiny assessment and in the course of proceedings, Transfer Pricing Officer (TPO) passed an order under Section 92CA(3) of the Income Tax Act (for short 'IT Act'), determining a transfer pricing adjustment. It is contended that under Section 144C of the IT Act, in a case where variation is proposed to the income as a consequence of the order of TPO, the person is treated as an 'eligible assessee' in the first instance and a draft assessment order under Section 144C is required to be passed, against which, the 'eligible assessee' has the option to file objections to the same before the Dispute Resolution Professional (DRP) within 30 days from the date of receipt of the order and if the same is done, the Assessing Officer is required to finalise the assessment in line with the directions of DRP. It is further contended that the petitioner is 'eligible assessee' and the draft assessment order having been passed by respondent No.1, the petitioner filed his objections before the DRP, but filing of objections could not be intimated to respondent No.1 on account of - 4 - NC: 2025:KHC:15715 - 4 - NC: 2025:KHC:15715 technical glitches in the portal/website maintained by the respondents. It is contended that though the petitioner had filed its objections to the draft assessment order, respondent No.1 ought to have awaited the outcome of the DRP proceedings, but has proceeded to pass final assessment order and issued a demand notice as well as penalty notice, all of which, is assailed in the present petition. 4. In support of her submissions, learned counsel places reliance upon the following judgments: (i) LG Soft India (P) Ltd., Vs Additional/Joint/Deputy/Assistant Commissioner of Income-tax/Income-tax Officer, National E-Assessment Centre, New Delhi reported in (2022) 140 taxmann.com 174 (Karnataka); and. (ii) Open Silicon Research (P) Ltd., Vs Assessment Unit, National Faceless Assessment Centre, Income Tax Department, New Delhi reported in (2023) 154 taxmann.com.11 (Karnataka.). 5. Per contra, learned counsel for the respondents submits that there is no merit in the petition and the same is liable to be dismissed. 6. In LG Soft India (P) Ltd. (supra), this Court held as under: "In this petition, the petitioner seeks quashing of impugned final assessment order at Annexure-A dated 30.04.2021, demand notice at Annexure-B dated 30.04.2021 and notice at Annexure-C dated 30.04.2021 and for other reliefs. 2. Heard learned counsel for petitioner and learned counsel for respondents. 3. In addition to reiterating the various contentions urged in the petition and referring to the documents produced by the petitioner, learned counsel for the petitioner invites my attention to the mandatory provisions of Section 144C of the Income Tax Act, 1961 (for short 'the I.T. Act') in order to point out that the statutory scheme underlying the said provision clearly indicates that under sub-section (2), after the draft assessment order dated 29.03.2021 was issued to the petitioner, the petitioner had two options viz., either to file his acceptance as provided under sub-section (2)(a) or to file objections as per sub-section (2)(b) of the I.T. Act. 4. It is contention of the petitioner that the petitioner submitted his objections on 26.04.2021 to the Dispute Resolution Panel (DRP) within the prescribed period; in view of change in the mechanism of assessment being shifted to the faceless scheme coupled with the Covid-19 pandemic exigency, the petitioner could not intimate the Assessing Officer about filing of the objections before the DRP; however, petitioner intimated the same to the Assessing Officer on 30.04.2021. It is the grievance of the petitioner that the despite the petitioner submitting his objections to the draft assessment order before the DRP as well as intimating the same to the Assessing Officer, the Assessing Officer proceeded to pass the impugned assessment order without following the mandatory procedure prescribed in sub-sections (5) to (13) of Section 144C and without awaiting directions from the DRP as provided in the said provisions. It is also contended that by virtue of Government Notifications, circulars etc., as well as the orders passed by the Apex Court extending the period of limitation, the inability and omission, if any, on the part of the petitioner to file objections with the Assessing Officer ought to be condoned and a lenient view is to be taken and indulgence in this regard is to be shown in favour of the petitioner, particularly when the petitioners had filed their objections before the DRP on 26.04.2021 within the prescribed period. It is therefore contended that the impugned assessment order is violative of the aforesaid mandatory provisions of Section 144C, particularly, since the petitioner had filed his objections to the draft assessment order before the DRP within the prescribed period and intimated the same to the Assessing Officer and consequently, the impugned Assessment Order and consequential notice deserve to be quashed and the DRP be directed to conclude the proceedings after considering the objections of the petitioner pursuant to which the Assessing Officer is to be directed to pass appropriate orders as provided under Section 144C of the IT Act. 5. It is further contended that in view of the aforesaid facts and circumstances, petitioner addressed communications dated 04.05.2021, 07.05.2021 and 11.05.2021 to the respondents calling upon them to keep the impugned Assessment Order and all further proceedings pursuant thereto in abeyance till conclusion of the proceedings before the DRP; however, the respondents did no respond to the said requests of the petitioner, who is before this Court by way of the present petition. 6. Per contra, learned counsel for the respondents submits that there is no merit in the petition and the same is liable to be dismissed. 7. As rightly contended by the learned counsel for the petitioner, the undisputed material on record clearly indicates that in response to the draft Assessment Order dated 29.03.2021 issued to the petitioner, petitioner submitted objections before the DRP on 26.04.2021, within the prescribed period and intimated the same to the Assessing Officer on 30.04.2021; the explanation offered by the petitioner as regards his inability and omission to file objections with the Assessing Officer also in addition to the DRP merits acceptance, particularly in view of the Government Orders, circulars etc. as well as the orders of the Apex Courts extending the period of limitation. At any rate, the petitioner had chosen to exercise the option of filing objections to the draft Assessment Order warranting the DRP to proceed further before the Assessing Officer takes further steps as provided under sub-sections 5 to 13 to Section 144C. Under these circumstances, I am of the considered opinion that the impugned Assessment Order passed by respondent No.1- Assessing Officer without awaiting directions from the DRP, before whom the matter was pending pursuant to the petitioner filing his objections within the prescribed period is clearly arbitrary, illegal and without jurisdiction or authority of law and the same deserves to be quashed and necessary directions are to be issued to the DRP as well as the Assessing Officer in this regard. 8. In the result, I pass the following: ORDER (i) The petition is hereby allowed. (ii) The impugned assessment order bearing No.ITBA/AST/S/143(3)/2021-22/1-3283 0156(1) at Annexure-A dated 30.04.2021, demand notice bearing No.ITBA/AST/S/156/2021-22/10327391 81(1) at Annexure-B dated 30.04.2021 and notice bearing No. ITBA/PNL/S/270A/2021-22/1032739213 (1) at Annexure-C dated 30.04.2021 are hereby quashed. (iii) The Dispute Resolution Panel (DRP) is directed to conclude the proceedings by considering the objections filed by the petitioner, in accordance with law and Section 144C of the Income Tax Act, 1961. (iv) Upon the DRP concluding the proceedings as provided under Section 144C referred to supra, respondent No.1 – Assessing Officer shall proceed further and pass appropriate orders in accordance with law." 7. In Open Silicon Research (P) Ltd., (supra), this Court held as under: "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 1[st] respondent to pass an order taking note of the procedure under Section 144C of the Income Tax Act, 1961 (for short ‘the Act’). (iv) Upon the DRP concluding the proceedings as provided under Section 144C referred to supra, respondent No.1 – Assessing Officer shall proceed further and pass appropriate orders in accordance with law." 7. In Open Silicon Research (P) Ltd., (supra), this Court held as under: "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 1[st] respondent to pass an order taking 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 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. 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. 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 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 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 accordingly, the communication at Annexure-A4 is set aside in terms of the above discussion. - 14 - 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 accordingly, the communication at Annexure-A4 is set aside in terms of the above discussion. - 14 - 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. In the instant case, a perusal of the material on record would indicate that so long as the petitioner had filed its objection before DRP, albeit not intimated due to glitches in the website/portal respondent No.1 ought to have awaited the outcome of DRP proceedings and could not have proceeded to pass the impugned assessment order, which deserves to be set aside and necessary directions ought to be issued to the DRP to conclude the proceedings by considering the objections in accordance with law. 9. In the result, pass the following: NC: 2025:KHC:15715 WP No. 11367 of 2025 ORDER (i) The petition is hereby allowed. (ii) The impugned orders at Annexures-D, 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 *bgn/- CT:VS List No.: 1 Sl No.: 16