MMIS TECHNOLOGY SERVICES INDIA PRIVATE LIMITED,BENGALURU vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4(1)(1), BENGALURU

IN THE INCOME TAX APPELLATE TRIBUNAL ‘C’ BENCH, BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI SOUNDARARAJAN K, JUDICIAL MEMBER

IT(TP)A No.763/Bang/2026 Assessment Year: 2022-23

MMIS Technology Services India Pvt. The Dy. Commissioner of Vs. Ltd., Income Tax, Surya Wave, Sy. No.61(P), Circle – 4(1)(1), Doddathogur Village, Begur Hobli, Bengaluru. Electronic City, Bengaluru – 560 100. PAN – AANCM 4253 B APPELLANT RESPONDENT Assessee by : Shri Aliasgar Rampurwala, CA and Shri Manju Prasad, Advocate Revenue by : Smt. Nandini Das, CIT (DR) Date of hearing : 09.06.2026 Date of Pronouncement : 02.07.2026 O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:

The present appeal has been instituted by the assessee against the order of the Ld. AO/TPO u/s 143(3) r.w.s. 144C(13) of the Act dt. 18.12.2025 for the AY 2022-23.

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on the issue of Transfer pricing adjustment, which we for the sake of brevity and convenience are not inclined to reproduce the same here.

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8.1 The Ld. DR submitted that while passing the final assessment order, the AO inadvertently proceeded on the assumption that the Ld. DRP had rejected all the objections raised by the assessee in relation to the transfer pricing adjustment, whereas, in fact, the Ld. DRP had rejected only certain specific objections and had granted partial relief to the

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assessee. According to the Ld. DR, this resulted in an erroneous retention of the original transfer pricing adjustment in the final assessment order. It was further submitted that the mistake committed by the AO is a mistake apparent from the record and falls within the ambit of section 154 of the Act. The Ld. DR argued that the assessment order itself demonstrates that the AO was aware of and had referred to the DRP directions and, therefore, it cannot be said that the AO had completely ignored or disregarded the directions of the Ld. DRP. The error, according to the Revenue, was only in the implementation of the directions and not in taking cognizance thereof.

8.2 The Ld. DR, therefore, contended that the defect in the final assessment order is merely a rectifiable mistake and does not render the assessment order void ab initio. The ld. DR in support of his contention relied on the Judgment of Hon’ble Supreme Court in the case of S.A.L. Narayan Row Vs. Ishwarlal Bhagwandass reported in 57 ITR 149, CIT Vs. Hero Cycles Private Ltd. reported in 228 ITR 463 and Hon’ble Karnataka High Court in the case of PCIT Vs. Stanley Black Decker India Ltd. reported in 301 taxman 145. Accordingly, it was prayed that the matter may be restored to the file of the AO for carrying out the necessary rectification in accordance with the directions of the Ld. DRP rather than quashing the assessment order in its entirety.

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Ld. DRP. The Ld. DRP after considering the objections raised by the assessee, granted partial relief and directed modification of the transfer pricing adjustment, pursuant to which the adjustment stood reduced to Rs. 7,14,73,800.00 only.

9.1 However, on perusal of the final assessment order dated 18.12.2025, we find that the AO failed to give effect to and incorporate the directions issued by the Ld. DRP. The final assessment order proceeds on the basis of the original adjustment proposed by the Ld. TPO and does not reflect the relief granted by the Ld. DRP. Thus, the final assessment order has not been passed in conformity with the directions issued by the Ld. DRP.

9.2 At this stage, it is relevant to refer to the provisions of section 144C(13) of the Act. The section provides that upon receipt of the directions issued by the ld. DRP, the AO shall complete the assessment in conformity with such directions. The use of the word "shall" clearly shows that the AO is under a mandatory obligation to follow and give effect to the directions of the ld. DRP while passing the final assessment order. The AO has no discretion to ignore or deviate from such directions.

9.3 In the present case, despite the specific directions issued by the Ld. DRP granting relief to the assessee, the AO passed the final assessment order without incorporating the said directions. This action not only amounts to violation of the mandatory provisions of section 144C(13) of the Act but also demonstrates a clear lack of application of mind on the part of the AO while passing the impugned order. Therefore, the final

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assessment order being contrary to the statutory mandate contained in section 144C(13) of the Act cannot be sustained in law.

9.4 We find force in the judicial precedent relied upon by the assessee in the case of Principal Commissioner of Income-tax vs. Flextronics Technologies (India) (P.) Ltd. [2023] reported in 148 taxmann.com 123 (Karnataka)/[2023] 459 ITR 493 (Karnataka) dated 09-01-2023 wherein the Hon’ble Karnataka High Court held that where Assessing Officer passed assessment order and made transfer pricing adjustment without reworking ALP as per direction of ld. DRP, the said assessment order was to be set aside as Assessing Officer was bound by directions issued by ld. DRP under section 144C and required to pass assessment order in conformity with said directions. The relevant para is reproduced below: “8. Shri. Dilip's contention is, the Assessing Officer has rightly passed the order within time. But it is relevant to note that the said order is not in conformity with section 144C of the IT Act. Hence, no exception can be taken to the impugned order passed by the ITAT. Hence, we proceed to pass the following: ORDER (1) Appeal is dismissed. (2) Questions of law answered in favour of assessee and against the Revenue. No costs.”

9.5 Respectfully following the aforesaid binding precedents and considering the facts of the present case, we hold that the impugned final assessment order having been passed without incorporating and giving effect to the directions of the Ld. DRP is contrary to the mandatory provisions of section 144C of the Act. Consequently, the impugned final assessment order is rendered unsustainable in law and deserves to be quashed. Accordingly, we hold that the final assessment order passed by the AO is void ab initio and liable to be quashed.

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9.6 The Ld. DR also contended that the impugned defect is merely a mistake apparent from the record and is rectifiable u/s 154 of the Act. According to the Revenue, the AO had taken cognizance of the directions of the Ld. DRP and the error occurred only while giving effect thereto.

9.7 We have duly considered the aforesaid contention of the Ld. DR. However, we are unable to accept the same. The issue before us is not whether the AO had knowledge of the directions issued by the Ld. DRP or whether the error committed by him was inadvertent. The issue is whether the final assessment order has been passed in conformity with the directions of the Ld. DRP as mandated u/s 144C(13) of the Act. Admittedly, the final assessment order retains the original transfer pricing adjustment proposed in the draft assessment order and does not give effect to the relief granted by the Ld. DRP. Thus, the statutory requirement of passing the final assessment order in conformity with the directions of the Ld. DRP remains unfulfilled. In our considered view, once the final assessment order is found to be contrary to the directions of the Ld. DRP, the same suffers from a jurisdictional defect and cannot be treated as a mere clerical or arithmetical mistake capable of rectification u/s 154 of the Act. The provisions of section 144C(13) of the Act cast a mandatory obligation upon the AO to pass the final assessment order strictly in accordance with the directions of the Ld. DRP. The validity of the assessment order has to be examined with reference to the order actually passed and not on the basis of what the AO intended to pass. Therefore, the plea of the Revenue that the defect is a rectifiable mistake does not come to its rescue. Once the final assessment order has been passed in violation of the mandatory provisions of section 144C(13) of the Act, the

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same becomes unsustainable in law and cannot be cured by resorting to the provisions of section 154 of the Act.

9.8 The decisions relied upon by the Revenue explain the scope of rectificatory jurisdiction u/s 154 of the Act and the circumstances in which a mistake apparent from the record may be corrected. However, none of those decisions lay down that an assessment order passed in violation of the mandatory requirement contained in section 144C(13) of the Act should nevertheless be treated as valid merely because such defect may be capable of rectification. In our considered view, the existence of a rectificatory power cannot validate an order which is otherwise contrary to the express mandate of the statute. Hence, the ground of appeal of the assessee is hereby allowed.

9.9 Since the assessment itself stands quashed on this legal issue, the other grounds raised on merits do not call for adjudication and are left open.

Order pronounced in court on 2nd day of July, 2026

Sd/- Sd/- (SOUNDARARAJAN K) (WASEEM AHMED) Judicial Member Accountant Member Bangalore Dated, July, 2026 / vms /

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Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore