GUNJAHALLI RENUKA,HRISHIKESH BELLARY vs. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 1(3), C R BUILDING

ITA 693/BANG/2026Status: DisposedITAT Bangalore22 September 2026AY 2013-145 pages
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What did the Tribunal hold?

The Tribunal held that the assessee, being a non-resident individual, was an "eligible assessee" within the meaning of Section 144C(15)(b) of the Income Tax Act, 1961, as amended by the Finance Act, 2020, which became effective from April 1, 2020. The impugned assessment order was passed on March 16, 2022, after this amendment. The Tribunal found that the AO made a variation prejudicial to the assessee's interest and was therefore mandatorily required to first forward a draft assessment order to the assessee as per Section 144C(1). The failure to pass a draft assessment order deprived the assessee of her statutory right to file objections before the DRP. The Tribunal reasoned that this failure is not a mere procedural irregularity but goes to the root of the validity of the final assessment order, rendering it without jurisdiction. Citing decisions in Zuari Cement Ltd. v. ACIT and International Air Transport Association v. DCIT (Bom.), the Tribunal quashed the impugned assessment order. The remaining grounds of appeal were left undecided as the assessment order itself was invalidated.

What were the facts?

The assessee, Gunjahalli Renuka, an individual and a chartered accountant, is a non-resident for the Assessment Year 2013-14. She filed a return of income declaring Rs. 29,48,650/-. The assessment was reopened under Section 147 of the Income Tax Act, 1961. The Assessing Officer (AO) completed the reassessment under Section 147 read with Section 143(3) on March 16, 2022, making an addition of Rs. 35,72,805/- on account of share sale. The assessment order was passed without issuing a draft assessment order as mandated by Section 144C(1). The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], challenging the validity of the assessment and the addition. The CIT(A) dismissed the appeal, upholding the AO's order. The assessee then filed an appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the assessee, being a non-resident individual, was an "eligible assessee" within the meaning of Section 144C(15) of the Income Tax Act, 1961, as amended by the Finance Act, 2020, and consequently, whether the AO was mandatorily required to pass a draft assessment order before issuing the final assessment order dated March 16, 2022? Assessee's Contention: The assessee argued that by virtue of the amendment to Section 144C(15)(b) effective April 1, 2020, a non-resident individual is an "eligible assessee." Since the AO proposed a variation prejudicial to her interest, a draft assessment order under Section 144C(1) was mandatory. Failure to do so renders the assessment order invalid, as it deprives the assessee of the right to approach the Dispute Resolution Panel (DRP). Reliance was placed on decisions in Zuari Cement Ltd. v. ACIT, International Air Transport Association v. DCIT, and ESPN Star Sports Mauritius S.N.C. ET Compagnie v. Union of India. Revenue's Contention: The revenue contended that merely being a non-resident individual does not make the assessee an "eligible assessee." It was argued that Section 144C applies only if a variation arises from an order of the Transfer Pricing Officer (TPO) under Section 92CA(3) or if the assessee is a foreign company. Therefore, the AO was not required to issue a draft assessment order.

Which sections of the Income-tax Act were involved?

Section 147,Section 143(3),Section 144C(1),Section 144C(15)(b),Section 92CA(3),Section 250

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, BANGALORE BENCHES, BANGALORE

Before: SHRI WASEEM AHMED & SHRI SANDEEP SINGH KARHAIL

For Respondent: Shri. Balusamy. H, JCIT

PER SHRI WASEEM AHMED, ACCOUNTANT MEMBER:

The present appeal filed by the assessee pertaining to A.Y. 2013-14 is directed against the order of the Ld. Commissioner of Income Tax (Appeals) [hereafter, the Ld. CIT(A)] u/s 250 of the Income Tax Act, 1961 (hereafter, the Act) vide order dated 03.12.2025. 2. In the memo of appeal, the assessee has ra

The order continues below.

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