SIDEL INDIA PRIVATE LTD vs. DEPUTY COMMISSIONER OF INCOME TAX AND ORS

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO. 6802 OF 2024 Sidel India Private Ltd .. Petitioner

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. principal contention of the Petitioner is that even the Draft Assessment Order was passed beyond the period of limitation prescribed under Section 153(1) read with Section 153(4) of the Act and therefore, is without jurisdiction and bad in law. 3. For AY 2021-22, the Petitioner filed its Return of Income on 14th February 2022 declaring a total income of Rs.5,62,13,660. The said Return was picked up for scrutiny assessment by issuance of a notice dated 28th June 2022 under Section 143(2) of the Act. During the course of the assessment proceedings, on 21st July 2022, a reference under Section 92CA(1) of the Act was made to the Transfer Pricing Officer (‘TPO’) for determining the Arm’s Length Price of the Petitioner’s international transactions. 4. The TPO thereafter issued various notices calling upon the Petitioner to furnish several details, information and documents concerning its international transactions. The Petitioner furnished submissions in response to these notices. 5. On 27th October 2023, the TPO passed an order under Section 92CA(3) of the Act proposing adjustments of (i) Rs. 83,63,465/- in respect of the manufacturing segment; (ii) Rs. 1,53,27,840/- in respect of management Page 2 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. service fees; and (iii) Rs. 3,49,571/- in respect of corporate guarantee fees. Hence, the aggregate adjustment proposed by the TPO was Rs. 2,40,40,876/-. 6. Separately, the Assessment Unit (‘Assessing Officer’ or ‘AO’) had, during the course of the assessment proceedings, issued several notices seeking information and documents in connection with the Petitioner’s Return of Income. The Petitioner duly furnished various responses to such notices. 7. Thereafter, on 23rd March 2024, the AO issued a Show Cause Notice proposing to incorporate the adjustment of Rs. 2,40,40,876/- made by the TPO into the Petitioner’s total income. By this notice, the Petitioner was called upon to furnish its response by the following day, i.e., 24th March 2024. The notice also proposed initiation of penalty proceedings under Section 270A of the Act. 8. The Petitioner responded to the aforesaid Show Cause Notice by its submission dated 24th March 2024. Amongst other contentions, the Petitioner specifically pointed out that the time prescribed under Section 153 had expired on 31st December 2023. It therefore submitted that the assessment proceedings could not be continued and that the proposed Draft Page 3 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. Assessment Order itself would be beyond limitation. Without prejudice to this objection, the Petitioner also relied upon its earlier submissions concerning the adjustments proposed by the TPO. 9. On 25th March 2024, the AO nevertheless passed the impugned Draft Assessment Order under Section 144C(1) of the Act. In this order, the AO proposed to add the transfer pricing adjustment of Rs. 2,40,40,876/- to the Petitioner’s returned income. Whilst referring to the Petitioner’s response to the Show Cause Notice, the Draft Assessment Order records: “The assessee furnished compliance against the show cause notice and raised some technical objections and also placed its reliance on its earlier dated submissions to substantiate its objection against the variations made to its total income”. 10. A perusal of the Draft Assessment Order reveals that the specific objection concerning expiry of the statutory period of limitation was neither identified nor answered and it further proceeds to reject the Petitioner’s submissions on the merits of Transfer Pricing addition. However, the discussion does not address the distinct objection that the AO no longer had jurisdiction to pass even a Draft Assessment Order having become time barred. 11. Subsequently, on 25thApril 2024, a Final Assessment Order under Section 143(3) read with Sections 144C(3) and 144B of the Act came to be passed. Page 4 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. The Final Order records that the Petitioner had not furnished objections against the Draft Assessment Order within the period contemplated under Section 144C(2). The AO accordingly incorporated the adjustment of Rs. 2,40,40,876/- and assessed the Petitioner’s total income at Rs. 8,02,54,540/-. A consequential Notice of Demand under Section 156 and a penalty Show Cause Notice under Section 274 read with Section 270A were also issued on 25thApril 2024. 12. In these circumstances, Mr. Kapadia appearing for the Petitioner, submits that the Draft Assessment Order dated 25th March 2024 is ex facie barred by limitation and liable to be quashed. He submitted that the present Writ Petition can be decided on this narrow point. It is submitted that, for AY 2021-22, the third proviso to Section 153(1) prescribed a period of nine months from the end of the assessment year. Since a reference under Section 92CA was made to the TPO during the assessment proceedings, Section 153(4) extended that period by twelve months. The applicable period under Section 153 of the Act therefore expired on 31st December 2023. According to the Petitioner, even proceeding on the basis most favourable to the Revenue, and without going into the larger question as to whether the Final Assessment Order must be passed within the period prescribed under Section 153, which is also challenged in the present Writ Page 5 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. Petition, nevertheless, in the present case, at least the Draft Assessment Order had to be passed within the aforesaid period stipulated in Section 153 of the Act. Not having done so, the Draft Assessment Order dated 25th March 2024 is without jurisdiction and illegal. 13. It is further submitted that the Final Assessment Order cannot survive independently of the Draft Assessment Order upon which it is founded. Once the Draft Assessment Order is held to have been passed beyond limitation, the consequential Final Assessment Order, Notice of Demand and Penalty Show Cause Notice must likewise be quashed and set aside. It is submitted that once the Draft Assessment Order is barred by limitation, subsequent compliance with the time limits prescribed under Section 144C cannot cure that jurisdictional defect or save the consequential assessment proceedings. 14. On the other hand, the Affidavit-in-Reply filed on behalf of the Respondents - Revenue by Mr. Khanchandani contends that the Writ Petition must be dismissed as the Petitioner has an adequate and efficacious alternative remedy by way of an appeal before the Commissioner of Income Tax (Appeals) under Section 246A of the Act. It is submitted that the Petitioner ought to pursue the statutory remedy rather than invoke the Page 6 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. extraordinary jurisdiction of this Court under Article 226 of the Constitution of India. 15. We have heard Mr. Kapadia and Mr. Khanchandani. Significantly, the relevant facts and dates are not disputed in the Affidavit-in-Reply filed by the Revenue. In the facts of the present case, it is clear that the time to complete the assessment for AY 2021-22 in terms of Section 153 (1) read with the third proviso thereto and 153(4) of the Act, would expire on 31st December 2023. Without going into the larger issue of whether the Final Assessment Order must be passed within this period, even the Revenue does not dispute that at least the Draft Assessment Order had to be made and forwarded by 31st December 2023 in terms of Section 144C(1) of the Act. It was admittedly not done till 25th March 2024. Therefore, the Draft Assessment Order passed by the AO in the present case is barred by limitation. Consequently, the Final Assessment Order dated 25th April 2024, as well as the Notice of Demand and Penalty Show Cause Notice issued for AY 2021-22 of even date are also barred by limitation and without jurisdiction. 16. We find support in the judgment of PCIT v. Lionbridge Technologies (P.) Ltd. [(2018) 100 taxmann.com 413 (Bom)], wherein this Court recognised Page 7 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. that the requisite Draft Assessment Order must be passed within the applicable statutory period. Although that case concerned an attempt to convert a Final Assessment Order into a Draft Order by a subsequent corrigendum, the relevant principle is that the mandatory Draft Assessment Order cannot be supplied after limitation under Section 153 has expired. The relevant findings read as under: “11. It must be noted that in respect of the procedure and determination of the ALP of International Transaction between related person, the law provides a special dispensation. In terms of Section 144C(I) of the Act, the Assessing Officer is to first pass a draft Assessment Order which is subject to challenge, by way of representation to the DRP. It is only after the DRP disposes of the representation, that the Assessing Officer passes a final order in terms of the directions of the DRP and such final order is appellable to the Tribunal. In this case, it is undisputed that on 12thMarch, 2014, the Assessing Officer passed a final Assessment Order in terms of the directions made by the DRP in the earlier round. The time to pass any such order, would expire in the present facts on 31stMarch, 2014, however, in case a Draft Assessment Order is issued, then the time to pass a final Assessment Order gets extended to one month after the passing of the directions by the DRP in terms of Section 144C(13) of the Act. Nevertheless, the Draft Assessment Order should have in the present facts been passed before 31

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. be understood as permitting the Assessing Officer to take the initial step of passing a Draft Assessment Order at any time, irrespective of the limitation prescribed under Section 153. Thus, the mandate of Section 144C(1) is that at least the Draft Assessment Order for AY 2021-22 must be passed and served upon the assessee on or before 31st December 2023. Here, the Assessing Officer passed and served such an order only on 25th March 2024. It is therefore clearly beyond the period of limitation and, hence, without jurisdiction. 18. Moreover, we note that the insertions in Sections 144C and 153 by the Finance Act, 2026 also support the Petitioner’s case. Section 153(10) and Sections 144C(4A) and 144C(13A) inserted by the Finance Act, 2026 seek to clarify, on the terms of those provisions, that at least the Draft Assessment Order must be made and forwarded prior to the applicable due date under Section 153. The newly inserted provisions read as: Section 153 “(10) Notwithstanding anything contained in any judgment, order or decree of any court, for the removal of doubts, it is hereby clarified that in terms of provisions of sub-sections (1) to (4), the draft of the proposed order of assessment referred to in sub-section (1) of section 144C shall be made, and shall always be deemed to have been made, at any time up to the time limit of assessment, reassessment or recomputation referred to in the said sub-sections.” Section 144C “(4A) Notwithstanding anything contained in any judgment, order or decree of any court, or section 153, for the removal of doubts, it is Page 9 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. hereby clarified for the purposes of sub-section (4) that where a draft of the proposed order of assessment under sub-section (1) is forwarded within the time period allowed under section 153, further time period available to the Assessing Officer to complete the assessment under sub-section (3) shall be governed and shall always be deemed to have been governed by the provisions of sub-section (4). … (13A) Notwithstanding anything contained in any judgment, order or decree of any court, or section 153, for the removal of doubts, it is hereby clarified for the purposes of sub-section (13) that where a draft of the proposed order of assessment under sub-section (1) is forwarded within the time period allowed under section 153, time period available for the Assessing Officer under sub-section (13) to pass the assessment order upon receipt of the direction issued under sub- section (5), shall be governed and shall always be deemed to have been governed by the provisions of sub-sections (12) and (13). 19. Thus, the Petitioner is right in contending that the Draft Assessment Order dated 25th March 2024 is without jurisdiction and illegal. This conclusion however does not depend upon the above insertions, and we express no opinion upon the larger issues relating to it. 20. Insofar as the Revenue’s preliminary objection is concerned, the existence of an alternative statutory remedy does not oust the jurisdiction of this Court under Article 226. The requirement that a party should ordinarily pursue that remedy is a rule of self-restraint governing the exercise of discretion. It is not an absolute bar, particularly where the order or proceedings complained of are wholly without jurisdiction. Law on this principle is well settled. Page 10 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. 21. In Whirlpool Corporation v. Registrar of Trademarks, Mumbai & Ors. [(1998) 8 SCC 1], the Hon’ble Supreme Court explained the plenary nature of the power under Article 226 and the self-imposed restriction concerning alternative remedies. It specifically recognised that an alternative remedy does not operate as a bar where the order or proceedings are wholly without jurisdiction. The Hon'ble Supreme Court further held that the existence of statutory remedies does not prevent examination of a contention that an authority has purported to usurp jurisdiction without any legal foundation. 22. In Kedaara Capital Fund II LLP v. Assessment Unit, National Faceless Assessment Centre (NFAC), Delhi [(2025) 178 taxmann.com 430 (Bombay)], this Court held that an alternative remedy does not prevent interference where an Assessment Order is completely illegal and contrary to the clear mandate of law. In paragraphs 8 & 9, this Court held: “8. On the first objection of the Revenue that the Writ Petition ought not to be entertained because there is an alternate remedy available to the Petitioner, we find that in the peculiar facts and circumstances of this case, this Court can exercise its discretion under Article 226 of the Constitution of India and interfere in the above matter when an assessment order is completely illegal, contrary to the clear mandate of law would be, in our opinion, at least prima facie, without jurisdiction. 9. Further, it is well settled that the jurisdiction of the High Court in entertaining the Writ Petition, despite alternate statutory remedies, is not affected in a case where the authority against Page 11 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. whom the Writ is filed has usurped its jurisdiction without any legal foundation. Not entertaining a Writ Petition where statutory remedies are available, is really one of self-restraint, and it can never be argued that the Writ Petition is not maintainable. We, therefore, do not find any merit in the first argument canvassed on behalf of the Revenue.” 23. Further, the decisions relied upon by the Revenue in its Affidavit-in-Reply, concerning the ordinary rule of recourse to statutory remedies, do not preclude examination of the jurisdictional objection raised in present Writ Petition. On the undisputed facts before us, the Draft Assessment Order was passed beyond the prescribed period of limitation and is therefore without jurisdiction. Accordingly, we see no reason to relegate the Petitioner to the statutory remedy of appeal merely to obtain an adjudication of this very objection that the Draft Assessment Order is without jurisdiction. 24. We, therefore, hold that the impugned Draft Assessment Order dated 25th March 2024 is barred by limitation and that the consequential Final Assessment Order and notices cannot survive. 25. Accordingly, the Draft Assessment Order dated 25th March 2024 passed under Section 144C(1) of the Act for AY 2021-22, the consequential Final Assessment Order dated 25th April 2024 passed under Section 143(3) read with Sections 144C(3) and 144B, the Notice of Demand dated 25th April Page 12 of 13 ------------------------------------- Order dated 19th October 2026

WP-6802-2024.doc Sidel India Pvt. Ltd. vs. Dy. Commissioner of IT & Ors. 2024 issued under Section 156, and the Penalty Show Cause Notice dated 25th April 2024 issued under Section 274 read with Section 270A are hereby quashed and set aside. 26. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs. 27. This order shall be digitally signed by the Private Secretary/Personal Assistant of this Court. All concerned parties shall act upon such digitally signed copy of this order downloaded from the official website of the Bombay High Court. ( FARHAN P. DUBASH, J. ) ( B. P. COLABAWALLA, J.) Shubham Gadhavepatil Page 13 of 13 ------------------------------------- Order dated 19th October 2026