ZYME SOLUTIONS PRIVATE LIMITED vs. JOINT COMMISSIONER OF INCOME TAX (IN-SITU) CIRCLE 7 (1)(1)

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WP/13673/2023HC KarnatakaKAHC01032251202313 July 2023Bench: S SUNIL DUTT YADAV5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court held that the Assessing Officer ought to have awaited the directions from the Dispute Resolution Panel (DRP) in terms of Section 144C(10) of the Income Tax Act, 1961, as the petitioner had duly intimated the filing of objections before the DRP. The Court found that the impugned Assessment Order dated April 29, 2022, was passed without waiting for these directions. Consequently, on this sole ground, the Assessment Order at Annexure-'A' was set aside. The Court also set aside the Demand Notice at Annexure-'B' dated April 29, 2022, as a consequential measure. The Assessing Officer was directed to take note of the DRP's directions (at Annexure-'K', dated November 23, 2022) and proceed to complete the assessment proceedings in accordance with Clause 13 of Section 144C. All contentions were kept open for further proceedings.

What were the facts?

The petitioner, Zyme Solutions Private Limited, is challenging an assessment order dated April 29, 2022, passed by the Joint Commissioner of Income Tax (Respondent 1) under Section 143(3) read with Section 254 and Section 92CA of the Income Tax Act, 1961, for Assessment Year 2012-13. The petitioner also challenges the consequential demand notice dated April 29, 2022, issued under Section 156. The petitioner contends that the Assessing Officer failed to follow the prescribed procedure under Section 144C of the Act. Specifically, the petitioner submitted objections to the Draft Assessment Order before the Dispute Resolution Panel (DRP) within the stipulated time. Despite intimating the Assessing Officer about these objections, the Assessing Officer proceeded to pass the final assessment order without awaiting the DRP's directions, which are binding. The DRP subsequently issued directions on November 23, 2022.

What were the issues?

1. Whether the Assessing Officer erred in passing the final assessment order under Section 143(3) read with Section 92CA of the Income Tax Act, 1961, without awaiting the directions from the Dispute Resolution Panel (DRP) as mandated by Section 144C(10) and (13) of the Act, when the assessee had filed objections before the DRP? Assessee's Contention: The petitioner argues that the Assessing Officer failed to adhere to the mandatory procedure prescribed under Section 144C of the Income Tax Act. It is submitted that after the petitioner filed objections to the Draft Assessment Order before the DRP, the Assessing Officer was obligated to wait for the DRP's directions, which are binding, before passing the final assessment order. The Assessing Officer proceeded to pass the final order prematurely, without considering the DRP's outcome. Revenue's Contention: The judgment does not record any specific contentions made by the revenue.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 254,Section 92CA,Section 144C,Section 156

AI-generated summary — verify with the full judgment below

Before: SMT. GEETHA RANI K., ADVOCATE)

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NC: 2023:KHC:24399 WP No. 13673 of 2023 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF JULY, 2023 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 13673 OF 2023 (T-IT) BETWEEN: 1. ZYME SOLUTIONS PRIVATE LIMITED NO.459, LAKSHA TOWERS, ASHOKA PILLAR ROAD, 2ND BLOCK, JAYANAGAR, BENGALURU-560 011 (REPRESENTED BY ITS DIRECTOR, MR. JAMI GANESH PRUSTY, S/O MR.JAMI SANKAR PRUSTY, AGED ABOUT 45 YEARS) COMPANY REGISTERED UNDER COMPANIES ACT, 1956. … PETITIONER (BY SRI. NARENDRA KUMAR J. JAIN, ADVOCATE AND SMT. GEETHA RANI K., ADVOCATE) AND: 1. JOINT COMMISSIONER OF INCOME TAX (IN-SITU) CIRCLE 7 (1)(1) ROOM NO.240, 2ND FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BENGALURU-560 095. 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 7 (1)(1) BMTC BUILDING, 80 FEET ROAD, BENGALURU-560 095. Digitally signed by VIDYA G R Location: High Court of Karnataka

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NC: 2023:KHC:24399 WP No. 13673 of 2023 3. THE DEPUTY COMMISSIONER OF INCOME TAX TRANSFER PRICING DC/ACIT TP2(2)(2), BMTC BUILDING, 80 FEET ROAD, BENGALURU-560 095. 4. THE DISPUTE RESOLUTION PANEL (DRP)-2, 4TH FLOOR, A WING, KENDRIYA SADAN, KORMANGALA, BANGALORE-560 034. … RESPONDENTS (BY SRI. M. DILIP, ADVOCATE)

THIS WRIT PETITION IS FIELD UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH AS FAR AS THE PETITIONER IS CONCERNED BY AN APPROPRIATE WRIT OR ORDER IN THE NATURE OF CERTIORARI OR OTHERWISE THE IMPUGNED ASSESSMENT ORDER DTD 29.04.2022 ISSUED BY THE LEARNED R-1 UNDER SECTION 143(3) R.W.S 254 R.W.S 92CA VIDE DIN ITBA/AST/M/143(3)/2022-23/1043026436(1) FOR AY 2012-13 ENCLOSED IN ANNEXURE-A AND ETC.

THIS WRIT PETITION COMING ON FOR ORDERS, THIS DAY, THE COURT MADE THE FOLLOWING: ORDER

The petitioner has sought for setting aside of the Assessment Order passed under Section 143(3) read with Section 254 read with Section 92CA of the Income Tax Act, 1961 ('I.T. Act' for brevity ) at Annexure-'A' and has also sought for setting aside of the impugned Demand Notice at Annexure-'B' dated 29.04.2022 passed under Section 156 of the I.T. Act.

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NC: 2023:KHC:24399 WP No. 13673 of 2023

2.

Learned counsel for the petitioner submits that insofar as the assessment proceedings where Section 144C was applicable, the procedure prescribed was not followed. It is pointed that Draft Assessment Order was forwarded to the petitioner as per Annexure-'D' and in response to which the petitioner has filed objections within thirty days in terms of Section 144C (2) before the Dispute Resolution Panel (D.R.P.).

3.

It is submitted that the petitioner has intimated the Assessing Officer in terms of Annexures-'F' and 'G' regarding the objections filed by it to the Draft Assessment Order before D.R.P. The petitioner has also made necessary intimation at Annexure-'G' electronically to the Authority regarding the filing of objections before the D.R.P.

4.

It is submitted that in terms of the procedure prescribed under Section 144C (10) and (13), the Assessing Officer had to wait the outcome of any direction to be issued by D.R.P. which is binding upon the Assessing

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NC: 2023:KHC:24399 WP No. 13673 of 2023 Officer, however, the Assessing Officer, without waiting for directions by D.R.P. has proceeded to pass the Final Assessment Order.

5.

It must be noted that in light of the petitioner having intimated the Assessing Officer in terms of Annexures-'F' and 'G' regarding the filing of objections before D.R.P, the Assessing Officer ought to have awaited the directions to be issued by D.R.P. in terms of Section 144C (10).

6.

As the impugned Assessment Order is passed without waiting for such directions, on that sole ground itself the order at Annexure-'A' requires to be set aside. Though the impugned Assessment Order is passed on 29.04.2022, subsequent to which D.R.P. has issued directions as per Annexure-K on 23.11.2022.

7.

In light of the admitted facts and procedure under Section 144C as noticed above, the Assessment Order at Annexure-'A' dated 29.04.2022 is set aside. The Assessing Officer to take note of the directions of D.R.P. at

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NC: 2023:KHC:24399 WP No. 13673 of 2023 Annexure-'K' and proceed to complete the assessment proceedings in terms of Clause 13 of Section 144C of I.T. Act. In light of setting aside of the Assessment Order at Annexure-'A' dated 29.04.2022, the Demand Notice at Annexure-'B' dated 29.40.2022 is also set aside. All contentions are kept open.

This petition is accordingly disposed off. Sd/- JUDGE VGR

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