ACCENTURE SOLUTIONS PRIVATE LIMITED,MUMBAI vs. DY. COMMISSIONER OF INCOME TAX, MUMBAI

Against the draft assessment order, the assessee raised objections before ld. Dispute Resolution Panel ('ld. DRP' for short).

After considering the submissions of the assessee, ld. DRP disposed of the objections vide directions dated 07.06.2022. In terms with the directions of ld. DRP, the A.O. finalized the assessment vide order dated 25.07.2022, passed u/s. 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act. When the matter stood, thus, ld. PCIT called for and examined the assessment records of the assessee. While doing so, he found that as per the objections of the internal audit, the deduction claimed of Rs.274,54,41,793/- on account of expenditure employee stock option plan (ESOP) is not allowable. He further found that as per the audit objection, deduction claimed u/s. 80G of the Act in respect of Corporate Social Responsibility (CSR) expenditure is not allowable. He further found that the Foreign Tax Credit (FTC) has been wrongly claimed. Based on such objections raised by the internal audit, ld. PCIT formed a view that the A.O. having not properly enquired into the objections raised by the internal audit, the assessment order is erroneous and prejudicial to the interest

Before us, ld. Counsel appearing for the assessee submitted that against the final assessment order passed in pursuance to directions of DRP, the revisionary authority cannot assume juri iction u/s. 263 of the Act. He submitted, the issue is no more res integra in view of various decisions of co-ordinate benches. In support, he relied upon the following decisions:  Barclays Bank PLC vs. CIT [2022] 139 taxmann.com 503 (Mum-Trib.)  Bharti Axa Life Insurance Co. Ltd. vs. Dy. CIT [2020] 116 taxmann.com 933 (Mum-Trib.)  M/s. Cambridge Technology Enterprises Limited vs. DCIT (in ITA No. 536/Hyd./2019) 6. Learned Departmental Representative ('ld. DR' for short) relied upon the observations of ld. PCIT.

We have considered rival submissions and perused the materials on record. We have also applied our mind to the decisions relied upon. Factual position relating to the issue in dispute are undisputed. As observed elsewhere in the order, the short issue arising for 4 Accenture Solutions Private Limited vs. Pr. CIT consideration is, whether ld. PCIT can validly assume juri iction u/s. 263 of the Act to revise an assessment order passed in pursuance to the directions of the DRP. Pertinently, section 144C of the Act providing the alternate dispute resolution mechanism by way of reference to ld. DRP was incorporated in the Act by Finance (No. 2) Act, 2009 with retrospective effect from 01.04.2009. Undisputedly, not only the present assessment year is covered u/s. 144C of the Act, but the assessee has subjected itself to such procedure. Now, it is well established that section 144C is a self-contained code and provides the mechanism of not only the procedure of assessment in case of an eligible assessee, but also the remedy available to the assessee against the assessment framed u/s. 144C of the Act. Section 144C of the Act gives an option to the assessee to either approach the Commissioner (Appeals) or the ld. DRP against an assessment order. Once the assessee approaches ld. DRP, in terms with section 144C(2)(b) of the Act, ld. DRP in terms with section 5 of section 144C of the Act issues directions to the A.O. for completing the final assessment. Sub-section 7 of section 144C of the Act, empowers the DRP to make further enquiry if it thinks fit and sub-section 8 of section 144C of the Act empowers the DRP to confirm, reduce or enhance the variation proposed in the draft order. Sub-section 8 of section 147 of the Act even empowers ld. DRP to enhance the valuation on issues which the assessee may or may not have raised. Once ld. DRP issues a direction for the guidance of the A.O. to pass the final assessment order, in terms with sub-section 13 of section 144C, the A.O. has to pass the final assessment order in conformity with the directions of ld. DRP without providing any further opportunity of being heard to the assessee. Thus, a reading of sub-section 13 of section 144C makes it clear that at the stage of final assessment, the A.O. has no mandate to deviate from the directions of ld. DRP, that is why at that stage, the A.O. is not required to give an opportunity of being heard to the assessee.

First, we note that in this case, the assessment order was passed after transfer pricing adjustment were made by the TPO. These have been detailed in the assessment order para '7' of the assessment order referred above. The TP adjustment made by TPO were in total Rs. 83,045,395/-. Assessee had made objection before the DRP and pursuant to DRP direction, the assessment was framed as per section 144C(13).

As against the above, Ld.CIT has noted that in this case TPO has not proposed any adjustment. This is contrary to the facts in this case, the above shows that Ld.CIT has exercised his juri iction u/s 263 without properly appreciating the assessment order passed. He also seems to be ignoring the fact that assessee has chosen to file objection before the DRP. When the assessment order has been passed pursuant to the direction of DRP, the appeal from the said assessment order does not lie with the ld.CIT(A), but lies directly to the ITAT as per provision of section 253(d). Now, the issue to be addressed in this case is whether, the Ld.CIT has erred in initiating proceedings u/s. 263 of the Act, when the original assessment order has been passed u/s. 143(3) r.w.s. 144C(13), on the basis of the directions of the Dispute Resolution Panel(DRP).

We may gainfully refer to the provision of section 263 in this regard. "263. (1) The Principal Commissioner or Commissioner may call for and examine the record of any proceeding under this Act, and if he considers that any order passed therein by the [Assessing] Officer is erroneous in so far as it is prejudicial to the interests of the revenue, he may, after giving the assessee an opportunity of being heard and after making or causing to be made such inquiry as he deems necessary, pass such order thereon as the circumstances of the case justify, including an order enhancing or modifying the assessment, or cancelling the assessment and directing a fresh assessment. Explanation 1.--For the removal of doubts, it is hereby declared that, for the purposes of this sub-section,-- (a) an order passed [ on or before or after the 1st day of June, 1988] by the Assessing Officer shall include (i) an order of assessment made by the Assistant Commissioner [or Deputy Commissioner] or the Income tax officer on the basis of the directions issued by the [Joint] Commissioner under section 144A. (ii) an order made by the [Joint] Commissioner in exercise of the powers or in the performance of the functions of an Assessing officer conferred on, or assigned to, him under the orders or directions issued by he Board or by the [Principal ] Chief Commissioner or] Chief Commissioner or[Principal Director General or] Director General or[ Principal Commissioner or] Commissioner authorized by the Board in this behalf under section 120. (b) "record" [ shall include and shall be deemed always to have included] all records relating to any proceeding under this Act available at the time of examination by the [Principal [Chief Commissioner or Chief Commissioner or Principal] Commissioner or] Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal [filed on or before or after the 1st day of June, 1988], the powers of the [Principal Commissioner or] Commissioner under this sub-section shall extend [and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal.]"

It will also be gainful to refer to the provision of section 144C dealing with the reference to DRP (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,-- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,-- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- - (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 [or section 153B], pass the assessment order under sub-section (3) within one month from the end of the month in which,-- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:-- (a) draft order; (b) objections filed by the assessee;

A reading of the said section brings to the fore following:-

Now, we examine the constitution of DRP. As evident from the above, the DRP constitutes a collegium comprising of three Principal Commissioners or Commissioners of Income-tax, the directions given by them is binding upon by the AO. Hon'ble Bombay High Court in the case of 9 Vodafone India Services Pvt.Ltd. vs Union of India & Others 2013 SCC online Bom 1534 has expounded upon the proceedings at DRP as under:- "The proceeding before the DRP is not an appeal proceeding but a correcting mechanism in the nature of a second look at the proposed assessment order by high functionaries of the revenue keeping in mind the interest of the assessee. It is a continuation of the Assessment proceedings till such time a final order of assessment which is appelable is passed by the Assessing Officer. This also finds support from Section 144C(6) which enables the DRP to collect evidence or cause any enquiry to be made before giving directions to the Assessing Officer under Section 144C(5). The DRP procedure can only be initiated by an assessee objecting to the draft assessment order. This would enable correction in the proposed order (draft assessment order) before a final assessment order is passed. Therefore, we are of the view that in the present facts this issue could be agitated before and rectified by the DRP." [underline ours]

The above exposition duly elaborates upon the provisions of the Act contained under section 144C.

From the above, it is also apparent that members of the DRP are three in numbers and are individually equivalent in rank to the CIT, who is initiating proceedings u/s. 263 against the order passed by the AO pursuant to their direction. Now as far as equivalence of single CIT to a 'colliguem of 3 CIT is concerned, it is settled law that bench comprising single persons is not higher/superior than a collegiums of three persons. Hence, it is abundantly clear that the DRP stands at a higher pedestal than the CIT passing an order alone.

Furthermore, we may refer to the decision of Hon'ble Bombay High court in the case of Virendra Kumar Jhamb vs. N.K.Vohra (supra). In this case, the Juri ictional High Court held that the assessee had approached the DDIT (investigation) under the Direct tax Amnesty Scheme. The CIT had accepted that the taxable income be computed at 8 percent of the total receipts. A second CIT, on scrutiny and verification of the assesses records, found the decision of the earlier CIT to be fair and justifiable. A subsequent CIT, sought to revise the order under section 263, and tax income at 9 percent of the receipts. The Bombay High Court inter alia held that the assessment orders were solely based on the directives of the earlier CITs, and the same could not be revised by the subsequent CIT under section 263. 24. In light of the above discussion and case laws, the case laws referred by the Ld.CIT-DR are not applicable on the facts of the case. As, we have already noted that the submission of Ld.CIT- DR are at variance with the exposition by Hon'ble Bombay High Court in Vodafone India Services Pvt.Ltd.(supra). The Ld.CIT-DR in his submission has emphasized that proceeding before DRP is akin to appeal before Ld.CIT(A). This is quiet contrary to the Hon'ble Bombay High Court exposition noted above and the other decisions of Hon'ble Juri ictional High court referred above.

The case of Devas Multimedia Pvt.Ltd.(supra) by the Hon'ble Karnataka High Court was in connection with the writ petition filed by the assessee, where assessee has objected to the notice issued u/s. 263 of the Act. Furthermore, Hon'ble High Court has expounded that writ court cannot examine the validity of notice on merits. Furthermore, the said decision has distinguished following decision of Hon'ble Bombay High Court, i) Vodafone Services Pvt.Ld.(supra) wherein Hon'ble 1(Bom.). In the present case, this Tribunal is under the juri iction of Hon'ble Bombay High Court. Hence, we do not have any authority whatsoever to deviate from the exposition of the Hon'ble juri ictional High Court that the proceedings at DRP is not an appeal proceedings, but a correcting mechanism. Furthermore, the ratio from the Hon'ble Bombay High Court in the case of Virendra Kumar Jamb(supra) also support this view. Hence, the submission of Ld. DR that subject under discussion here has not been subject matter of Hon'ble juri ictional High Court elaboration

Identical view has been expressed by the co-ordinate benches in case of Bharti Axa Life Insurance Co. Ltd. (supra) and M/s. Cambridge Technology Enterprises Limited (supra) as well. The ratio laid down in these decisions squarely apply to the facts of the present case. No contrary decision has been brought to our notice by the Department. Therefore, respectfully following the ratio laid down in the judicial precedents referred to above, we hold that ld. PCIT has no authority to assume juri iction u/s. 263 of the Act to revise the final assessment order passed in pursuance to the direction of ld. DRP. Accordingly, we quash the impugned order passed u/s. 263 of the Act and restore the final assessment order.

In the result, the appeal is allowed as indicated above. Order pronounced in the open court on 28.08.2025 (Girish Agrawal) (Saktijit Dey) Accountant Member Vice President

The Appellant 2. The Respondent 3. The CIT(A) 4. CIT - concerned 5. DR, ITAT, Mumbai 6. Guard File BY ORDER,