BRAVURA SOLUTIONS INDIA LLP,NEW DELHI vs. DEPUTY COMMISSIONER OF INCOME TAX, NEW DELHI

The ld AR before us prayed for grant of working capital adjustment to be applied on the comparable margin, which in either case, if granted, there would no need to separately impute interest on outstanding receivables as the same would get subsumed. Reliance in this regard was placed on the decision of the Hon'ble Delhi High Court in the case of Kusum Healthcare in dated 25.04.2017. We find that the ld DRP had also directed the ld TPO / AO to grant working capital adjustment to the assessee which has not been followed by the ld TPO. Hence, the order passed by the TPO had to be considered as not passed in consonance with the binding directions u/s 144C(10) of the Act of ld DRP. On this limited count itself, the order of ld TPO deserves to be quashed and is hereby quashed. Accordingly, original Ground Nos. 2 and 3 raised by the assessee are hereby allowed.

Ground No. 4 raised by the assessee is challenging the action of the ld AO in enhancing the income and the tax liability in the final assessment order which was not even proposed by him in the draft assessment order.

We have heard the rival submissions and perused the materials available on record. The draft assessment order gets merged with the order of the ld DRP and the final assessment order is merely giving effect to the directions of the ld DRP. As per section 144C(10) of the Act, directions given by the ld DRP are binding on the ld AO. Hence, the ld AO could not carry out even arithmetical exercise in the final assessment order proceedings which is passed pursuant to the directions of the ld DRP. Accordingly, any issue that was not subject matter of consideration in the draft assessment proceedings or before the ld DRP, Page 4 of 7 cannot take its birth strangely for the first time in the final assessment order. The alternative recourse is provided in the statute for the same. Hence, the Ground No. 4 raised by the assessee is allowed.

The assessee has also raised additional grounds vide letter dated 13.01.2024. These additional grounds go to the root of the matter and are hereby admitted. In view of the decision rendered by us in Ground No. 4, the additional grounds raised by the assessee are also hereby allowed for the same reason.

With regard to chargeability of interest u/s 234A of the Act, the ld AO is directed to verify the extended due date of filing of return u/s 139(1) of the Act for AY 2020-21. Accordingly, the ld AO is directed to decide the chargeability of interest u/s 234A of the Act. The chargeability of interest u/s 234B of the Act is consequential in nature. With regard to interest u/s 234C of the Act, the law is settled that the same has to be charged only on the returned income and not on the assessed income. Accordingly, Ground No. 5 is disposed of in the above mentioned terms.

Ground No. 6 raised by the assessee is challenging the initiation of penalty proceedings u/s 270A of the Act. In view of the decision given by us on the above grounds, initiation of penalty would have no legs to stand. Hence, Ground No. 6 raised by the assessee is allowed.

In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 22/04/2025.