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HC-KAR NC: 2025:KHC:19558-DB ITA No. 571 of 2017
IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 4TH DAY OF JUNE, 2025 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE T.M.NADAF INCOME TAX APPEAL NO. 571 OF 2017 BETWEEN:
M/S. HIMALAYA DRUG COMPANY MAKALI, TUMKUR ROAD, BENGLAURU-562 162 (REP. BY ITS CHIEF FINANCIAL OFFICER, MS. JAYASHREE ULLALL, AGED ABOUT 43 YEARS, D/O SHRI. DAYANANDA ULLAL) PAN:AADFT 3025 B. …APPELLANT (BY SRI. K.K. CHYTHANYA, SR. COUNSEL FOR SRI TATA KRISHNA, ADV.)
AND:
THE DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-1(1) BMTC BUILDING, 80FT. ROAD, KORAMANGALA 6TH BLOCK, BENGALURU-560 095. …RESPONDENT (BY SRI. Y.V. RAVIRAJ, ADV. FOR)
THE ADVOCATE FOR THE APPELLANT HAS FILED THE ABOVE ITA / INCOME TAX APPEAL UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 21/06/2017 PASSED IN ITA NO.807/BANG/2016, FOR THE ASSESSMENT YEAR 2011-2012 ANNEXURE-A AND ETC.
Digitally signed by MARIGANGAIAH PREMAKUMARI Location: HIGH COURT OF KARNATAKA
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HC-KAR NC: 2025:KHC:19558-DB ITA No. 571 of 2017
THIS APPEAL, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER:
CORAM: HON'BLE MR JUSTICE S.G.PANDIT AND HON'BLE MR JUSTICE T.M.NADAF
ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE S.G.PANDIT)
The appellant-assessee is before this Court under Section 260A of the Income-Tax Act, 1961 (for short “IT Act”), questioning the order dated 21.06.2017 in IT(TP)A No.807/Bang/2016 passed by Income Tax Appellate Tribunal, “B” Bench, Bengaluru (for short “Tribunal”), dismissing the appeal refusing to declare the proceedings under Section 144C of the IT Act as null and void.
The appeal coming on for admission on 15.11.2017, this Court admitted the appeal to consider the questions formulated in the appeal, which reads as follows: “1. Whether on the facts and circumstances of the case, the Tribunal is justified in law upholding the validity of final assessment order passed by the Assessing Officer beyond the time limit prescribed under Section 144C(13)?
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Whether on the facts and circumstances of the case, the Tribunal is justified in law in failing to follow the decisions of co-ordinate bench?”
Heard learned senior counsel Sri.K.K.Chaitanya for Sri.Tata Krishna, learned counsel for the appellant and Sri.Y.V.Raviraj, learned counsel for the respondent- Revenue. Perused the entire appeal papers.
The brief facts of the case are that, the appellant, a Partnership Firm filed its returns for the assessment year 2011-12 on 30.09.2011. The same was processed under Section 143(1) of the IT Act and notice under Section 143(2) of the IT Act was issued calling upon certain details/information from the appellant. Thereafter, the case of the appellant was referred to Transfer Pricing Officer under Section 92CA of IT Act and the Transfer Pricing Officer passed order under Section 92CA on 30.01.2015. Thereafter, the respondent passed draft assessment order under Section 144C read with Section
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143(2) of IT Act on 27.03.2015 for the relevant assessment year. Aggrieved by the said draft assessment order, the appellant is said to have filed an appeal before the Dispute Resolution Panel, Bangalore (for short “DRP”) in Form No.35A. The DRP, after hearing the parties passed an order on 17.12.2015 under Section 144C(5) of the IT Act and communicated the same to the respondent on 29.12.2015. Subsequently, final assessment order was passed on 18.02.2016 under Section 143(3) of the Act. Against which, the appellant filed an appeal before the Tribunal. The Tribunal, under impugned order dated 21.06.2017 dismissed the appeal of the appellant.
Learned senior counsel Sri.Chythanya for appellant would contend that the final assessment order dated 18.02.2016 is contrary to Section 144C(13) of the IT Act. He invites attention of this Court to the above said provision and submits that the final assessment order ought to have been passed within one month from the end of the month in which communication of order under
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Section 144C(5) of the IT Act was received. In that, he submits that DRP passed order on 17.12.2015 and the same was communicated on 29.12.2015. Learned counsel submits that the Assessing Authority ought to have passed final assessment order on or before 31.01.2016, whereas the final assessment order is passed on 18.02.2016, as such there is delay of 18 days in passing the final assessment order, which is contrary to Section 144C(13) of the IT Act.
Learned senior counsel taking us through the impugned order of the Tribunal submitted that the Tribunal erroneously placed reliance on the decision of the Andhra Pradesh High Court in the case of RAIN CEMENTS LIMITED v/s DEPUTY CIT (392 ITR 253) to come to a conclusion that the proceedings cannot be declared as null and void simply because the Assessing Officer passed assessment order beyond the period prescribed therein. He submits that the above decision came to be passed on a different context and the same would not apply to the
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facts of the present case. In support of his contention, learned senior counsel places reliance on the decision of the High Court of Delhi reported in (2024) 159 taxmann.com 244 (Delhi) in LOUIS DREYFUS COMPANY INDIA (P). LTD., v/s DEPUTY COMISSIONER OF INCOME-TAX and a decision of the High Court of Telangana in W.P.Nos.44891-44915/2022 disposed of on 09.01.2025 RAPISCAN SYSTEMS PVT. LIMITED, REP. BY AUTHORISED REPRESENTATIVE V/S ADIT (INT.TAX)-2 AYAKAR BHAWAN, OPP: L.B. STADIUM, BASHEER BAGH, HYDERABAD & OTHERS.
Learned senior counsel would further contend that in terms of Section 144C(13) of the IT Act, if the Assessing Officer fails to pass order within the time prescribed therein, the proceedings would lapse. Thus, he prays for allowing the appeal.
Per contra, learned counsel Sri.Y.V.Raviraj for Revenue would support the order passed by the Tribunal
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HC-KAR NC: 2025:KHC:19558-DB ITA No. 571 of 2017
impugned herein and further submits that in the facts and circumstances of the case, the Tribunal is justified in placing reliance on the decision of the Telangana High Court in RAIN CEMENTS LIMITED (supra). Thus, he prays for dismissal of the appeal.
The facts are not in dispute. The appellant/assessee filed returns for the year 2011-12 on 30.09.2011, within the time prescribed. On process of the returns, notice under Section 143(2) of the IT Act was issued to the appellant calling for certain information. Thereafter, the case of the appellant was referred to the Transfer Pricing Officer under Section 92CA of the IT Act. The Transfer Pricing Officer passed order under Section 92CA of IT Act on 30.01.2015 for the assessment year 2011-12. Subsequently, the respondent-Revenue passed draft assessment order under Section 144C read with Section 143(2) of the IT Act on 27.03.2015. Against the said draft assessment order, appellant filed objections/appeal before the DRP and the DRP after hearing, passed order on
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17.12.2015 under Section 144C(5) of the IT Act. The said order passed by the DRP was communicated to the Assessing Officer on 29.12.2015. On receipt of the order/direction of the DRP, the Assessing Officer is required to pass order in terms of Sub-section (13) of Section 144C of the IT Act. Section 144C(13) of the IT Act reads as follows:
“144C. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 or section 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.”
In terms of the above provision, the Assessing Officer shall complete the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. In the instant case, the Assessing
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Officer received the direction from the DRP passed under Sub-Section (5) of Section 144C of the IT Act on 29.12.2015 and the Assessing Officer was required to pass assessment order within one month from the end of December 2015 i.e., the Assessing Officer ought to have passed assessment order on or before 31.01.2016. However, the Assessing Officer passed assessment order only on 18.02.2016, beyond the prescribed time under Sub-Section (13) of Section 144C of the IT Act. Under Sub-Section (13) of Section 144C of the IT Act, the Assessing Officer is mandated to pass order within the time prescribed thereunder and no discretion is vested with the Assessing Officer. Under Sub-Section (13) of Section 144C of the IT Act, the Assessing Officer on receipt of direction under Sub-Section (5) from DRP, mandated to complete the assessment within one month from the end of the month in which such direction is received. In other words, immediately on receipt of direction from the DRP under Sub-Section(5), the
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Assessing Officer shall complete the assessment within the timeline. The timeline prescribed under Sub-Section 144C are to be construed as mandatory.
The High Court of Delhi in the case of LOUIS DREYFUS COMPANY INDIA (P) LTD., (supra) was considering an identical factual situation and at paragraphs 17, 18, 19 and 20, held as follows: “17. As is manifest from a reading of sub- section (13) of Section 144-C of the Act, the assessing officer is not accorded any discretion in the framing of an order of assessment once directions have come to be framed by the Dispute Resolution Panel. In fact, the provision requires the assessing officer to frame an order of assessment in conformity with those directions and without providing any further opportunity of hearing to the assessee. This principle of law has been affirmed by the Bombay High Court in the aforenoted paras of Vodafone Idea Ltd. case [Vodafone Idea Ltd. v. Central Processing Centre, (2023) 459 ITR 413 : 2023 SCC OnLine Bom 2464] and in Shell India Markets (P) Ltd. v. CIT [Shell India Markets
(P) Ltd. v. CIT, (2022) 443 ITR 366 : 2022 SCC OnLine Bom 379] judgment dated 14-2-2022 in WP
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No. 3298 of 2021. The relevant para of the decision in Shell India Markets (P) Ltd. case [Shell India Markets (P) Ltd. v. CIT, (2022) 443 ITR 366 : 2022 SCC OnLine Bom 379] are extracted hereinbelow:
“10. Sub-section (13) of Section 144-C, therefore, is very clear inasmuch as the assessing officer shall, upon receipt of the directions issued under sub-section (5), in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received. Sub-section (13) also provides that the assessing officer can complete the assessment without providing any further opportunity of being heard to the assessee. This means that the moment the assessing officer receives the directions under sub-section (5), he has to straightaway complete the assessment, and he does not even have to hear the assessee. The assessing officer shall simply comply with the directions received from the Dispute Resolution Panel within one month from the end of the month in which such direction is received.”
In this backdrop, we note that both the judgments of the Bombay High Court in Shell India Markets (P) Ltd. case [Shell India Markets (P)
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Ltd. v. CIT, (2022) 443 ITR 366 : 2022 SCC OnLine Bom 379] and Vodafone Idea Ltd. case [Vodafone Idea Ltd. v. Central Processing Centre, (2023) 459 ITR 413 : 2023 SCC OnLine Bom 2464] construe the timelines as provided in Section 144-C to be mandatory in character. In our considered opinion, this interpretation is in accord with the intent behind insertion of that provision and the bare text and spirit of that section. Thus, we accord our approval to the interpretation as set out in the aforenoted decisions of the Bombay High Court. 19. Further, the procedure of assessment as provided under Section 144-C does not envisage or contemplate the interdiction or involvement of the transfer pricing officer once a directive has been framed by the Dispute Resolution Panel. The role of the transfer pricing officer comes to an end once an order as contemplated under Section 92-CA(4) of the Act has come to be framed and remitted to the assessing officer. There was thus no occasion for the transfer pricing officer having resumed proceedings post the passing of the direction by the Dispute Resolution Panel on 20-6-2022. 20. Undisputedly, the directive of the Dispute Resolution Panel came to be uploaded on the Income Tax Business Application portal on 24-6- 2022. It is additionally stated to have been dispatched through speed post to the third
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respondent (TPO) and the fourth respondent (Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi) on 27-6-2022. It is thereafter that the transfer pricing officer appears to have passed the order dated 25 July 2022.”
In RAPISCAN SYSTEMS PVT. LIMITED (supra), the Division Bench of Telangana High Court while considering Section 144C of the IT Act at paragraph 32 and 33 has observed as follows:
“32. In view of the forgoing discussion, there is no cavil of doubt that the Assessing Officer received the Dispute Resolution Panel's directions on June 30, 2022 and, therefore, the limitation must be counted from that date and not from July 5, 2022. The impugned assessment orders dated August 30, 2022 and September 1, 2022 that were issued counting the limitation from July 5, 2022 in both the writ petitions are liable to be set aside as the same are issued beyond permissible period of limitation.
In the result, both the writ petitions are allowed by setting aside the impugned assessment orders dated August 30, 2022 and September 1,
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2022. There shall be no order as to costs. Miscellaneous applications, if any, shall stand closed.”
The reason of the Tribunal while passing the impugned order placing reliance on the RAIN CEMENTS LIMITED is misplaced, as the said decision though arises from Section 144C of the IT Act, it was under a different context or different fact situation; in the said case, no direction under Sub-Section (5) of Section 144C of the IT Act was passed within the time prescribed therein. In the said circumstances, the said decision would have no application to the facts of the present case, as in the present case upon the direction issued by DRP, the order should have been passed within the time prescribed. under Section 144C(13) of the I.T. Act.
For the reasons stated above, the following: ORDER
i) Appeal is allowed.
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ii) The impugned order bearing IT(TP)A.No.807/Bang/2016, dated 21.06.2017 (Annexure-A) passed by the Income Tax Appellate Tribunal, Bengaluru ‘B’ Bench is set aside.
iii) Accordingly, the Substantial Question of Law No.1 is answered in favour of the appellant/assessee and against the respondent/revenue.
iv) In view of answering Substantial Question of Law No.1 in favour of the appellant/assessee, Substantial Question of Law No.2 would no more survive for consideration.
Sd/- (S.G.PANDIT) JUDGE
Sd/- (T.M.NADAF) JUDGE
MPK/NC CT:bms