Telangana High Court

Gc India Dental Private Limited vs Additional/Joint/ Deputy/ Assistant ... on 10 March, 2025

Author: P.Sam Koshy

Bench: P.Sam Koshy

      IN THE HIGH COURT FOR THE STATE OF TELANGANA:
                        HYDERABAD
                          ***
              WRIT PETITION No.10372 of 2024


Between:
GC India Dental Private Limited.
                                                           Petitioner
                              VERSUS

Additional/Joint/Deputy/
Assistant Commissioner of Income Tax/
Income-tax Officer, National Assessment Centre
and Others.
                                                       Respondents


             ORDER PRONOUNCED ON: 10.03.2025


           THE HON'BLE SRI JUSTICE P.SAM KOSHY
                           AND
     THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA


1.    Whether Reporters of Local newspapers
      may be allowed to see the Judgments?       :   Yes

2.    Whether the copies of judgment may be
      marked to Law Reporters/Journals?          :   Yes

3.    Whether His Lordship wishes to
      see the fair copy of the Judgment?         :   Yes



                                                 _______________
                                                  P.SAM KOSHY, J
                                     Page 2 of 17


           * THE HON'BLE SRI JUSTICE P.SAM KOSHY
                                      AND
   THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA
               + WRIT PETITION No.10372 of 2024

% 10.03.2025
# Between:
GC India Dental Private Limited.

                                                                          Petitioner
                                    VERSUS

Additional/Joint/Deputy/
Assistant Commissioner of Income Tax/
Income-tax Officer, National Assessment Centre
and Others.
                                                                       Respondents



! Counsel for Petitioner(s)            : Mr. T.Surya Narayana, learned
                                         Senior Counsel, representing
                                         Ms. K. Sri Latha.

^Counsel for the respondent(s) : Mr. P. Murali Krishna, learned
                                 Standing Counsel for Income Tax.



<GIST:
> HEAD NOTE:

? Cases referred
  1) Order dated 19.07.2023 in Writ Petition No.14541 of 2023 (T-IT)
  2) [2023] 157 taxmann.com 143 (Delhi)
  3) Order dated 27.10.2021 in Writ Petition (L) No.15811 of 2021
  4) [2024] 163 taxmann.com 747 (Karnataka)
  5) Order dated 12.02.2024 in Writ Petition (L) No.2030 of 2024
  6) Order dated 17.06.2024 in Writ Petition No.27596 of 2021
                                          Page 3 of 17


                 THE HON'BLE SRI JUSTICE P.SAM KOSHY
                                            AND
     THE HON'BLE SRI JUSTICE NARSING RAO NANDIKONDA

                     WRIT PETITION No.10372 of 2024


ORDER:

(per the Hon'ble Sri Justice P.Sam Koshy)

The present writ petition has been filed seeking quashment of

the assessment order dated 22.12.2023 issued by respondent No.1

under Section 143(3) read with Section 144C(3) also read with

Section 144B of the Income Tax Act, 1961 (briefly 'the Act'

hereinafter). The challenge is also the consequent demand notice of

the same date i.e. 22.12.2023 issued by respondent No.1 under

Section 156 of the Act and also the notice issued under Section 274

read with Section 270A of the Act dated 22.12.2023. The challenge

is also to the further notice dated 08.03.2024 issued by respondent

No.1 under Section 270A of the Act.

2. Heard Mr. T. Surya Narayana, learned Senior Counsel,

representing Ms. K. Sri Latha, learned counsel for the petitioner,

and Mr. P. Murali Krishna, learned Standing Counsel for Income Tax

appearing on behalf of the respondents.

3. The brief facts which led to filing of the instant writ petition are

that in terms of the provisions under Section 144C(1) of the Act, a

draft assessment order was passed by respondent No.1 on

16.11.2023. In terms of the provisions of Section 144C(2), on

receipt of the draft assessment order, the assessee if he wants so,

within thirty days file his objections with the Dispute Resolution

Panel (for short, the 'DRP') and to the Assessing Officer. In the

instant case, the petitioner availing the said recourse, filed an

objection dated 12.12.2023 (Annexure - P3) within the prescribed

thirty days time. The filing of the same stands established from the

acknowledgement received from the Department on 14.12.2023,

which again is well within the prescribed time. On the same day, i.e.

on 12.12.2023 itself the objection filed under Section 144C(2) was

informed to the Assessing Officer as well. The petitioner has been

able to show proof of the same of having been informed to the

Assessing Officer from the acknowledgement of the objections

having successfully submitted online. The Department also gave an

transaction ID to the acknowledgement, which establishes the

receipt of the objections by the Assessing Officer. The screenshot of

the said acknowledgement is also enclosed along with the writ

petition. However, without considering the said objection so filed by

the petitioner, the Assessing Officer in contravention to the

requirement under Sub-Sections (5) and (6) of Section 144C(2),

proceeded and passed the final order dated 22.12.2023. At the

stage of admission of the writ petition, vide order dated 22.04.2024,

interim protection was granted by this Court which is still in force.

4. It is this passing of the final order assessment order being in

violation of the provisions of Section 144C of the Act; the instant

writ petition has been filed.

5. It would be relevant at this juncture to refer to Sub-Sections

(2), (3), (5) and (6) of Section 144C of the Act. The said Sub-

Sections reads thus:

"Reference to dispute resolution panel.

144C. (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).

(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;

(c) evidence furnished by the assessee;

(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority;

(e) records relating to the draft order;

(f) evidence collected by, or caused to be collected by, it; and

(g) result of any enquiry made by, or caused to be made by, it."

A plain reading of the aforementioned provisions under Section

144C of the Act would make it amply clear that as soon as the draft

assessment order is passed, the assessee gets a right of filing his

objections within thirty days which in the instant case the petitioner

did comply with. Upon receipt of the objections, the DRP has to

consider the objections and thereafter pass appropriate orders by

either confirming the draft assessment order, reducing or enhancing

the variations proposed in the draft assessment order, and only

thereafter, can the Assessing Officer pass the assessment order and

not otherwise.

6. In the instant case, though the stand of the Department is that

the petitioner has not submitted any objection under Section

144C(2) to the Assessing Officer, therefore the Assessing Officer

was not aware of the filing of such objection before the DRP. Hence,

the assessment order was proper, legal and justified, and the

petitioner should now challenge the same by way of an appeal.

However, during the course of hearing, upon putting a query to the

learned Standing Counsel as regards the acknowledgement received

by the Department in the objection filed by the petitioner under

Section 144C(2) and the screenshot showing successful submission

of the objection to Assessing Officer has not been controverted,

which would force this Bench to draw an inference that it was all

within the knowledge of the Department when they had passed the

assessment order dated 22.12.2023.

7. A plain reading of Sub-Sections (5) and (6) reproduced in the

preceding paragraphs, would give a clear indication that upon

receipt of an objection under Section 144C(2)(b) within a period of

thirty days from the date of passing of the draft assessment order,

it is incumbent upon the DRP to proceed and decide the same in

accordance with law and also in accordance with other Sub-Sections

stipulated under Section 144(C) of the Act. The provisions of Section

144(C) also indicates that it is only after the DRP takes a decision

on the objections so filed by the assessee, the Assessing Officer can

proceed and pass the final assessment order.

8. In the present case, the filing of the objections with the DRP

with information being forwarded to the Assessing Officer stands

established from the cogent proof and materials enclosed along with

the writ petition. In the absence of the DRP not deciding the

objections in accordance with Section 144C and in due course of

time, the Assessing Officer also having passed the final assessment

order, the question crops up for consideration is the effect of such

an assessment order and the judicial precedents on the said issue.

9. Recently, the High Court of Karnataka had an occasion of

dealing with such issue in the case of Open Silicon Research

Private Limited vs. The Assessment Unit, National Faceless

Assessment Centre, Income-Tax Department and Others 1 .

Order dated 19.07.2023 in Writ Petition No.14541 of 2023 (T-IT)

The High Court dealing with the said objection in paragraph Nos.7,

8, 10, 11 and 13 has held as under:

"7. It is not in dispute that the petitioner is an eligible assessee in terms of Section 144C (15)(b)(i) of the Act. It is also not in dispute that the draft order was issued and communicated to the petitioner. It is also not in dispute that the petitioner has filed its objections before the DRP as is evident from the Acknowledgment at Annexure-H which is within the time stipulated, which is also not controverted.

8. No doubt, there has been lapse in not filing the objections under Section 144C (2)(b)(ii) of the Act before the assessing officer. It is clear from the facts that the DRP has issued directions as per Annexure-N. Though the said direction is dated 15.05.2023 after passing of the assessment order on 26.10.2022, question as to whether non-filing of objections before the assessing officer will have the effect of assessing officer being empowered to go ahead and conclude the proceedings when in fact the petitioner had filed objections before the DRP and had not intimated the same to the assessing officer, requires consideration.

10. Once such objections have been filed, the DRP in terms of Section 144C (5) may issue directions for guidance of the assessing officer to enable him to complete the assessment. The power of the DRP is provided for under Sections 144C (6) to 144C (10) of the Act. After the DRP exercises power vested under Section 144C as noticed above and directions are issued, the assessing officer has no discretion except to act in conformity with the directions.

11. It is not in dispute that if no directions are issued, the assessing officer need not wait under Section 144C (13). However, the fact remains that once objections are filed before the DRP and till directions are issued, the assessing officer cannot proceed further. This is in light of mandate under Section 144C (13). Accordingly, non- intimation to the assessing officer under Section 144C (2)(b)(ii) though is a lapse on the part of the petitioner, the only way of meaningfully and harmoniously interpreting the obligation of filing objections under Section 144C (2)(b)(ii) is to construe the procedure that once such objections are filed before the DRP and till the decision is taken by the DRP regarding directions to be passed, the assessing officer ought not to proceed further..................................................................................... ......Accordingly, the assessment order is required to be set aside. In light of the above, the assessment order at Annexure-A1 is set aside. Consequently, the computation sheet at Annexure-A2 and the demand notice at Annexure-A3 are set aside.

13. In light of the above, petition is disposed off. The matter is restored to the stage of 144C(13) and the assessing officer shall proceed further in terms of the procedure under Section 144C(13) and the time contemplated under Section 144C(13) is deemed to commence from the date of receipt of certified copy of this order by the assessing officer. The assessing officer is to follow the directions issued by the DRP at Annexure-N. It is clarified that the observations made above are made in the context of directions being issued by the DRP at a subsequent point of time and will not have the effect of construing the duty to file objections before the assessing officer under Section 144C(2)(b)(ii) as being optional and not mandatory."

10. A similar view has also been taken by the Delhi High Court in

the case of Pepsico India Holdings (P.) Ltd. vs. Assessment

Unit Income-tax Department National Faceless Assessment

Centre 2 wherein again the Division Bench of Delhi High Court in

paragraph Nos.6 to 9 has held as under:

"6. He submits that under Section 144C(2)(b)(ii), the Petitioner on receipt of the draft assessment order was statutorily required to file its objections before the Assessing Officer in addition to the DRP. He further submits that under Section 144C(3)(b) the Assessing Officer was obligated to complete the assessment on the basis of the draft assessment order if no objections were received within the time period specified under Section 144C(2) i.e. within thirty days of the receipt of the draft order. He states that the Assessing Officer was well within his right to pass the impugned assessment order dated 21st November, 2023 and he cannot be faulted for finalising the assessment in accordance with the prescribed procedure.

7. Having heard learned counsel for the parties, this Court is of the view that the issue at hand is no longer res integra as it has been decided by the Bombay High Court in Sulzer Pumps (supra) wherein it has been held as under:-

"6. In our view since petitioner had already filed a reference raising his objections to the DRP and Section 144C (4) of the Act requires the Assessing Officer to pass the final order including the view expressed by the

[2023] 157 taxmann.com 143 (Delhi)

DRP, we will be justified in setting aside the order of the Assessing Officer dated 28th June, 2021 which is impugned in this petition. We would also observe that the Assessing Officer cannot be faulted for passing the impugned order. At the same time, the Assessing Officer will also have benefit of considering the views of DRP while passing a fresh Assessment Order."

8. This Court is in agreement with the view expressed by the Bombay High Court in the aforesaid decision. Once the objections have been filed by the assessee against a draft assessment order within the time limit prescribed under Section 144C(2)(b), the rest of the procedure should be followed as prescribed and the final assessment order ought to be passed by the Assessing Officer in accordance with the directions issued by the DRP.

9. This Court is further of the view that no prejudice will be caused to the Respondent-Department if the present petition is allowed and the impugned assessment order is set aside as Respondent-Department would be well within its rights to pass a fresh assessment order post the receipt of direction from the Respondent No. 3-DRP."

11. Earlier also a similar stand was taken by the Bombay High

Court in the case of Sulzer Pumps India Private Limited vs. Dy.

Commissioner of Income Tax, Circle -15(3) (2) and Ors. 3

wherein in paragraph No.6 it has been held as under:

Order dated 27.10.2021 in Writ Petition (L) No.15811 of 2021

"6. In our view since petitioner had already filed a reference raising his objections to the DRP and Section 144C (4) of the Act requires Assessing Officer to pass the final order including the view expressed by the DRP, we will be justified in setting aside the order of the Assessing Officer dated 28th June, 2021 which is impugned in this petition."

12. Recently again the High Court of Karnataka in the case of

ZoomRx Healthcare Technology Solutions (P.) Ltd. vs.

Additional/Joint/Deputy/Assistant Commissioner of Income

Tax 4 relying upon its own decision in the case of Open Silicon

Research Private Limited (supra) held in paragraph Nos.5 and 6

as under:

"5. Taking note that the objections have been filed before the DRP and in light of the observations made in the case of Open Silicon Research (P) Ltd referred to hereinabove, it is clear that the Assessment Order passed disregarding the objections filed, requires to be interfered with. The Assessing Officer ought to have waited till directions are passed by DRP.

6. Taking note that objections have been filed before the DRP, it would meet the ends of justice by allowing the petition by setting aside the order at Annexure-'A' dated 20.11.2023 with a further direction that the Assessing Officer must follow the directions of DRP and proceed thereafter, while DRP would issue necessary directions taking note of the objections filed

[2024] 163 taxmann.com 747 (Karnataka)

by the petitioner filed, copy of which is enclosed at Annexure- 'G'. Accordingly, the petition is allowed."

13. A similar view was taken by the Bombay High Court in the

case of APM Terminals India Private Limited vs. Assessment

Unit, Income Tax Department-NFAC & Ors. 5 whereby the writ

petition was allowed in terms of the order passed in Sulzer Pumps

India Private Limited (supra).

14. Even the jurisdictional High Court in the instant case i.e. the

High Court for the State of Telangana had an occasion of dealing

with a similar question in the case of Infor (India) Private

Limited vs. Additional/Joint/Deputy/Assistant Commissioner

of Income Tax / Income Tax Officer, National Faceless

Assessment Centre, Delhi and Others 6 wherein in paragraph

Nos.3 to 6 it has been held as under:

"3. Though counter affidavit has not been filed by the respondents, nonetheless Ms. K.Mamata Choudary, learned counsel submits on the basis of written instructions. Ms. K.Mamata Choudary has explained in her submission that assessing officer could not consider the objections raised by the petitioner before the Dispute Resolution Panel as those were not placed before the assessing officer.

Order dated 12.02.2024 in Writ Petition (L) No.2030 of 2024

Order dated 17.06.2024 in Writ Petition No.27596 of 2021

4. There is a consensus at the Bar that in view of non- compliance of the procedure laid down under Sections 144B and 144C of the Income Tax Act, 1961 (briefly referred to hereinafter as the 'Act'), the impugned assessment order dated 07.10.2021 passed by the 1st respondent and the consequential demand notice dated 07.10.2021 should be set aside and the matter remanded back to the assessing officer i.e., 1st respondent after the Dispute Resolution Panel issues the directions under the aforesaid provision.

5. Consequently order dated 07.10.2021 and the consequential notice of demand dated 07.10.2021 are hereby set aside. Matter is remanded back to the 1st respondent for passing fresh order of assessment in accordance with law after affording due opportunity of hearing to the petitioner.

6. Be it stated that the Dispute Resolution Panel may issue the necessary directions in accordance with law within a period of six (06) months from the date of receipt of a copy of this order."

15. Keeping in view the series of judicial precedents narrated in

the preceding paragraphs, this Bench has no hesitation in reaching

to the conclusion and forming the opinion that the assessment order

dated 22.12.2023 would not be sustainable as the Assessing Officer

could have passed the assessment order only after the decision of

the DRP on the objections so filed by the petitioner under Section

144C(2). Undisputedly, when the assessment order was passed, the

objection before the DRP was pending. It can also not be

authentically accepted that the Assessing Officer was not aware of

the objections so filed by the petitioner before DRP with an

intimation to the Assessing Officer, as the acknowledgement and the

transaction ID issued from the Assessing Officer's office also is