A petitioner not deemed 'eligible assessee' under Section 144C due to absence of TPO variation cannot be subjected to draft assessment procedures, confirming jurisdictional limits of the Assessing Officer.

ORDER :

S.R. KRISHNA KUMAR, J.

In this petition, petitioner seeks the following reliefs :

“(a) Quashing the draft assessment order bearing DIN ITBA/AST/F/144C/2023-24/1056676734(1) dated 29.09.2023 (Annexure B) passed by the 1st Respondent under Section 144C of the Act for the assessment year 2020-21 as non-est and void ab initio;

(b) Quashing of the directions issued by the DRP dated 28.06.2024 (Annexure D) bearing no. F. No. 235/DRP-1/BNG/2023-24 by the 3rd Respondent under Section 144C(5) of the Act for the assessment year 2020-21 as being without jurisdiction;

(c) pass such other or further orders as this Hon'ble Court may deem fit in the facts and circumstances of the case, in the interests of justice and equity.”

2. Heard learned Senior Counsel for the petitioner and learned counsel for the respondents and perused the material on record.

3. A perusal of the material on record will indicate that for the assessment year 2020-21, the petitioner has filed its return of income declaring a total income of Rs.2,97,02,48,150/- and tax liability of Rs.73,87,00,259/-. During the course of assessment proceedings, a reference came to be made to the Transfer Pricing Officer (TPO) on 24.07.2023 for determination of the arm’s length price of the international transactions entered into by the petitioner. The TPO passed an order holding that no adjustment was required to be made. Despite there being no variation proposed by the TPO and the petitioner not being an eligible assessee in terms of Section 144C(15)(b) of the Income Tax Act, 1961, the 1^st respondent proceeded to pass a draft assessment order dated 29.09.2023 at Annexure-B contrary to the provisions of the Act on the erroneous premise that the petitioner was a ‘eligible assessee’. In pursuance of the said order dated 29.09.2023, petitioner filed petition before respondent No.3-Dispute Resolution Panel – 1 (DRP-1), who issued directions on 28.06.2024 holding that petitioner did not satisfy the conditions stipulated in Section 144C(15)(b) of the IT Act since he was a eligible assessee on the ground that objections were filed before the DRP and proceeded to adjudicate the matter on merits. Aggrieved by the impugned draft assessment order at Annexure- B and the directions issued by the DRP at Annexure- D, petitioner is before this Court by way of the present petition placing reliance upon the judgment of the Bombay High Court in the case of Classic Legends (P.) Ltd., Vs. Assessment Unit – W.P.(L) No.14748/2025 dated 09.09.2025.

4. Per contra, learned counsel for the respondent submits that there is no merit in the petition and the same is liable to be dismissed.

5. As rightly contented by the learned Senior Counsel for the petitioner, the petitioner was not an ‘eligible assessee’ as wrongly held/concluded by the respondents. Under identical circumstances in the case of Classic Legends (P) Ltd., referred to supra, the Division Bench of Bombay High Court held as under:

1. Rule. Respondents waive service. With the consent of the parties, Rule made returnable forthwith and heard finally.

2. The above Writ Petition is filed seeking to quash and set aside the impugned Draft Assessment Order dated 8^th March 2025 passed under Section 144C and the Final Assessment Order dated 7^th April 2025 passed under Section 143 (3) read with Section 144C and Section 144B of the Income Tax Act, 1961 (“for short “I.T.Act”). Consequently, the Demand Notice issued under Section 156 as well as the Show Cause Notice issued for imposing penalty under Section 270A and Section 271AAC are also impugned.

3. The short ground on which all these orders and notices are impugned is that the Assessing Officer has wrongly invoked the provisions of Section 144C which relate to a reference to the Dispute Resol