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2026 Supreme(Online)(ITAT) 9023
INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH)
Yogesh Kumar, Judicial Member, Manish Agarwal, Accountant Member
Midea India Pvt.Ltd. – Appellant
Versus
Assessment Unit, Income Unit No.-517-522, 5th Floor, Tax Department BPTP Park Centra, Sector- 30, Gurugram-122001 (Jurisdictional Assessing Officer: DCIT, Circle-1(1), Gurgaon, Haryana) – Respondent
[Assessment Year : 2021-22]
For the Appellants/Petitioners: Deepak Chopra, Adv., Ashish Sharda, Adv., Ankkul Gupta, CA
For the Respondents: S.K.Jhadav, CIT DR
Final assessment order u/s 144C(13) passed without conforming to binding DRP directions is invalid and quashed; no prejudice needs proof when authority acts contrary to statute.
Headnote:(A) Income Tax Act, 1961 - Sections 144C(10), 144C(13), 92CA(3) - Transfer pricing adjustment - Final assessment order passed u/s 144C(13) without conforming to binding directions of Dispute Resolution Panel (DRP) issued u/s 144C(5) - Directions of DRP are binding on Assessing Officer - Upon receipt of DRP directions, AO shall complete assessment in conformity therewith within one month, without further opportunity of hearing to assessee - Failure to follow DRP directions before passing final order is violation of statutory provisions - NFAC notice post-DRP directions requiring details as per DRP confirms awareness of pending proceedings - Adjustment reduced from INR 13,35,00,268/- to INR 10,27,89,884/- in order giving effect to DRP directions passed same day but after final order - No rectification u/s 154 passed till date - Final assessment order quashed as invalid and bad in law; no need to prove prejudice as action contrary to statute itself causes prejudice - Action without due process of law entitles assessee to have it quashed. (Paras 7, 9, 10, 11)
(B) Appeal - Scope - Where final assessment order quashed for procedural violation, grounds on merits of additions not adjudicated. (Para 12)
Facts of the case:
Assessee company engaged in manufacturing and trading domestic appliances with international transactions referred to TPO, who made TP adjustment of INR 13,35,00,268/- adopted in draft assessment order u/s 144C(1). Assessee filed objections before DRP, which partly accepted contentions and directed re-working of ALP adjustment. AO passed order giving effect on 20.09.2024 reducing adjustment to INR 10,27,89,884/-, but on same day passed final assessment order u/s 143(3)/144C r.w.s. 144B incorporating draft order additions without considering DRP directions.
Findings of Court:
Final assessment order u/s 144C(13) passed without following binding DRP directions is quashed; matter not remitted for fresh consideration as no rectification undertaken despite time elapsed.
Issues: Whether final assessment order u/s 144C(13) can be passed without conforming to binding DRP directions u/s 144C(5) and (10).
Ratio Decidendi: Conjoint reading of sections 144C(10) and (13) mandates AO to pass order u/s 144C(13) strictly in conformity with DRP directions, which are binding; non-compliance renders order invalid, requiring quashing without proof of prejudice.
Result: Appeal allowed; final assessment order quashed.
| Table of Content |
|---|
| 1. factual background of tp adjustment and drp proceedings (Para 2 , 3 , 4) |
| 2. appeal allowed; assessment order quashed (Para 5 , 12 , 13) |
| 3. parties contend on ao's non-compliance with drp (Para 6 , 7 , 8) |
| 4. ao violated binding section 144c(10) & (13) directions (Para 9 , 10) |
| 5. quashing ao order for ignoring drp directions per precedent (Para 11) |
ORDER
PER MANISH AGARWAL, AM :
The captioned appeal is filed by assessee against the directions of Dispute Resolution Panel (“DRP”) dated 07.08.2024 on the objections filed by the assessee against the draft assessment order dated 29.11.2023 passed u/s 144C(1) of the Income Tax Act, 1961 (“the Act”) pertaining to assessment year 2021-22.
2. Brief facts of the case are that the assessee is a domestic company and subsidiary of Midea Electric Trading (Singapore) Pte.Ltd. who is holding 99.99% shares of the assessee. The assessee is engaged in the business of manufacturing and selling of domestic appliances, wholesale trading of electric parts and other services. The return of income was e-filed on 13.03.2022, declaring NIL income and loss of INR 24,82,46,516/- was carried over to next year. Since there were international transactions with the Associated Enterprises (“AEs”), the matter was selected for scrutiny under CASS and a reference was made to the Transfer Pricing Officer (“TPO”) for determination of Arm’s Length Price (“ALP”) of the international transactions. The TPO vide order dated 26.12.2022 has made the adjustment under trading segment of international transactions of INR 13,35,00,268/-. Thereafter, the AO passed the draft assessment order dated 29.11.2023 proposed the addition to the extent of adjustments in ALP of INR 13,35,00,268/- to the total income of the assessee.
3. Aggrieved by the said order, the assessee filed objections before Ld. DRP wherein Ld. DRP disposed off all the objections by partly accepted the contention of the assessee and direct the AO/TPO to re-work out the adjustment of ALP of international transactions. Thereafter, AO/TPO has passed the order giving effect dated 20.09.2024 and on the same day without considering the said order of giving effect to the directions of Ld. DRP, AO passed the final assessment order vide order dated 20.09.2024 u/s 143(3)/144C r.w.s. 144B of the Act by making the additions as proposed in the draft assessment order.
4. Aggrieved by the said order, the assessee is in appeal before the Tribunal.
5. Ground of appeal Nos.1 & 3 raised by the assessee are general in nature, need no separate adjudication hence, dismissed.
6. In Ground of appeal No.2, the assessee has challenged the final assessment order passed in violation to the directions given by Ld. DRP and therefore, it is requested that the same be quashed.
7. Before us, Ld.AR for the assessee submits that final assessment order was passed on 20.09.2024 however, the directions given by Ld. DRP have not been considered in the said order. Ld. AR submits that since statutory provisions have not been followed and the directions given by Ld. DRP which are binding in nature as per section 144C(10) of the Act therefore, the final assessment order was passed u/s 144C(13) is deserves to be quashed. For this, reliance is placed on the judgment of Co-ordinate Bench in the case of Comparex India (P.) Ltd. vs ITO reported in [2024] 166 taxmann.com 720 dated 09.09.2024 (Del. Trib.).
8. On the other hand, Ld. CIT DR for the Revenue supported the orders of the lower authorities and submits that order giving effect was passed though on the very same but few minutes after the order passed by the AO u/s 144C(13) and therefore, AO has not taken into consideration the effect to the direction given by Ld. DRP. He therefore, requested to set aside the matter to the file of AO for re-consideration of the directions given by Ld. DRP as followed in the order giving effect.
9. Heard the contentions of both the parties and perused the material available on record. At the outset, it is seen that AO h
