Case Note & Summary
The Petitioner, Classic Legends Pvt Ltd, filed a Writ Petition before the Bombay High Court challenging a Draft Assessment Order dated 8 March 2025 and a Final Assessment Order dated 7 April 2025 passed under Section 144C read with Section 143(3) and Section 144B of the Income Tax Act, 1961. The Petitioner also challenged the consequential Demand Notice under Section 156 and Show Cause Notices for penalty under Sections 270A and 271AAC. The core issue was whether the Assessing Officer could invoke Section 144C, which provides for a reference to the Dispute Resolution Panel, when the Transfer Pricing Officer (TPO) had made no variation to the income declared by the Petitioner. The TPO, after a reference under Section 92CA, had accepted that the international transactions were at arm's length price, resulting in no variation. The Petitioner argued that under Section 144C(15), an 'eligible assessee' is one in whose case a variation occurs on account of a reference under Section 92CA. Since no variation was made, the Petitioner could not be treated as an eligible assessee, and the Assessing Officer should have passed an assessment order under Section 143(3) without invoking Section 144C. The Revenue contended that a broader interpretation should be given, including cases where the TPO makes no variation, as the term 'variation' should include 'no variation'. The court, after hearing both sides, held that the plain language of Section 144C requires a variation by the TPO. Since the TPO made no variation, the Petitioner was not an eligible assessee, and the impugned orders and notices were without jurisdiction. The court quashed the Draft Assessment Order, Final Assessment Order, Demand Notice, and Show Cause Notices, and directed the Assessing Officer to pass a fresh assessment order under Section 143(3) without invoking Section 144C.
Headnote
A) Income Tax - Eligible Assessee - Section 144C(15) Income Tax Act, 1961 - Condition Precedent - The court considered whether an assessee can be treated as an 'eligible assessee' under Section 144C when the TPO makes no variation. The Assessing Officer had invoked Section 144C despite the TPO accepting the international transactions at arm's length price. The court held that the definition of 'eligible assessee' requires a variation by the TPO, and since no variation was made, the Petitioner could not be treated as an eligible assessee. Consequently, the Draft Assessment Order and Final Assessment Order under Section 144C were without jurisdiction. (Paras 3-5) B) Income Tax - Draft Assessment Order - Section 144C(1) Income Tax Act, 1961 - Jurisdiction - The court examined whether the Assessing Officer had jurisdiction to pass a Draft Assessment Order under Section 144C when the TPO did not propose any variation. The Revenue argued for a broader interpretation, but the court rejected this, holding that the plain language of Section 144C requires a variation. The court quashed the impugned orders and notices, directing the Assessing Officer to pass a fresh assessment order under Section 143(3) without invoking Section 144C. (Paras 4-5)
Issue of Consideration
Whether the Petitioner is an 'eligible assessee' under Section 144C(15) of the Income Tax Act, 1961, when the Transfer Pricing Officer (TPO) made no variation to the income declared by the Petitioner.
Final Decision
The court allowed the Writ Petition, quashing the Draft Assessment Order dated 8 March 2025, the Final Assessment Order dated 7 April 2025, the Demand Notice under Section 156, and the Show Cause Notices for penalty under Sections 270A and 271AAC. The court directed the Assessing Officer to pass a fresh assessment order under Section 143(3) of the Income Tax Act, 1961, without invoking the provisions of Section 144C.
Law Points
- Interpretation of 'eligible assessee' under Section 144C(15) of the Income Tax Act
- 1961
- Condition precedent for invoking Section 144C is a variation by the TPO
- No variation by TPO renders Section 144C inapplicable
