SMARTEK21 PRIVATE LIMITED,CHENNAI V. DICT CORPORATE CIRCLE 3(1), CHENNAI

ITTPA 91/CHNY/2024

AI Insights

The case involves Smartek21 Private Limited, which appealed against the final assessment order for the assessment year 2021-22. The appeal was directed against the order passed by the Assessing Officer, which included an upward adjustment to the revenue based on the Transfer Pricing Officer's (TPO) assessment. The TPO had rejected the company's segmentation analysis and selected 27 comparable companies, leading to a significant upward adjustment. The Dispute Resolution Panel (DRP) later excluded four of these comparables as functionally dissimilar, but the Assessing Officer did not adhere to this direction in the final assessment order. The Tribunal's decision emphasized the mandatory nature of the DRP's directions under section 144C(13) and the legal obligation of the Assessing Officer to conform to these directions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 782289 (ITAT-CHENNAI)
• Duration Of Justice: 11 month(s) 8 day(s)
• Appeal Type: Income Tax (Transfer Pricing) Appeal
• Pronouncement Date: 31-10-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2021-2022
• Appeal Filed On: 22-11-2024
• Other Referred Cases: ESPN Star Sports Mauritius S.N.C. ET Compagnie v UOI, M/s. Olympus Medical Systems Pvt. Ltd. v ACIT, Royal Canin India Pvt. Ltd. v ACIT, M/s. Software Paradigms Infotech Pvt. Ltd. v ACIT, M/s. Global One India Pvt. Ltd. v DCIT, CIT v Sanmina SCI India (P.) Ltd.
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: .V. SREENIVASAN
• Assessee Lawyers: T. BANUSEKAR
• Keywords: Set aside; Opportunity of being heard; Transfer pricing; International transaction; Principle of natural justice; Competent authority
• Section: 144; 143(3)

Judgement Text

"आयकर अपीलीय अधिकरण, ’डी’ न्यायपीठ, चेन्नई। IN THE INCOME TAX APPELLATE TRIBUNAL ‘D’ BENCH: CHENNAI माननीय श्री मनु क ुमार गिरि, न्यागयक सदस्य एवं माननीय श्री एस.आर.रघुनाथा ,लेखा सदस्य क े समक्ष । BEFORE HON’BLE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND HON’BLE SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./IT(TP)A No.91/Chny/2024 Assessment Year – 2021-22 Smartek21 Private Limited, 2nd Floor, Block B, Global Infocity Park, Plot No.40, MGR Salai, Kandanchavadi, Perungudi, Chennai-600 096. [PAN: AAXCS4902M] v. Deputy Commissioner of Income Tax, Corporate Circle-3(1), Chennai. (अपीलार्थी/Appellant) (प्रत्यर्थी/Respondent) अपीलार्थी की ओर से/ Appellant by : Mr.T.Banusekar, Advocate. प्रत्यर्थी की ओर से /Respondent by : Mr.AR.V.Sreenivasan, CIT सुनवाईकीतारीख/Date of Hearing : 23.10.2025 घोषणाकीतारीख /Date of Pronouncement : 31.10.2025 आदेश / O R D E R PER MANU KUMAR GIRI, JM: This appeal by the assessee is directed against the final assessment order passed by the Assessing Officer (“AO”) under section 143(3) read with section 144C(3) and section 144B of the Income-tax Act, 1961 (“the Act”) dated 23.09.2024, for the assessment year 2021-22, in pursuance of the directions issued by the Dispute Resolution Panel (“DRP”), Bengaluru, dated 06.09.2024. Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 2 of 18 2. The grounds of appeal of the assessee are as under : - 1. For that the Directions of the Dispute Resolution Panel and consequently the order of the Assessing Officer is without jurisdiction, is contrary to law, facts and circumstances of the case and at any rate is opposed to the principles of equity. natural justice and fair play. Legal Grounds 2. For that the order of the Assessing Officer passed u/s.143(3) r.w.s.144C(3) r.w.s.144B of the Income Tax Act dated 23.09.2024 is bad in law. 3. For that the Assessing Officer completed the assessment vide order passed u/s.143(3) r.w.s.144C(3) r.w.s.144B of the Income Tax Act dated 23.09.2024 without complying with the statutory requirements of law. 4. For that the final assessment order u/s.143(3) r.w.s.144C(3) r.w.s.144B is not in conformity with the Directions of the Hon'ble Dispute Resolution Panel and therefore bad in law. Upward adjustment of Revenue of Rs.6,05,17,823/- 5. For that the Dispute Resolution Panel and consequently the Assessing Officer erred in making an upward adjustment of Rs.6,05,17,823/- to the revenue of the appellant. 6. For that the Dispute Resolution Panel and consequently the Assessing Officer erred in affirming the action of the Transfer Pricing Officer in rejecting the transfer pricing study conducted by the appellant. 7. For that the Dispute Resolution Panel and consequently the Assessing Officer erred in affirming the action of the Transfer Pricing Officer in conducting an independent search using different selection criteria without proper basis. 8. For that the Dispute Resolution Panel and consequently the Assessing Officer erred in rejecting the segmented financial statements of the appellant 9. For that the Dispute Resolution Panel and consequently the Assessing Officer failed to appreciate that the appellant had incurred Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 3 of 18 product development expenditure which is a separate Non-AE segment of the appellant. 10. For that the Dispute Resolution Panel and consequently the Assessing Officer failed to appreciate that the product development expenditure is in the nature of research and development expenses and has to be excluded to compute the PLI of the appellant. 11. For that the Dispute Resolution Panel and consequently the Assessing Officer ought to have excluded the product development expense from operating costs to compute the operating margin of the appellant. 12. For that without prejudice to the above, the Dispute Resolution Panel and consequently the Assessing Officer ought to have at least considered employee related expense incurred for product development as part of the product development segment of the appellant. 13. For that the Dispute Resolution Panel and consequently the Assessing Officer erred in not applying an upper turnover filter to select comparables. 14. For that the Dispute Resolution Panel and consequently the Assessing Officer erred in concluding that a functionally comparable company cannot be excluded merely on account of high turnover. 15. For that the Dispute Resolution Panel and consequently the Assessing Officer failed to appreciate that Dun & Bradstreet Technologies & Data Services P Ltd and IDS Infotech Ltd are functionally different from the appellant and cannot be considered as comparable companies 16. For that the Assessing Officer failed to appreciate that Dispute Resolution Panel had concluded that the following comparables were functionally dissimilar to the appellant:  Druva Data Solutions P Ltd.  Ingenuity Gaming P Ltd.  V2 Tech Ventures P Ltd.  Vitae Intemational Accounting Services Pvt. Ltd. Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 4 of 18 Levy of interest u/s.234B 17. The appellant objects to the levy of interest u/s.234 of the Income Tax Act. PRAYER For these grounds raised and such other grounds that may be raised, may be altered, amended or modified, with the leave of the Hon'ble Tribunal before or during the hearing of the appeal, it is most humbly prayed that the Hon'ble Tribunal may be pleased to: a) Quash the assessment order passed u/s.143(3) r.w.s.144C(3) r.w.s.144B of the Income Tax Act dated 23.09.2024 and/or b) Delete the upward adjustment of Rs.6,05,17,823/- to the revenue of the appellant and/or c) Pass such other orders as the Hon'ble Tribunal may deem fit. 3. Facts of the case are that the assessee, a company and subsidiary of Smartek21 LLC, is engaged in the business of software development services. For the impugned year, it filed its return of income declaring a total income of Rs.95,16,290/-. The case was selected for complete scrutiny and reference was made by the Assessing Officer (“AO”) to the Transfer Pricing Officer (“TPO”) under section 92CA(1) to determine the arm’s length price (“ALP”) in respect of international transactions with its Associated Enterprise (“AE”). The TPO rejected the segmentation analysis furnished by the assessee and selected 27 comparable companies, computing an upward adjustment of Rs.6,05,17,823/- vide order dated 27.10.2023 under section 92CA(3). The draft assessment order dated 01.12.2023 incorporated the said adjustment. 4. The assessee raised objections before the DRP, inter alia, contesting inclusion of six comparables, namely — 1. IDS Infotech Ltd. 2. Druva Data Solutions Pvt. Ltd. 3. Ingenuity Gaming Pvt. Ltd. Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 5 of 18 4. Viate International Accounting Services Pvt. Ltd. 5. V2 Tech Ventures Pvt. Ltd. 6. Dun & Bradstreet Technologies & Data Services Pvt. Ltd. The DRP, after examination, held four comparables viz., Druva Data Solutions Pvt. Ltd., Ingenuity Gaming Pvt. Ltd., Viate International Accounting Services Pvt. Ltd., and V2 Tech Ventures Pvt. Ltd. to be functionally dissimilar and directed their exclusion. However, it did not adjudicate upon the comparability of IDS Infotech Ltd. and Dun & Bradstreet Technologies & Data Services Pvt. Ltd. 5. The Assessing Officer (“AO”) thereafter passed the final assessment order dated 23.09.2024 assessing the total income at Rs.7,00,34,743/-, reiterating the same adjustment of Rs.6,05,17,823/- as in the draft assessment order, without giving effect to the DRP’s directions for exclusion of the four comparables. Now, assessee is in appeal before us. 6. The ld. counsel Shri Banusekar, Advocate has argued the appeal in extenso which he has summarized in the written submissions as under: “The appellant, a company and subsidiary of Smartek21 LLC, is engaged in the business of software development. The appellant filed its return of income declaring a total income of Rs.95,16,290/- for the impugned year. The case of the appellant was selected for complete scrutiny and reference was made by the Assessing Officer to the Transfer Pricing Officer u/s.92CA(1) of the Income Tax Act, 1961 to determine the arm's length price of international transactions entered into by the appellant. The appellant, in its Transfer Pricing Study had segmented its financial statements between its AE and its Non-AE business. The Transfer Pricing Officer rejected the segmentation and conducted a fresh search whereby he identified 27 comparable companies (Page Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 6 of 18 17 & 18 of the TP Order) and made an upward adjustment to the value of international transactions (i.e., sales made by the appellant to Smartek21 LLC) to the tune of Rs. 6,05,17,823/- vide order passed u/s.92CA(3) dated 27.10.2023. Thereafter, a draft assessment order was passed on 01.12.2023 incorporating the addition of Rs.6,05,17,823/- being the upward adjustment made by the Transfer Pricing Officer. Aggrieved by the upward adjustment, the appellant filed objections before the Dispute Resolution Panel, Bangalore. Before the DRP, the appellant, among other issues, objected to the following 6 out of the 27 companies chosen by the TPO on account of functional dissimilarity [Pages 16 to 18 of Index of Paper Book - 2 (Red colour taped book)] 1. IDS Infotech Ltd. 2. Druva Data Solutions P Ltd. 3. Ingenuity Gaming P Ltd 4. Viate International Accounting Services Private Limited 5. V2 Tech Ventures P Ltd 6. Dun & Bradstreet Technologies & Data Services P Ltd The DRP was pleased to hold that the following companies were not comparable to the appellant and deleted the same from the list of final comparables arrived by the TPO (Refer paragraph just above point 4.0 in page 15 of the directions of the DRP) 1. Druva Data Solutions P Ltd. 2. Ingenuity Gaming P Ltd 3. Viate International Accounting Services Private Limited 4. V2 Tech Ventures P Ltd With respect to the remaining two comparables, the DRP did not adjudicate the functional comparability of ID S Infotech Ltd. with the appellant and in connection with respect to Dun & Bradstreet Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 7 of 18 Technologies & Data Services P Ltd. the DRP stated that the appellant had asked for inclusion of the said company and the said company already figures in the list of final list of companies chosen by the TPO and therefore did not adjudicate the functional comparability with the appellant. In this connection, it is humbly submitted that, the appellant had asked for exclusion and not inclusion of Dun & Bradstreet Technologies & Data Services P Ltd and therefore the observation of the DRP is incorrect. (Can be seen at page 13 and 15 in S.No.2 of Index of Paper Book-2. (red colour taped book)] Therefore, 4 out of the 6 comparables were deleted by the DRP since they were functionally dissimilar to the appellant and the 2 other comparables were not adjudicated by the DRP. The other objections raised by the appellant on segmentation of financial statements and turnover filter was rejected by the DRP. Attention of this Hon'ble Tribunal is now drawn to the final assessment order passed by the Assessing Officer u/s. 143(3) r.w.s. 144C(3) r.w.s.144B wherein at page 3 it is stated as under: \"3.2.1 International Transactions:- On perusal of Form 3CEB furnished with the return for the A.Y. 2021-22 and after considering CBDT Inst. No. 3/2016 dated 10.03.2016, a reference was proposed to be made to the Transfer Pricing Officer u/s 92CA(1) of the Income Tax Act, 1961 with the prior approval of competent authority. A reference in this regard was made to the Technical Unit for referring the case to concerned TPO for determining arm's length price u/s 92CA(3) of the Income Tax Act, 1961 in respect of intemational transaction entered into by the assessee during financial year 2020-21. Order u/s 92CA(3) dated 27.10.2023 of the DC/ACIT Transfer Pricing-3(1), Chennai was received in this office, recommending that an ALP adjustment to the International transaction of Software Development Segment of Rs. 6,05,17,823/- (Copy of TPO order is attached as annexture-A) Subsequently a draft assessment order dated 01.12.2023 was issued, aggrieved on this, the assessee filed an objection before the Hon'ble DRP on 29.12.2023. After due consideration of the assessee's objections the Hon'ble DRP passed an order on 06.09.2024. (Copy of Hon'ble DRP order is attached as annexture- B) The Hon'ble DRP, upheld the upward adjustment towards margin Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 8 of 18 in IT Segment of Rs. 6,05,17,823 made by the TPO in the order u/s 92CA(3) dated 13.10.2023. (Addition: TP Adjustment-Rs. 6,05,17,823/-) 4. Table of Variations: Particulars Amount (Rs.) Income as per ITR 95,16,290/- Addition: on account of Transfer Pricing adjustment 6,05,17,823/- Assessed Income 7,00,34,743/- Accordingly total income of the assessee is assessed u/s 144C of the Act at Rs. 7,00,34,743/-as per computation sheet attached. Issue demand notice. Charge interest u/s 234A, 2348 & 234C, as applicable.\" On a perusal of the above, it can be seen that the Assessing Officer has confirmed the addition to the tune of Rs.6,05,17,823/- proposed in the draft assessment order on account of upward adjustment without considering the fact that the DRP has deleted 4 comparables on account of functional dissimilarity. In other words, the Assessing Officer has passed the final assessment order which is not in conformity with the directions of the DRP. Further, it may also be noted that the Assessing Officer in the computation sheet to the final assessment order has assessed the income of the appellant at Rs.95,16,290/-which is the returned income of the appellant. In this connection, attention of this Hon'ble Tribunal is invited to the provisions of section 144C of the Act, the relevant portions read as under. \"(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. (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 Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 9 of 18 opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.\" From the above provisions, it may be noted that the Assessing Officer, on receipt of directions issued by the DRP, is mandated to complete the assessment in conformity with such directions, within one month from the end of the month in which such direction is received. If the final assessment order is not passed in conformity with the directions of the DRP, such order would not be a valid order. In this connection, attention of this Hon'ble Tribunal is invited to the decision of the Hon'ble Delhi High Court in the case of ESPN star Sports Mauritius S.N.C. ET Compagnie v UOI [2016] 388 ITR 383 (Del) [S.No.1 of Index of Case Laws (Black colour taped book)] wherein it was held that in view of the provisions of section 144C(10) r.w.s. 144C(13), the Assessing Officer was bound by the order passed by the DRP and since the same was not adhered to in that case, the final assessment order was void ab initio and deserved to be quashed. The relevant excerpts of the said decision are as under \"29. The above submissions have been considered. In the first place the Court would like to observe that this is an instance of blatant disregard by the AO of the order of the DRP notwithstanding that the DRP had categorically held that the two Petitioners do not satisfy the conditions of an 'eligible assessee' in terms of Section 144(15)(b)(ii) of the Act. As already noticed under Section 144C(10) of the Act the AO had no option but to comply with the order of the DRP. Even if no direction was issued by the DRP under Section 144C(5) of the Act, the fact that the DRP held that both the Petitioners were not eligible Assessees' could not have been ignored by the AO. 30. It appears to the Court that it is plain that under Section 144C, the AO should have proceeded to pass an order under Section 143(3) of the Act. Instead the AO confirmed the draft assessment order passed under Section 144C(1) of the Act. This, therefore, vitiated the entire exercise. The Court has no hesitation in holding that the final assessment order dated 28th January, 2015 is without jurisdiction and null and void. The draft assessment order dated 28th March, 2014, having been passed in respect of entities which were not 'eligible assessees', is also held to be invalid. Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 10 of 18 41. The language used in the present case by the AO while disagreeing with the binding order of the DRP is wholly unacceptable. In the final assessment order dated 28th January, 2015, the AO while discussing the order of the DRP observed inter alia in para 4.2 that \"The DRP has not acted in accordance with the provisions of the Act while passing this order which is grossly illegal, against the intent of legislature, without following the basic principles of natural justice and adopting very narrow interpretation of the provisions of the Act.\" 45. For the above reasons, the draft assessment order dated 28th March, 2014 and the final assessment order dated 28th January, 2015 passed by the AO are held to be void ab initio and quashed on that basis. The orders consequential thereto also do not survive. Reliance is further placed on the decision of the Delhi Bench of the Income Tax Appellate Tribunal in the case of M/s. Olympus Medical Systems Pvt. Ltd. v ACIT 2022 (1) TMI 886-ITAT Delhi (In page 17 to 19 at para 10, 11, 13 & 14) in S.No.2 of Index of Case Laws) wherein the final assessment order was quashed for the reason that the final assessment order and the draft assessment order was the same and as per the directions of the DRP one comparable was to be included and another comparable was to be excluded. Attention of this Hon'ble Tribunal is also invited to decision of the the Jurisdictional High Court in the case of CIT v Sanmina SCI India (P.) Ltd. [2017] 398 ITR 645 (Mad) wherein it was held that in terms of section 144C(13), the Assessing Officer is bound to confirm to the directions given by the DRP and give effect to the same and that any attempt to delve beyond the directions of the DRP would not be in accordance with law. It may be noted that in the aforesaid case, the Assessing Officer while passing the final assessment order, in computing relief under section 10A had additionally made a new disallowance of brought forward losses which was neither proposed by the Assessing Officer in the draft assessment order nor as any such direction been given by the DRP. Considering the said action of the Assessing Officer and the provisions of section 144C(13) of the Income Tax Act, the Jurisdictional High Court upheld the view of the Hon'ble Income Tax Appellate Tribunal where the assessment order was set aside [Refer Paras 16 to 18 at Pages 73 and 74, Paras 20 and 21 at Page 75 of S.No.7 of Index of Case Laws (Black colour taped book)] Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 11 of 18 In doing so, the High Court held as follows: \"18.............. The powers of an Assessing Officer under sub-section (13) of 144 Chave clearly been limited to giving consequence to the directions of DRP and cannot extendany further. Any attempt by the Assessing Officer to delve beyond would result in greatprejudice to an Assessee in the light of the express stipulation that no opportunity is to beprovided and an interpretation to further such a conclusion would be wholly unacceptableand contrary to law........ 20. Acceptance of the proposition advanced by the Department would tantamount to giving leave to the Assessing Officer to pass more than one order of assessment in the course of a single proceeding, which is not envisaged in the scheme of the Act. Subsequent assessments either rectifying, revising or reopening the original assessment are permitted by exercising specified powers under different statutory provisions. The order of draft assessment under section 144C(1) is for all intents and purposes an order of original assessment though in draft form. In this light of the matter, the order of the Tribunal to this effect is right in law and calls for no inference.\" The contention of the appellant that the final assessment order is bad in law since the same is not passed in conformity with the DRP Directions in accordance with the provisions of section 144C(13) also found favour in the following decisions:  Royal Canin India Pvt. Ltd. v ACIT 2025 (5) TMI 193-ITAT Mumbai (S.No.3 of Index of Case laws)  Royal Canin India Pvt. Ltd. v ACIT [2025] 174 taxmann.com 30 (Mumbai-Trib) (S.No.4 of Index of Case laws)  M/s. Software Paradigms Infotech Pvt. Ltd. v ACIT 2018 (1) TMI 1550-ITAT Bangalore (S.No.5 of Index of Case laws)  M/s Global One India Pvt. Ltd. v DCIT 2019 (12) TMI 503- ITAT Delhi (S.No.6 of Index of Case laws) The relevant paragraph and page numbers of the aforesaid decision relied upon by the appellant is enclosed. In the instant case, as submitted earlier, the Assessing Officer has passed the final assessment order which is not in conformity with directions of DRP which deleted 4 comparables chosen by the Transfer Pricing Officer on account of functional dissimilarity. Therefore, it is most humbly submitted that since the final assessment order passed by the Assessing Officer is not in Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 12 of 18 conformity with the directions issued by the DRP, the final assessment order passed by the Assessing Officer u/s 143(3) rw.s. 144C(3) r.w.s. 1448 dated 23.09.2024 is bad in law and liable to be quashed. It may be noted that even the Transfer Pricing Officer in the order giving effect to the directions of the DRP dated 13.09.2024 [in S.No.2 of Index of Paper Book - 2 (Red colour taped book)) has also given effect to the order of the DRP without considering the fact that the DRP has in its directions, deleted 4 comparables on account of functional dissimilarity. The Ld. DR, during the course of hearing placed reliance on the decision of the Hon'ble Supreme Court in the case of PCIT v M/s.S.G.Asia Holdings (India) Pvt. Ltd. in Civil Appeal No.6144 of 2019. In this connection the appellant wishes to submit that the Hon'ble Supreme Court in the said case had set aside the matter to the file of the Assessing Officer in a case where the Assessing Officer failed to make a reference to the Transfer Pricing Officer in accordance with CBDT Instructions. It may be noted that the Tribunal in this case declined to set aside the matter to the file of the Assessing Officer though the DR had prayed for the same since the Tribunal cannot interfere in administrative matters. This is reproduced at Para 2 of the order of the Hon'ble Supreme Court, being Para 16.2 of the order of the Tribunal. It may further be noted that the said decision of the Hon'ble Supreme Court arose out of the appeal filed by the Revenue against the order of the Hon'ble Bombay High Court which confirmed the order passed by the Mumbai Bench of the Hon'ble Tribunal. In this connection, it may be noted that the appeal filed by the assessee before the Hon'ble Tribunal was against the order of the CIT (Appeals) and not the DRP. Therefore, the provisions of section 144C were not applicable at all in the case of PCIT v M/s S.G. Asia Holdings (India) Pvt. Ltd cited by the Ld DR. In the instant case, it may be noted that non-compliance by the Assessing Officer is not with an administrative direction but is a case where the clear mandate of law in section 144C(13) of the Income Tax Act is not been complied with. Further, the provisions of section 144C were not applicable in that case as the appeal arose out of the order of the CIT (Appeals) and therefore the decision of Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 13 of 18 the Hon'ble Supreme Court in this matter is distinguishable and cannot apply to the facts and circumstances of the instant case. Therefore, on the basis of the above, it is submitted that the above decision relied upon by the Ld. DR and thus the same ought not to be considered in the facts and circumstances of the instant case. In light of the above submissions and the judicial precedents cited, it may be observed that in the present case, the Assessing Officer despite being aware of the DRP directions where 4 comparables were deleted on account of functional dissimilarity went on to pass the final assessment order using the same language as in the draft assessment order and therefore the same is a clear violation of the provisions of section 144C(13) of the Income Tax Act and therefore the final assessment order is bad in law and liable to be quashed. It may be noticed that both the TPO and the Assessing Officer were clearly aware of the directions of the DRP for the order giving effect by the TPO clearly refers to the directions of the DRP dated 06.09.2024. Similarly, the final assessment order of the Assessing Officer also contains reference to the directions of the DRP which clearly shows that both the authorities were aware of the directions of the DRP. It is therefore most humbly prayed that this Hon'ble Tribunal may be pleased to quash the final assessment order passed by the Assessing Officer u/s.143(3) r.w.s. 144C(3) r.w.s. 1448 of the Act.” 7. He further filed the paper book-2 which is as under: INDEX OF PAPER BOOK-2 S.No. PARTICULARS PAGE NO. 1. Declaration by Authorised Representative 1 2. Copy of Order passed by the Transfer Pricing Officer Giving Effect to directions u/s. 144C. 2 – 3 3. Copy of Written Submissions filed before the Hon’ble Dispute Resolution Panel. 4 – 18 4. Copy of acknowledgement for filing Income Tax Return 19 Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 14 of 18 8. To substantiate the point home, the ld. counsel also filed case law Paper Book-1 as under: RELEVANT PAGES/PARAGRAPHS OF CASE LAW BOOK SL. No. PARTICULARS Pg.Nos. / Paragraph Nos. 1. ESPN Star Sports Mauritius S.N.C. ET Compagnie v UOI [2016] 388 ITR 383 (Del) Pg.No.8 Para Nos. 29 & 30 Pg No. 10 Para Nos 41, 42, 45 2. M/s.Olympus Medical Systems Pvt. Ltd. v ACIT 2022 (1) TMI 886-ITAT Delhi Pg Nos. 17-19 Para Nos. 10,11 & 13 3. Royal Canin India Pvt. Ltd. v ACIT 2025 (5) TMI 193-ITAT Mumbai Pg. No.30 Para No.9 4. Royal Canin India Pvt. Ltd. v ACIT [2025] 174 taxmann.com 30 (Mumbai - Trib) Pg. Nos.45 & 46 Para No.6 5. M/s. Software Paradigms Infotech Pvt. Ltd. v ACIT 2018 (1) TMI 1550-ITAT Bangalore Pg. No.54 Para No.3.3.1 & 3.3.2 6. M/s.Global One India Pvt. Ltd. v DCIT 2019 (12) TMI 503-ITAT Delhi Pg Nos.60-63 Para No.3-6 & 11 7. CIT v Sanmina SCI India (P.) Ltd. [2017] 398 ITR 645 (Mad) Pg. Nos.73-75 Para Nos. 16-18 & 20-21 Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 15 of 18 8. Genesys Telecom Labs India Pvt. Ltd. v DCIT in IT(TP)A No.: 38/CHNY/2024- ITAT Chennai Pg Nos.80-83 Para Nos.6.2 to 6.4 9. Concur Technologies India (P.) Ltd v DCIT [2023] 153 taxmann.com 644 (Bangalore - Trib.) Pg No.96 Para Nos.6 & 6.1 10. Motorola Mobility India (P.) Ltd. v DCIT [2023] 147 taxmann.com 444 (Bengaluru - Trib) Pg Nos. 102-104 Para Nos.9, 11 & 12 11. Acusis Software India (P.) Ltd. v ITO [2018] 98 taxmann.com 183 (Karnataka) Pg Nos. 116-117 Para Nos. 14 & 15 12. Virtusa Consulting Services (P.) Ltd. v DCIT [2024] 168 taxmann.com 709 (Chennai - Trib.) Pg No.127 Para No.8 to 8.2 13. M/s. Benu Networks Packet Switch Private Limited v DCIT [2024] 168 taxmann.com 589 (Hyderabad - Trib.) Page No.142 Para No. 15 & 16 9. Per Contra, the ld. DR, Shri AR. V. Sreenivasan, CIT relied upon the assessment order and placed reliance on the decision of the Hon’ble Supreme Court in PCIT v. S.G. Asia Holdings (India) Pvt. Ltd., Civil Appeal No. 6144 of 2019. He also pleaded that the purported error is bonafide hence it falls under section 292B of the Act. 10. In rebuttal, the assessee distinguished the said decision on the ground that the same pertained to a case not governed by section 144C proceedings but arising out of an appeal before the CIT(A), and thus was inapplicable to the present facts and also section 292B is not applicable. Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 16 of 18 11. We have heard the rival submissions, perused the record, gone through the written submissions and paper books filed including case law. The primary grievance of the assessee is that the final assessment order passed by the Assessing Officer is not in conformity with the binding directions issued by the DRP under section 144C(5), in contravention of section 144C(13) of the Act, and hence void ab initio. 12. The ld. counsel submitted that under section 144C(13) of the Act, the Assessing Officer is mandatorily required to pass the final assessment order in conformity with the directions issued by the DRP. In the instant case, despite clear findings of the DRP deleting four comparables, the Assessing Officer (“AO”) repeated the adjustment computed in the draft assessment order, thereby completely ignoring the directions of the DRP. The ld. Counsel put reliance upon the following judicial precedents:  ESPN Star Sports Mauritius S.N.C. ET Compagnie v. UOI [2016] 388 ITR 383 (Del);  CIT v. Sanmina SCI India (P.) Ltd. [2017] 398 ITR 645 (Mad);  Olympus Medical Systems Pvt. Ltd. v. ACIT [2022 (1) TMI 886 – ITAT Delhi];  Royal Canin India Pvt. Ltd. v. ACIT [2025 (5) TMI 193 – ITAT Mumbai];  Software Paradigms Infotech Pvt. Ltd. v. ACIT [2018 (1) TMI 1550 – ITAT Bangalore];  Global One India Pvt. Ltd. v. DCIT [2019 (12) TMI 503 – ITAT Delhi]. It was contended that the Assessing Officer’s failure to give effect to DRP directions renders the final order non est in law, liable to be quashed. The ld. counsel further clarified that the DRP’s observation regarding Dun & Bradstreet Technologies & Data Services Pvt. Ltd. being sought for inclusion was factually incorrect, since the assessee had in fact prayed for its exclusion. Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 17 of 18 13. It is an undisputed fact that the DRP, in its directions dated 06.09.2024, directed the exclusion of four comparables from the list adopted by the TPO. Section 144C(13) of the Act reads as under: “Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete the assessment...” Thus, the language of the statute is peremptory. The Assessing Officer is duty-bound to pass the assessment in conformity with the DRP’s directions. The Hon’ble Delhi High Court in ESPN Star Sports Mauritius S.N.C. ET Compagnie (supra) categorically held that where the final assessment order is not in conformity with DRP directions, the same is void ab initio. Similar view has been expressed by the Hon’ble Madras High Court in CIT v. Sanmina SCI India (P.) Ltd. (supra), observing that the powers of the Assessing Officer under section 144C(13) are confined only to implementing DRP directions and cannot extend any further. 14. Applying the above ratio, we find merit in the contention of the assessee. The Assessing Officer, despite explicit directions of the DRP deleting four comparables, adopted the same adjustment as in the draft assessment order. Such conduct constitutes a clear violation of section 144C(13) and renders the impugned assessment order unsustainable in law. The fact that both the TPO and the AO were aware of the DRP’s directions but nevertheless failed to give effect thereto, further reinforces the illegality of the final order. 15. We find that the precedents relied upon by the assessee, particularly Olympus Medical Systems Pvt. Ltd. (supra) and Royal Canin India Pvt. Ltd. (supra), squarely cover the issue and hold that where the final assessment order mirrors the draft assessment order without giving effect to DRP directions, such order deserves to be quashed. The reliance placed by the Printed from counselvise.com IT(TP)A Nos.91/Chny/2024 (AY-2021-22) Smartek21 Private Limited. Page 18 of 18 learned DR on PCIT v. S.G. Asia Holdings (India) Pvt. Ltd. (supra) is misplaced, as the said decision pertained to a case where section 144C procedure was not invoked at all. Hence, the ratio thereof does not advance the Revenue’s case. In this case, section 292B is also not applicable as the final order passed by the AO is not irregularity but nullity. 16. In light of the above discussion and the binding judicial precedents of the Hon’ble High Courts, we hold that the final assessment order dated 23.09.2024 passed under section 143(3) r.w.s. 144C(3) r.w.s. 144B of the Act, not being in conformity with the directions of the DRP, is void ab initio and liable to be quashed. Accordingly, the impugned final assessment order is quashed. Consequently, all additions made therein, including the transfer pricing adjustment of Rs.6,05,17,823/-, stand deleted. 17. In the result, the appeal filed by the assessee is allowed. Order pronounced on the 31st , day of October, 2025, in Chennai. Sd/- Sd/- (एस.आर.रघुनाथा) (मनु क ुमाि गिरि) (S. R. RAGHUNATHA) (MANU KUMAR GIRI) लेखा सदस्य/ACCOUNTANT MEMBER न्याययक सदस्य/JUDICIAL MEMBER चेन्नई/Chennai, ददनाांक/Dated: 31st, October, 2025. KB 1. अपीलार्थी/Appellant 2. प्रत्यर्थी/Respondent 3. आयकरआयुक्त/CIT, Chennai / Madurai / Salem / Coimbatore. 4. विभागीयप्रविविवि/DR 5. गार्डफाईल/GF Printed from counselvise.com "