ZoomRx Healthcare Technology Solutions Private Limited V. The Additional/Joint/Deputy/Assistant Commissioner of Income Tax and Deputy Commissioner of Income Tax Circle 7(1)(1), Bengaluru

WP/13955/2024

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The case involves ZoomRx Healthcare Technology Solutions Private Limited, which filed a writ petition against the order passed by the Income Tax authorities concerning the Assessment Year 2021-2022. The petitioner had filed objections to a Draft Assessment Order regarding transfer pricing adjustments before the Dispute Resolution Panel (DRP), but failed to file them with the Assessing Officer within the prescribed time. The main legal contention was whether the non-filing of objections with the Assessing Officer, while having filed them with the DRP, invalidated the procedural requirements under Section 144C of the Income Tax Act. The court referenced a similar case, Open Silicon Research (P) Ltd, to conclude that the Assessing Officer should not have proceeded with the assessment until the DRP issued directions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 817139 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 11-06-2024
• Assessment Year: misc
• Other Referred Cases: Open Silicon Research (P) Ltd v. Assessment Unit, National Faceless Assessment Centre, Income-tax Department, New Delhi
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: M DILEEP
• Assessee Lawyers: N V BALAJI
• Keywords: Assessment year 2021-22; Dispute Resolution Panel; Draft Assessment Order; Income Tax; Transfer pricing; Writ of Certiorari
• Section: 144; 144C(13); 144C(5); 144B; 144C(3); 144C(1); 144C(10); 144C(6)

Judgement Text

" - 1 - NC: 2024:KHC:20684 WP No. 13955 of 2024 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11TH DAY OF JUNE, 2024 BEFORE THE HON'BLE MR JUSTICE S SUNIL DUTT YADAV WRIT PETITION NO. 13955 OF 2024 (T-IT) BETWEEN: 1. ZOOMRX HEALTHCARE TECHNOLOGY SOLUTIONS PRIVATE LIMITED PRIVATE LIMITED COMPANY ENGAGED IN SOFTWARE DEVELOPMENT AND DATA ANALYTICS INCORPORATED UNDER COMPANIES ACT 1956 REPRESENTED BY ITS VICE PRESIDENT - TECHNOLOGY MR SIVAKUMAR KUPPUSAMY 94 TVH BELICIAA TOWER MRC NAGAR RA PURAM CHENNAI-600 028 … PETITIONER (BY SRI. N.V. BALAJI, ADVOCATE FOR SRI SRIBALA B., ADVOCATE) AND: 1. THE ADDITIONAL/JOINT/DEPUTY/ ASSISTANT COMMISSIONER OF INCOME TAX INCOME TAX OFFICER ASSESSMENT UNIT NATIONAL FACELESS ASSESSMENT CENTRE DELHI-110 001 Digitally signed by VIDYA G R Location: HIGH COURT OF KARNATAKA - 2 - NC: 2024:KHC:20684 WP No. 13955 of 2024 2. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7(1)(1), BENGALURU BMTC BUILDING KORAMANGALA BENGALURU … RESPONDENTS (BY SRI. M. DILEEP, JUNIOR STANDING COUNSEL) THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA, PRAYING TO ISSUE A WRIT OF CERTIORARI TO QUASH THE IMPUGNED ORDER DATED 20.11.2023 BEARING DIN ITBA/AST/S/144/2023- 24/1058081333(1) PASSED UNDER SECTION 144 R.W.S 144C(3) READ WITH SECTION 144B OF THE INCOME TAX ACT, 1961, FOR THE AY 2021-22 VIDE ANNEXURE A, PASS SUCH FURTHER OR OTHER ORDERS AS MAY BE DEEMED FIT AND PROPER IN THE CIRCUMSTANCES OF THIS CASE, AND RENDER JUSTICE AND ETC. THIS PETITION COMING ON FOR PRELIMINARY HEARING THIS DAY, THE COURT MADE THE FOLLOWING: ORDER The petitioner has sought for issuance of writ of certiorari to quash the order at Annexure-'A' dated 20.11.2023 passed under Section 144C(3) read with Section 144B of the Income Tax Act, 1961 as regards the Assessment Year 2021-2022. 2. The case that is made out by the petitioner is that it had filed return of income for the Assessment year 2021-2022 and the case of the petitioner was selected for - 3 - NC: 2024:KHC:20684 WP No. 13955 of 2024 scrutiny and the matter was referred to the Transfer Pricing Officer (TPO) for determination of Arm's Length Price. Pursuant to such reference, TPO has made transfer price adjustment and pursuant to the same, the respondent No.1 has passed the Draft Assessment Order under Section 144C(1) of the Income Tax Act. It is stated that the petitioner had filed its objections to the Draft Assessment Order before the Dispute Resolution Panel (DRP). Though copy of the said objection was required to be filed before the Assessing Officer, there has been some lapse on the part of the petitioner to do so within the time prescribed as per law. 3. It is submitted that the fact that the petitioner has filed its objections before the DRP must be taken to be sufficient. 4. Reliance is placed on the decision of this Court in the case of Open Silicon Research (P) Ltd v. Assessment Unit, National Faceless Assessment Centre, Income-tax Department, New Delhi reported - 4 - NC: 2024:KHC:20684 WP No. 13955 of 2024 in (2023) 154 taxmann.com 11 (Karnataka). The observations made by this Court at paras-7 to 13 could be relied upon and are extracted hereinbelow:- \"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. - 5 - NC: 2024:KHC:20684 WP No. 13955 of 2024 9. The scheme at Section 144C is clear and would envisage the procedure as follows: (a) On receipt of the draft order, the assessee within thirty days may file his acceptance of the variations to the Assessing Officer; or (b) In the event he disagrees with such variations, he has to file his objections to such variations with the Dispute Resolution Panel and the Assessing Officer. 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 - 6 - NC: 2024:KHC:20684 WP No. 13955 of 2024 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. This is the procedure to be followed. In the present case where objections no doubt have been filed before the DRP and directions passed though at a later point of time, in light of the manner of construing the procedure the assessing officer ought not to have proceeded and ought to have waited till directions were passed by the DRP, as the directions have though been subsequently passed on 15.05.2023. 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. 12. Insofar as the communication at Annexure-A4 is concerned, once the DRP issues directions, it is not concerned with the action of the Assessing Officer. The passing of directions by - 7 - NC: 2024:KHC:20684 WP No. 13955 of 2024 the DRP confirms right on the petitioner to have such directions adhered to and even otherwise, in terms of Section 144C(13), the assessing officer has no discretion. If that were to be so, the question of the DRP withdrawing its directions does not arise and accordingly, the communication at Annexure-A4 is set aside in terms of the above discussion. 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.\" 5. Taking note that the objections have been filed before the DRP and in light of the observations made in - 8 - NC: 2024:KHC:20684 WP No. 13955 of 2024 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 by the petitioner filed, copy of which is enclosed at Annexure-'G'. Accordingly, the petition is allowed. Sd/- JUDGE VGR "