Hitachi Energy India Limited Vs DCIT (Karnataka High Court)
In Hitachi Energy India Ltd. vs DCIT (Karnataka High Court), the Court quashed the draft assessment order and the DRP’s directions for AY 2020–21, holding that the authorities lacked jurisdiction to invoke the special procedure under Section 144C. The assessee, engaged in manufacturing and supplying power equipment and related services, filed its return declaring income of about ₹297.02 crore. During assessment, the AO made a reference to the TPO under Section 92CA, but the TPO passed an order under Section 92CA(3) categorically stating that no transfer pricing adjustment was required, resulting in no variation to the returned income. Despite this, the AO issued a draft assessment order under Section 144C(1) treating the assessee as an “eligible assessee”, and the DRP proceeded to issue directions—even while observing that the assessee did not satisfy the statutory conditions under Section 144C(15)(b). The High Court held that the definition of “eligible assessee” is strict and can apply only where the variation arises as a consequence of the TPO’s order (or the assessee is a foreign company). Relying on Classic Legends (Bombay HC), which followed Pankaj Extrusions (Gujarat HC) and was reinforced by Honda Cars (Delhi HC), the Court held that where the TPO proposes no variation, Section 144C cannot be triggered, and a draft assessment order cannot be issued. As the mandatory jurisdictional precondition of “variation” was absent, the draft order and DRP directions were declared non est and void, while granting liberty to the Revenue to proceed afresh in accordance with law.
