Louis Dreyfus Company India Private Limited Vs DCIT (Delhi High Court)
Delhi High Court has ruled in favor of Louis Dreyfus Company India Private Limited, quashing an assessment order dated August 24, 2022, issued by the Assessing Officer (AO) for the Assessment Year (AY) 2018-19. The court also set aside the consequential penalty show cause notice and the directions issued by the Dispute Resolution Panel (DRP) dated June 20, 2022. The primary reason for the court’s decision was the AO’s failure to issue the final assessment order within the mandatory one-month timeframe stipulated under Section 144C(13) of the Income Tax Act, 1961, following the DRP’s directions.
The case originated from a transfer pricing adjustment of ₹25,82,66,995 proposed by the Transfer Pricing Officer (TPO). Subsequently, a draft assessment order was issued, against which Louis Dreyfus filed objections with the DRP. The DRP issued its directions on June 20, 2022, which were uploaded onto the Income Tax Business Application (ITBA) portal on June 24, 2022. Section 144C(13) mandates that the AO must complete the assessment in conformity with the DRP’s directions within one month from the end of the month in which such directions are received.
The petitioner argued that the one-month period should be calculated from the end of June 2022, making the deadline for the assessment order July 31, 2022. However, the assessment order was issued on August 24, 2022, clearly exceeding the statutory limit. The respondents contended that the timeline should be counted from July 25, 2022, when the TPO passed an order giving effect to the DRP’s directions, placing the assessment order within the one-month window.
The Delhi High Court rejected the respondents’ argument, relying on the provisions of the E-assessment Scheme, 2019, and the interpretation provided by the Bombay High Court in Vodafone Idea Limited v. Central Processing Centre & Ors and Shell India Markets Private Limited v. Additional Commissioner of Income Tax Officer. These precedents established that once the DRP’s directions are uploaded on the ITBA portal, it constitutes deemed receipt by the AO and triggers the commencement of the one-month period under Section 144C(13).
The court emphasized that Section 144C is a self-contained provision intended for the speedy disposal of disputes, particularly in transfer pricing cases. Strict adherence to the prescribed timelines is crucial to uphold the objective of this alternative dispute resolution mechanism. The court also noted that the procedure under Section 144C does not envisage any further involvement of the TPO after the DRP has issued its directions. The TPO’s role concludes after the initial transfer pricing order is framed and remitted to the AO.
Furthermore, the court highlighted that the E-assessment Scheme, 2019, explicitly states that all communication within the faceless assessment regime must occur through the National e-Assessment Centre, with orders and decisions uploaded on the ITBA portal. Therefore, the uploading of the DRP’s directive on June 24, 2022, constituted valid service and marked the beginning of the limitation period for the AO to finalize the assessment.
Given that the assessment order was issued beyond the stipulated deadline, the Delhi High Court found a clear failure on the part of the AO to comply with the mandatory timelines of Section 144C(13). Consequently, the writ petition was allowed, and the impugned assessment order and the subsequent penalty proceedings were quashed. The court further directed that due to the respondents’ failure to implement the DRP’s directives within the statutory period, the return filed by Louis Dreyfus Company India Private Limited would be deemed to have been accepted, and the tax liability would be calculated accordingly.
FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT
