Bombay HC Quashes Assessment for Failure to Issue Section 144C Draft Order

Danfoss Fluid Power Private Limited Vs Union of India & Other (Bombay High Court)

The Bombay High Court considered a writ petition challenging the final assessment order dated 28 March 2025 passed by the Assessing Officer. The petitioner contended that it was an eligible assessee under Section 144C(15) of the Income-tax Act, 1961, and that the Assessing Officer had passed a final assessment order without first issuing a draft assessment order as mandated by Section 144C(1).

The petitioner had entered into share purchase agreements with Eaton Technologies Private Limited, India and ETN Holding 2 Limited, Mauritius to acquire 98% shareholding in Danfoss Systems Limited (formerly known as Eaton Fluid Power Limited) as part of a global corporate restructuring. The transaction involved the purchase of shares, including shares acquired from the Mauritius entity, and was referred by the Assessing Officer to the Transfer Pricing Officer (TPO) for determination of the Arm’s Length Price (ALP).

The TPO proposed an adjustment by determining the ALP at ₹517.82 per share instead of the purchase price of ₹363.10 per share, thereby recommending a variation prejudicial to the petitioner. Despite this variation, the Assessing Officer passed a final assessment order directly without first forwarding a draft assessment order.