PHI Seeds Pvt. Ltd. Vs DCIT (ITAT Delhi)
The assessee’s assessment was completed through the draft assessment/DRP mechanism under section 144C after a reference to the Transfer Pricing Officer (TPO). However, the TPO, in his order under section 92CA(3), accepted that all international transactions were at arm’s length and made no variation to the returned income.
Raising an additional legal ground before the Tribunal, the assessee contended that in the absence of any TPO variation, it did not qualify as an “eligible assessee” under section 144C(15). Therefore, the Assessing Officer had no jurisdiction to follow the draft order–DRP procedure and the final assessment framed under section 143(3) read with section 144C was void ab initio.
The Tribunal admitted this additional ground as a pure question of law going to the root of jurisdiction. Relying on the Bombay High Court decision in Classic Legends (P) Ltd., it held that where the TPO proposes no adjustment, the assessee cannot be treated as an “eligible assessee” and the entire section 144C procedure becomes inapplicable.
Since the Assessing Officer nevertheless issued a draft order and completed the assessment through the DRP route, the assessment suffered from lack of jurisdiction. Accordingly, the entire assessment order was quashed, and other issues on merits, including denial of exemption under section 10(1) for agricultural income from hybrid seed activities, were rendered academic. The assessee’s appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
