Gujarat High Court Grants Relief After Transfer Pricing Objections Were Mistakenly Filed Before Wrong Authority, Quashes Final Assessment

The Gujarat High Court recently granted relief to a company which had inadvertently filed its objections to a proposed transfer pricing adjustment for Assessment Year 2022-23 before the jurisdictional assessing officer instead of filing it before the faceless authority.The petitioner had sought quashing of final Assessment Order dated 02.05.2025 passed under Section 143(3) read with Section 144C (3) and Section 144B of the Income Tax Act, for Assessment Year 2022-23. The petitioner had further sought a direction to the tax authority to hear the application and issue fresh directions under Section 144C(5) of the Act on the ground that the same is non-est having been passed in violation of the mandatory procedure prescribed under Section 144C(13) of the Act.The petitioner was selected for scrutiny assessment under the Computer Aided Scrutiny Selection (CASS) parameters, for issues involving significant international transactions and transfer pricing risk parameters. Consequently, the matter was referred to the Transfer Pricing Officer (TPO) under Section 92CA (1) of the Act for determination of the arm's length price (ALP).The TPO vide its letter dated 16.01.2025 passed under Section 92CA (3) of the Act proposed an upward adjustment of Rs.12,68,130 in respect of notional interest imputed on alleged delayed realization of sale invoices from Associated Enterprises (AEs) beyond normal credit period extended by the petitioner Company. Being aggrieved by the proposed variation, the petitioner in compliance with the provisions of Section 144C(2) filed its objections in Form 35A of the Act before the respondent no. 3 – Dispute Resolution Panel (DRP) on 21.04.2025, which was filed within the prescribed period of limitation of 30 days. The same was acknowledged by respondent No.3 – DRP on 21.04.2025 and respondent no. 2 – Jurisdictional Assessing Officer (JAO) on 22.04.2025. Despite the pendency of the said objections before respondent no. 3 - DRP, and without awaiting issuance of directions under Section 144C(5) of the Act from the respondent no. 3, respondent no. 1 – Faceless Assessing Officer (NFAC) passed a final Assessment Order dated 02.05.2025 under Section 143(3) read with Section 144C(3) and Section 144B of the Act.A division bench of Justice AS Supehia and Justice Pranav Trivedi in its order noted:"It appears that the draft Assessment Order under Section 144C(1) of the Act was passed 24.03.2025 by the respondent no. 1 proposing adjustment of Rs.12,68,130/- and the petitioner having been aggrieved by the same filed its objections in Form 35A before the respondent no. 3 – Disputes Resolution Panel (DRP) on 21.04.2025 within the limitation period of 30 days as per the provisions of Section 144C(2) of the Act. At the same time, the petitioner also filed its objections on 22.04.2025 before respondent no.2 (JAO). Both the objections were acknowledged by the respondent authorities. It is not in dispute and in fact admitted by the respective parties that the petitioner was supposed to file its objections before the Faceless Assessing Officer and had erroneously filed it before the JAO and thereafter the Faceless Assessing Officer proceeded to pass the Final Assessment Order on 02.05.2025 under Section 143(3) read with Section 144C(3) and Section 144B of the Act. Along with the Final Assessment Order, notice under Section 274 read with Section 270A of the Act was also issued for initiation of penalty proceedings. The petitioner thereafter filed various representations before the respondent authorities. However, the same was not acceded to and the Final Assessment Order was passed on 25.06.2025"During the pendency of the writ petition, the respondent no. 3 DRP also passed the order on 25.06.2025 by observing that since the Assessing Officer had already passed the Assessment Order dated 02.05.2025, the objections filed by the petitioner before it has become non est as the DRP lacks jurisdiction.The bench said that in the present case, so far as the filing of objections by the petitioner before the DRP within a period of 30 days is concerned, the same is not in dispute. "However, the case of the respective parties hinges on the noncompliance of the provision of Section 144C(2) (b)(ii) of the Act i.e. before the Assessing Officer. It is not in dispute that due to bona fide error, the petitioner filed objections within prescribed period of limitation before the JAO instead of Faceless Assessing Officer and accordingly the Faceless Assessing Officer passed the Final Assessment Order. Pursuant to which the DRP also passed the impugned order as having become functus offico in adjudicating the dispute. The respondents has not denied the aforesaid aspect. This the petitioner has carved out a case for interference as it is not in dispute that the petitioner due to inadvertence instead of filing objections before the Faceless Assessing Officer filed the same before the JAO within limitation...

Gujarat High Court Grants Relief After Transfer Pricing Objections Were Mistakenly Filed Before Wrong Authority, Quashes Final Assessment

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