Kerala High Court
Ibs Software Services Private Limited vs Union Of India on 16 June, 2025
2025:KER:42465
W.P.(C).Nos.9520 & 9521 of 2014
1
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
MONDAY, THE 16TH DAY OF JUNE 2025 / 26TH JYAISHTA, 1947
WP(C) NO. 9520 OF 2014
PETITIONER:
IBS SOFTWARE SERVICES PRIVATE LIMITED
521 - 524, NILA, TECHNOPARK CAMPUS,
TRIVANDRUM-695 581,
REPRESENTED BY ITS COMPANY SECRETARY
MR.RAMESH BABU.M
BY ADVS.
SHRI.M.GOPIKRISHNAN NAMBIAR
SHRI.BENNY P. THOMAS (SR.)
SHRI.K.JOHN MATHAI
SRI RAJA KANNAN
RESPONDENTS:
1 THE UNION OF INDIA
REPRESENTED BY THE SECRETARY,
MINISTRY OF FINANCE(DEPARTMENT OF REVENUE),
NORTH BLOCK, NEW DELHI -110 001.
2 THE COMMISSIONER OF INCOME TAX
THIRUVANANTHAPURAM, AAYAKAR BHAVAN,
KOWDIAR, TRIVANDRUM - 695 003.
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W.P.(C).Nos.9520 & 9521 of 2014
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3 JOINT COMMISSIONER OF INCOME TAX,
RANGE - I,
THIRUVANANTHAPURAM, AAYAKAR BHAVAN,
KOWDIAR, TRIVANDRUM - 695 003.
BY ADVS.
SHRI.JOSE JOSEPH, SC, INCOME TAX DEPARTMENT,
KERALA
SRI.P.G.JAYASHANKAR
SRI.G.KEERTHIVAS
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 16.06.2025, ALONG WITH WP(C).9521/2014, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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W.P.(C).Nos.9520 & 9521 of 2014
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IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT
THE HONOURABLE MR. JUSTICE S.MANU
MONDAY, THE 16TH DAY OF JUNE 2025 / 26TH JYAISHTA, 1947
WP(C) NO. 9521 OF 2014
PETITIONER:
SUNTEC BUSINESS SOLUTIONS PRIVATE LIMITED,
321, NILA, TECHNOPARK CAMPUS, TRIVANDRUM-695 581,
REPRESENTED BY ITS CHIEF FINANCIAL OFFICER,
MR.SURESH RAO V.R.
BY ADVS.
SHRI.M.GOPIKRISHNAN NAMBIAR
SHRI.BENNY P. THOMAS (SR.)
SHRI.K.JOHN MATHAI
SHRI.RAJA KANNAN
RESPONDENTS:
1 THE UNION OF INDIA
REPRESENTED BY THE SECRETARY,
MINISTRY OF FINANCE (DEPARTMENT OF REVENUE),
NORTH BLOCK, NEW DELHI - 110 001.
2 THE COMMISSIONER OF INCOME TAX
THIRUVANANTHAPURAM, AAYAKAR BHAVAN,
KOWDIAR, TRIVANDRUM - 695 003.
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W.P.(C).Nos.9520 & 9521 of 2014
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3 ASSISTANT COMMISSIONER OF INCOME TAX,
RANGE-1, THIRUVANANTHAPURAM, AAYAKAR BHAVAN,
KOWDIAR, TRIVANDRUM - 695 003.
4 JOINT COMMISSIONER OF INCOME TAX
RANGE-1, THIRUVANANTHAPURAM, AAYAKAR BHAVAN,
KOWDIAR, TRIVANDRUM - 695 003.
BY ADVS.
SRI.P.K.R.MENON,SENIOR COUNSEL, GOI(TAXES)
SRI.P.G.JAYASHANKAR
SHRI.JOSE JOSEPH, SC, INCOME TAX DEPARTMENT,
KERALA
SRI.G.KEERTHIVAS
THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY
HEARD ON 16.06.2025, ALONG WITH WP(C).9520/2014, THE
COURT ON THE SAME DAY DELIVERED THE FOLLOWING:
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W.P.(C).Nos.9520 & 9521 of 2014
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[CR]
S.MANU, J.
--------------------------------------------------
W.P.(C).Nos.9520 & 9521 of 2014
-------------------------------------------------
Dated this the 16th day of June, 2025
JUDGMENT
In these writ petitions assessment orders issued by the
competent authority of the Income Tax Department are under
challenge mainly on the ground that they were issued beyond
the time limit under sub-section (13) of Section 144C of the Act.
2. Section 144C of the Income Tax Act is extracted
hereunder:-
“144C. (1) The Assessing Officer shall, notwithstanding
anything to the contrary contained in this Act, in the
first instance, forward a draft of the proposed order of
assessment (hereafter in this section referred to as the
draft order) to the eligible assessee if he proposes to
make, on or after the 1st day of October, 2009, any
variation which is prejudicial to the interest of such
assessee.
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W.P.(C).Nos.9520 & 9521 of 2014
6(2) On receipt of the draft order, the eligible assessee
shall, within thirty days of the receipt by him of the
draft order,-
(a) file his acceptance of the variations to the
Assessing Officer; or
(b) file his objections, if any, to such variation
with,-
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the
assessment on the basis of the draft order, if –
(a) the assessee intimates to the Assessing
Officer the acceptance of the variation; or
(b) no objections are received within the period
specified in sub-section (2).
(4) The Assessing Officer shall, notwithstanding
anything contained in section 153 [or section 153B],
pass the assessment order under sub-section (3) within
one month from the end of the month in which,-
(a) the acceptance is received; or
(b) the period of filing of objections under sub-
section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where
any objection is received under sub-section (2), issue
such directions, as it thinks fit, for the guidance of the
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7Assessing Officer to enable him to complete the
assessment.
(6) The Dispute Resolution Panel shall issue the
directions referred to in sub-section (5), after
considering the following, namely:-
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer,
Valuation Officer or Transfer Pricing Officer or any
other authority;
(e) records relating to the draft order,
(f) evidence collected by, or caused to be
collected by, it; and
(g) result of any enquiry made by, or caused to
be made by, it.
(7) The Dispute Resolution Panel may, before issuing
any directions referred to in sub-section (5),-
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any
income-tax authority and report the result of the same
to it.
(8) The Dispute Resolution Panel may confirm, reduce
or enhance the variations proposed in the draft order
so, however, that it shall not set aside any proposed
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W.P.(C).Nos.9520 & 9521 of 2014
8variation or issue any direction under sub-section (5)
for further enquiry and passing of the assessment
order.
“[Explanation.-For the removal of doubts, it is hereby
declared that the power of the Dispute Resolution Panel
to enhance the variation shall include and shall be
deemed always to have included the power to consider
any matter arising out of the assessment proceedings
relating to the draft order, notwithstanding that such
matter was raised or not by the eligible assessee.]
(9) If the members of the Dispute Resolution Panel
differ in opinion on any point, the point shall be decided
according to the opinion of the majority of the
members.
(10) Every direction issued by the Dispute Resolution
Panel shall be binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued
unless an opportunity of being heard is given to the
assessee and the Assessing Officer on such directions
which are prejudicial to the interest of the assessee or
the interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued
after nine months from the end of the month in which
the draft order is forwarded to the eligible assessee.
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(13) Upon receipt of the directions issued under sub-
section (5), the Assessing Officer shall, in conformity
with the directions, complete, notwithstanding anything
to the contrary contained in section 153 [or section
153B], the assessment without providing any further
opportunity of being heard to the assessee, within one
month from the end of the month in which such
direction is received.
(14) The Board may make rules for the purposes of the
efficient functioning of the Dispute Resolution Panel and
expeditious disposal of the objections filed under sub-
section (2) by the eligible assessee.
“[(14A) The provisions of this section shall not apply to
any assessment or reassessment order passed by the
Assessing Officer with the prior approval of the
“[Principal Commissioner or] Commissioner as provided
in sub-section (12) of section 144BA.]
“[(14B) The Central Government may make a scheme,
by notification in the Official Gazette, for the purposes
of issuance of directions by the dispute resolution
panel, so as to impart greater efficiency, transparency
and accountability by-
(a) eliminating the interface between the dispute
resolution panel and the eligible assessee or any other
person to the extent technologically feasible;
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(b) optimising utilisation of the resources through
economies of scale and functional specialisation;
(c) introducing a mechanism with dynamic
jurisdiction for issuance of directions by dispute
resolution panel.
(14C) The Central Government may, for the purpose of
giving effect to the scheme made under sub-section
(14B), by notification in the Official Gazette, direct that
any of the provisions of this Act shall not apply or shall
apply with such exceptions, modifications and
adaptations as may be specified in the notification:
Provided that no direction shall be issued after the 31 st
day of March, 2024.
(14D) Every notification issued under sub-section (14B)
and sub-section (14C) shall, as soon as may be after
the notification is issued, be laid before each House of
Parliament.]
(15) For the purposes of this section,-
(a) “Dispute Resolution Panel” means a collegium
comprising of three “[Principal Commissioners or]
Commissioners of Income-tax constituted by the Board
for this purpose;
(b) “eligible assessee” means,-
(i) any person in whose case the variation
referred to in sub-section (1) arises as a consequence
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11of the order of the Transfer Pricing Officer passed
under sub-section (3) of section 92CA; and
(ii) any non-resident not being a company, or any
foreign company.”
[Emphasis supplied]
3. Many specific time limits are stipulated under the
provisions of Section 144C. Under sub-section (2), on receipt of
draft order issued by the Assessing Officer, an eligible assessee
shall file acceptance of the variations or objections within 30
days of the receipt of the draft order. If no objections are
received within the said period, Assessing Officer can complete
the assessment on the basis of the draft order. Under sub-
section (4), time limit of one month from the end of the month
is stipulated for the Assessing Officer to complete the
assessment if acceptance was received from the assessee or the
period for filing of objections under sub-section (2) expired. If
objection is filed before the Dispute Resolution Panel (DRP) as
provided under Section 144C(2)(b), the DRP shall complete its
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proceedings within a period of 9 months from the end of the
month in which the draft order is forwarded to the eligible
assessee. Under sub-section (13), time limit is stipulated for
the Assessing Officer to complete the assessment on receipt of
the direction from the DRP. The Assessing Officer shall complete
the assessment within one month from the end of the month in
which such direction is received. The prime ground of challenge
in these writ petitions is regarding non-adherence to the time
limit fixed under sub-section (13).
4. The relevant dates to be noted in both cases are
given below:-
Events W.P.(C)No. W.P.(C)No. 9520/2014 9521/2014 Date of issuance of 27.03.2013 20.03.2013 draft assessment order Date of filing of 26.04.2013 24.04.2013 objections before the DRP Date of issuance of 13.12.2013 11.12.2013 directions by DRP Date of issuance of 25.03.2014 12.03.2014 assessment order 2025:KER:42465 W.P.(C).Nos.9520 & 9521 of 2014 13
Therefore in both cases, indisputably the assessment
orders were issued beyond the time limit under S.144C
(13). Hence the only issue arising for consideration is the
consequence of the failure to adhere to the time limit under
sub-section 13.
5. Sri.Raja Kannan, learned counsel for the petitioner
pointed out that Section 144C was incorporated in the Income
Tax Act by Finance Act, 2009 with effect from 1.4.2009. He
referred to the budget speech of the Hon’ble Minister of Finance
in which objective of incorporating the provision was explained.
An alternative dispute resolution mechanism was proposed to be
introduced within the Income Tax Department, for the resolution
of transfer pricing disputes in order to facilitate speedy
resolution of tax disputes, taking into account the necessity to
improve the investment climate in the country. Learned counsel
also made reference to the notes on clauses. Regarding Section
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144C, it was mentioned in the notes on clauses as under:-
“Clause 55 of the Bill seeks to insert a new section
144C in the Income Tax Act relating to Dispute
Resolution Panel.
The subjects of transfer pricing audit and the
taxation of foreign company are at nascent stage in
India. Often the Assessing Officers and Transfer Pricing
Officers tend to take a conservative view. The
correction of such view take very long time with the
existing appellate structure.
With a view to provide speedy disposal, it is
proposed to amend the Income Tax Act so as to create
an alternative dispute resolution mechanism within the
Income Tax Department and accordingly, section 144C
has been proposed to be inserted so as to provide inter
alia the Dispute Resolution Panel as an alternative
dispute resolution mechanism.
This amendment will take effect from 1st October,
2009.”
6. Further, the learned counsel made reference to the
memorandum explaining the provisions in the Finance Bill,
2009. The relevant extract reads as under:-
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W.P.(C).Nos.9520 & 9521 of 2014
15“Provision for constitution of alternate
dispute resolution mechanism
The dispute resolution mechanism presently
in place is time consuming and finality in high
demand cases is attained only after a long drawn
litigation till Supreme Court. Flow of foreign
investment is extremely sensitive to prolonged
uncertainty in tax related matter. Therefore, it is
proposed to amend the Income Tax Act to provide
for an alternate dispute resolution mechanism
which will facilitate expeditious resolution of
disputes in a fast track basis.”
7. The learned counsel submitted in view of the above
that the incorporation of Section 144C of Income Tax Act was
with the laudable goal of speedy resolution/mitigation of
disputes. He therefore submitted that the time limits ingrained
in the provisions of Section 144C are so consciously
incorporated by the law makers with the aim of introducing a
fast-track mechanism. He hence contended that any breach of
the time limits would consequently vitiate the proceedings and
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the provisions of Section 144C are not merely procedural in
nature. The learned counsel made reference to various reported
judgments. He placed heavy reliance on the judgment of a
Division Bench of Bombay High Court reported in Vodafone Idea
Limited v. Central Processing Centre and Others [2023 SCC
OnLine Bom 2464]. The Division Bench of the Bombay High
Court considered the provisions of Section 144C and held that it
is a self-contained provision, which carves out a separate class
of assessees, i.e. eligible assessees. Further, it was held that if
the provisions of Section 144C are not strictly adhered to, the
entire object of providing an alternate redressal mechanism in
the form of DRP would stand defeated. The Bombay High Court,
considered challenge against an assessment order passed by
the Assessing Authority two years after the DRP issued its
direction and held that it was time barred and cannot be
sustained. Relevant discussions in the judgment of the Bombay
High Court are extracted hereunder:-
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W.P.(C).Nos.9520 & 9521 of 2014
17“21. Section 144C of the Act is a self contained
provision which carves out a separate class of
assessees, i.e., ‘eligible assessee’. Section 144C of
the Act was inserted in the Finance Act of 2009 and
came into effect from 1st October 2009. In the notes
on clauses to the Finance Bill, 2009 (Budget 2009-
2010), the reason for insertion of Section 144C is
given as under :
“The subjects of transfer pricing audit and
the taxation of foreign company are at
nascent stage in India. Often the Assessing
Officers and Transfer Pricing Officers tend to
take a conservative view. The correction of
such view take very long time with the
existing appellate structure.
With a view to provide speedy disposal, it
is proposed to amend the Income Tax Act so
as to create an alternative dispute resolution
mechanism within the income-tax
department and accordingly, Section 144C
has been proposed to be inserted so as to
provide inter alia the Dispute Resolution
Panel as an alternative dispute resolution
mechanism.”
22. Thus, if the provisions of Section 144C as
mandated by the Statute are not strictly adhered the
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entire object of providing for an alternate redressal
mechanism in the form of DRP stand defeated. That
is not the intention of the legislature when the
provision was introduced in the Act. Section 144C
(10) of the Act provide that the directions of DRP are
binding on the AO. By failing to pass any order in
terms of the provision, the AO cannot be permitted
to defeat the entire exercise and render the same
futile. When a Statute prescribes the power to do a
certain thing in a certain way, then the thing must
be done in that way and other methods of
performance are forbidden. Once the statute has
prescribed a limitation period for passing the final
order, it is expected that the internal procedure of
the department should mould itself to give meaning
to and act in aid of the provision. Any procedural
defect (there is none in this case) in the internal
mechanism of the working of E-assessment Scheme,
cannot operate against the interest of assessee.
Hence, the FAO cannot be believed that the DRP
direction was received by him only on 23 rd August
2023 despite being uploaded on the ITBA portal on
25th March 2021. The failure on the part of
department to follow the procedure under Section
144C of the Act is not merely a procedural
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irregularity, but is an illegality and vitiates the entire
proceeding.
23. In a decision in the matter of Turner
International India Private Limited v. Deputy
Commissioner of Income Tax, Circle-25(2), New
Delhi, the Delhi High Court has held that the
question “whether the final assessment order stands
vitiated for failure to adhere to the mandatory
requirements of Section 144C of the Act?”, is no
longer res integra and any order passed contrary to
Section 144C of the Act cannot be sustained.
24. In a decision cited by Mr. Mistri in the
matter of Shell India Markets (P.) Ltd. (supra), this
Court has also held as follows :
“10. Sub-section (13) of Section 144C,
therefore, is very clear inasmuch as the
Assessing Officer shall, upon receipt of the
directions issued under Sub-section (5), in
conformity with the directions, complete the
assessment within one month from the end of
the month in which such direction is received.
Sub-section (13) also provides that the
Assessing Officer can complete the
assessment without providing any further
opportunity of being heard to the assessee.
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20This means that the moment the Assessing
Officer receives the directions under Sub-
section (5), he has to straight away complete
the assessment and he does not even have to
hear the assessee. The Assessing Officer shall
simply comply with the directions received
from the DRP within one month from the end
of the month in which such directions is
received.”
25. In view of the aforesaid discussion, we have no
hesitation in holding that the assessment order
dated 31st August 2023 passed by FAO two years
after the DRP directions, is time barred and cannot
be sustained. Consequently, the ROI as filed has to
be accepted. Petitioner is entitled to receive the
refund together with interest, in accordance with
law. The procedure to be completed within 30 days
of this order being unloaded. This would, however,
not preclude revenue, should the need arise, from
reopening the assessment by following due process
and in accordance with law.”
8. He also placed reliance over a judgment of a learned
Single Judge of this Court in Allianz Cornhill Information
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Services Private Limited, Rep. by its Chief Financial Officer v.
Union of India rep. by Secretary, Ministry of Finance
(Department of Revenue) and Others [2023 SCC OnLine Ker.
11076]. This Court in the said judgment considered a case in
which the assessment order was issued beyond the period
stipulated under Section 144C(13). There was a delay of about
two months in passing the assessment order. Following
observations made by this Court in the said judgment are
germane:-
“14. On a perusal of Section 144C of the Act, it
is found that, time is the essence of the
proceedings. The specific time frame given under
various sub-sections would clearly reflect the
essentiality of the time factor, in which
proceedings contemplated under Section 144C
are to be completed by the respective
authorities. A dilution of the time limits envisaged
under the statutory frame work of Section 144C
would, therefore, defeat the very purpose and
object behind the insertion of the said provision.
Section 153 of the Act deals with the time limit
contemplated for the completion of assessments
and re-assessments under the Act. It is relevant
to note that in addition to the non-obstante
clause under Section 144C(1) with respect to
other provisions of the Act, there is a specific
exclusion of the application of Section 153 from
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22the frame work of Section 144C. This specific
exclusion of Section 153 from the proceedings
under Section 144C, exemplifies the rigour of the
specific time limits provided under Section 144C.
Under Section 153 of the Act, longer time limit is
prescribed, whereas, specific time limit is
prescribed under Section 144C of the Act. The
specific exclusion of Section 153 from the ambit
of Section 144C is a conscious action of the law-
maker. If the legislature does not have any
intention to stick on with the time limit
prescribed in Section 144C, there was no
necessity of insertion of Section 144C, since
there was already a provision under Section 153
contemplating time limit for completion of
assessments or re-assessments. Hence, it cannot
be said that Section 144C is procedural, but, on
the other hand, it is a substantive provision
specifying time limit for completing proceedings
by the assessee, the assessing officer and the
DRP.
………………………………………………………….
16. By inserting Section 144C, the legislature
had a specific intention that the time limit
prescribed in the provision has to be strictly
complied with and notwithstanding anything
contained in Section 153, the assessing officer
has to pass the assessment order. Hence, it is
clear that the intention of the legislature was to
comply with the time limit prescribed in the said
section in order to avail the benefit of fast track
assessment. The assessing officer cannot, at
their whims and fancies, pass any order under
Section 144C, but, they have to strictly comply
with the statutory provisions envisaged under
Section 144C.
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23……………………………………………………………
19. Section 144C is inserted in the Finance Act,
2009 with a view to provide a speedy disposal to
create an alternative dispute resolution
mechanism within the Income Tax Department. If
the provisions of Section 144C as mandated by
the statute are not strictly adhered to, the entire
object of providing an alternative dispute
resolution mechanism in the form of DRP would
stand defeated. The legislature had clear
intention while the said provision was inserted in
2009 to facilitate an expeditious resolution of
disputes on a fast track basis. If the assessing
officer fails to pass any order in accordance with
the statutory provisions, as mandated under
Section 144C, it will defeat the entire exercise
and render the same futile. The directions in
Ext.P3 given by the DRP are binding on the
assessing officer, who has to finalize the
assessment order even without affording the
assessee an opportunity of being heard. There
was nothing more to do by the assessing officer
than to pass an assessment order on receipt of
Ext.P3. Once the statute has prescribed limitation
period for passing a final order, the officers of the
Department should act accordingly in order to
provide the assessee an expeditious resolution of
the disputes. The impugned orders were passed
by the assessing authority beyond the time
prescribed under Section 144C(13). Therefore, I
am of the opinion that the impugned order
passed by the assessing officer cannot be
sustained.”
This Court set aside the impugned assessment order issued
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beyond the time limit prescribed under Section 144C(13).
Learned Counsel submitted, relying on the said decision, that it
was rendered on almost identical set of facts and hence these
writ petitions may also be allowed.
9. Sri.P.G.Jayashankar, the learned Standing Counsel for
the Income Tax Department, submitted that the charging
provisions of the Act and the provisions providing for machinery
are to be understood and interpreted differently. He contended
that Section 144C is essentially a machinery provision which
provides for a swift procedure. He submitted that a breach of
the time limit prescribed under sub-section (13) cannot be
considered as a vitiating factor affecting the very validity of the
assessment order. He submitted that the Assessing Authority is
not vested with any discretion under Section 144C when the
DRP issues directions. Once the DRP issues directions, the
Assessing Authority has to issue an assessment order following
the directions as such. The Assessing Authority in such a
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25
situation exercises only an administrative power. He therefore
contended that even if the Assessing Authority takes time more
than that is provided under sub-section (13) of Section 144C, no
prejudice is caused and the assessment need not be considered
as vitiated. He referred to various provisions of Section 144C
and contended that accepting the interpretation canvassed by
the learned counsel for the petitioner would result in the
machinery provisions defeating the charging provisions.
10. The learned Standing Counsel made reference to
various reported judgments. He made reference to the
judgment reported in Panchamahal Steel Ltd. v. U.A.Joshi, ITO
and another [(1997) 225 ITR 458]. The Hon’ble Supreme Court
in the said judgment examined the provisions of Section 144B
and observed that once a draft order is made and the matter is
referred to the Inspecting Assistant Commissioner on receiving
the objections of the assesssee, the function of the Income Tax
Officer practically comes to an end and the remaining thing to
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26
do by him is to pass a final order of assessment in accordance
with the directions given by the Inspecting Assistant
Commissioner. The learned Standing Counsel submitted that the
Assessing Officer is in a comparable situation when he receives
the directions from the DRP. The learned Standing Counsel
made reference to the judgment of a Division Bench of this
Court reported in Joseph Kuruvila v. Commissioner of Income
Tax [(1989) 179 ITR 139]. This Court held in the said case that
failure to confirm to Section 144B is only an irregularity. The
learned Standing Counsel pointed out a recent judgment of this
Court in Parameswara Krishna Kaimal v. Union of India and
others [(2024) 462 ITR 154 (Ker)]. A learned Single Judge of
this Court observed in the said judgment that Section 144C is
not a substantive provision. Further it was held that it is a
machinery provision which has been incorporated for the benefit
of assessees. The learned Standing Counsel made further
reference to the judgment of a Constitution Bench of the
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Hon’ble Supreme Court reported in J.K.Synthetics Limited and
Birla Cement Works and Ors. v. Commercial Taxes Officer and
State of Rajasthan and Ors [(1994) 4 SCC 276]. The Hon’ble
Supreme Court in the said judgment held that ordinarily the
charging section which fixes the liability is strictly construed but
that rule of strict construction is not extended to the machinery
provisions which are construed like any other statute. Further,
the Hon’ble Supreme Court held that the machinery provisions
must no doubt be so construed as would effectuate the object
and purpose of the statute and not defeat the same. The
learned Standing Counsel contended relying on the above said
judgment that the provisions of Section 144C being machinery
provisions, strict interpretation of the same in such a manner as
argued by the petitioners would be erroneous. Such an
interpretation would lead to defeating the provisions of the Act.
He further submitted that the judgment of the Bombay High
Court, relied on by the learned counsel for the petitioner was
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W.P.(C).Nos.9520 & 9521 of 2014
28
rendered in a case in which the assessment order was issued
more than 2 years after the DRP issued directions. Hence,
according to the learned Standing Counsel the same is
distinguishable on facts. He also pointed out that the judgment
of the learned Single Judge of this Court relied on by the
learned counsel for the petitioner is under challenge before the
Division Bench of this Court. He hence submitted that the writ
petitions are liable to be dismissed, upholding the assessment.
11. Though the judgment of the learned Single Judge
in Allianz Cornhill Information Services Private Limited, Rep.
by its Chief Financial Officer v. Union of India rep. by
Secretary, Ministry of Finance (Department of Revenue) and
Others [2023 SCC OnLine Ker 11076] is under challenge in writ
appeal, no orders have been passed by the Division Bench
touching its operation and precedential value. However, as the
learned Standing Counsel for Income Tax Department
strenuously argued that the interpretation adopted in the said
judgment of this Court and also by the Bombay High Court in
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W.P.(C).Nos.9520 & 9521 of 2014
29
Vodafone Idea Limited v. Central Processing Centre and
Others [2023 SCC OnLine Bom 2464] is against the accepted
principles of interpretation, to be fair to him, I find it
appropriate to address his contentions.
12. The submission of the learned Standing Counsel that
the function of the Assessment Officer after receiving directions
from the DRP is comparable to the position of the Income Tax
Officer after obtaining directions from the Inspecting Assistant
Commissioner, with reference to Section 144B and relying on
judgments of the Hon’ble Supreme Court in Panchamahal
Steel Ltd.‘s case and Joseph Kuruvila‘s case, does not
appear to be perfectly sound. It may be correct that no
discretion is vested with the Income Tax Officer in the
mentioned circumstances and the Assessing Officer acting
pursuant to the directions from the DRP. However, for that
reason alone it cannot be concluded that as in the case of
Section 144B, breach of the provisions of Section 144C should
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W.P.(C).Nos.9520 & 9521 of 2014
30
be treated as a mere irregularity.
13. It is true that a learned Single Judge of this Court in
Parameswara Krishna Kaimal‘s case observed that Section
144C is not a substantive provision. However, the observations
and findings, virtually to the contrary, made in an earlier
decision by a co-ordinate bench in Allianz Cornhill Information
Services Private Limited, Rep. by its Chief Financial Officer v.
Union of India rep. by Secretary, Ministry of Finance
(Department of Revenue) and Others [2023 SCC OnLine Ker.
11076] were not brought to the notice of the learned Judge. The
argument of the learned Standing Counsel that the judgment of
the Bombay High Court in Vodafone Idea Limited v. Central
Processing Centre and Others [2023 SCC OnLine Bom 2464] is
distinguishable on facts, as the Court was considering a case
involving delay of more than 2 years, also cannot be accepted,
as the question considered by the Court was the consequence of
not following strictly, the time limit stipulated under Section
144C(13). Extent of delay in passing the assessment order was
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W.P.(C).Nos.9520 & 9521 of 2014
31
immaterial.
14. Section 144C was incorporated to the Act by an
amendment. Amendments are thoughtful, purpose-driven
changes made to an existing legislation by the legislature. When
an amendment is made, it must be assumed that the legislature
felt it was appropriate to alter the law as it existed prior to the
amendment. The legislature, well aware of the scheme and
provisions of the statute as it existed, proceeds to amend the
statute when the need of a change is felt. Amendments are
hence impelled by the conviction of the legislature regarding
changes required to be made for various considerations and
reasons.
15. An amended provision becomes an integral part of
the statute and it cannot be considered and interpreted in
isolation, detached from the other provisions of the statute.
However, apart from keeping in mind the object of the statute,
it is essential to keep the legislative purpose of effecting the
2025:KER:42465
W.P.(C).Nos.9520 & 9521 of 2014
32
amendment also in mind while attempting to interpret an
amended provision. Otherwise, the interpretation may defeat
the purpose of the amendment.
16. In Rameshwar Prasad and Ors v. State of UP
and Ors [(1983) 2 SCC 195 ] the Hon’ble Supreme Court held
thus:
“Whenever a court is called upon to
interpret an amended provision, it has to
bear in mind the history of the provision,
the mischief which the legislature
attempted to remedy, the remedy
provided by the amendment and the
reason for providing such remedy.”
17. Normally when the legislative intention is clear from
the plain language of the provision, the Court need not look into
any other aspects. Nevertheless, since the provision was
incorporated by an amendment, following the observations of
the Hon’ble Apex Court referred above, it is apposite in the
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W.P.(C).Nos.9520 & 9521 of 2014
33
case at hand to take note of the objectives of incorporating the
provision pointed out by the learned counsel for the petitioner
noted in the opening paragraphs of this judgment. As explained
by the law makers, Section 144C was incorporated with the
objective of providing a speedy mechanism for assessments
involving transfer pricing, to reduce possibility of disputes and to
avoid time consuming litigations. The said provision was
incorporated in the Act to further improve the investment
climate in the country. Object of incorporating such a provision
will be defeated if it is interpreted in such a manner, so that the
same would become watered down and futile.
18. Even in the judgment of the Hon’ble Supreme Court
relied on by the learned Standing Counsel for Income Tax
Department, reported in J.K.Synthetics Limited and Birla
Cement Works and Ors. v. Commercial Taxes Officer and State
of Rajasthan and Ors. [1994 (4) SCC 276], the Hon’ble
Supreme Court held in clear terms that the machinery
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W.P.(C).Nos.9520 & 9521 of 2014
34
provisions must no doubt be so construed as would effectuate
the object and purpose of the statute and not defeat the same.
In the case at hand, object and purpose of the amendment are
to be kept in mind and an interpretation giving the provisions of
S.144C proper effect needs to be adopted even if it is assumed
that the same is a machinery provision. After the amendment
comes to force, the amended provision becomes integral part of
the statute and the analysis of the object and purpose of the
statute must be taking in to account the amendment also.
19. Viewed from the perspective as explained above
despite persuasive submissions of the learned Standing Counsel,
I do not find any reason to take a different view from that
adopted by a learned Single Judge of this Court in Allianz
Cornhill Information Services Private Limited, Rep. by its
Chief Financial Officer v. Union of India rep. by Secretary,
Ministry of Finance (Department of Revenue) and Others
[2023 SCC OnLine Ker 11076] and Division Bench of the
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W.P.(C).Nos.9520 & 9521 of 2014
35
Bombay High Court in Vodafone Idea Limited v. Central
Processing Centre and Others [2023 SCC OnLine Bom 2464].
Assessing Officer is bound to adhere to the time limit stipulated
in S.144 C (13 ) of the Income Tax Act and assessment order
issued in breach of it shall be invalid.
20. In view of the foregoing discussion, I allow these writ
petitions. Impugned Ext.P4 assessment orders in both writ
petitions shall stand set aside.
Writ Petitions are disposed of as above.
Sd/-
S.MANU
JUDGE
skj
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W.P.(C).Nos.9520 & 9521 of 2014
36
APPENDIX OF WP(C) 9520/2014
PETITIONER’S EXHIBITS
EXT.P1: TRUE COPY OF THE DRAFT ASSESSMENT ORDER DATED
27.3.2013 ISSUED BY THE 3RD RESPONDENT
EXT.P2: TRUE COPY OF THE OBJECTIONS DATED 26.4.2013
FILED UNDER SUB-SECTION (2) OF SECTION 144C OF
THE ACT.
EXT.P3: TRUE COPY OF THE ‘DIRECTIONS’ DATED 13.12.2013
ISSUED BY THE DISPUTE RESOLUTION PANEL SUB-
SECTION (5) OF SECTION 144C OF THE ACT.
EXT.P4: TRUE COPY OF THE ASSESSMENT ORDER DATED
25.3.2014, (WRONGLY TYPED AS 2013) WHICH WAS
SERVED ON THE PETITIONER ON 27.3.2014
EXT.P5: TRUE COPY OF THE ASSESSMENT ORDER DATED 9.3.2004
FOR THE ASSESSMENT YEAR 2001 – 02 IN RESPECT OF
THE PETITIONER
EXT.P6: TRUE COPY OF THE FINAL ORDER OF THE INCOME TAX
APPELLATE TRIBUNAL IN I.T.A NOS 855 TO
857/COCH/2007 AND I.T.A. NO.847/COCH/2007 DATED
13.7.2010
EXT.P7: TRUE COPY OF THE INTERIM ORDER DATED 18.1.2011
IN WPC NO.1694/2011
EXT.P8: TRUE COPY OF THE INTERIM ORDER DATED 29.7.2011
IN WPC NO.1694/2011
EXT.P9: TRUE COPY OF THE INTERIM ORDER DATED 13.1.2012
IN WPC NO.1102/2012
EXT.P10 THE TRUE COPY OF THE ORDER DATED 27.3.2018
ISSUED BY THE NCLT,DIVISION BENCH,CHENNAI IN THE
MATTER OF SCHEME OF AMALGAMATION WITH IBS
SOFTWARE SERVICES PRIVATE LIMITED WITH IBS
SOFTWARE PRIVATE LIMITED,ALONG WITH THE
SANCTIONED SCHEME OF AMALGAMATION AND ORDER
DATED 27.3.2018 ISSUED BY THE REGISTRY OF THE
NCLT, DIVISION BENCH CHENNAI.
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W.P.(C).Nos.9520 & 9521 of 2014
37
APPENDIX OF WP(C) 9521/2014
PETITIONER’S EXHIBITS
EXT.P1: TRUE COPY OF THE DRAFT ASSESSMENT ORDER FOR THE
YEAR 2009-10 DATED 20/03/2013 ISSUED TO THE
PETITIONER BY THE 3RD RESPONDENT.
EXT.P2: TRUE COPY OF THE OBJECTIONS DATED 24/04/2013
(WITH COVERING LETTER) FILED BY THE PETITIONER
BEFORE THE DISPUTE RESOLUTION PANEL UNDER SUB-
SECTION (2) OF SECTION 144 C OF THE ACT.
EXT.P3: TRUE COPY OF THE DIRECTIONS DATED 11/12/2013
ISSUED TO THE PETITIONER BY THE DISPUTE
RESOLUTION PANEL SUB-SECTION (5) OF SECTION 144C
OF THE ACT.
EXT.P4: TRUE COPY OF THE ASSESSMENT ORDER DATED 12/3/2014
ISSUED TO THE PETITIONER BY THE 4TH RESPONDENT.
Ext.P5 THE TRUE COPY OF THE ORDER DATED 06.10.2021
ISSUED BY THE NATIONAL COMPANY LAW TRIBUNAL,
DIVISION BENCH-II, CHENNAI, IN CP(CAA)/12
(CHE)/2021 IN CA/478/CAA/2020
Ext.P6 THE TRUE COPY OF THE CERTIFICATE OF INCORPORATION
PURSUANT TO CHANGE OF NAME DATED 06.12.2021
ISSUED BY THE REGISTRAR OF COMPANIES, CHENNAI-34
Ext.P7 THE TRUE COPY OF THE MASTER DATA DATED NIL
OBTAINED FROM THE WEBSITE OF THE MINISTRY OF
CORPORATE AFFAIRS, GOVERNMENT OF INDIA
(www.mca.gov.in)