Delhi High Court Sets Aside Assessment Order in PepsiCo India Holdings Case

Case Name:

PepsiCo India Holdings Private Limited vs. Assessment Unit Income Tax Department National Faceless Assessment Centre & Ors.

Key Takeaways:

1. The petitioner filed a writ petition challenging the assessment order and consequent notices issued by the Income Tax Department.
2. The petitioner argued that although objections were filed before the DRP within the prescribed time limit, they inadvertently failed to intimate the Assessing Officer about the objections.
3. The court held that once objections have been filed by the assessee against a draft assessment order within the prescribed time limit, the final assessment order should be passed by the Assessing Officer in accordance with the directions issued by the DRP.
4. The court set aside the assessment order, computation sheet, and subsequent notices, allowing the petitioner’s writ petition.
5. The decision is in line with previous judgments from the Bombay High Court and the Delhi High Court, which also set aside assessment orders and consequent notices passed without waiting for the directions issued by the DRP.

Case Synopsis:

This is a judgment from the High Court of Delhi in the case of PepsiCo India Holdings Private Limited vs. Assessment Unit Income Tax Department National Faceless Assessment Centre & Ors. The judgment was delivered on December 1, 2023.

In this case, the petitioner, PepsiCo India Holdings Private Limited, filed a writ petition challenging the order passed by the Respondent No.1 under Section 143(3) (of Income Tax Act, 1961) read with Section 144C(4) (of Income Tax Act, 1961) for Assessment Year 2020-21, as well as the computation sheet and demand notice issued under Section 156 (of Income Tax Act, 1961). The petitioner also challenged the notice issued under Section 274 (of Income Tax Act, 1961) read with Section 270A (of Income Tax Act, 1961), initiating penalty proceedings against the petitioner. The petitioner also sought directions to the Respondent No.3-Dispute Resolution Panel (DRP) to decide the objections in accordance with the law.

The petitioner’s counsel argued that although the petitioner had filed its objections against the draft assessment order before the DRP within the prescribed time limit, the petitioner inadvertently failed to intimate the Assessing Officer regarding the objections. Due to this inadvertent lapse, the Assessing Officer passed the final assessment order, thereby closing the assessment for the year under consideration.

The petitioner’s counsel relied on judgments from the High Court of Karnataka and the Bombay High Court, where under similar circumstances, the court had set aside the final assessment order and consequent notices. The counsel also relied on a decision of the Delhi High Court in SRF Ltd. vs. NFAC, Anand Nvh Products (P.) Ltd. vs. NFAC, and Fiberhome India (P.) Ltd. vs. National E-Assessment Centre, wherein the court set aside the final assessment order and consequent notices/computations that were passed without waiting for the directions issued by the DRP as per the mandate of Section 144C (of Income Tax Act, 1961).

After hearing the arguments of both parties, the court held that once the objections have been filed by the assessee against a draft assessment order within the prescribed time limit, the rest of the procedure should be followed as prescribed, and the final assessment order should be passed by the Assessing Officer in accordance with the directions issued by the DRP. The court also noted that setting aside the impugned assessment order would not cause any prejudice to the Respondent-Department, as they would have the opportunity to pass a fresh assessment order after receiving directions from the DRP.

Therefore, the court set aside the impugned assessment order, computation sheet, and subsequent notices, and allowed the writ petition.

FAQ:

Q1: What was the petitioner challenging in this case?

A1: The petitioner challenged the assessment order, computation sheet, and subsequent notices issued by the Income Tax Department.

Q2: What was the argument of the petitioner?

A2: The petitioner argued that although objections were filed before the DRP within the prescribed time limit, they inadvertently failed to intimate the Assessing Officer about the objections.

Q3: What was the court’s decision?

A3: The court set aside the assessment order, computation sheet, and subsequent notices, allowing the petitioner’s writ petition.

Q4: What is the key takeaway from this case?

A4: The key takeaway is that once objections have been filed by the assessee against a draft assessment order within the prescribed time limit, the final assessment order should be passed by the Assessing Officer in accordance with the directions issued by the DRP.

1. Present writ petition has been filed challenging the order dated 21st November, 2023 passed by the Respondent No.1 under Section 143(3) (of Income Tax Act, 1961) read with Section 144C(4) (of Income Tax Act, 1961) [hereinafter referred to as ‘the Act’] for Assessment Year 2020-21 as well as the computation sheet and demand notice issued under Section 156 (of Income Tax Act, 1961). Petitioner also challenges the notice dated 21st November, 2023 issued under Section 274 (of Income Tax Act, 1961)

read with Section 270A (of Income Tax Act, 1961) initiating penalty proceedings against the

Petitioner. Petitioner also seeks directions to the Respondent No.3-Dispute

Resolution Panel (‘DRP’), to decide the objections dated 20th October, 2023

in accordance with law.

2. Learned counsel for the Petitioner states that though the Petitioner had

preferred its objections against the draft assessment order dated 26th September, 2023 before the Respondent No.3-DRP within limitation as provided under Section 144C(2)(b)(i) (of Income Tax Act, 1961) read with Section 144B(1)(xxiv)(b)(I) (of Income Tax Act, 1961), yet the Petitioner inadvertently failed to intimate the Respondent No.1-Assessing Officer regarding the objections in terms of Section 144C(2)(b)(ii) (of Income Tax Act, 1961). He states that due to the inadvertent lapse on behalf of the Petitioner, Respondent No.1- Assessing Officer passed the impugned final assessment order dated 21st November, 2023, thereby closing the assessment for the year under consideration.

3. Learned counsel for the Petitioner states that since the Petitioner had

exercised its statutory remedy of filing its objections before the Respondent No.3-DRP, the impugned final assessment order should not have been passed by the Respondent No. 1- Assessing Officer before the Respondent

No. 3-DRP issued its directions for framing of the assessment.

4. In support of his submission, he relies on the judgment dated 19th July, 2023 passed by the High Court of Karnataka in Open Silicon Research Private limited v. The Assessment Unit [W.P. No. 14541 of 2023] and the Bombay High Court in Sulzer Pumps India Private Limited v. Dy. Commissioner of Income Tax [W.P.(L) No. 15811/2021] wherein under identical facts, the Court had set aside the final assessment order and consequent notices. He also relies on the decision of this Court in SRF Ltd. vs. NFAC, [2021] 281 Taxman 574 (Delhi High Court), Anand Nvh Products (P.) Ltd. vs. NFAC, [2021] 282 Taxman 485 (Delhi High Court) and Fiberhome India (P.) Ltd. Vs. National E-Assessment Centre, Additional/Joint/Deputy Assistant Commissioner of Income-tax/Incometax Officer, (2022) 132 taxmann.com 118 (Delhi) wherein this Court set aside the final assessment order and the consequent notices/ computations that were passed without waiting for the directions issued by the DRP as per the mandate of Section 144C (of Income Tax Act, 1961).

5. Issue Notice. Mr.Aseem Chawla, Senior Standing Counsel, accepts

notice on behalf of the Respondents.

6. He submits that under Section 144C(2)(b)(ii) (of Income Tax Act, 1961), the Petitioner on receipt

of the draft assessment order was statutorily required to file its objections before the Assessing Officer in addition to the DRP. He further submits that under Section 144C(3)(b) (of Income Tax Act, 1961) the Assessing Officer was obligated to complete the assessment on the basis of the draft assessment order if no objections were received within the time period specified under Section 144C(2) (of Income Tax Act, 1961) i.e. within thirty days of the receipt of the draft order. He states that the Assessing Officer was well within his right to pass the impugned assessment order dated 21st November, 2023 and he cannot be faulted for finalising the assessment in accordance with the prescribed procedure.

7. Having heard learned counsel for the parties, this Court is of the view

that the issue at hand is no longer res integra as it has been decided by the Bombay High Court in Sulzer Pumps (supra) wherein it has been held as

under:-

“6. In our view since petitioner had already filed a reference raising

his objections to the DRP and Section 144C(4) (of Income Tax Act, 1961) requires the

Assessing Officer to pass the final order including the view expressed

by the DRP, we will be justified in setting aside the order of the

Assessing Officer dated 28th June, 2021 which is impugned in this

petition. We would also observe that the Assessing Officer cannot be

faulted for passing the impugned order. At the same time, the

Assessing Officer will also have benefit of considering the views of

DRP while passing a fresh Assessment Order.”

8. This Court is in agreement with the view expressed by the Bombay

High Court in the aforesaid decision. Once the objections have been filed by

the assessee against a draft assessment order within the time limit prescribed under Section 144C(2)(b) (of Income Tax Act, 1961), the rest of the procedure should be followed as prescribed and the final assessment order ought to be passed by the Assessing Officer in accordance with the directions issued by the DRP.

9. This Court is further of the view that no prejudice will be caused to

the Respondent-Department if the present petition is allowed and the

impugned assessment order is set aside as Respondent-Department would be

well within its rights to pass a fresh assessment order post the receipt of

direction from the Respondent No. 3-DRP.

10. Accordingly the impugned assessment order dated 21st November, 2023, the computation sheet as well as all the subsequent notices are set aside and the writ petition is allowed.

ACTING CHIEF JUSTICE

MINI PUSHKARNA, J

DECEMBER 1, 2023