Symbol Technologies India Pvt. Ltd., engaged in providing software development services to its AEs, was subjected to a TP assessment for AY 2022-23. The TPO proposed a TP adjustment of ₹6.15 crore, against which the assessee filed objections before the DRP. The DRP granted partial relief, reducing the TP adjustment to ₹4.53 crore. However, while passing the final assessment order under section 144C(13), the AO ignored the DRP's directions and retained the original TP adjustment, leading to the present dispute.
Assessee’s Contentions | Revenue’s Contentions | Tribunal’s Judgment |
The AO was required to pass the final assessment order strictly in accordance with the DRP's directions under section 144C (13). Since the AO retained the original TP adjustment instead of giving effect to the DRP's relief, the assessment order was invalid | The AO had considered the DRP's directions, but the error occurred while giving effect to them. Therefore, the mistake was only an apparent error that could be rectified under section 154 or the matter could be remanded to the AO. | The Tribunal held that section 144C(13) is mandatory, and the AO has no discretion to ignore or deviate from the DRP's directions. Since the final assessment order did not incorporate the DRP's relief, it was not passed in accordance with law and was liable to be quashed. |
The assessee relied on earlier decisions holding that an assessment order passed contrary to the DRP's binding directions is void ab initio and cannot be sustained. | The Revenue argued that the defect was procedural in nature and could be cured through rectification under section 154 without quashing the assessment. | The Tribunal rejected the Revenue's contention and held that the defect was jurisdictional, not procedural and quashed the assessment order as void ab initio. |
Ruling Summary -
Bangalore ITAT held that a final assessment order passed without giving effect to the binding directions of the DRP violates section 144C (13) and is void ab initio, since the AO has no discretion to deviate from the DRP's directions.
The Tribunal further held that such a defect is jurisdictional in nature and cannot be cured through rectification under section 154. Accordingly, the final assessment order was quashed.
