Karnataka High Court
Hitachi Energy India Limited vs Deputy Commissoner Of Income Tax on 16 December, 2025
Author: S.R.Krishna Kumar
Bench: S.R.Krishna Kumar
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NC: 2025:KHC:54069
WP No. 18110 of 2024
HC-KAR
IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 16TH DAY OF DECEMBER, 2025
BEFORE
THE HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
WRIT PETITION NO. 18110 OF 2024 (T-IT)
BETWEEN:
HITACHI ENERGY INDIA LIMITED
(FORMERLY KNOWN AS ABB POWER
PRODUCTS AND SYSTEMS INDIA LIMITED)
A COMPANY REGISTERED UNDER THE,
COMPANIES ACT, 1956, HAVING OFFICE AT
8TH FLOOR, BRIGADE OPUS, 70/401,
KODIGEHALLI MAIN ROAD,
KODIGEHALLI, BANGALORE - 560 092.
REPRESENTED BY ITS HEAD OF TAXATION,
MR ARINDAM LAHIRI.
...PETITIONER
(BY SRI. T. SURYANARAYANA, SENIOR COUNSEL FOR
SMT. TANMAYEE RAJKUMAR, ADVOCATE)
AND:
1. DEPUTY COMMISSONER OF INCOME TAX
Digitally signed by CIRCLE 3(1)(1), BMTC BUILDING,
CHANDANA B M 80 FEET ROAD, KORAMANGALA,
Location: High BANGALORE - 560 095.
Court of Karnataka
2. PRINCIPAL COMMISSIONER OF INCOME TAX -3
BMTC BUILDING, 80 FEET ROAD,
KORAMANGALA,
BANGALORE - 560 095.
3. DISPUTE RESOLUTION PANEL-1
KENDRIYA SADAN, 4TH FLOOR,
C WING, BANGALORE - 560 064.
...RESPONDENTS
(BY SRI. THIRUMALESH, ADVOCATE)
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NC: 2025:KHC:54069
WP No. 18110 of 2024
HC-KAR
THIS W.P. IS FILED UNDER ARTICLE 226 OF THE
CONSTITUTION OF INDIA PRAYING TO QUASH THE DRAFT
ASSESSMENT ORDER BEARING DIN ITBA/AST/F/144C/2023-
24/1056676734(1) DTD. 29.09.2023 (ANNX-B) PASSED BY THE 1ST
RESPONDENT UNDER SECTION 144C OF THE ACT FOR THE
ASSESSMENT YEAR 2020-21 AS NON-EST AND VOID AB INITIO
AND ETC.,
THIS PETITION, COMING ON FOR ORDERS, THIS DAY,
ORDER WAS MADE THEREIN AS UNDER:
CORAM: HON'BLE MR. JUSTICE S.R.KRISHNA KUMAR
ORAL ORDER
In this petition, petitioner seeks the following reliefs:
"(a) Quashing the draft assessment order bearing DIN ITBA/AST/F/144C/2023-24/1056676734(1) dated 29.09.2023 (Annexure B) passed by the 1st Respondent under Section 144C of the Act for the assessment year 2020-21 as non-est and void ab initio;
(b) Quashing of the directions issued by the DRP dated 28.06.2024 (Annexure D) bearing no. F. No. 235/DRP-
1/BNG/2023-24 by the 3rd Respondent under Section 144C(5) of the Act for the assessment year 2020-21 as being without jurisdiction;
(c) pass such other or further orders as this Hon'ble Court may deem fit in the facts and circumstances of the case, in the interests of justice and equity."
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2. Heard learned Senior Counsel for the petitioner and learned counsel for the respondents and perused the material on record.
3. A perusal of the material on record will indicate that for the assessment year 2020-21, the petitioner has filed its return of income declaring a total income of Rs.2,97,02,48,150/- and tax liability of Rs.73,87,00,259/-. During the course of assessment proceedings, a reference came to be made to the Transfer Pricing Officer (TPO) on 24.07.2023 for determination of the arm's length price of the international transactions entered into by the petitioner.
The TPO passed an order holding that no adjustment was required to be made. Despite there being no variation proposed by the TPO and the petitioner not being an eligible assessee in terms of Section 144C(15)(b) of the Income Tax Act, 1961, the 1st respondent proceeded to pass a draft assessment order dated 29.09.2023 at Annexure-B contrary to the provisions of the Act on the erroneous premise that the petitioner was a 'eligible assessee'.
In pursuance of the said order dated 29.09.2023, petitioner filed petition before respondent No.3-Dispute Resolution Panel - 1 (DRP-1), who issued directions on 28.06.2024 holding that -4- NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR petitioner did not satisfy the conditions stipulated in Section 144C(15)(b) of the IT Act since he was a eligible assessee on the ground that objections were filed before the DRP and proceeded to adjudicate the matter on merits. Aggrieved by the impugned draft assessment order at Annexure- B and the directions issued by the DRP at Annexure- D, petitioner is before this Court by way of the present petition placing reliance upon the judgment of the Bombay High Court in the case of Classic Legends (P.) Ltd., Vs. Assessment Unit - W.P.(L) No.14748/2025 dated 09.09.2025
4. Per contra, learned counsel for the respondent submits that there is no merit in the petition and the same is liable to be dismissed.
5. As rightly contented by the learned Senior Counsel for the petitioner, the petitioner was not an 'eligible assessee' as wrongly held/concluded by the respondents. Under identical circumstances in the case of Classic Legends (P) Ltd., referred to supra, the Division Bench of Bombay High Court held as under:
1. Rule. Respondents waive service. With the consent of the parties, Rule made returnable forthwith and heard finally.
2. The above Writ Petition is filed seeking to quash and -5- NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR set aside the impugned Draft Assessment Order dated 8th March 2025 passed under Section 144C and the Final Assessment Order dated 7th April 2025 passed under Section 143 (3) read with Section 144C and Section 144B of the Income Tax Act, 1961 ("for short "I.T.Act").
Consequently, the Demand Notice issued under Section 156 as well as the Show Cause Notice issued for imposing penalty under Section 270A and Section 271AAC are also impugned.
3. The short ground on which all these orders and notices are impugned is that the Assessing Officer has wrongly invoked the provisions of Section 144C which relate to a reference to the Dispute Resolution Panel. According to the Petitioner, in the facts of the present case, initially the Assessing Officer had made a reference to the Transfer Pricing Officer ("TPO") under Section 92CA of the I. T. Act. Pursuant to this reference, the TPO issued notices to the Petitioner and thereafter passed an order under Section 92CA(3) accepting that the international transactions entered into by the Petitioner with its Associated Enterprises were at an Arms Length Price. In other words, the TPO made no variation. According to the Petitioner, by virtue of the definition of the words "eligible assessee" appearing in Section 144C(15), the Petitioner could never fall within the aforesaid definition because the TPO never made any variation. Since no variation was made, there was no occasion for the Assessing Officer to pass any Draft Assessment Order and thereafter serve it upon the Petitioner. In other words, the Assessing Officer ought to -6- NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR have passed his Assessment Order under Section 143 (3) without invoking the provisions of Section 144C of the I. T. Act.
4. On the other hand, in the affidavit in reply dated 14th August 2025 filed by the Revenue, it is contention of the Revenue that it is totally incorrect to submit that the Draft Assessment Order as well as the Final Assessment Order passed under the provisions of Section 144C read with Section 143 (3) are without jurisdiction. Though the Revenue admits that the TPO did not propose any variation, it contends that this would not mean that the Assessing Officer was powerless to issue a Draft Assessment Order under Section 144C. According to the Revenue, the Petitioner puts a very restrictive meaning to the words "eligible assessee"
when infact a broader meaning has to be given which would include all Assessees where a reference to the TPO is made by the Assessing Officer proposing a variation to the income declared by the Assessee. As the meaning of income includes loss, similar meaning of "variation" would also include "no variation" by the TPO, is the submission of the Revenue.
5. We have heard the learned counsel for the parties at length and we have also perused the papers and proceedings in the above Writ Petition. The short question that falls for consideration in the present Petition is really whether the Petitioner is an "eligible assessee". Section 144C provides for a detailed procedure to be followed in cases where any variation in income or loss returned, which is prejudicial to the interest of an assessee, occurs on -7- NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR account of a reference made under Section 92CA of the I. T. Act. The relevant portion of Section 144C is reproduced hereinbelow:-
"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.
********* (15) For the purposes of this section,-
(a) "Dispute Resolution Panel" means a collegium comprising of three [Principal Commissioner 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 of 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:] [Provided that such eligible assessee shall not include person referred to in sub-section (1) of section 158BA or other person other person referred to in section 158BD.]"
(emphasis supplied)
6. In the facts of the present case, it is not in dispute that the Petitioner is not a non-resident or a foreign company as contemplated under Section 144C (15) (b)(ii). The question is whether the Petitioner would fall within the definition of "eligible assessee" as contemplated under Section 144C -8- NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR (15) (b) (i). On a plain reading of the said provision, the Petitioner can be stated to be an "eligible assessee" only if there is a case of variation referred to in the said sub-section 1 and which arises as a consequence of the order passed by the TPO under sub-section 3 of Section 92CA. In the facts of the present case, it is an admitted position that there was no variation in the income of the Petitioner by virtue of the order of the TPO. That being the position, the Petitioner cannot be stated to be an "eligible assessee" as defined in clause (b) of sub-section 15 of Section 144C of the I. T. Act. Once this is the case, the entire procedure for issuance of a draft order calling for the Petitioner's objections thereon and taking further steps as laid down under Section 144C would, therefore, not apply.
7. We are unable to agree with the contention of the Revenue that the word "variation" appearing in Section 144C(1) and 144C(15) would also include "no variation". This is clear from Section 144C(1) itself which categorically states that the Assessing Officer would have to forward a draft assessment order to the "eligible assesee", if he proposes to make, on or after 1st October 2009, any variation which is prejudicial to the interest of such Assessee. When there is no variation, there is no question of any prejudice being caused to the Assessee which would then entail him to file any objections to the Draft Order as contemplated under sub-section 2 of Section 144C. We, therefore, find that the arguments canvassed by the Revenue on this aspect is contrary to the statutory provisions.
8. In the view that we take, we are supported by a -9- NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR decision of the Hon'ble Gujarat High Court in the case of Pankaj Extrusion Ltd v/s Assistant Commissioner of Income-tax (OSD) [2011] 10 taxmann.com 17 (Gujarat). The relevant portion of this decision reads thus:-
"5. Short question that calls for consideration in the present petition is whether the petitioner is an "eligible assessee".
6. Section 144C provides for a detailed procedure to be followed in cases where any variation in income or Loss returned which is prejudicial to the interest of an assessee occurs on account of reference made in section 92CA of the Act. Relevant portion of section 144C is reproduced here-in- below :
"144C.Reference to Dispute Resolution Panel.-(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 in the income or loss returned which is prejudicial to the interest of such assessee.
15. For the purposes of this section,--
(b)"eligible assessee" means,--
(i) any person in whose case the variation referred to in sub-section (1) arises as consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and
(ii) any foreign company."
7. Plain reading of clause (b) of sub-section (15) of section 144C would show that an assessee can be stated to be an eligible assessee as referred to in sub- section (1) of section 144C in whose case variation referred to in the said sub-
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NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR section arises as a consequence of order of Transfer Pricing Officer passed under sub-section (3) of section 92CA. We have been taken through the order passed by the Assistant Commissioner of Income-tax dated 29-9-2010, wherein it is held as under:
"3.The assessee is engaged in the business of manufacture of Aluminium Profiles. The details of international transactions in terms of section 92B of the Act between the assessee and its Associate Enterprise are given in Form 3CEB. Relevant details regarding international transactions were produced by the assessee and are kept on record. After discussion and based on records produced, no adjustment is being made to the arm's length price of the transactions."
(Emphasis supplied)
8. From the above, it is clear that for assessment year relevant for our purpose, on account of procedure undertaken in section 92CA of the Act, there was no variation in the income by virtue of order of Transfer Pricing Officer. That being the position, the petitioner cannot be stated to be an eligible assessee as defined in clause (b) of sub-section (15) of section 144C of the Act. Procedure for issuance of draft order calling for his objection and taking further steps as laid down under section 144C therefore, would not apply."
(emphasis supplied)
9. The decision of the Hon'ble Gujarat High Court in Pankaj Extrusion (supra) was thereafter also followed by the Hon'ble Delhi High Court in the case of Honda Cars India Ltd v/s Deputy Commissioner of Income-tax [2016] 67 taxmann.com 29 (Delhi). The relevant portion of the Hon'ble Delhi High Court judgment reads thus:-
"8. A reading of Section 144C(1) of the Act shows that the Assessing Officer, in the first instance, is to
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NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR forward a draft of the proposed order of assessment to the "eligible assessee", if he proposes to make any variation in the income or loss return which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an "eligible assessee" which means that for the section to apply a person has to be an "eligible assessee".
9. Section 144C(15)(b) of the Act defines an "eligible assessee" to mean (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under section 92CA(3); and (ii) any foreign company.
10. The Supreme Court in P. Kasilingam v. P.S.G. College of Technology 1995 (Suppl) 2 SCC 348 has held that the use of word "means" indicates that the definition is a hard and fast definition and no other meaning can be assigned to the expression than is put down in the definition.
11. In Section 144C(15)(b) of the Act, the term "eligible assessee" is followed by an expression "means" only and there are two categories referred therein (i) any person in whose case the variation arises as a consequence of an order of the Transfer Pricing Officer and (ii) any foreign company. The use of the word "means" indicates that the definition "eligible assessee" for the purposes of Section 144(C)(15)(b) is a hard and fast definition and can only be applicable in the above two categories.
12. First of all, the petitioner is admittedly not a foreign Company. Secondly, the Transfer Pricing Officer has not proposed any variation to the return filed by the petitioner. The consequence of this is that the Assessing Officer cannot propose an order of assessment that is at variance in the income or loss return. The Transfer Pricing Officer has accepted the return filed by the petitioner. In view of the which, neither of the two conditions are satisfied in the case of the petitioner and thus the petitioner for the purposes of Section 144C(15)(b) is not an "eligible assessee". Since the petitioner is not an eligible assessee in terms of Section 144C(15)(b),
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NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR no draft order can be passed in the case of the petitioner under Section 144C(1).
***********
14. In view of the above, it is clear that the petitioner, not being an "eligible assessee" in terms of Section 144C(15)(b) of the Act, the Assessing Officer was not competent to pass the draft assessment order under Section 144C(1) of the Act. The draft assessment order dated 31.03.2015 is accordingly quashed."
(emphasis supplied)
10. In view of the above discussion, it is clear that the Petitioner in the present case, not being an "eligible assessee" in terms of Section 144C15(b) of the I. T. Act, the Assessing Officer was not competent to pass the Draft Assessment Order under Section 144C(1) of the I. T. Act. Consequently, there was no occasion for him to thereafter pass a Final Assessment Order under Section 143 (3) read with Section 144C (3) read with Section 144B of the I. T. Act. Accordingly, the Draft Assessment Order dated 8th March 2025; the Final Assessment Order dated 7th April 2025 and the Demand Notice dated 7th April 2025 as well as the Show Cause Notices dated 7th April 2025 seeking to impose penalty, are all hereby quashed and set aside.
11. Rule is made absolute in the aforesaid terms and the Writ Petition is also disposed of in terms thereof. However, there shall be no order as to costs.
12. This order will be digitally signed by the Private Secretary/ Personal Assistant of this Court. All concerned will act on production by fax or email of a digitally signed copy of this order."
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NC: 2025:KHC:54069 WP No. 18110 of 2024 HC-KAR
6. A perusal of the material on record will clearly indicate that the petitioner was not an 'eligible assessee' and the respondents clearly fell in error in passing the impugned draft assessment order and directions and in the light of the judgment of the Bombay High Court in Classic Legends (P) Ltd.,'s case supra, I am of the considered opinion that the impugned draft assessment order and directions deserve to be quashed.
7. In the result, I pass the following:
ORDER
i) The petition is hereby allowed.
ii) The impugned draft assessment order dated 29.09.2023 at Annexure-B and DRP directions dated 28.06.2024 at Annexure-D are hereby quashed.
iii) Liberty is reserved in favour of the respondent to proceed further in accordance with law.
SD/-
(S.R.KRISHNA KUMAR) JUDGE MDS List No.: 2 Sl No.: 33