ITAT Delhi quashes assessment against PHI Seeds for wrongful invocation of DRP mechanism

The Delhi Bench ‘F’ of the Income Tax Appellate Tribunal has allowed the appeal filed by PHI Seeds Pvt. Ltd. (now known as Corteva Agriscience Seeds Private Limited) for Assessment Year 2012–13, holding that the Assessing Officer (AO) wrongly invoked the provisions of Section 144C of the Income-tax Act, 1961 in the absence of any transfer pricing adjustment.

No TP variation, assessee not ‘eligible assessee’

The Tribunal admitted an additional legal ground raised by the assessee under Rule 11 of the ITAT Rules, relying on the Supreme Court’s rulings in NTPC Ltd. v. CIT and Jute Corporation of India v. CIT. The assessee contended that it was not an “eligible assessee” within the meaning of Section 144C(15), as the Transfer Pricing Officer (TPO), despite issuing notices under Section 92CA, had ultimately accepted the arm’s length price of the international transactions without proposing any variation.

Accepting this submission, the Tribunal noted that once no variation is made by the TPO, the statutory precondition for invoking the Dispute Resolution Panel (DRP) mechanism fails. Consequently, the issuance of a draft assessment order under Section 144C(1) and the passing of a final assessment order under Section 143 read with Section 144C were held to be without jurisdiction.

Reliance on Bombay High Court precedent

The Tribunal placed reliance on the judgment of the Bombay High Court in Classic Legends (P) Ltd. v. Assessment Unit [2025] 178 taxmann.com 457, which categorically held that where the TPO does not propose any variation, the assessee cannot be treated as an “eligible assessee” and the entire DRP procedure becomes inapplicable.

Applying this ratio, the Tribunal quashed the assessment order in its entirety. Since the assessment itself was held to be void ab initio, the Tribunal declined to adjudicate the other grounds on merits, including the controversy relating to exemption of agricultural income under Section 10(1).

The appeal was accordingly allowed in favour of the assessee.