The latest ITAT Judgment Delhi brings important relief to taxpayers dealing with transfer pricing disputes. In this case, Sumitomo Corporation India Pvt. Ltd succeeded before the tribunal because the tax department passed a final assessment order without first issuing a draft assessment order. This is a landmark ITAT judgment latest from Delhi that every business dealing with foreign group companies must read. The ITAT Delhi judgment in the case of Sumitomo Corporation India Pvt. Ltd. vs. DCIT, Circle-22(2) is a perfect example of how a final tax demand can be struck down entirely not because the numbers were wrong, but because the tax department skipped a mandatory step in the process.
This itat judgment latest confirms that the legal procedure under section 144C must be followed strictly. If the department skips the draft order stage, the final assessment order may not survive in law.
Background of the Company
Sumitomo Corporation India Pvt. Ltd is a wholly owned subsidiary of Sumitomo Corporation Japan. The company is engaged in providing business support services, trade assistance and advisory services mainly to its associated enterprises.
Its role includes helping in import and export transactions, coordinating with suppliers, understanding customer requirements, market support, logistics assistance and ensuring smooth execution of commercial transactions in India.
Facts of the Case
For Assessment Years 2020-21 and 2021-22, the company was selected for scrutiny under transfer pricing provisions because it had international transactions with related foreign entities.
During the assessment, the department proposed additions mainly on the following grounds:
- TNMM based transfer pricing adjustment
- Interest on delayed receivables from associated enterprises
- Certain tax computation differences
The matter was taken before the Dispute Resolution Panel (DRP). However, after the DRP stage, the Assessing Officer passed the final assessment orders directly without issuing a fresh draft assessment order to the company.
The company challenged this action before the tribunal and argued that such procedure was contrary to section 144C of the Income Tax Act.
Arguments by Sumitomo Corporation India Pvt. Ltd
The company submitted that the final assessment orders were legally defective and should be cancelled. Its major arguments were:
Draft Order Is Compulsory
In eligible cases involving transfer pricing, the law requires the Assessing Officer to first issue a draft assessment order before passing the final order.
Right to File Objections Was Affected
Without a draft order, the taxpayer loses the valuable right to raise objections before the DRP against proposed additions.
Violation of Fair Procedure
The company argued that by passing the mandatory process goes against principles of natural justice.
Judicial Support Available
The company relied upon earlier Delhi High Court rulings, including decisions in its own case, where similar legal principles were already recognized.
ITAT Judgment delhi – Tribunal Decision
After hearing both sides, the tribunal agreed with Sumitomo Corporation India Pvt. Ltd.
The itat delhi judgment clearly held that section 144C procedure is mandatory in such matters. The tribunal observed that once a draft assessment order is required under law, the Assessing Officer cannot directly issue a final order.
Since the department failed to follow the correct legal process, both final assessment orders were treated as invalid and void from the beginning. Accordingly, the tribunal quashed the orders passed against the company.
Simple Example for Understanding
Suppose a company receives a proposed tax addition of ₹2 crore under transfer pricing.
The proper legal process should be:
- Tax officer issues draft assessment order
- Company gets chance to file objections
- DRP reviews the objections
- Final order is passed after due process
If the officer directly issues the final demand order without the draft stage, then as per this itat judgment in delhi, such order may be legally invalid.
Conclusion
The ITAT Judgment delhi in Sumitomo Corporation India Pvt. Ltd is an important ruling for taxpayers facing transfer pricing disputes. It confirms that tax authorities must follow the procedure laid down under law and cannot skip mandatory stages.
This itat judgment latest strengthens taxpayer rights and ensures that businesses receive a fair opportunity to contest proposed adjustments.
For companies involved in international transactions, this itat judgment in delhi and valuable itat case law serves as a strong precedent in future case law in delhi matters.