Delhi High Court Strikes Down Rs. 160.43 Crore Addition: AO Cannot Ignore Mandatory DRP Directions Under Section 144C(10)
Case Reference
LX Pantos India Private Limited Vs Assessment Unit National Faceless Assessment Centre
Court: Delhi High Court
Assessment Order Date: 18 December 2025
DRP Order Date: 29 November 2025
Background and Context
A significant ruling has emerged from the Delhi High Court concerning the binding nature of directions issued by the Dispute Resolution Panel and the obligation of an Assessing Officer to comply with such directions before framing an assessment order. The case involved LX Pantos India Private Limited, which challenged an assessment order on the ground that the Assessing Officer had proceeded in direct contravention of explicit instructions issued by the DRP.
The central issue revolved around whether an addition under Section 40(a)(i) of the Income Tax Act, 1961 could be sustained when the DRP had categorically directed that no such addition was to be made unless the Department had filed an appeal against the orders of the Income Tax Appellate Tribunal. As the facts unfolded, the AO not only failed to verify this condition but also recorded an incorrect factual position in the assessment order — that a departmental appeal was in fact pending before the Delhi High Court — which turned out to be entirely untrue.
Facts of the Case
The DRP's Direction
The DRP, vide its order dated 29 November 2025, addressed the question of the addition sought to be made under Section 40(a)(i) of the Income Tax Act, 1961. The DRP issued a clear and unambiguous direction: if the Department had not filed any appeal against the orders of the ITAT, the Assessing Officer shall not make any addition under that provision.
This direction was rooted in the principle of consistency and the binding effect of Tribunal decisions in the absence of a contrary appellate ruling. The DRP essentially conditioned the making of the addition on the existence of a pending departmental challenge before a superior court.
What the AO Actually Did
Despite the conditional nature of the DRP's instruction, the AO proceeded to frame the assessment order dated 18 December 2025 and made the addition under Section 40(a)(i). More critically, the AO recorded in the assessment order that an appeal against the Tribunal's order for Assessment Year 2017-18 and earlier years was pending before the Delhi High Court.
On the basis of this factual assertion — which the assessee claimed was incorrect — the AO proceeded to raise a tax demand of Rs. 75,75,24,930/- against the assessee.
The Assessee's Position
The assessee's counsel, Mr. Prashant Meharchandani, appeared before the Court and drew attention to paragraphs 8 and 9 of the writ petition. He asserted that no appeal filed by the Department against the ITAT's order dated 17.05.2024 (passed for Assessment Years 2017-18 and 2018-19) was pending before the Delhi High Court. He further confirmed that he had independently verified this position from the Delhi High Court's official website and found no record of any such pending appeal.