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The Gujarat High Court reportedly quashed two fresh assessment orders against Sun Pharmaceutical Industries Limited because the Assessing Officer issued final orders after a Section 263 remand without first issuing new draft orders under Section 144C. The reported ruling is fact-specific: the company remained an “eligible assessee” under Section 144C(15)(b), and the court treated the draft-order stage as mandatory in that fresh assessment. The case-specific account is from a secondary summary, not the signed judgment.
What the Gujarat High Court reportedly decided
In Sun Pharmaceutical Industries Limited v. Deputy Commissioner of Income Tax, Circle 2(1)(1), Vadodara & Anr., the Gujarat High Court reportedly held that setting aside an assessment under Section 263 did not permit the Assessing Officer to bypass Section 144C’s draft-order procedure when the taxpayer remained eligible for it. The case page identifies the decision as dated 6 January 2026, in R/Special Civil Application Nos. 5973 and 6130 of 2025, with citation 2026:GUJHC:2846-DB. It names Justices A.S. Supehia and Pranav Trivedi. LawText case summary
How the assessment reached the court
- On 20 September 2021, the company received a draft assessment order, followed by a final order on 29 October 2021.
- On 24 March 2024, the Principal Commissioner of Income-tax set the original assessment aside under Section 263 and directed a fresh de novo assessment.
- The Assessing Officer issued fresh final assessment orders on 26 and 27 March 2025, without issuing new draft orders under Section 144C.
- The company challenged those final orders in the Gujarat High Court.
These dates and procedural details are those reported by LawText; the signed judgment should be checked for the court’s precise account of the record. LawText case summary Case chronology
Why Section 144C eligibility matters
Section 144C(1) provides for an Assessing Officer, “in the first instance,” to forward a draft of a proposed assessment order to an eligible assessee where the proposed variation is prejudicial to that assessee. The statutory definition reproduced in an ITAT decision includes a person whose variation arises from an order of the Transfer Pricing Officer under Section 92CA(3), as well as any foreign company. ITAT decision reproducing Section 144C
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The draft is not simply another notice before an assessment. It is the procedural step that gives an eligible assessee the opportunity to object and, where applicable, use the Dispute Resolution Panel process before a final assessment order is made. Eligibility and the statutory trigger must both be considered: not every taxpayer, adjustment, or remand automatically engages Section 144C.
Why the remand did not, on the reported facts, remove the draft stage
The tax department reportedly argued that the Section 263 remand allowed the Assessing Officer to issue final orders directly and that transfer-pricing issues had not been referred again. The court rejected that position, according to the case page, because Sun Pharmaceutical remained eligible under Section 144C(15)(b). It treated Section 144C(1)’s draft step as mandatory and quashed the March 2025 orders made without fresh drafts. The writ petitions were allowed with no order as to costs. LawText case summary
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The practical point is narrow but important: the fact that an assessment is being redone after a Section 263 order does not, by itself, answer whether a draft order is required. The reported result turned on continuing eligibility and the application of Section 144C to the fresh assessment. It should not be generalized into a rule that every Section 263 remand requires a draft order.
How to assess a comparable case
For a taxpayer or adviser reviewing a fresh assessment, focus on these questions in sequence:
- Eligibility: Does the assessee fall within Section 144C(15)(b), including the specified transfer-pricing category or foreign-company category?
- Statutory trigger: Does the proposed assessment involve a variation prejudicial to the assessee within Section 144C(1)?
- Procedure followed: Was a draft order issued before the final order, and were the relevant objection and DRP opportunities available where applicable?
- Assessment history: Is this an original assessment or a fresh assessment following a remand, and what did the remand direct?
For the last question, the remand order and the proposed variations matter; the reported Sun Pharmaceutical result does not resolve every possible combination of eligibility, variation, and remand directions.
How the ruling fits with earlier Section 144C authority
An ITAT decision hosted on IndiaKanoon reproduces the Delhi High Court’s reasoning in Turner International India Pvt. Ltd. v. DCIT: failure to first issue a draft assessment order under Section 144C(1) invalidates the final assessment order and consequential demand notices and penalty proceedings. The same ITAT material refers to decisions from the Andhra Pradesh, Madras, Delhi, and Bombay High Courts. That provides supporting context for the importance of the draft stage, but it does not replace analysis of the Gujarat case’s facts or the scope of its reported ruling. ITAT decision discussing related precedent
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What remains to verify before relying on the case
The case-specific account available here is LawText’s secondary summary, not the signed Gujarat High Court judgment. Practitioners should obtain and review the judgment using the reported case numbers or citation before relying on its exact reasoning, describing the scope of its holding, or applying it in a live dispute. The statutory text should also be checked against the current official version of the Income-tax Act, 1961.
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