आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member)
1. Aforesaid appeal by assessee for Assessment Year 2016-17 (AY) arises out of final assessment order dated 30.04.2021 passed by learned Income Tax Officer, (AO), National e-Assessment Centre, Delhi u/s.143(3) r.w.s 144C(13) r.w.s 144B pursuant to the directions of Ld. Dispute Resolution Panel-2, Bengaluru u/s 144C(5) dated 26.03.2021. Since the assessee carried out certain international
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transactions with its Associated Enterprises (AE), the same were referred to learned Additional Commissioner of Income Tax, TPO-3, Chennai (TPO) for determination of Arm's Length Price. The Ld. TPO passed an order u/s 92CA (3) on 01/11/2019, the proposal of which were incorporated in draft assessment order dated 30.12.2019 which were subjected to assessee's objections before Ld. DRP and finally, a final assessment order was passed by Ld. AO which is under challenge before us. The ground nos. 1 & 2 questions the validity of assessment proceedings and the same read as under: -
1. Transfer Pricing Order passed by the Learned Transfer Pricing Officer ('Ld. TPO') is barred by limitation and the j transfer pricing adjustments sustained by the National e-Assessment Center ('Learned Assessing Officer' or 'Ld. AO') | and confirmed by the Learned Dispute Resolution Panel ('Ld. DRP') are bad in law and are liable to be quashed
1.1. The Transfer Pricing Order issued by Ld. TPO, is barred by limitation as it had been passed beyond the time limit prescribed under sub-section (3A) to section 92CA of the Act, which expired on 31 October 2019, upheld by the Hon'ble Madras High Court in the case of M/s Pfizer Healthcare India Private Limited (Writ petition no. 32699 of 2019).
1.2. The Final Assessment Order passed by the Ld. AO is also barred by limitation as it had been passed beyond the period of limitation provided under section 153(1) of the Act, since the TP Order was bad in law and where transfer pricing proceedings have become invalid, the due date for passing final assessment order was 31 December 2019.
1.3. The Ld. DRP failed to follow the Order of the jurisdictional High Court which has held that TP Orders dated 1 November 2019 passed by the Ld. TPO under Section 92CA(3) of the Act for AY 2016-17, are barred by limitation.
2. Final Assessment Order passed by Ld. AO without considering Ld. DRP's Directions is liable to be quashed.
2.1. The Final Assessment Order passed by the Ld. AO is not in conformity with the directions issued by Ld. DRP under section 144C(5) and 144C(13) of the Act, and hence, is bad in law and void.
2.2 The Ld. AO grossly erred in law and on facts in proceeding to compute the total income of the Appellant by making an addition of INR 1,51,27,17,908, without considering the giving effect order of the Ld. TPO pursuant to directions of Ld. DRP.
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2. Since the assessee has raised pertinent legal issues questioning the validity of assessment proceedings, it would become imperative to take notes of the dates on which respective orders have been passed by lower authorities and these dates would assume great significance. For ease of reference, the same could be tabulated as under: -
| Description |
Date |
| Date of Order passed by Ld. TPO u/s 92CA(3) |
01.11.2019 |
| Date of Draft Assessment Order passed u/s 144C(1) |
30.12.2019 |
| Date of Filing Objections before the DRP |
29.01.2020 |
| Date of DRP Directions u/s 144C(5) |
26.03.2021 |
| Date of Final Assessment Order |
30.04.2021 |
3. The Ld. Sr. Counsel Shri Ajay Vohra, at the outset, submitted that the assessment proceedings would be nullity in terms of decision of Hon'ble High Court of Madras in bunch of appeals titled as M/s Pfizer Healthcare India Pvt. Ltd. & ors. (WP Nos. 32688 of 2019 & ors.) order dated 07.09.2020 as confirmed by Division Bench in revenue's Writ Appeals (WA) Nos. 1120 of 2021 & ors. in its order dated 31.03.2022. The copies of the decisions have been placed on record.
4. The first and foremost contention raised by Ld. Sr. Counsel is that the order passed by Ld. TPO on 01.11.2019 is barred by limitation since as per explicit language of Sec.92CA(3A), the order of TPO should have been passed on or before 31.10.2019. Since this order is time barred, the same is null and void / non est. The consequent of the same would be that the assessee would cease to be an eligible assessee u/s 144C(15)(b) and therefore, the machinery
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of Sec.144C would not be triggered. Ergo, the AO is not required to pass the draft assessment order; DRP would not have any jurisdiction to adjudicate the matter. Consequently, the final assessment order passed on 30.04.2021 would be barred by limitation since in terms of Sec. 153(1), the same should have been passed within a period of 21 months from the end of the relevant assessment year i.e., on or before 31.12.2018. Even considering the extended time period as envisaged u/s 153(4), the last date to make the assessment would be 31.12.2019 whereas final assessment order has been passed on 30.04.2021 which is clearly barred by statutory limitation. For the same, Ld. Sr. Counsel drew support from the decision of Hon'ble High Court of Madras in the case of M/s Roca Bathroom Products Pvt. Ltd. (445 ITR 537) and the decision of Delhi Tribunal in Super Brands Ltd. vs. ADIT (ITA No.3115/Del/2009 & ors. order dated 20.09.2022) wherein it has been held that the provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The time period provided in Sec. 153(1) and 153(4) are for passing the final assessment order and this would include the proceedings before TPO and DRP. The third legal proposition raised by Ld. Sr. Counsel is that the final order passed by Ld. AO is not in line with the binding directions of DRP and therefore the same would be null and void as per the decision of Delhi Tribunal in Olympus Medical Systems Pvt. Ltd. (ITA No.873/Del/2021).
On the contrary, Ld. CIT-DR maintained the position that the orders have been passed in consonance with statutory time limit but no contrary decision of any authority could be shown to us.
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Having heard rival submissions and after due consideration of relevant material on record, our adjudication would be as under.
5. The undisputed fact that emerges is that for AY 2016-17, the order has been passed by Ld. TPO u/s 92CA (3) on 01.11.2019. As per the decision of Hon'ble Single Judge in cited decision of M/s Pfizer Healthcare India Pvt. Ltd. & ors. (supra), this order would be barred by limitation. In this decision, bunch of assessee invoked writ jurisdiction of Hon'ble Court on the ground that the order passed u/s 92CA(3) was barred by limitation by one day. It was noted that in terms of Sec.92CA(3A), an order has to be passed by TPO before 60 days prior to the last day on which the period of limitation referred to in Sec.153 for making assessment expires. The assessment is to be completed within 21 months from end of assessment year in which the income was first assessable. Therefore. Counting from 31.03.2017, the assessment was to be framed on or before 31.12.2019. The period of 60 days prior thereto would run till 01.11.2019 and any date prior thereto would mean 31stof October or before. Since the order was passed on 01.11.2019, the same would be barred by limitation. The relevant observations were as under: -
"19. The revenue relies on the amendment to Section 92CA(4) which requires the Assessing Officer to compute total income of an assessee after receipt of the transfer pricing order. Prior to 01.06.2007, it was mandatory for the Assessing Authority to accept the ALP determined by the TPO and the phrase used in the provision was 'having regard to'. Post amendment, the provision made it compulsory for the Assessing Authority to adopt the ALP as determined by the TPO and the phrase 'having regard to' was replaced by the phrase 'in conformity with'. Thus, according to the revenue, the AO hardly need apply his mind with respect to the ALP determined and the prescription of 60 days is merely for internal convenience of the different officers to facilitate step by step completion of assessment.
20. Much has been stated about the use of the words in the computation itself, such as 'may', 'shall', the absence of reference to 'month' as it may have led to
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an ambiguity of whether the period should be reckoned as 30 or 31 days and the absence of the phrase 'no order shall be made' as used in Section 153. This, according to the revenue, leads to the conclusion that there is nothing sacrosanct about the period of 60 days which must be construed as flexible.
21. On the question of alternate remedy, I see no reason to relegate the petitioners to the Assessing Authority for completion of draft assessment that may be challenged before the DRP. Limitation, which is the issue raised in these writ petitions, is a mixed question of law and facts, but there are no disputes on factual aspects in the present case. The writ petitions are thus, held to be maintainable.
22. Limitation has been prescribed for each stage/process in an assessment, commencing with the filing of a return, transfer pricing proceedings under Section 92, filing of objections to draft assessment order in terms of Section 144C(2), passing of final order of assessment after expiry of the period for filing of objections in terms of Section 144C(4), issuance of directions by the DRP in terms of Section 144C(12) and passing of final assessment order after receipt of directions from the DRP in terms of Section 144C(13). An assessment involving issues of transfer pricing is thus measured by limitation at every step.
23. On the question of interpretation of the language employed in the provisions, the following judgements of the Supreme Court settle the position that one should not proceed blindly on the basis of the words/phrases employed in Statute, whether 'may', 'shall', 'no order shall be passed' or 'within' and the scheme of assessment in entirety as well as the intention of Legislature qua that scheme of assessment must be taken into account.
Drawing support from various judicial precedents, it was finally held by Hon'ble Court as under: -
29. The provisions of Section 144C prescribe mandatory time limits both pre and post the stage of passing of a transfer pricing order. Assessments involving transfer pricing issues are different and distinct from regular assessments and the intention of Legislature is to fast track such assessments. Bearing in mind the specialized nature of such assessments, a separate set of Officers attend to the framing of assessments and the DRP has been constituted for redressal of disputes involving TP issues, in a timely fashion. In this scheme of things, I am unable to accept the submission that the period of 60 days stipulated for passing of an order of transfer pricing, is only directory or a rough and ready guideline. This argument is rejected.
30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 a m of 01.01.2020. However, this would mean that an order of assessment can be passed at 12 a m on 01.01.2020, whereas, in my view, such an order would be
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held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31.12.2019. The period of 21 months therefore, expires on 31.12.2019 that must stand excluded since Section 92CA(3A) states 'before 60 days prior to the date on which the period of limitation referred to Section 153 expires'. Excluding 31.12.2019, the period of 60 days would expire on 01.11.2019 and the transfer pricing orders thus ought to have been passed on 31.10.2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31.10.2019. The impugned orders are thus, held to be barred by limitation.
It has been pointed out that the present assessee was also a party to this litigation. Since at that stage, the draft assessment order was under challenge by assessee before Ld. DRP, it was directed by Hon'ble Court that the petitioner would pursue the remedy opted by them.
6. The revenue's writ appeals against this decision came up for hearing before Division Bench of Hon'ble Court which was disposed- off on 31.03.2022 wherein the writ appeals were dismissed and the adjudication of Ld. Judge was confirmed. With respect to assessee, the revenue preferred similar WA No.2051 of 2021 which was disposed-off on 16.09.2021 wherein it was held that since the assessee chose to avail alternative provided under the Act by approaching DRP, it would be open for the assessee to canvass all legal and factual issues before Tribunal before which the appeal was pending at that stage.
7. The assessee raised similar legal plea before Ld. DRP who held that the intention was never to make this time limit of 60 days mandatory since the expression used in Sec. 92CA(3A) is "may" in contrast to "shall" as used in Sec. 92CA(4). The word "may" could not be read as "shall" and therefore, the time period was not mandatory. It
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was further observed by Ld. DRP that the department has not accepted the ruling and preferred Writ Appeals with the division bench and therefore, to keep the matter alive, the objection raised by the assessee were dismissed. Aggrieved, the assessee is in further appeal before us.
8. The undisputed position that emerges is that now the division bench has dismissed the Writ appeals of the revenue and confirmed the adjudication of Hon'ble Single Judge. Accordingly, the legal plea as raised by Ld. Sr. Counsel squarely favors the case of the assessee. Therefore, we would hold that considering the statutory time limit, the order passed by Ld. TPO u/s 92CA(3) on 01.11.2019 would be barred by limitation and consequence as mentioned in para- 4 would follow. In other words, this order would be time barred as a result of which the assessee would cease to be an eligible assessee and therefore, the machinery of Sec.144C would not be triggered. The Ld. AO is not required to pass the draft assessment order; DRP would not have any jurisdiction to adjudicate the matter. Consequently, the final assessment order passed on 30.04.2021 would be barred by limitation since in terms of Sec. 153(1) r.w.s. 153(4), the same should have been passed on or before 31.12.2019. The same is accordingly, liable to be quashed. Accepting first two legal propositions of Ld. Sr. Counsel, we would hold that the assessment would be nullity since it is barred by limitation. Delving into other legal ground as well as entering into the merits of the assessment has been rendered merely academic in nature.
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9. The appeal stand allowed in terms of our above order. Order pronounced on 18thNovember, 2022.
Sd/- Sd/-
(MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL)
उपा12 /VICE PRESIDENT लेखा सद: /ACCOUNTANT MEMBER
चे+ई/ Chennai; िदनांक/ Dated : 18-11-2022
DS
आदेशकीWितिलिपअ7ेिषत/Copy of the Order forwarded to :
1. अपीलाथ/Appellant2. यथ/Respondent 3. आयकरआयु (अपील)/CIT(A)4. आयकरआयु/CIT 5. िवभागीयितिनिध/DR6. गाडफ ाईल/GF