Tribunal invalidates assessment due to time-barred order, emphasizes compliance with statutory time limits.

The tribunal concluded that the draft assessment order was valid as it was passed within a reasonable time, but the Transfer Pricing Officer's order was time-barred. Consequently, the transfer pricing adjustment based on the time-barred TPO order was deleted from the final assessment order, rendering it invalid. The tribunal partially allowed the appeal, highlighting the significance of complying with statutory time limits in transfer pricing assessments.

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Issues Involved:
1. Time limit for passing of the draft assessment order by the Assessing Officer (AO).
2. Time limit for passing of the order by the Transfer Pricing Officer (TPO).
3. Consequences of a valid draft order and a time-barred TPO order.

Issue-wise Analysis:

1. Time Limit for Passing of the Draft Assessment Order by the AO:
The primary issue raised by the assessee was that the draft assessment order passed by the AO on 11.7.2014 was barred by limitation under section 153(1) of the Income-tax Act, 1961. The assessee argued that the draft order should have been passed by 7.6.2014, considering the time limit for completion of assessments and reassessments.

The tribunal examined section 153(1) and its third proviso, which extended the time limit to three years from the end of the assessment year when a reference is made to the TPO. The tribunal noted that the relevant period for exclusion in computing the limitation period, as per Explanation 1 clause (viii) to section 153, was from the date of reference for exchange of information to the date on which the information was last received.

In this case, the information was received by the Director of Income-tax (DIT) on 2.4.2014, and the tribunal held that the time limit for passing the draft order was extended to 7.6.2014. The tribunal concluded that the draft order passed on 11.7.2014 was beyond this period, but it emphasized that section 153 pertains to the final assessment order, not the draft order. The final assessment order was passed within the time prescribed under section 144C(13), making the draft order valid as it was passed within a reasonable time.

2. Time Limit for Passing of the Order by the TPO:
The assessee also challenged the TPO's order dated 31.5.2014 as time-barred under section 92CA(3A). The tribunal highlighted that section 92CA(3A) mandates the TPO to pass the order at least sixty days before the expiry of the time limit for the AO to complete the assessment under section 153.

The tribunal determined that the time limit for the AO to complete the assessment was 7.6.2014, making the deadline for the TPO's order 8.4.2014. Since the TPO's order was passed on 31.5.2014, it was deemed time-barred. The tribunal rejected the argument that the word "may" in section 92CA(3A) implies a directory rather than a mandatory time limit, affirming that the TPO's order was invalid.

3. Consequences of a Valid Draft Order and a Time-barred TPO Order:
The tribunal addressed the consequences of having a valid draft order but a time-barred TPO order. It emphasized that an invalid TPO order is considered null and void, effectively non-existent for practical purposes. Consequently, the final assessment order, which included the transfer pricing adjustment based on the TPO's time-barred order, was unsustainable.

The tribunal directed the deletion of the transfer pricing adjustment from the final assessment order, rendering the addition on account of transfer pricing adjustment invalid. This decision rendered it unnecessary to address the merits of the transfer pricing adjustment.

Conclusion:
The tribunal concluded that while the draft order was valid as it was passed within a reasonable time, the TPO's order was time-barred, leading to the deletion of the transfer pricing adjustment from the final assessment order. The appeal was partly allowed, emphasizing the importance of adhering to statutory time limits in transfer pricing assessments.

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