2021 (2) TMI 1152 - HC - Income Tax

Court quashes orders for exceeding time limit, interprets statute as mandatory

Pfizer Healthcare India (P.) Ltd. Versus Joint Commissioner of Income Tax

The Court quashed the impugned orders dated 1-11-2019 as they were beyond the limitation period under Section 92CA(3) of the Income-tax Act, 1961. The ... Orders passed u/s 92CA(3) barred by limitation by one day - Assessments are to be completed within the limitation set out in Section 153 - HELD THAT:- 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, 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. How the 60 day period is to be computed - 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 1-1-2020. However, this would mean that an order of assessment can be passed at 12 a m on 1-1-2020, whereas, in my view, such an order would be 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 1-11-2019 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. Issues Involved:1. Whether the impugned orders under Section 92CA(3) of the Income-tax Act, 1961 are barred by limitation.2. Whether the impugned orders were passed in violation of the principles of natural justice.3. Whether the word 'may' in Section 92CA(3A) should be interpreted as 'shall.'4. Whether the writ petitions are maintainable despite the availability of alternate remedies.Issue-wise Detailed Analysis:1. Limitation of Orders under Section 92CA(3):The petitioners challenged the orders under Section 92CA(3) on the ground that they were barred by limitation by one day. According to Section 92CA(3A), an order must be passed by the Transfer Pricing Officer (TPO) before 60 days prior to the last day on which the period of limitation referred to in Section 153 for making an assessment expires. The assessments were to be completed within 21 months from the end of the assessment year, i.e., by 31-12-2019. Therefore, the period of 60 days prior would end on 1-11-2019, meaning the orders should have been passed by 31-10-2019. The Court held that the impugned orders dated 1-11-2019 were beyond the limitation period and thus barred.2. Violation of Principles of Natural Justice:Some petitioners argued that the orders were passed in violation of the principles of natural justice as notices were issued towards the close of the limitation period, giving them insufficient time to make submissions. The Court acknowledged this argument but primarily focused on the limitation aspect to quash the orders.3. Interpretation of 'May' as 'Shall':The petitioners argued that the word 'may' in Section 92CA(3A) should be read as 'shall,' making the provision mandatory. The Court examined various judgments and principles of statutory interpretation, concluding that the period of 60 days stipulated for passing an order of transfer pricing is mandatory and not merely directory. The Court emphasized that the legislative intent and the scheme of the Act support a mandatory interpretation to ensure timely completion of assessments.4. Maintainability of Writ Petitions:The Revenue argued that the writ petitions were not maintainable as the petitioners had alternate remedies, such as filing objections before the Dispute Resolution Panel (DRP). However, the Court held that the writ petitions were maintainable since the issue of limitation is a mixed question of law and facts, with no factual disputes in the present case. The Court decided to address the matter directly rather than relegating the petitioners to alternate remedies.Conclusion:The Court quashed the impugned orders dated 1-11-2019 as they were barred by limitation. The Court also noted that some petitioners had pursued statutory remedies or requested final orders, and those writ petitions were closed accordingly. The remaining writ petitions were allowed, and the connected miscellaneous petitions were closed without costs.