2023 (4) TMI 390 - HC - Income Tax

Court rules assessment order time-barred under Income Tax Act, emphasizing statutory limitations.

The court ruled in favor of the petitioner, holding that the assessment order issued under the Income Tax Act, 1961 was time-barred. The court rejected ... Assessment u/s 143(3) r.w.s 144C - Period of limitation u/s 153 - Issuance of direction by the JCIT u/s 144A - time available to the TPO to pass an order of transfer pricing - HELD THAT:- The limitations set out under sub-section (3A) of Section 92CA are to be construed in the context of, and within the overall limitation provided for u/s 153. There is, in my considered view, no situation that is contemplated that would alter the limitation set out u/s 153 save the exclusions set out under Explanation-1 to Section 153 itself. The time limits set out under sub-section (3A) of Section 92CA are thus subject to the limitation prescribed under Section 153 that can, under no circumstances, be tampered with. If the argument of the revenue is to be accepted, the limitation set out u/s 153 would stand distorted, which is an incorrect understanding of the legal position. The second proviso to Explanation-1 of Section 153 is categoric in stating that period of limitation available to the Assessing Officer for making an order of assessment shall be extended to 60 days. The 60 days period, thus must run from the date of transfer pricing order to provide for the seamless completion of assessment. The transmission of a transfer pricing order from the TPO to the Assessing Officer is an internal administrative act and cannot impact statutory limitation, which is the exclusive prerogative of Section 153 alone. The issuance of the direction and the communication of such direction by the Joint Commissioner to the assessing officer to aid in the completion of assessment is expected to be within the overall limits provided for completion of assessment under Section 153 and Explanation (1) thereto and nowhere it is contemplated that such reference would extend the limitation. This situation is not a situation that finds reference in the situations set out in Explanation I to Section 153. So too in the present case. The impugned order of assessment is held to be barred by limitation and is set aside. This writ petition is allowed. Issues:Challenging assessment order under Income Tax Act, 1961 based on limitation provisions.Analysis:1. The challenge in the writ petition concerns the assessment order dated 26.07.2019 passed under Section 143(3) r.w. Section 144C(1) of the Income Tax Act, 1961. 2. The main arguments revolve around the bar of limitation, with specific reference to the time limits for completion of regular assessment as per Section 153(1) of the Act. 3. The timeline of events is crucial, including the reference to the Transfer Pricing Officer (TPO) due to transactions with foreign entities, triggering extensions under Section 153(4) and exclusions under Explanation-1 to Section 153. 4. The argument focuses on the exclusion of time periods for awaiting information and the subsequent extensions granted for passing the transfer pricing order. 5. The petitioner contends that the assessment order should have been passed by 22.07.2019, while the revenue relies on the provisions of Section 92(CA)(4) regarding the effective date for computing the 60-day period for assessment completion. 6. The court rejects the revenue's interpretation, emphasizing that Section 92(CA) is procedural and does not dictate limitation, which is governed by Section 153 and its statutory extensions/exclusions. 7. It is clarified that the time limits under Section 92CA(3A) must align with the overall limitation under Section 153, without distorting the prescribed timelines. 8. The court underscores that the transmission of the TPO's order to the Assessing Officer is an administrative step and cannot impact statutory limitation, which is solely governed by Section 153. 9. Additionally, the judgment discusses other scenarios where officers may seek expert assistance under Sections 142(2A) and 142A for special audits and valuation reports, emphasizing their impact on limitation periods as per Explanation I to Section 153. 10. The ruling concludes that the assessment order is time-barred and sets it aside, allowing the writ petition with no costs incurred.