2023 (11) TMI 857 - AT - Income Tax

Assessment order under section 144C declared void for missing mandatory one-month deadline after DRP directions

ITAT Mumbai held the final assessment order u/s 144C void-ab-initio for being time-barred. The AO was required to pass the assessment order within one ... Time-barred assessment - strict compliance of statutory time limit - Section 144C(13) - obligation to complete assessment within one month from the end of the month in which DRP directions are received - no further opportunity of being heard after DRP directionsTime-barred assessment - Section 144C(13) - obligation to complete assessment within one month from the end of the month in which DRP directions are received - strict compliance of statutory time limit - no justification for delay by administrative steps - Validity of the assessment order dated 30.12.2022 in view of the time limit prescribed by section 144C(13) of the Act. - HELD THAT: - The statute mandates that upon receipt of DRP directions the Assessing Officer shall complete the assessment, in conformity with those directions and without providing further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. The DRP direction was received on 28.01.2022 (proof of receipt on record showing 31.01.2022). Consequently the assessment ought to have been completed on or before 28.02.2022. The Assessing Officer passed the final assessment order on 30.12.2022, well beyond the statutory cut-off. The Department's contention that the TPO's request for information justified the delay was rejected: seeking further details after DRP directions does not constitute a legally tenable cause for extending the mandatory time-limit under section 144C(13). In view of the statutory prescription of strict compliance and the absence of any permissible exception, the assessment order passed beyond the prescribed period is void ab initio. As the primary assessment order is quashed on jurisdictional/time-bar grounds, the Tribunal treated the remaining contentions on transfer pricing and comparables as academic and did not adjudicate them on merits. [Paras 7, 8, 9]Assessment order dated 30.12.2022 held to be time-barred and void ab initio; ground no.1 allowed and appeal disposed of in favour of the assessee; other grounds rendered academic.Final Conclusion: The assessment order passed beyond the time prescribed by section 144C(13) was quashed as time-barred and void ab initio; the appeal succeeds and other substantive grounds were not adjudicated as they became academic. Issues involved:The judgment involves issues related to the assessment order passed under sections 143(3), 260, and 144B of the Income Tax Act, 1961 being challenged as barred by limitation, transfer pricing adjustments, rejection of benchmarking analysis, selection of comparable companies, and the time limit for passing the assessment order.Challenging Assessment Order as Barred by Limitation:The assessee challenged the assessment order on the grounds of being time-barred under section 144C(13) of the Act. The Tribunal observed that the assessment order was passed beyond the prescribed time limit, as mandated by the statute, leading to the order being deemed void-ab-initio. The Tribunal upheld the assessee's contention, allowing the appeal on this ground.Transfer Pricing Adjustments and Benchmarking Analysis:The Transfer Pricing Officer proposed an upward adjustment to the total income of the assessee in relation to international transactions of Marketing Support Services (MSS). The Dispute Resolution Panel confirmed/enhanced the adjustments, leading to a dispute. The Tribunal noted the rejection of the benchmarking analysis by the TPO using the Transaction Net Margin Method (TNMM) and the selection of comparable companies, which was contested by the assessee.Selection of Comparable Companies:The dispute also involved the selection of comparable companies for determining the arm's length price of international transactions. The assessee challenged the selection made by the TPO and DRP, proposing alternative companies for consideration. The Tribunal assessed the grounds raised by the assessee regarding the selection process and the rejection of certain comparable companies.Time Limit for Passing Assessment Order:The judgment highlighted the importance of adhering to the time limit prescribed under section 144C(13) of the Act for passing the assessment order after receiving directions from the Dispute Resolution Panel. The Tribunal emphasized the mandatory nature of this provision, requiring strict compliance by the Assessing Officer. The delay in passing the assessment order beyond the stipulated time period led to the order being declared void-ab-initio.Conclusion:The Tribunal allowed the appeal filed by the assessee, primarily on the grounds of the assessment order being time-barred. The judgment underscored the significance of complying with statutory time limits in the assessment process, ultimately rendering the assessment order null and void. The decision focused on procedural adherence and the implications of exceeding prescribed timeframes in tax assessments.