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 ... Validity of Final assessment order u/s 144C passed in pursuant to the direction of DRP - period of limitation - upward adjustment to total income of Appellant in respect of international transaction of provision of Marketing Support Services (‘MSS’) - TPO rejected the bench marking analysis adopted by the assessee by applying TNMM method and also rejected the comparable companies considered by the assessee - HELD THAT:- The statute has mandated that the ld. A.O. shall pass the assessment order within one month from the end of the month in which the ld. DRP directions is received. This provision is mandatory which has placed strict adherence to the ld. A.O. to pass the assessment order even without providing any further opportunity of being heard to the assessee which further implies strict compliance of the said provision. The bench had sought for clarification from the ld. counsels as to the date of receipt of ld. DRP's direction by the ld. A.O. and the ld. AR had submitted the proof of receipt which is found to be on 31.01.2022. From the above observation, it is observed that the ld. A.O. has passed the assessment order beyond the time period prescribed under the provisions of the Act. We, therefore, are inclined to hold the assessment order to be time barred and thereby holding it to be void-ab-initio 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.