TPO order under section 92CA(3) quashed as time-barred when not completed within 60 days before section 153 limitation period

The ITAT Mumbai held that a TPO order passed under section 92CA(3) was time-barred as it was not completed within 60 days prior to the limitation period under section 153. The TPO order should have been passed by 31/10/2019, considering the assessment completion deadline of 31/12/2019 (21 months plus 12 months extension for TP reference). Consequently, the TPO order was quashed as invalid. Without a valid TPO order, no transfer pricing adjustment could be sustained, making the assessee ineligible for section 144C proceedings. The draft assessment order became legally invalid, and all consequential proceedings failed. The assessee's appeal was allowed.

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Issues Involved:
1. Validity of Transfer Pricing Order and Assessment Order being barred by limitation.
2. Specific transfer pricing adjustments and disallowances.
3. Consequences of the transfer pricing order being time-barred on the draft and final assessment orders.

Summary:

Issue 1: Validity of Transfer Pricing Order and Assessment Order being barred by limitation
The assessee challenged the validity of the transfer pricing order u/s 92CA(3) and the final assessment order, arguing they were barred by limitation. The assessee contended that the order dated 01/11/2019 by the TPO was beyond the permissible time limit, which should have been on or before 31/10/2019. The Tribunal referred to the judgment of the Hon'ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd., which established that the period of 60 days should exclude the last day of the limitation period. Consequently, the TPO's order was held to be time-barred and invalid.

Issue 2: Specific Transfer Pricing Adjustments and Disallowances
The TPO proposed several adjustments, including:
- AMP expenses: INR 1,08,99,66,623
- Reimbursement of expenses: INR 6,26,48,940
- IT management and related support services: INR 1,14,44,925
- Import of finished goods: INR 15,35,87,893
- AMP expenses (convention expenses): INR 44,62,88,562

The DRP provided partial relief, reducing some adjustments and confirming others. Final adjustments included:
- AMP expenses: INR 1,08,99,66,623
- Reimbursement of expenses: reduced to INR 3,38,07,378
- IT management and related support services: deleted
- Import of finished goods: reduced to INR 14,13,63,999
- AMP expenses (convention expenses): reduced by 8.12%

Issue 3: Consequences of the Transfer Pricing Order being Time-Barred
Given the TPO's order was deemed invalid, the Tribunal held that the entire transfer pricing adjustment and the draft assessment order were also invalid. The draft assessment order should not have been passed, and the final assessment order dated 25/05/2021 was barred by limitation. The Tribunal concluded that the assessee was not an "eligible assessee" under section 144C(15)(b) as the transfer pricing order was void ab initio, making the entire assessment process invalid.

Conclusion:
The appeal of the assessee was allowed on legal grounds, quashing the transfer pricing order and the final assessment order due to being barred by limitation. The Tribunal emphasized the importance of adhering to statutory timelines and the legal consequences of failing to do so.

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