2024 (5) TMI 151 - AT - Income Tax

TPO order barred by limitation under section 92CA(3) passed beyond mandatory time limit

The ITAT Mumbai held that the TPO's order dated 01.11.2019 was barred by limitation under section 92CA(3) as it was passed beyond the mandatory time limit ... Time limit to pass assessment u/s. 92CA(3) - time line for passing of the order u/s. 92CA(3) of the Act for the purpose of reckoning the time period for completion of the assessment - HELD THAT:- The assessee has relied on the said decision of the Hon'ble High Court of Madras which has held that the time period prescribed under the said provision is mandatory and not discretionary though the word used in the statute is “may”. The assessee has also placed reliance on the decision of Saint Gobain India (P) Ltd. [2022 (4) TMI 808 - MADRAS HIGH COURT]which has again reiterated that on identical facts, TPO should have passed the order on or before 31.10.2019 and any order passed beyond this would be barred by limitation, holding the ld.TPO's order to be nonest in the eyes of law, consequently the draft assessment order is also held to be invalid. In the case of an invalid transfer pricing order and the draft assessment order, the ld. A.O. has no jurisdiction to assess u/s. 144C of the Act holding the assessee to be not an ‘eligible assessee’ as per section 144C(15)(b)(i) of the Act. On the above observation, where this issue has been dealt with extensively by the Hon'ble High Court, we are inclined to hold the ld. TPO's order dated 01.11.2019, draft assessment order and the final assessment order dated 27.03.2021 is barred by limitation as per the provision of section 92CA(3) and, hence, the subsequent draft assessment order and the final assessment order is, therefore, liable to be quashed on this ground. Hence, the additional ground raised by the assessee are hereby allowed. Issues Involved:1. Validity of the draft and final assessment orders on the grounds of limitation.2. Transfer pricing adjustments and the validity of the TPO's order.Summary:Validity of the Draft and Final Assessment Orders on the Grounds of Limitation:The assessee challenged the draft and final assessment orders as being bad-in-law on the grounds of limitation, referencing the decision of the Hon'ble Madras High Court in the case of M/s. Roca Bathroom Products Pvt. Ltd. The assessee argued that the order of the TPO dated 01.11.2019 was null and void as it was passed beyond the time limit prescribed u/s 92CA(3A) r.w.s. 153 of the Act. The Tribunal admitted the additional grounds raised by the assessee, relying on the decision of the Hon'ble Apex Court in the case of National Thermal Power Co. Ltd. vs. CIT [1998] 229 ITR 383 (SC).The Tribunal noted that the TPO's order should have been passed on or before 31.10.2019, but was actually passed on 01.11.2019, making it one day late. The Tribunal referred to the provisions of section 92CA(3) and section 153 of the Act, concluding that the period of limitation prescribed u/s 92CA(3A) is mandatory. The Tribunal relied on the decisions of the Hon'ble Madras High Court in Pfizer Healthcare India (P.) Ltd. Vs. Jt. CIT [2021] 124 taxmann.com 536 (Madras) and Dy. CIT vs. Saint Gobain India (P) Ltd. [2022] 137 taxmann.com 215 (Madras), which held that orders passed beyond the prescribed time limit are barred by limitation.Based on this, the Tribunal held that the TPO's order dated 01.11.2019, the draft assessment order, and the final assessment order dated 27.03.2021 were barred by limitation and, therefore, quashed. Consequently, the additional ground nos. 5, 6 & 7 raised by the assessee were allowed.Transfer Pricing Adjustments and the Validity of the TPO's Order:The assessee contended that the TPO's order and the subsequent draft and final assessment orders were barred by limitation. The Departmental Representation argued that the time limit specified is not mandatory but discretionary. The Tribunal, after hearing the rival submissions and perusing the materials on record, concluded that the TPO's order was delayed by one day and thus barred by limitation. The Tribunal held that the TPO's order, the draft assessment order, and the final assessment order were invalid due to the time-barred TPO's order.Conclusion:As the entire assessment proceeding was quashed on the grounds of limitation, the Tribunal did not adjudicate the merits of the case. The other grounds of appeal were rendered academic and infructuous. The appeal filed by the assessee was allowed. Order pronounced in the open court on 30.04.2024.