2024 (5) TMI 845 - AT - Income Tax

Assessment proceedings under section 144C barred by limitation after AO failed to complete within mandatory one-month timeline

The ITAT Chennai held that assessment proceedings under section 144C were barred by limitation. The AO failed to complete the assessment within one month ... Assessment u/s 144C - Period of limitation - whether assessment proceedings are barred by limitation? - verification, if any, had to be conducted by AO, he has to do so within the time line given [viz within one month from the end of the month of receipt of the DRP direction] - HELD THAT:- As per sub-section (13) of section 144C of the Act, upon receipt of the directions under sub-section (5) from DRP, the AO shall inconformity with the directions of the DRP, complete the assessment without providing any further opportunity of being heard to the assessee within one month from the end of the month in which such direction is received. As relying on M/s.Taeyang Metal India Pvt. Ltd [2024 (3) TMI 153 - MADRAS HIGH COURT] we hold that the final assessment order passed by the AO/DCIT, Corporate Circle-1(2), Chennai, dated 21.11.2017 for AY 2013-14 in the case of the assessee was barred by limitation and therefore, passed wholly without jurisdiction and therefore, null in the eyes of law andtherefore, we quash the impugned assessment order. Assessee appeal allowed. Issues Involved:1. Validity of the final assessment order due to the alleged expiration of the time limit prescribed under Section 144C(13) of the Income Tax Act, 1961.Issue-Wise Detailed Analysis:1. Validity of the Final Assessment Order:The primary issue in this case is the validity of the final assessment order passed by the Assessing Officer (AO) on 21.11.2017, which the assessee claims is barred by limitation as per Section 144C(13) of the Income Tax Act, 1961. The relevant facts and legal provisions are as follows:Facts:- The assessee, engaged in providing audio, video, and web conferencing services, filed its return of income (RoI) for AY 2013-14 on 31.03.2014, admitting a total income of Rs. 37,23,48,860/-.- The AO noted that the assessee had entered into international transactions with its Associated Enterprise (AE) amounting to Rs. 1,33,64,73,845/-.- The Transfer Pricing Officer (TPO) made a downward adjustment of Rs. 7,53,90,367/- on 24.10.2016.- The AO issued a draft assessment order on 26.12.2016, computing the total income of the assessee at Rs. 48,75,73,688/-.- The assessee filed objections before the Dispute Resolution Panel (DRP), which were rejected on 08.09.2017, confirming the TPO's adjustment.- The AO passed the final assessment order on 21.11.2017.Contentions:- The assessee argued that the AO failed to pass the final assessment order within one month from the end of the month in which the DRP's directions were received, making the order time-barred and invalid as per Section 144C(13).- The AO received the DRP's directions on 18.09.2017, and thus, the final assessment order should have been passed by 31.10.2017.Legal Provisions and Analysis:- Section 144C(13) mandates that the AO must complete the assessment within one month from the end of the month in which the DRP's directions are received.- The AO received the DRP's directions on 18.09.2017, making 31.10.2017 the last date for passing the final assessment order.- The final assessment order was passed on 21.11.2017, which is beyond the prescribed time limit, rendering it invalid and without jurisdiction.Judicial Precedents:- The Hon'ble Bombay High Court in the case of Vodafone Idea Ltd. v. Central Processing Centre & Ors emphasized the strict adherence to the time limits prescribed under Section 144C to maintain the integrity of the alternate dispute resolution mechanism provided by the DRP.- The Hon'ble Madras High Court in M/s. Taeyang Metal India Pvt. Ltd. v. DCIT/ITO/DRP quashed an assessment order passed beyond the time limit specified in Section 144C(13), reinforcing the mandatory nature of the time limit.Conclusion:In light of the statutory provisions, judicial precedents, and the facts of the case, the final assessment order dated 21.11.2017 was held to be barred by limitation and thus invalid. The appeal filed by the assessee was allowed, and the impugned assessment order was quashed.Outcome:The appeal filed by the assessee was allowed, and the final assessment order dated 21.11.2017 was quashed as being barred by limitation and without jurisdiction. The other grounds on merits were not adjudicated as they were rendered academic.Order Pronounced:The order was pronounced on the 10th day of May, 2024, in Chennai.