AO's second TPO reference after ITAT remand held invalid, Section 92CA(4) assessment order mandatory

The Delhi HC held that the second reference made by the AO to the TPO on 27 December 2018 was unwarranted and legally unsustainable. The ITAT had already remanded the matter directly to the TPO on 14 July 2017, who passed an order on 17 October 2017. The AO failed to pass the consequential assessment order as mandated under Section 92CA(4). The court ruled that the nine-month limitation period under Section 153(3) expired on 31 December 2018, depriving the respondent of jurisdiction to pass any further assessment orders for AY 2009-10. The writ petition was allowed.

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Issues Involved:
1. Legality of the DRP order dated 29 January 2021.
2. Authority of the TPO to frame an order on 17 October 2017.
3. Validity of the reference made by the AO on 27 December 2018.
4. Applicability of the limitation period u/s 153 of the Income Tax Act.

Summary:

1. Legality of the DRP Order:
The petitioner challenged the DRP order dated 29 January 2021, which upheld the draft assessment order dated 31 March 2013. The DRP refused to entertain the limitation objection, noting that its jurisdiction u/s 144C(8) restricts it to confirming, reducing, or enhancing the variations proposed in the draft order.

2. Authority of the TPO to Frame an Order on 17 October 2017:
The TPO had framed an order on 17 October 2017 to give effect to the ITAT order dated 14 July 2017. The petitioner argued that the TPO was divested of any authority to undertake an identical exercise based on a subsequent reference by the AO on 27 December 2018. The court held that once the ITAT remitted the matter to the TPO, the TPO was legally obliged to proceed in accordance with the ITAT's directions, and no fresh reference was warranted.

3. Validity of the Reference Made by the AO on 27 December 2018:
The court found the reference made by the AO on 27 December 2018 to be superfluous and unwarranted. The ITAT had already remitted the matter directly to the TPO, and the TPO had acted upon it by passing an order on 17 October 2017. The court held that the AO's reference did not confer a fresh lease of life to the power to assess.

4. Applicability of the Limitation Period u/s 153:
The court held that the period of nine months for completing the assessment, as prescribed u/s 153(3) of the Act, expired on 31 December 2018. The court rejected the argument that the extended period of twelve months u/s 153(4) was applicable, as it pertains to references made by the AO during the course of assessment or reassessment. The court concluded that the respondents were barred from passing any further orders of final assessment for AY 2009-10.

Conclusion:
The court allowed the writ petition, holding that the respondents were barred from passing any further orders of final assessment for AY 2009-10 and the petitioner was entitled to all consequential reliefs.

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