TPO order under Section 92CA(3) held time-barred as it violated 60-day limitation requirement before assessment completion

The ITAT Chennai held that a Transfer Pricing Order passed under Section 92CA(3) was barred by limitation. The TPO issued the order on 01.11.2019 for AY 2016-17, but Section 92CA(3A) requires such orders to be passed at least 60 days before the assessment limitation period expires. Since the assessment had to be completed by 31.12.2019, the TPO order should have been passed by 31.10.2019 or earlier. Following the Madras HC decision in Pfizer Healthcare, the tribunal ruled the TP proceedings were time-barred, making the assessee ineligible under Section 144C(15)(b), and consequently the assessment should have been completed within 33 months under Section 153(1). The appeal was allowed on legal grounds.

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Issues Involved:
1. Disallowance u/s 14A
2. Disallowance u/s 35(2AB)
3. Disallowance u/s 2(24) r.w.s. 36(1)(va)
4. Validity of assessment order being time-barred

Summary:

Issue 1: Disallowance u/s 14A
The judgment does not delve into the specifics of the disallowance u/s 14A as the primary focus is on the validity of the assessment order.

Issue 2: Disallowance u/s 35(2AB)
Similar to Issue 1, the judgment does not provide detailed discussion on the disallowance u/s 35(2AB) due to the overarching issue of the assessment order's validity.

Issue 3: Disallowance u/s 2(24) r.w.s. 36(1)(va)
The judgment does not specifically address the disallowance u/s 2(24) r.w.s. 36(1)(va) due to the primary focus on the time-barred nature of the assessment order.

Issue 4: Validity of Assessment Order Being Time-Barred
The core issue revolves around whether the assessment order dated 28-02-2020 is time-barred and thus null and void. The appellant argued that the assessment order is barred by limitation, referencing the timeline of the assessment proceedings and the relevant statutory provisions.

The appellant's key argument was that the Transfer Pricing Officer (TPO) issued the order u/s 92CA(3) on 01-11-2019, which was beyond the statutory time limit, making the transfer pricing adjustment void-ab-initio. Consequently, the appellant ceased to be an eligible assessee u/s 144C(15)(b), and the machinery provisions of Section 144C would not apply. Therefore, the assessment should have been completed by 31-12-2019, but it was concluded on 28-02-2020, rendering it time-barred.

The respondent countered that the AO had to wait for the TPO's determination of the Arm's Length Price (ALP) and could not foresee the TPO's order being challenged. The respondent cited case laws to argue that procedural irregularities should not invalidate the proceedings.

The Tribunal, however, found the appellant's timeline undisputed and agreed that the transfer pricing proceedings were barred by limitation. Consequently, the assessment order dated 28-02-2020 was held to be null and void-ab-initio. The Tribunal dismissed the respondent's argument that the AO could not predict the TPO's order's fate, emphasizing that any order passed beyond the statutory time limit is invalid.

Conclusion:
The appeal was allowed on legal grounds, declaring the assessment order null and void-ab-initio due to being time-barred. The corporate additions made in the assessment order were rendered academic and did not survive. The judgment was pronounced on 3rd June, 2024.

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