AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2019 (10) TMI 992
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....mmended an awkward suggestion of international transaction of Rs. 86095422/-. The Assessee filed objections before the ld DRP against the draft order dated 11.03.2013. The ld DRP issued direction u/s 144C(5) on 20.12.2013. Pursuant to that direction the ld Assessing Officer passed order u/s 143(3) read with Section 144C of the Act on 30.01.2014. On the above facts in the appeal Assessee has raised an additional grounds as under 3. "That on the facts and circumstances of the case and in law, the impugned order passed by the Assessing Officer is barred by limitation and therefore, is liable to be quashed.' 4. The ld AR adverting to the additional ground pressed for its admission submitted as under:- "The aforesaid additional ground of appeal raises a purely legal issue which does not require any fresh investigation into facts; facts already being on records. The aforesaid additional ground of appeal calls for being admitted and adjudicated on merits in view of the discretion conferred on your Honours under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 and the Supreme Court decision in the case of National Thermal Power Co. Ltd. vs. CIT : [1998] 229 ITR 383 (SC). ....
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....issues notice under section 143(2) within the stipulated time. After collating the necessary details that may be required from the assessee and after granting an assessee adequate opportunity of being heard, the assessing officer would pass the assessment under section 143(3) of the Act. Where the assessee had entered into international transactions within the meaning of section 92B of the Act, ("eligible assessee') the assessing officer is required to make a reference to the Transfer Pricing Officer ("TPO') to determine the arm's length price ("ALP') in respect of such international transactions. In case of such an eligible assessee, (as also defined in subsection 15(b) of section 144C of the Act), the assessing officer is mandatorily required to pass proposed order of assessment (hereinafter referred to as 'draft assessment order'). Once the draft assessment order is passed by the assessing officer and served on the eligible assessee, the eligible assessee may within 30 days of receipt thereof either (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with the Dispute Resolution Panel ("DRP'). [Refer sectio....
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....led on or after the 1st day of July, 2012, by the assessee under sub-section (2) of section 144C in pursuance of which the Assessing Officer has passed an order completing the assessment or reassessment, direct the Assessing Officer to appeal to the Appellate Tribunal against the order." The assessment order passed by the assessing officer pursuant to the directions of the DRP is under section 143(3) read with section 144C(13) of the Act only. Such an order cannot be construed as having been passed independently and on a stand-alone basis under section 144C(13) of the Act. To put it differently, the order passed pursuant to the directions of the DRP under section 144C(13) of the Act is regarded as the assessment order. The same is the only operative assessment in case of an eligible assessee. B. Scheme of the Act with respect to limitation: The relevant provisions of section153 of the Act as applicable at the relevant time read as under: "153. Time limit for completion of assessments and reassessments.-(1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of- (a) two years from the end of the assessment year in which the ....
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.... order, i.e., assessment order under section 143(3) of the Act without making a draft assessment order. The non-obstante provision in section 144C(1) of the Act is to make it mandatory for the assessing officer to pass draft assessment order in the case of an eligible assessee, contrary to the scheme of the Act wherein the assessing officer is required to pass one and only assessment order in the case of all other assessees. Having regard to the aforesaid, the non-obstante clause in section 144C(1) of the Act requiring passing of a draft assessment order in case of an eligible assessee is, therefore, to be read limited to the context, i.e., exception to the ordinary rule that there will be only one assessment order passed by the assessing officer on culmination of the assessment proceedings. The time limit of passing the assessment order in the circumstances mentioned in section 144C(4), is, notwithstanding that the assessing officer may have time available to complete the assessment in terms of section 153 of the Act. The non-obstante clause in section 144C(4) of the Act thus seeks to shorten the time available for completion of assessment in case of an eligible assessee who acc....
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.... resolution of disputes in a fast track basis' It is submitted that if the non-obstante clause in sections144C(4)/ 144C(13) of the Act is interpreted as allowing the assessing officer additional time over and above the limit provided under section 153of the Act, the same would defeat the entire purpose of expediting the dispute resolution process, by enlarging the time available for completion of assessment to almost five years from the end of the relevant previous year (four years from the end of the relevant assessment year) as explained hereinafter. C. Import of non obstante clause: It is settled law that the non- obstante provisions have to be read in context and for the purpose for which the same have been enacted, i.e., a non obstante clause is to be interpreted consistent with the specific purpose and legislative intent behind the enactment of such provision. In other words, application of non obstante clauses ought to be confined to the purpose/ scheme for which they same was intended. The Hon'ble apex Court in Bharat Hari Singhania vs. CWT 207 ITR 1 (SC) outlined the meaning and import of a non obstante clause in the following terms: "21. The contention of the le....
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....ature and any statutory construction of such a provision is to be limited to the context/ purpose for which the same was intended. It may be useful to the refer to the observations in the case of Geeta vs. State of U.P. (2010) 13 SCC 686, whereinafter exhaustively citing the earlier legal precedents and interpretative guidelines on the subject, the Hon'ble Court held as under: "38. Interpretation of non obstante clauses has come up for consideration before this Court in a large number of decisions. In Aswini Kumar Ghose v. Arabinda Bose [AIR 1952 SC 369], a Constitution Bench of this Court speaking through Patanjali Sastri, C.J. observed that: (AIR p. 377, para 27) "27. ... the non obstante clause can reasonably be read as overriding 'anything contained' in any relevant existing law which is inconsistent with the new enactment.' But His Lordship made it clear that: (Arabinda Bose case [AIR 1952 SC 369], AIR p. 377, para 27) "27. ... The enacting part of a statute must, where it is clear, be taken to control the non obstante clause where both cannot be read harmoniously.' 39. Again in another Constitution Bench judgment of this Court in Dominion of India v. Shrinbai A. I....
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....same statute or other statute but 'for that reason alone we must determine the scope' of that provision strictly. When the section containing the said clause does not refer to any particular provisions which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it excludes the whole Act and stands alone by itself.' 43. This Court also held in ICICI Bank Ltd. v. SIDCO Leathers Ltd. [(2006) 10 SCC 452] that the wide amplitude of a non obstante clause must be kept confined to the legislative policy and it can be given effect to, to the extent Parliament intended and not beyond the same and that in construing the provisions of a non obstante clause, it was necessary to determine the purpose and object for which it was enacted (see pp. 465-66). 44. In Central Bank of India v. State of Kerala [(2009) 4 SCC 94] this Court reiterated that while interpreting a non obstante clause the Court is required to find out the extent to which the legislature intended to give it an overriding effect. 45. In view of such consistent opinion expressed by this Court on the purport and meaning of non obstante clause we are of the view that th....
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....e of interpretation of statutes to interpret the statute as it is; further, it is contrary to all rules of construction to read words into a statute which the Legislature in its wisdom has deliberately not incorporated. [Refer CIT vs. Tara Agencies: 292 ITR 444 (SC) reproduced infra] Explaining the same, Justice (Retd.) G.P. Singh in his celebrated treatise on the 'Principles of Statutory Interpretation' [Twelfth Edition, 2010] @ 85-86, noted that: "The words of a statute are first understood in their natural, ordinary or popular sense and phrases and sentences are construes according to their grammatical meaning, unless that leads to some absurdity or unless there is something in the context, or in the object of the statute to suggest the contrary...............' In other words, Courts while interpreting a legal provision ought to assign primacy to the plain, natural, grammatical, ordinary or popular meaning of the words used by the Legislature as applied to the legal subject-matter, unless such a construction leads to absurdity of consequence, unworkability of the statute, or is patently contrary to the legislative intent and policy.The rule of literal construction, often reg....
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....arly imposes the obligations. Equally important is the rule of construction that if the words of a statute are precise and unambiguous, they must be-accepted as declaring the express intentions of the legislature.' Reference may also be made to the judgment in the case of Smt. Tarulata Shyam vs. CIT [1971] 108 ITR 345 (SC), wherein the Hon'ble apex Court cautioned against the judicial deployment of casus omissus, in the following terms: "We have given anxious thought to the persuasive arguments of Mr. Sharma. His arguments, if accepted, will certainly soften the rigour of this extremely drastic provision and bring it more in conformity with logic and equity. But the language of sections 2(6A)(e) and 12(1B) is clear and unambiguous. There is no scope for importing into the statute words which are not there. Such importation would be, not to construe, but to amend the statute. Even if there be a casus omissus, the defect can be remedied only by legislation and not by judicial interpretation. To us, there appears no justification to depart from the normal rule of construction according to which the intention of the legislature is primarily to be gathered from the words used in....
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....vision the exercise undertaken by the court is to make explicit the intention of the Legislature which enacted the legislation. It is not for the court to reframe the legislation for the very good reason that the powers to 'legislate' have not been conferred on the court. 65. In Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests 1990 (Suppl) SCC 785, the court rightly observed that in seeking legislative intention Judges not only listen to the voice of the Legislature but also listen attentively to what the Legislature does not say. 66. House of Lords in Pinner v. Everett [1969] 3 All. ER 257 aptly observed that we have been warned again and again that it is wrong and dangerous to proceed by substituting some other words for the words of the statute. 67. Therefore the legal position seems to be clear and consistent that it is the bounden duty and obligation of the court to interpret the statute as it is. It is contrary to all rules of construction to read words into a statute which the Legislature in its wisdom has deliberately not incorporated.' To similar effect are other judgments of the Hon'ble Supreme Court in cases such as Union of India v....
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....aning must be collected from the expressed intention of the legislature. (State of U.P. v. Dr Vijay Anand Maharaj (1963) 1 SCR 1. In construing a statutory provision, the first and foremost rule of construction is the literal construction. All that the court has to see at the very outset is what does that provision say. If the provision is unambiguous and if, from that provision, the legislative intent is clear, the court need not call into aid other rules of construction of statutes. The other rules of construction are to be called into aid only when the legislative intention is not clear. (Raghunath Rai Bareja (2007) 2 SCC 230; HiralalRatanlal v. STO (1973) 1 SCC 216) 45. If the words used are capable of one construction only, it would not be open to the Courts to adopt any other hypothetical construction on the ground that such hypothetical construction is more consistent with the alleged object and policy of the Act. The words used in the material provisions of the Statute must be interpreted in their plain grammatical meaning, (Kanai Lal Sur v. ParamnidhiSadhukhan: 1958 SCR 360, and must be construed in its ordinary sense as it is well recognised that the language used speak....
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....meaning. (Kirkness (Inspector of Taxes) v. John Hudson & Co., Ltd. (1955) AC 696 (HL). It is only when the material words are capable of two constructions, one of which is likely to defeat or impair the policy of the Act whilst the other construction is likely to assist the achievement of the said policy, would Courts prefer to adopt the latter construction.' In view of the aforesaid, it would be appreciated that it is a settled judicial position that the Courts are duty bound to interpret the words of a statute in their ordinary sense as drafted by the Legislature and are not to resort of creative devices of judicial incorporation or modification of statutory language. It is submitted that words used in a statute, in plain and clear terms, serve as the best guide towards determination of legislative intention, and any external device, which enables a construction, contrary to such plain words of the statute, is to be avoided Having regard to the aforesaid scheme of the Act, it is the respectful submission of the appellant that over all limitation for making an assessment including in the case of an eligible assessee is 3 years from the end of the relevant assessment year whi....
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....ct is ousted. 9. In rebuttal ld AR submitted as under :- Rebuttal to submissions of the Revenue I. It was contended by the Ld CIT DR that proceedings before the DRP are substitution of the appellate proceedings and the order passed by the DRP is akin to the appellate order; the final assessment order passed by the assessing officer under section 144C(13) of the Act is akin to the appeal effect order. It was further contended that as in the case of appellate proceedings, if provisions of section 144C are invoked applicability of section 153 of the Act is ousted. At the outset, it is respectfully submitted that the aforesaid submissions on the side of the Revenue are contrary to the scheme of the Act. The proceedings before the DRP are not in substitution of appellate proceedings; the Act provides the assessee a choice of either invoking proceedings under section 144C before the DRP or opting to avail the appellate remedy before the CIT(A). Furthermore, the Bombay High Court in the case of Vodafone India Services Pvt. Ltd. : 361 ITR 531, conclusively held that the proceedings before the DRP are not appeal proceedings but a proceeding to finalize the assessment on the basis o....
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....Trading Corporation vs. CIT : (2015) 61- taxmann.com-233, wherein the Hon'ble bench was pleased to hold that the provisions of section 144C override the provisions of section 153 of the Act. While rejecting the assessee's contention that the limitation in section 153 referred to passing of draft assessment order, the Tribunal held that: (i) Section 144C gives a complete go bye to section 153; and (ii) The Act does not contemplate any limitation for passing of draft assessment order, which can be passed within a reasonable time. The relevant observations of the Tribunal are extracted hereinbelow: "5.22 Now, we take up an important point raised by the ld. AR that if the time limit for the passing of the final assessment order is governed by section 144C, then, the time limit given in section 153 must be inferred for the passing of the draft order because there cannot be two simultaneous time limits for the completion of assessment. ... .... ... Though the question posed by the ld.AR that if the time limit for passing of the final assessment order is contained in section 144C then section153 cannot cover the same thing once again, is noteworthy, but we find that the inferenc....
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....overned by sub-section (4) or (13) of section 144C. This shows that upon the introduction of section 144C, there emerged two simultaneous time limits for completion of assessments, viz., the one which already existed as per section 153 and the latest one, which came to be introduced through section 144C. At this stage, it is significant to note one salient feature in the time limits enshrined under sub-sections (4) and (13) of section 144C. Such common thread is that the time limits given in both the sub-sections are 'notwithstanding anything to the contrary contained in section 153 or ...'. This transpires that the time limits for completion of assessment as prescribed in sub-sections (4) and (13) of section 144C have been superimposed on the time limit as given under third proviso to section 153(1) for the passing of the assessment order. Effect of the insertion of this non-obstante clause in sub-sections (4) and (13) of section 144C is that the hitherto applicable time limit given in section 153 came to expressly excluded for the purposes of completion of the final assessment order pursuant to the draft order. Under this scenario, as is also instantly prevalent, the time....
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....bove that the term 'draft order' has been statutorily coined u/s 144C(1). It means that the term 'draft order' has been recognized as and is actually different in ambit from the term 'assessment order'. With the insertion of section 144C, which led to the birth of the draft order, the legislature did not substitute the term 'order of assessment' with the term 'draft order' in section 153. If the intention of the legislature had been to substitute the hitherto time limit for passing of the assessment order as the time limit for the passing of draft order henceforth, on shifting the time limit for passing of the final assessment order to section 144C(4) or (13), then it would have made necessary changes in section 153 by substituting the term 'draft order' with the term 'order of assessment'. In fact, the term 'draft order' is totally absent in section 153,which indicates that it has been treated as alien to section 153. If we accept the contention of the ld. AR that after the introduction of section 144C, the time limit provided u/s 153 applies only to the draft order, it would amount to re-writing section 153 which falls i....
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....n that view of the matter, the draft order of assessment can be equated with the assessment completed in pursuance of the directions of the DRP under section 143(3) read with section 144C(13) of the Act. 2. The conclusion of the Tribunal that there is no time limit for passing of the draft assessment order under the scheme of section 144C and the same can be passed within a reasonable time, is clearly flawed. Keeping in view the legislative intent in progressively reducing the limitation for passing the assessment order so as to expedite the dispute resolution process and impart certainty and finality to assessment proceedings, the finding of the Tribunal is clearly contrary to law. 3. Further the finding of the Tribunal that the limitation under section 153 is only retained with reference to passing of the order by the TPO is again contrary to the overall scheme of the Act. The passing of the order by the TPO is the first step; subsequent to receipt of the order by the TPO, the AO passes the draft assessment order which is forwarded to the assessee. Once the assessee files objections to the DRP against the variations proposed in the draft assessment order, the DRP disposes o....
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....e date on which direction passed by the DRP was received by the AO so as to determine whether the assessment order was passed by the AO within 30 days of receipt of directions of the DRP. It was not the case of the assessee that section 144C had the effect of overriding the overall limitation contained in section 153 for passing the assessment order under section 143(3) read with section 144C(13) of the Act, as is being canvassed in the present case. The passing observation made by the Hon'ble bench to the effect that section 144C(13) of the Act gives extension of further period of one month, in addition to the limitation under section 153 of the Act cannot, therefore, be said to be deciding the issue in dispute in the present appeal, having regard to the arguments canvassed by the present appellant before the Hon'ble bench. It is settled law that it is improper to read a part of a judgment de hors the context in which the judgment is rendered and the controversy in dispute. Reliance is placed in this regard on the decision of the Hon'ble Supreme Court in the case of CIT vs Sun Engineering Works Pvt. Ltd. 198 ITR 297, wherein the Hon'ble apex Court held as under (pg 320): "Such....
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....s also not barred by limitation. Against this decision no further appeal is filed by the Assessee. However, the ld AR has given a detail rebuttal to the submission of the revenue. 11. The first argument of the ld AR was that argument of the ld CIT DR that DRP proceedings are substitution of the appellant proceedings, thus, direction of the ld DRP like an appeal order therefore, provision of section 153 of the Act does not apply. The ld Authorized Representative referred to the decision of the Hon'ble Bombay High Court in 361 ITR 531 where it is held that DRP proceedings are not appellate proceedings. The Hon'ble Bombay High Court has held that the process before the ld DRP Panel is continuation of assessment proceedings as only thereafter would a final appealable assessment order be passed. However, the Hon'ble High Court further held that process before the ld DRP is a correcting mechanism in the nature of a second look at the proposed assessment order by high functionaries of the revenue keeping in mind the interest of the Assessee. 12. The ld Authorized Representative further stated that as the coordinate bench has held that the draft order is actually different in ambit from ....
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....in the draft assessment order except what is directed by the learned dispute resolution panel. The provisions of principles of natural justice are ingrained in the provisions of section 144C of the act. It further says a time limit of 9 months from the end of the month when the draft order is forwarded to the assessee for passing of issue of any directions. Upon receipt of the direction the AO shall pass an order of final assessment which is in conformity with the direction of the dispute resolution panel within one month from the end of the month in which the directions are received. There is no further provision of granting any opportunity to the assessee of further hearing. Thus the above provisions are a self-contained code. In this code, the role of the assessing officer ends the movement, the objections are filed by the assessee or draft order is accepted by the assessee. Therefore, the learned assessing officer cannot make any upward adjustment to the income of the assessee after passing of the draft assessment order. He also cannot initiate any further penalties which are attached to the assessment order if same are not initiated in the draft order. The rights of the vari....