TaxTMI 
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2023 (4) TMI 30
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....is barred by limitation and hence, invalid in law. 3. The assessee has also filed additional ground before us on 18/07/2022 wherein it had stated that since the order of the ld. TPO is barred by limitation, the assessee does not become "eligible assessee" u/s.144C of the Act and hence, the draft assessment order dated 07/12/2019 and final assessment order passed by the ld. AO on 31/03/2021 using the extended period provided in third proviso to Section 153 of the Act would also be barred by limitation. 4. We have heard rival submissions and perused the materials available on record. The return of income for the A.Y.2016-17 was electronically filed on 29/11/2016. The assessee , a Joint Venture of Tubacex SA and Prakash Steelage Limited, was incorporated as a private limited company on 22/04/2015. The assessee is engaged in manufacturing and distribution of Stainless Steel , Tubes and Pipes. The company's business activity falls within a single business segment i.e manufacturing and sales of stainless steel - Bars, Hollows, Tubes and pipes being primary segment and all other activities revolve around the main business activity. The case was selected for scrutiny by issuance of notic....
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....sessment order passed on 07.12.2019 9. DRP directions on 19.03.2021 10. Final Assessment order 31.03.2021 4.3. The ld. DR before us filed the following written submissions vide letter dated 23/03/2023, which is reproduced hereunder for the sake of convenience :- "1.The additional grounds of appeal filed by the assessee before the Hon'ble ITAT is not acceptable on the following basis: 1.1. It is submitted that the Interpretation by the Hon'ble Tribunal regarding the time limit in Sec.92CA (3A) is against the provisions of the General Clauses Act and the settled principles of Interpretation of Laws 1.2 It is submitted that the legislature uses different words such as "from", "to" "before", "after", "prior", "within", "not later than", not thereafter", "not leas than", "at least" for computation of days. The principle of excluding the date of starting day and the inclusion of ending day are provided in Sec. 12 of the limitation Act and in Sec. 9 of the General Clauses Act and a provision cannot be interpreted ignoring the same. 1.3 As per Sec. 9 of the General Clauses Act, in computation of the time limit, the day referred to as "from" has to be excluded and the day re....
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....e the order is passed on this date, therefore the order is not barred by time limitation. 1.9 Sec. 92CA(3A) uses the word may only and the same cannot be construed as shall and equated to limitation especially when further proceedings are contemplated under the Act such as passing draft assessment order, remedy before Dispute resolution panel and final assessment order. 1.10 There is no necessity or occasion to read the word "may" as "shall" Sub-sections 3A and 4 were introduced in Sec. 92CA by the very same Finance Act, 2007 and the Legislature has consciously used the word "may" in Sec. 92CA(3A) while using the word "shall" in Sec. 92CA(4) Hence, in view of the context and background of the provisions, the word "may" should not and cannot be read as "shall". 4.4. For the sake of convenience, the provisions of Section 92CA(3A) of the Act are reproduced hereunder:- Reference to Transfer Pricing Officer. 92CA. (1) ................................................................................................... (2) .................................................................................................. (2A) ......................................................
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....s in December and 30 days in November. Hence, the due date for passing the order by the ld. TPO u/s.92CA(3) of the Act would be 31/10/2019. In other words, the ld. TPO as per Section 92CA(3A) of the Act is bound to pass an order u/s 92CA(3) of the Act on or before 31/10/2019. In the instant case, since the order of the ld. TPO is passed on 01/11/2019, it is squarely barred by limitation as it is in violation of provisions of Section 92CA(3A) of the Act. In this regard, the ld. AR rightly placed reliance on the decision of the Hon'ble Madras High Court Single Bench decision in the case of Pfizer Healthcare India (P.) Ltd. vs. JCIT reported in 433 ITR 28 (Madras). This decision was subject matter of consideration by the Division Bench of Hon'ble Madras High court in the case of DCIT vs. Saint Gobain India (P.) Ltd. reported in 444 ITR 636 (Madras). This Division Bench approved the decision of Single Bench of Hon'ble Madras High Court. The relevant operative portion of the Division Bench's order is reproduced hereunder:- "29. The language employed is simple. 31-12-2019 is the last date for the assessing officer to pass his order under section 153. The TPO has to pass order before 60....
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....sessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Sub-section (5) of section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is empowered to issue such direction as it thinks fit for the guidance of the Assessing Officer after considering various details provided in Clauses (A) to (G) thereof. Sub-section (13) of section 144C of the Act provides that upon receipt of directions issued under sub-section (5) of section 144C of the Act, the Assessing Officer shall in conformity with the directions complete the assessment proceedings. It goes without saying that if no objections are filed by the Assessee either before the DRP or the assessing officer to the determination by the TPO, section 92CA(4) would come into operation. Therefore, it is very clear that once a reference is made, it would have an impact on the assessment unless a decision on merits is taken by DRP rejecting or varying the determination by the TPO. 33. It would only be apropos to note that as pe....
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.... stages sets forth that the object of the provisions is to facilitate faster assessment involving such determination. In the present case, as rightly held by the learned Judge in paragraphs 22 to 29 of the order dated 7-9-2020, the order of the TPO or the failure to pass an order before 60 days will have an impact in the order to be passed by the Assessing Officer, for which an outer time limit has been prescribed under sections 144C and 153 and is hence mandatory. What is also not to be forgotten, considering the scheme of the Act, the inter-relatability and inter-dependency of the provisions to conclude the assessment, is the consequence or the effect that follows, if an order is not passed in time. When an order is passed in time, the procedures under 144C and 92CA(4) are to be followed. When the determination is not in time, it cannot be relied upon by the assessing officer while concluding the assessment proceedings. 39. Upon consideration of the judgments and the scheme of the Act, we are of the opinion that the word "may" used therein has to be construed as "shall" and the time period fixed therein has to be scrupulously followed. The word "may" is used there to imply that....
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....l. CIT in ITA No.1492/Mum/2015 dated 14/11/2022 and Atos India Pvt. Ltd vs. DCIT in ITA No.1795/Mum/2017 dated 23/02/2023. Per contra, the ld. DR placed reliance on the report of the ld. AO on the additional ground raised by the assessee which is reproduced supra. The ld. DR placed reliance on the decision of the Co-ordinate Bench of the Delhi Tribunal in the case of Louis Dreyfus Commodities India Private Ltd. vs DCIT in ITA No.2381/Del/2014 dated 11/03/2021 which is also reported in 138 taxmann.com 556. In the said decision of the Delhi Tribunal in para 27 thereon it has been held as under:- "27. Consequent additions made on account of transfer pricing adjustment by way of determining the ALP transaction by the TPO are also not sustainable in the eyes of law, the order of the TPO (supra) being barred by limitation. Since vide assessment order dated 24-2-2014 AO has made addition on account of determination of ALP of international transaction, such addition stands deleted being order of ld. TPO barred by limitation, but the assessment order u/s 143 (3) passed by AO is in time, it stands except those additions proposed by ld. TPO. Thus, additions made by AO, based on order of ld.....
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....r, it has also been provided that the TPO shall determine the ALP at least two months before the expiry of statutory time limit for making the assessment. In appeal under consideration, due date for completion of assessment under third proviso of section 153(1) of the Act was 31/03/2014 and the time limit for passing an order u/s. 92CA(3A) of the Act is two months prior to the date of limitation. The TPO passed the order on 30/01/2014 which is two months prior to 31/03/2014, therefore, the order passed by TPO is within the period of limitation. The ld. Departmental Representative further referred to the Central Action Plant for Financial Year 2014-15 and 2015-16, wherein the period prescribed to frame transfer pricing audit is 31/01/2015 and 31/01/2016, respectively, and the limitation for order u/s.143(3) r.w.s. 153 of the Act is 31/03/2015 and 31/03/2016, respectively. The same principle would apply to A.Y. 2010-11. The ld. Departmental Representative submits that in line with the Boards Central Action Plan the TPO has passed the order within the period of limitation. The ld. Departmental Representative placed reliance on the decision of Delhi Bench of Tribunal in the case of M/s....
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....) of the Act and the third proviso as was applicable to the impugned assessment year are reproduced herein below: Section 92CA (3A) "(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires:" Section 153(1) " Time limit for completion of assessment 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 income was first assessable, or (b) One year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment ....
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....al Action Plan also indicates the date by which the Transfer Pricing orders are to be passed as 31-10-2019. The impugned orders are thus, held to be barred by limitation". 14. The aforesaid decision of Single Judge was assailed by the Department in writ appeal before the Division Bench. The Division Bench of the Hon'ble Madras High Court in the case of DCIT vs. Saint Gobain India (P) Ltd. (supra) upheld the decision of Single Judge and observed as under:- "28. The word "date" in section 92CA(3A) would indicate 31-12-2019. But the preceding words "prior to" would indicate that for the purpose of calculating the 60 days, 31-12-2019 must be excluded. The usage of the word "prior" is not without significance. It is not open to this court to just consider the word "to" by ignoring "prior". The word "prior" in the present context, not only denotes the flow of direction, but also actual date from which the period of 60 days is to be calculated. It is settled law that while interpreting a statute, it is not for the courts to treat any word(s) as redundant or superfluous and ignore the same. In this connection, it is pertinent to note the judgment of the Apex Court in Grasim Industries ....
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....ore 60 days prior to the last date. The 60 days is to be calculated excluding the last date because of the use of the words "prior to" and the TPO has to pass order before the 60th day. In the present case, the word "before" used before "60 days" would indicate that an order has to be passed before 1-11-2019 i.e on or before 31-10-2019 as rightly held by the Learned Judge. 30. Even considering for the purpose of alternate interpretation, the scope of section 9 of the General Clauses Act, it is to be noted that an inverted calculation of the period of limitation takes place here. If the last date is taken to be the first date from which the period of 60 days is to be calculated, reading down the provision with the use of the word "from", which denotes the starting point or period of direction in general parlance, would mean that 60 days "from the last date". Even going by section 9 of the General Clauses Act, when the word "from" is used, then, that date is to be excluded, implying here that 31-12-2019 must be excluded. After excluding 31-12-2019, if the period of 60 days is calculated, the 60th day would fall on 1-11-2019 and the TPO must have passed the order on or before 31-10-....
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.... as per proviso to section 92CA (3A), if the time limit for the TPO to pass an order is less than 60 days, then the remaining period shall be extended to 60 days. This implies that not only is the time frame mandatory, but also that the TPO has to pass an order within 60 days. 34. Further, the extension in the proviso referred above, also automatically extends the period of assessment to 60 days as per the second proviso to section 153. 35. Also, but for the reference to the TPO, the time limit for completing the assessment would only be 21 months from the end of the assessment year. It is only if a reference is pending, the department gets another 12 months. Once reference is made and after availing the benefit of the extended period to pass orders, the department cannot claim that the time limits are not mandatory. Hence, the contention raised in this regard is rejected. 36. As rightly pointed out by Mr. Ajay Vohra, learned senior counsel for the respondents in WA. Nos.1148 and 1149/2021, the word "may" has to be sometimes read as "shall" and vice versa depending upon the context in which it is used, the consequences of the performance or failure on the overall scheme and o....
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....y that an order can be passed any day before 60 days and it is not that the order must be made on the day before the 60th day. The impact of the proviso to the sub-section clarifies the mandatory nature of the time schedule. The word "may" cannot be interpreted to say that the legislature never wanted the authority to pass an order within 60 days and it gave a discretion. Therefore, the learned Judge rightly held the orders impugned in the writ petitions as barred by limitation, as the Board, in the Central Action Plan, has specified 31-10-2019 as the date on which orders are to be passed by the TPO, reiterating the time limit to be mandatory." The period of limitation for passing the assessment order in the instant case expires on 31/03/2014. The time limit for passing the order u/s. 92CA(3A) is sixty days prior to the date on which the limitation referred in section 153 of the Act expires. Thus, the limitation in the present case for passing the order u/s. 92CA(3) of the Act expires on 29/01/2014. The TPO passed the order u/s. 92CA(3) of the Act on 30/01/2014. Ergo, the order u/s. 92CA(3) of the Act is surely time barred by one day. 15. The Ld. Departmental Representative has....
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.... succeeds on the aforesaid legal grounds. 18. No arguments were made by ld. Counsel for the assessee in respect of original grounds of appeal / other additional grounds of appeal at this stage. Hence, they are left open for adjudication, if the need arises. 19. In the result, appeal by the assessee is allowed." 4.9. Similar view has been rendered in the recent decision of this Tribunal in the case of Atos India Pvt. Ltd. vs. DCIT in ITA No.1795/Mum/2017 dated 23/02/2023 independently without considering the aforesaid decision of the Tribunal. The relevant operative portion of the said decision is reproduced hereunder:- "30. Now another issue which crops up, is, whether, once the TPO order is held to be nullity or quashed on the ground of being barred by limitation, then could AO have passed the draft order treating it to be as 'eligible assessee'. Section 144C was brought on the statute as special scheme of assessment and to provide alternative dispute resolution scheme to certain categories of 'eligible assessee'. Section 144C provides that the AO has to pass and forward a draft assessment order in the case of 'eligible assessee' if he proposes to make any variation which i....
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....he said statute must be interpreted strictly without there being any role of 'equity or intendment' in such interpretation. 34. In the present case, the assessee is an Indian company and, thus, a resident in India under section 6 of the Act. Thus, the second condition under section 144C (15)(b)(ii) of the Act for qualifying as an 'eligible assessee' is not applicable. As regards the first condition under section 144C(15)(b)(i) of the Act, the same applies where there is a transfer pricing variation arising as a consequence of the order of the Ld. TPO under section 92CA(3) of the Act. In the instant case, it will be apparent that there is no transfer pricing variation arising as a consequence of the order of the Ld. TPO once the said transfer pricing order is held to be time-barred, non-est and void-ab-inito from the very date of its existence and inception. The entire premise to adopt the special procedure under section 144C of the Act and treat the appellant an 'eligible assessee' rests on the fact that the order passed under section 92CA(3) of the Act has resulted in transfer pricing variations prejudicial to the interest of the appellant. However, once the transfer pricing ord....
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....0 taxmann.com17/198 Taxman 6 (Guj.) (iii) FedEx Express Transportation and Supply Chain Services (India) (P.) Ltd. v. DCIT [2019] 108 taxmann.com 542 (Mumbai - Trib.) In case of FedEx Express, the relevant portion of which has been reproduced in the foregoing paras, wherein the Tribunal has expressed the provision and finally deleted the corporate grounds also. We accordingly follow the same reasoning here in this case also. 37.Similarly, in a reverse case scenario, i.e., where a draft assessment order was required to be passed on an 'eligible assessee' as per section 144C(1) of the Act but the same was not so passed, in the following decisions as well, the entire assessment proceedings have been held to be invalid and liable to be quashed: (i) Vijay Television (P.) Ltd. v. DRP [2014] 46 taxmann.com 100/225 Taxman 35/369 ITR 113 (Madras) affirmed by the Division Bench of the Hon'ble Madras HC in [2018] 95 taxmann.com 101 (Madras); (ii) International Air Transport Association v. Dy. CIT [2016] 68 taxmann.com 246 (Bombay); (iii) Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2- 2013] (Andhra Pradesh)- Revenue's SLP dismissed by the Hon'ble Apex Court....
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.... expression has been defined under section 144C(15)(b) of the Act. Here, once it is held that there is no legal or valid transfer pricing order under section 92CA(3) of the Act, there remains no variation arising as a consequence thereto and the case of the assessee, being an Indian company, falls outside the definition of 'eligible assessee' as defined under section 144C(15)(b) of the Act. Thus, the Ld. AO cannot be said to acquire a 'legal or a valid' jurisdiction under section 144C(1) r.w.s. 144C(15)(b) of the Act to pass or forward a draft assessment order to the appellant who is otherwise an 'ineligible assessee'. The action of the Ld. AO in passing the impugned draft assessment order in instant case results in non-compliance of section 144C of the Act which vitiates the entire assessment exercise. 41.The issue being fairly settled and the intent of legislature in strictly interpreting the provision of section 144C of the Act being repeatedly held so, the act of the Ld. AO in proceeding to pass a draft assessment order on the basis of an order by the Ld. TPO which is barred by limitation and thus bad in law/ non-est, results in an incurable illegality which is liable to be h....