TaxTMI 
TaxTMI 
2023 (5) TMI 797
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....ated 01/11/2019 is barred by limitation and hence, invalid in law. 3. The assessee has also filed additional ground before us on 23/04/2022 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 27/12/2019 and final assessment order passed by the ld. AO on 17/04/2021 using the extended period provided in third proviso to Section 153 of the Act would also be barred by limitation. For the sake of convenience, the original ground No.2 raised by the assessee is reproduced hereunder:- "2. Re: Validity of the Order: 2.1 On the facts and in circumstances of the case and in law, the impugned transfer pricing order under section 92CA(3) dated 1 November 2019 is barred by limitation and hence invalid in law" 3.1. The additional grounds raised by the assessee are as under:- 1:0 Re: Eloal Assessment Order barred by limitation: 1:1 The Appellant submits that considering the facts and circumstances of its case and the law prevailing on the subject, the impugned Order dated 17 April 2021 passed us. 143(3) r.w.s. 144C(13) rws 1448 of the Income-t....
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....O u/s.92CA(3) on 01/11/2019 is clearly barred by limitation as it is passed in violation of provisions of Section 92CA(3A) of the Act. He placed on record the following table to buttress this argument:- Sr. No. Particulars Relevant date/ period Assessment Year involved 2016-17 1. Period of limitation for making an order of assessment as per section 153 of the Income-tax Act, 1961 ["the Act"] 21 months from the end of the Assessment Year 2. Extension of period of limitation in case reference is made u/s. 92CA of the Act. 12 months 3. Assessment proceedings should be completed on / or before 31.12.2019 4. Date prior to the date on which period of limitation expires (stated in Sr. No. 3 above) 30.12.2019 5. Sixty day period expires on December = 30 days (excluding 31.12.2019) November = 30 days 01.11.2019 6. Transfer Pricing Order u/s. 92CA(3) of the Act to be passed on/ or before 31.10.2019 7. Date on which Transfer Pricing Order u/s. 92CA(3) is passed 01.11.2019 4.3. For the sake of convenience, the provisions of Section 92CA(3A) of the Act are reproduced hereunder:- Reference to Transfer Pricing Officer. 92CA. (1) .....................
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....arlier, the time limit for completion of assessment u/s.153 of the Act is 31/12/2019. In order to reckon 60 days prior to that date, obviously the date of 31/12/2019 should be ignored. Hence, 60 days prior to 31/12/2019 would fall on 31/10/2019 i.e. 30 days 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. JCIR 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‟bl....
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....ch the period of limitation under section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, 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. Subsection (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....
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....h comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the "cardinal principle of construction".' 38. In case of assessments involving transfer pricing, fixing of time limits at various 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 conclud....
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.... illegal and invalid order i.e. DRP directions dated 20/03/2021 and final assessment order dated 17/04/2021 also becomes void ab initio. In support of this, the ld. AR before us placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of Mondelez India Foods Pvt. Ltd. vs. Addl. CIT in ITA No.1492/Mum/2015 and Atos India Pvt. Ltd vs. DCIT in ITA No.1795/Mum/2017. Per contra, the ld. DR placed reliance on the report of the ld. AO on the additional ground raised by the assessee. The said report is received in e-mail from the ld. AO by the ld. CIT DR which is placed on record. The ld. DR placed reliance on the decision of the Coordinate 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 orde....
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....ct, 2007 has explained that with a view that TPO gets sufficient time to make the audit of Transfer Pricing and also to provide the Assessing Officer sufficient time to make assessment in the case involving international transactions, the time limit specified in section 153 of the Act has been extended by 12 months, where reference is made to the TPO. Further, 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....
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....30 days Less: Number of days February 2014 28 days Less: Number of days January 2014 2 days Last date for passing the order under section 92CA(3) of the Act 29-01-2014 Date of passing the transfer-pricing order ('TP order') under section 92CA(3) of the Act 30-01-2014 12. The relevant extract of the provisions of section 92CA(3A) and section 153(1) 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 assessmen....
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....31-12- 2019 that must stand excluded since section 92CA(3A) states 'before 60 days prior to the date on which the period of limitation referred to section 153 expires'. Excluding 31-12-2019, the period of 60 days would expire on 1-11- 2019 and the transfer pricing orders thus ought to have been passed on 31-10- 2019 or any date prior thereto. Incidentally, the Board, in the Central 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 ....
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.... SCC 323 : 1992 SCC (L&S) 248 : (1992) 19 ATC 219 : AIR 1992 SC 96] , Institute of Chartered Accountants of India v. Price Waterhouse [(1997) 6 SCC 312] and Harbhajan Singh v. Press Council of India [(2002) 3 SCC 722 : JT (2002) 3 SC 21] .)" 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 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 di....
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.... 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 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 clai....
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.... 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 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 pa....
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....ion (15) to section 144C of the Act . If there is no eligible assessee, no reference to DRP could have been made. Once the substratum for making the assessment under transfer pricing mechanism erodes the subsequent proceedings emanating from flawed foundation is without jurisdiction. 17. In the light of facts of the case and decisions referred above, we find merit in the additional grounds of appeal No.48 & 49. The assessee 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." 4.8. 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....
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....nd fast definition and can only be applicable in the above two categories. Ostensibly, the expression 'eligible assessee' has a restrictive meaning as it covers only the two types of persons mentioned above. 33. Further, considering the express language employed in defining the term 'eligible assessee' under section 144C(15)(b) and section 144C(1) in forwarding a draft assessment order to such an 'eligible assessee' only, is plain, clean and unambiguous; the 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. T....
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....isions of law is also illegal and void ab initio which deserves to be quashed. 36.It is a well-settled proposition now that a draft order passed in case of an 'ineligible assessee' vitiates the entire exercise of assessment and all subsequent proceedings are liable to be quashed has been held in the following cases: (i) Honda Cars India Ltd. v. Dy. CIT [2016] 67 taxmann.com 29/240 Taxman 707/382 ITR 88 (Delhi); (ii) Pankaj Extrusion Ltd. v. Asstt. CIT [2011] 10 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 hel....
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.... on 27th September, 2013. 40. The various judgments which have been cited before us that 144C(1) will not apply and there is no variation in the return of income which cannot be disputed. Thus in our view, Ld. AO to acquire a legal and valid jurisdiction for the purpose of forwarding a draft assessment order at the first instance under section 144C(1) of the Act, it is necessary that the assessee must be an 'eligible assessee' within the restrictive and strict four corners of how the said 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 in....