TaxTMI 
TaxTMI 
2023 (5) TMI 797
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the ld. TPO u/s.92CA(3) of the Act dated 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 4.2. The ld. AR before us stated that the transfer pricing order passed by the ld. TPO 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, th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of the Act at any time before 60 days prior to the date on which the period of limitation referred to in Section 153 of the Act for making the order of assessment or re-assessment expires. As stated earlier, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....The TPO after considering the documents submitted by the assessee is to pass an order under section 92CA (3) of the Act. As per section 92CA(3A), the order has to be passed before the expiry of 60 days prior to the date on which 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ombines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... this process, the draft assessment order passed by the ld. AO on 27/12/2019 for A.Y.2016-17 also becomes barred by limitation. Because of the draft assessment order getting barred by limitation, it becomes an order void ab initio. Accordingly, any subsequent proceedings emanating from the 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 th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....representing the Department vehemently submitted that the order passed by TPO u/s.92CA(3)of the Act is a valid order passed within the period of limitation. The ld. Departmental Representative submits that CBDT vide Circular No.3/2008 dated 12/03/2008 in the Explanatory Notes on the provisions of the Finance Act, 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sessment Year 31-03-2011 Due date for completion of assessment under Third Proviso to section 153(1) of the Act (i.e. 3 years from the end of AY) 31-03-2014 Time limit for passing the order under section 92CA(3A) of the Act 60 days Less: Date on which limitation expires under section 153 of the Act i.e. 31-03-2014 1 day Less: Remaining days of March 2014 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,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 am of 1-1-2020. However, this would mean that an order of assessment can be passed at 12 am on 1-1-2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31-12-2019. The period of 21 months therefore, expires on 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'....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deficiencies which are left there". In case of an ordinary word there should be no attempt to substitute or paraphrase of general application. Attention should be confined to what is necessary for deciding the particular case. This principle is too well settled and reference to a few decisions of this Court would suffice. (See : Gwalior Rayons Silk Mfg. (Wvg.) Co. Ltd. v. Custodian of Vested Forests [1990 Supp SCC 785 : AIR 1990 SC 1747] , Union of India v. Deoki Nandan Aggarwal [1992 Supp (1) 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 b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 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 ord....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he 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 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....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) (ii) any non-resident not being a company, or any foreign company" A perusal of the above definition would show that eligible assessee mean any person in whose case variation arises as a consequence of the order of the TPO passed u/s. 92CA(3) of the Act. The order has to be a valid order. In the instant case since, the order of TPO was beyond the period of limitation it is not a valid order. Therefore, there is no "eligible assessee" in terms of the definition provided in sub-section (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 ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h assessee. The draft assessment order is to be forwarded to an "eligible assessee", which means that, for this section to apply a person has to be an "eligible assessee" Here, the draft assessment order is to be forwarded only to an "eligible assessee" and not to every assessee under the Act. 32. Thus, under the aforesaid provision, the expression "eligible assessee" is followed by an expression "means" and there are two categories referred therein (i) any person in whose case the variation arises as a consequence of TPO's order and (ii) any NR or Foreign company. The use of the word "means" indicates that the definition "eligible assessee" for the purposes of Section 144C(15)(b) is a hard and 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 statu....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a year in view of the 3rd proviso of section 153 of the Act. Accordingly, the time limit to complete assessment proceedings u/s 143(3) of the Act in the instant case expired on 31 March 2016. As on the date of passing draft assessment order u/s 144C(1) of the Act i.e. on 29 March 2016, the Ld. AO had already received the order passed by the Ld. TPO dated 31 January 2016, which as discussed above, is time barred, illegal and void ab initio, thereby making the Appellant not an eligible assesseeu/s 144C(15) of the Act. In view of the same, the Ld. AO was ostensibly required to pass the final assessment order u/s 143(3) of the Act on that day. Having said that, the draft assessment order passed by the Ld. AO under the provisions 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. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Revenue, but also the assessee and any mistake committed by any one of them, the said party is supposed to face the consequences and cannot put the hands of the clock back and start afresh." 39. Further, in case of Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2-2013] (Andhra Pradesh), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order "without jurisdiction, null and void and unenforceable." In that case, the consequent demand notice was also set aside. The decision of the Andhra Pradesh High Court was affirmed by the Supreme Court by the dismissal of the Revenue's SLP (C) [CC No. 16694/2013] 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 ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct, as it stood applicable for the AY 2012- 13, provided a time limit of 3 years from the end of AY 2012-13 for completion of assessment under section 143(3) of the Act, i.e., on or before 31 March 2016. 44.In such a case if the Ld. AO invokes the provisions of section 144C of the Act and passes the final assessment order after 31 January 2016 i.e. beyond the period of limitation as stated above, such final assessment order u/s 143(3) r.w.s 144C of the Act is liable to be quashed as being barred by limitation. 45. In a recent decision of the Hon'ble Madras High Court in case of Virtusa Consulting Services Put. Ltd [TS-474-HC-2022(MAD)] dated 9 June 2022, it has been held in context of period of limitation under section 153 of the Act as under: "17. Further, it is to be noted that the different timelines to be adhered by the TPO, Assessing Officer to pass a draft order, assessee to file their objections, DRP to issue directions and the assessing officer to pass final order, would commence only on a reference to the TPO and not otherwise. At this juncture, it is not to be forgotten that the period of 33 months is to pass the final order of assessment after the d....