TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1429
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....ed by limitation as prescribed under section 144C of the Act and therefore, is illegal and liable to be quashed. 3. That the AO/ TPO/ DRP erred on facts and in law in making an adjustment of Rs. 105,07,00,000 to the arm's length price of 'international transactions' of sale of APIs and formulations, undertaken by the Appellant with the Associated Enterprises ("AEs"), on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ("TPO") and Dispute Resolution Panel ("DRP"). 3.1 That the AO/TPO/DRP erred on facts and in law in considering the Appellant as the tested party for benchmarking international transaction of provision of sale of APIs and formulations, applying TNMM, not appreciating that the Appellant being the manufacturer of such formulations, undertaking complex operations and owning intangibles, is more complex entity than the AEs. 3.2 That the AO/TPO/ DRP erred on facts and in law in rejecting benchmarking analysis undertaken by the assessee taking the AEs as the tested party, allegedly on the basis that the AEs are the creator of the assessee and that assessee does not hold controlling stakes and comprehensive autho....
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....e Appellant with the independent comparable companies in terms of Rule 10B(2) and Rule 10B(3) of the Income-tax Rules, 1962. 3.10 Without prejudice, that the TPO/ DRP erred on facts and in law in rejecting the contention of the Appellant that since the AEs have incurred a loss in relation to goods sold by the Appellant to the AEs, which in turn were sold by the AEs to ultimate third party customer(s), no Transfer Pricing adjustment was even otherwise warranted. 3.11 Without prejudice, that the TPO/DRP erred on facts and in law in not appreciating that the adjustment made in relation to an international transaction cannot exceed the profits retained and the amount of margin retained by the AEs. 3.12 Without prejudice, that the TPO/ DRP erred on facts and in law in considering incorrect margin of the companies considered by him as comparable to the Appellant for benchmarking the international transactions of sale of APIs and formulations. 4. That the DRP erred on facts and in law in enhancing the income of the Appellant by disallowing expenses amounting to Rs. 41,26,51,244 incurred by the assessee for undertaking corrective and remedial measures against procedural irregularit....
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....s of jurisdiction and limitation thus the same are taken up first for consideration. 4. Brief facts of the case are that the draft Assessment Order was passed on 24/12/2018 by Assistant Commissioner of Income Tax, Circle -9(2), New Delhi. The assessee filed objections before ld. DRP on 22.01.2019 i.e. within the permissible time limit allowed for filing the objections before the ld. DRP. The ld. DRP has given directions in terms of its order passed u/s 144C(5) of the Act dt. 26.09.2019. In compliance to the directions given by the ld. DRP, the TPO has passed the effect order on 26.11.2019 with a copy to the Jurisdictional assessing officer. The due date for passing of the final Assessment Order was 31.10.2019. Even if it is presumed that the order of ld. DRP was received by the AO in the month of October, 2019, the limitation for completion of final assessment order u/s 144C(13) expired on 20.11.2019. However, the final Assessment Order was passed on 20.12.2019 which is in divergence to due date prescribed u/s144C(13) of the Act, the assessee submits that the final order passed by the Assessing Officer is barred by limitation, and hence, should be treated as void. 5. On the other....
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....l issue the directions referred to in sub- section (5), after considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer of Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the mem....
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....m; (ii) the National Faceless Assessment Centre shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section; (iii) a notice shall be served on the assessee, through the National Faceless Assessment Centre, under sub-section (2) of section 143 or under sub-section (1) of section 142 and the assessee may file his response to such notice within the date specified therein, to the National Faceless Assessment Centre which shall forward the same to the assessment unit; (iv) ....(xx) (xxi) in case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of such assessee, as mentioned in sub-section (1) under section 144C, the National Faceless Assessment Centre shall serve the draft order referred to in clause (xx) on the assessee; (xxii) ...(xxiii) (xxiv) where a draft order is served on the assessee as referred to in clause (xxi), such assessee shall,- (a) file his acceptance of the variations proposed in such draft order to the National Faceless Assessment Centre; or (b) file his objections, if any, to such variations, with- (I) the Dispute....
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....f September, 2019 i.e. the month when such directions were received by the Assessing Office. As observed above, as per section 144C(13), the final assessment order should be passed by the Assessing Officer within a period of one month from the end of the month in which such direction is received. In the instant case the directions were given by Ld. DRP on 29/09/2019 thus for the AO for passing the final order, the limitation expired on 31.10.2019. It is also relevant to state here that when DRP issued directions, TPO has no power to resume jurisdiction and the TPO could only pass the effect order which in no case extended the time limit for passing the Final Assessment Order available to Assessing Officer in terms of section 144C(13) of the Act. Accordingly, in the present case, the limitation for passing final order by AO expired on 31.10.2019 thus the final assessment order passed on 20.12.2019 is barred by limitations and is void and invalid order. 10. One more fact that needs to be considered is that the AO in its order at page 2 last para observed that the DRP has passed the rectification order on 07/11/2019 which was forwarded to TPO for giving effect. Thereafter the final o....
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....sessment by virtue of section 144C(1) of the Act. If the assessee be aggrieved by the proposed order of assessment, it is entitled to file objections before the DRP in accordance with Section 144C(2) of the Act. The power of the AO to complete the assessment on the basis of the draft order stands interdicted in case objections have come to be preferred within the 30 day period as contemplated in Section 144C(2) of the Act. It is the DRP which thereafter proceeds to decide the objections and frame directions to enable the AO to complete the assessment in accordance with Section 144C(5) of the Act. 15. In terms of sub-section (13) of Section 144C of the Act, the AO is mandated to complete the assessment "in conformity with the directions" as framed by the DRP. That very provision commands the AO to complete the assessment within one month from the end of the month in which such a direction is received. 16. This is evident from Section 144C of the Act which is extracted herein below:- ........ 17. As is manifest from a reading of sub-section (13) of Section 144C of the Act, the AO is not accorded any discretion in the framing of an order of assessment once directions have come....
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....is additionally stated to have been dispatched through Speed Post to the third respondent (TPO) and the fourth respondent (Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi) on 27 June 2022. It is thereafter that the TPO appears to have passed the order dated 25 July 2022. XXX XXX XXX 22. It is thus manifest that as per the provisions of E-as, 2019, all orders, notices and decisions have to be necessarily uploaded on the ITBA portal and as part of the larger faceless assessment regime which now holds the field. The uploading of the directive of the DRP on the ITBA portal would thus constitute valid and sufficient service and the period of limitation as prescribed in Section 144C(13) of the Act would be liable to be computed bearing that crucial date in mind. Once the aforesaid position becomes clear, it is evident that the order of assessment, if at all could have been framed lastly by 31 July 2022. There has thus been an abject failure on the part of the first respondent to comply with the mandatory timelines as incorporated in the aforenoted provisions. Accordingly, the writ petition is liable to be allowed and the imp....
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....heme, cannot operate against the interest of assessee. Hence, the FAO cannot be believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part of department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity, but is an illegality and vitiates the entire proceeding. 22. In a decision in the matter of Turner International India Private Limited v. Deputy Commissioner of Income Tax, Circle-25(2), New Delhi, the Delhi High Court has held that the question "whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of Section 144C of the Act?", is no longer res integra and any order passed contrary to Section 144C of the Act cannot be sustained. 23. In a decision cited by Mr. Mistri in the matter of Shell India Markets (P) Ltd. (supra), this Court has also held as follows: "10. Sub-section (13) of Section 144C, therefore, is very clear inasmuch as the Assessing Officer shall, upon receipt of the directions issued under Sub-section (5), in conformity with the directions, complete the assessment with....
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....d to the CBDT and the Principal Secretary, Ministry of Finance, GOI. 27. Mr. Singh seeks stay of the judgment. Stay refused." 13. Further the decision of Hon'ble Madras High Court in the case of M/s Taeyang Metal India Private Limited vs. DCIT in Writ Petition No.12159 of 2023 and W.M.P. No.11989 of 2023 vide order dated 23.02.2024 has held as under: "6. The interpretation of sub-section 13 of Section 144C takes center stage in the adjudication of this dispute. The said sub-section is set out below: "(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received." From the above provision, it is evident that the specified time limit is one month from the end of the month in which directions are received. It is also clear that the time limit should be computed from the date of receipt of directions issued under sub-section (5) thereof. Sub-section (5....
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....ion 144C. By taking into account not only statutory prescription but also the interpretation thereof by the Division Bench of this Court in Roca and that of the Division Bench of the Delhi High Court in Louis Dreyfus, 1 conclude that the assessment order cannot be sustained. 9. In view of the conclusion that the assessment proceedings are barred by limitation, it is unnecessary to examine as to whether the assessing officer was duly authorized to exercise jurisdiction either under the WhatsApp message issued on 13.04.2022 or upon the physical file being signed on 21.04.2022." 14. Further the decision of the ITAT, Chennai Bench 'D" in the case of M/s Cognizant Technology Solutions India Private Limited (as successor-in- interest of M/s KBACE Technologies Private Limited) vs. ACIT in IT(TP)A 61/CHNY/2023 vide order dated 29/05/2024 has held has under: "10. We have heard rival submissions in the light of facts of the case, evidence placed on record and judicial citations relied upon. Ground of appeal no.1 is general in nature and hence bereft of any meritorious adjudication. Coming to grounds of appeal Nos. 2 to 6 whereby the assessee has challenged procedural irregularities in g....