TaxTMI 
TaxTMI 
2025 (12) TMI 964
X X X X Extracts X X X X
X X X X Extracts X X X X
....essee and the ld. AO both are in appeal before us. 3. The brief facts of the case pointed out before us is that the assessment year involved is 2011-12, the period of limitation for passing the assessment order as per section 153 of the Act is 2 years from the end of the assessment year. The above period is further extended by 12 months as there is a reference made u/s. 92CA of the Act, thus the assessment proceedings should have been completed on or before 31.3.2015. Thus the period of limitation expires on 30.3.2015. The TP order u/s. 92CA(3) of the Act is required to be passed on or before 60 days from the date of limitation. Thus as the 60 days period expires on 30.1.2015 being 2 days of January, 28 days of February & 30 days of the month of March, 2015, thus the limitation expires on 30th January, 2015 and therefore the TP order u/s. 92CA(3) is required to be passed on 29.1.2015. However, in the impugned case, the TP order has been passed on 30.1.2015. Thus, the order passed by the ld. TPO is beyond the period of limitation and thus the whole assessment of the ALP of the international transaction deserves to be quashed. In this case, the total adjustment made by the ld. TPO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y' be made or 'shall' be made. Thirdly, what is the meaning of the word 'made' itself i.e whether the TP order is to be 'made, 'passed' or 'served'. These will be subsequently discussed. However, what is essential is to understand the context in which the words in the section have been used. And what better way to understand the context than by perusing the Memorandum to the Finance Bill, 2007 vide which section 92CA (3A) was introduced in the statute. 3. Before delving upon the Memorandum, it is important to know the position in the Statute before the amendment was brought about in Finance Act, 2007. Prior to 1st June 2007, there was no separate time limitation in the Act for the TPO. The time limitation for making the TP order coincided with the time limitation of the Assessing Officer (`AO') under Section 153. This resulted in a situation where there was no extra time available to the AO for completing the assessments where reference to the TPO was made. Having realized this lacuna in the statute, the legislature brought an amendment to the Act vide Finance Bill, 2007. The Memorandum to the Finance Bill 2007 explaining the pro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....3) of section 92CA, the Assessing Officer shall proceed to compute the total income of the assessee under sub-section (4) of section 92C in conformity with the Arm's length price determined under sub-section (3) of section 92CA by the Transfer Pricing Officer. These amendments will take effect from 1st June, 2007 and shall also be applicable in cases where a reference to the Transfer Pricing Officer was made prior to 1.7.2007 but the Transfer Pricing Officer did not pass the order under sub- section (3) of section 92CA before the said date. [Clauses 25,39 and 40]" (emphasis supplied) 4. Two points clearly stand out from the above excerpt showing the legislative intent for the proposed amendment: First is that the TPO shall determine the Arm's Length Price at least 2 months before the expiry of the new time limit for making assessment and secondly, on receipt of the TPO's order, the AO shall proceed to compute the total income of the assessee in conformity with the Arm's length Price ('ALP'). The first point envisages that the TPO will also have a limitation of 60 days before the time limitation for the assessment expires. And the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....assessment order can be passed on 31st March. Therefore, the limitation is not 'expiring' on 31st March. Does it then mean that the limitation expires on 1St April. No, because any order passed after midnight of 31st March would be barred by limitation. Therefore, it is in the context of the situation, legislative intent and the entirety of facts that the issue in hand needs to be looked at. As submitted earlier, the legislative intent is to give atleast 60 days for the AO to make the assessment order and if the AO can pass assessment order on 31st March, the TPO can pass the TP order latest by 30th January because after this date (i.e after 30th January), the AO will have at least 60 days to make the assessment order. 6. Without prejudice to the above submissions, as explained in the Memorandum to the budget of 2007-08, the AO should have at least 2 months or 60 days with him to pass the assessment order. If assessee's contention is to be accepted (i.e if 29th January is the time barring for the TPO's order), then the number of days remaining with the AO would be - : a. 30th and 31st January (2 days) b. February (28 days) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....TP order. The TPO's order is neither the final assessment order nor is the TPO's order appealable. So, no prejudice is caused to the assessee on passing of the TP order. Further, it is beyond doubt that the assessment order passed by the AO was well within the time limitations. Therefore, the matter needs to be seen in this context as well. 10. To conclude, the contention of legislative intent, as mentioned in the Memorandum Explaining the Provisions in the Finance Bill, 2007, and as discussed in the forgoing paras, has not been adjudicated in the Judicial forums so far. 11. Hence it is prayed that the TPO's order is not barred by limitation u/s 92CA(3A) of the Act and therefore the ground of the assessee in this regard may kindly be dismissed." 6. The Hon'ble jurisdictional High Court in Principal Commissioner of Income-tax vs. Tata Power Solar Systems Ltd. [2024] 166 taxmann.com 16 (Karnataka) [12-08-2024] has decided this issue as under :- "9. The question that arose for adjudication before the Tribunal fell on a narrow compass, inasmuch as it was the contention of the assessee that the order passed under Section 92CA(3) of the Act was b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpact 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 of the time schedule. The word "may" cannot be interpreted to say that the legislature never wanted the au....