TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 1208
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....hed in-limine. 2. On the facts and circumstances of the case and in law, the learned Assessing Officer ('AO') / the learned Transfer Pricing Officer ('TPO'), under the directions of the Hon'ble Dispute Resolution Panel ('DRP'), erred in computing the total income of the Appellant at INR 85,89,25,995 as against returned income of INR 20,82,36,540. Transfer Pricing 3. On the facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, erred in making adjustment of INR 31,49,76,739/- to the total income of the Appellant in relation to the international transaction of provision of information technology enabled services ('ITES') and assistance in software development services. 4. On the facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, erred in arbitrarily rejecting the economic analysis undertaken by the Appellant in accordance with the provisions of the Act read with the Income-tax Rules, 1961 ('Rules') and various submissions made by the Appellant before lower authorities....
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....al on record that there has been under charging of real income. 12. On the facts and circumstances of the case and in law, the learned AO / learned TPO, under the directions of the Hon'ble DRP, erred in not appreciating that since the weighted average period of receivables of the Appellant is less than 30 days, no adjustment ought to have been made on account of alleged international transaction of outstanding receivables. Corporate Tax 13. On facts and circumstances of the case and in law, the learned AO, under the directions of the Hon'ble DRP, erred in reducing the deduction claimed under section 10AA of the Act by INR 5,05,39,902 by re-allocating consultancy charges from SEZ Unit 1 to SEZ Unit 2 of the Appellant. 14. Without prejudice, on facts and circumstances of the case and in law, the learned AO, under the directions of the Hon'ble DRP, erred in computing deduction under Section 10AA of the Act by setting off losses of Unit 2 against profit of Unit 1 which is contrary to the provisions of Section 10AA of the Act. 15. Without prejudice, on facts and circumstances of the case and in law, the learned AO, under the directions ....
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.... extends the time limit for further 12 months for completing the assessment and consequently, the time limit in the case of the assessee expires on 31.12.2023. Learned Sr. Counsel for the Assessee has submitted that since the impugned order was passed on 18.10.2024, therefore, the same is barred by limitation and liable to be quashed. He has further pointed-out that even the Draft Assessment Order passed by the Assessing Officer is not within the period of limitation as provided as it did not allow the period of 30 days to the assessee to file it's acceptance of variations or file it's objections, if any, to such variations with the DRP because allowing the said period of 30 days will again cross the limitation provided for passing the Final Assessment Order by 31.12.2023. Thus, the Learned Counsel for the Assessee has submitted that as per sub-sec.(2) of sec. 144C, the Assessing Officer has to give 30 days time period to the assessee to file acceptance or it's objections with the DRP before the limitation period provided u/sec.153(4) expires. In support of his contention, he has relied upon the Judgment of Hon'ble Madras High Court in the case of CIT vs., Roca Bath....
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.... further extended by a period of 12 months as per sub-sec.(4) of sec. 153. The learned DR has further submitted that as per the special provisions u/sec. 144C, the assessee is having an option to accept the Draft Assessment Order and variations in the draft assessment or to object the same by filing objections before the DRP or to the Assessing Officer for going to challenge the order of the Assessing Officer under regular appeal before the learned CIT(A). Therefore, once the assessee decided to go for the objections before the DRP, the limitation for completing the assessment is applicable as provided u/sec. 144C(13) of the Act. Thus, the learned DR has submitted that once the Final Assessment Order is passed within the period of 30 days from the receipt of the DRP directions, then, it is well within the period of limitation provided u/sec.144C(13) of the Act. The learned DR has further submitted that this issue is pending adjudication before the Hon'ble Supreme Court. Earlier the Division Bench of the Hon'ble Supreme Court has given divergent decisions and, therefore, now this controversy has to be resolved by a Larger Bench of Hon'ble Supreme Court. Thus, the learned....
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.... months" had been substituted. Provided also that in respect of an order of assessment relating to ) the assessment year commencing on the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "nine months" had been substituted: Provided also that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2022, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted: (1A) XXXXX XXXXX (1B) XXXXX XXXXX (2) XXXXX XXXXX (3) XXXXX XXXXX (3A) XXXXX XXXX (4) Notwithstanding anything contained in sub-sections (1), (1A), (2) (3) and (3A), where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections (1), (1A), (2), (3) and (3A) shall be extended by twelve months. (5) Where effect to an order under section 250 or section 25....
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....f the assessment shall be extended by 12 months. It is an undisputed fact that the present case is falling in the category of an "eligible assessee" where reference u/sec. 92CA(1) was made by the Assessing Officer to the TPO and, therefore, the time limit for completing the assessment was extended by 12 months whereby the Assessing Officer was required to complete the assessment by 31.12.2023. The Assessing Officer has passed the Final Assessment Order on 18.10.2024 in pursuance to the Directions dated 24.09.2024 of the DRP. This controversy of the limitation applicable u/sec.153 or u/sec. 144C(13) was considered by the Hon'ble Madras High Court in the case of CIT vs., Roca Bathroom Products (P.) Ltd., (supra) and held in Paras-18 to 28 as under : 18. The main contentions of the Department, through their counsel are that Section 144C is a code in itself and hence on remand by the ITAT, the power of DRP to take up the dispute on additions by TPO, is not circumscribed by Section 153 and that in the absence of any express time limits contemplated under the Act, the time limits under Section 153 for reassessment cannot be read into Section 144C more particularly when the p....
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....ays prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given 9 months time and thereafter, within one month from the end of the month of receipt of directions from DRP, the final order is to be passed. This court is not in consonance with the contention of the learned senior panel counsel for the appellants/ revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had issued the notices. If the contention of the appellants / revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years. 21. As held above, the assessment has to be concluded within 21 months when there is no reference and when there is a refer....
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....very clause of a statute should be construed with reference to the context and other clauses of the Act, so as, as far as possible, to make a consistent enactment of the whole statute or series of statutes relating to the subject-matter......." 14. This rule of construction which is also spoken of as "ex visceribus actus" helps in avoiding any inconsistency either within a section or between two different sections or provisions of the same statute. 15. On a conspectus of the case-law indicated above, the following principles are clearly discernible: (1) It is the duty of the courts to avoid a head-on clash between two sections of the Act and to construe the provisions which appear to be in conflict with each other in such a manner as to harmonise them. (2) The provisions of one section of a statute cannot be used to defeat the other provisions unless the court, in spite of its efforts, finds it impossible to effect reconciliation between them. (3) It has to be borne in mind by all the courts all the time that when there are two conflicting provisions in an Act, which cannot be reconciled with each other, they should be so interpreted tha....
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.... unjust, unfair, unreasonable or does not make any sense. [Bennion on Statutory Interpretation, 5th Edn., p. 986.] When an interpretation is beset with practical difficulties, the courts have not shied from turning sides to accept an interpretation that offers a pragmatic solution that will serve the needs of society [Id, p. 971, quoting Griffiths, L.J.]. Therefore, when there is choice between two interpretations, we would avoid a "construction" which would reduce the legislation to futility, and should rather accept the "construction" based on the view that draftsmen would legislate only for the purpose of bringing about an effective result. We must strive as far as possible to give meaningful life to enactment or rule and avoid cadaveric consequences [See Principles of Statutory Interpretation by Justice G.P. Singh, 14th Edn., p. 50.]" 23. Further, similar non-obstante clause is also used in section 144C(4) with a same limited purpose to imply, even though there might be a larger time limit under Section 153, once the order of TPO is accepted or not objected to, causing a deeming fiction of acceptance, the final order is to be passed immediately. The object is to conclu....
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....onths from the financial year 2016-17. Therefore, the Assessing officer ought to have passed a draft assessment order immediately and asked the assessee to file their objections with the DRP. For the mistake and the lapse of the Assessing officer, the vested right of the Assessee cannot be taken away. 26. We are not oblivious of the fact that any finding on the aspect of reasonableness in time in passing orders when no time is provided would be superfluous in view of our decision in earlier paragraphs. It is necessary to decide on the issue as in this case, the revenue has taken more than 5 years in one appeal and 4 years in other appeals, which is unacceptable as rightly held by the learned judge. We are not alone on this issue and are fortified by the following judgments of the Hon'ble Supreme Court in this regard. (i). Bharat Steel Tubes Ltd. v. State of Haryana 1988 taxmann.com 761 "15. Before we part with the case, we would like to indicate that assessment of tax should be completed with expedition. It involves the revenue to the State. In the case of a registered dealer who collects sales tax on behalf of the State, there is no justification for....
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.... issuance of notice of demand is raised, it would be open to the assessee to contend that it is bad on the ground of delay and it will be for the relevant officer to consider the question whether in the facts and circumstances of the case notice of demand for recovery was made within reasonable period. No hard and fast rules can be laid down in this regard as the determination of the question will depend upon the facts of each case.' (iii). State of Punjab v. Bhatinda District Co-op. Milk P. Union Ltd. [2007] 11 SCC 363 : '17. A bare reading of Section 21 of the Act would reveal that although no period of limitation has been prescribed therefor, the same would not mean that the suo motu power can be exercised at any time. 18. It is trite that if no period of limitation has been prescribed, statutory authority must exercise its jurisdiction within a reasonable period. What, however, shall be the reasonable period would depend upon the nature of the statute, rights and liabilities thereunder and other relevant factors. 1 19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard ....
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...., drawing a clue from Article 113 of the Limitation Act, the residual entry, it would be reasonable to conclude that in such cases, action is to be concluded within 3 years. Needless to say, if the statute prescribes shorter period, the doctrine of reasonable time will not be applicable and the timeline under the statute is to be strictly followed. 27. For the reasons set out herein before, we conclude as under: (a) The provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under Section 153 (2A) or 153 (3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders. (b) Even in case of remand, the TPO or the DRP have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under section 144C(12) of the Income-tax Act, (c) Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing....
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....ALP) of international transactions engaged in by the assessee. The DRP was constituted bearing in mind the necessity for an expert body to look into intricate matters concerning valuation and transfer pricing and it is for this reason that specific timelines have been drawn within the framework of section 144C to ensure prompt and expeditious finalisation of this special assessment. The purpose is to fast-track a special type of assessment. That cannot be considered to mean that overall time limits prescribed have been given a go by in the process. 24. We find it difficult to accept the submissions of Mr. Suresh Kumar because it would in fact mean that, notwithstanding the twelve month period prescribed under section 153 (3) of the Act, where it says that an order of fresh assessment in pursuance of an order under section 254 of the Act may be made at any time before the expiry of twelve months from the end of the financial year in which order under section 254 of the Act is received by the Commissioner, would not apply to a case where section 144C of the Act is applicable. It would also mean that the time prescribed in section 153 (1) of the Act cannot apply where section....
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....c., shall be excluded. There is no mention anywhere about section 144C of the Act. 26. If we accept the submissions of Shri Suresh Kumar that when there is a remand as in this case, the AO is unfettered by limitation, it would run counter to the avowed object of provisions that were considered while framing the provisions of section 144C of the Act. Having set time limits every step of the way, it does not stand to reason that proceedings on remand to the AO may be done at leisure sans the imposition of any time limit at all. 27. Having considered the language of sections 144C and 153, we cannot accept that the provisions of section 153 are excluded to the operation of section 144C. 28. Mr. Mistri, therefore, is correct in his submissions that the time limit prescribed under section 153 of the Act would prevail over and above the assessment time limit prescribed under section 144C of the Act. This is because the Assessing Officer may follow the procedure prescribed under section 144C of the Act, if he deemis fit necessary but then the entire procedure has to be commenced and concluded within the twelve months period provided under section 153 (3) of the A....
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....imited purpose to imply, even though there might be a larger time limit under section 153, once the matter is remanded to AO by the ITAT under section 254, the process to pass final order under section 144C has to be taken immediately. 32. The object is to conclude the proceedings as expeditiously as possible. There is a limit prescribed under the statute for the AO and therefore, it is his duty to pass an order in time. After 30th September 2021, the AO will have no authority to pass any final assessment order in this Case. 33. We cannot accept the submissions of Shri Suresh Kumar that passing of draft assessment order before 30th September 2021 would suffice. We find support for this view in Roca Bathroom (SB) (supra) and Roca Bathroom (DB) (supra). 34. In the circumstances, since no final assessment order can be passed in the present case as the same is time barred, the Return of Income as filed by Petitioner be accepted. This would however, not preclude the Revenue from taking any other steps in accordance with law. 11. Therefore, following the Judgments of Hon'ble Madras High Court as well as Hon'ble Bombay High Court cited (surpa), we hol....
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....Kankanala Ravindra Reddy (1 supra) shall however be subject to the outcome of the SLPs which were filed by the Income Tax Department and which is pending consideration before the Hon'ble Supreme Court. 16. In the given facts and circumstances, this Bench is of the considered opinion that unless and until we do not timely dispose of matters which are squarely covered by the decision of this Court and which stands fortified by the decisions of the various other High Courts on the very same issue, the pendency of this High Court would further be burdened which otherwise can be decided and disposed of as a covered matter. 17. So far as the interest of the Revenue is concerned, we are of the considered opinion that the interest of the Revenue has already been considered and protected, as has been observed in paragraphs 36, 37 and 38 of the order which, for ready reference, is reproduced hereunder: 36. For all the aforesaid reasons, the impugned notices issued and the proceedings drawn by the respondent- Department is neither tenable, nor sustainable. * The notices so issued and the procedure adopted being per se illegal, deserves to be and are acc....