TaxTMI 
TaxTMI 
2025 (12) TMI 1282
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1), Hyderabad ('Ld. AO') in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel - I, Bengaluru ('Hon'ble DRP') on the following grounds: 1. On the facts and circumstances of the case and in law, the Deputy Commissioner of Income tax (Transfer Pricing Officer) - 3, ('Ld. TPO') and the Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad ('Ld. AO') in pursuance of the directions issued by the Hon'ble Dispute Resolution Panel - I, Bengaluru ('Hon'ble DRP') erred in making an addition of Rs. 72,65,88,412/- (based on the provisions of chapter X of the Income Tax, 1961 ('the Act')) and the said addition being wholly unjustified are liable to be deleted. 2. On the facts and circumstance of the case and in contrary to law, the Ld. TPO erred in, and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in rejecting the transfer pricing documentation maintained by the Appellant in accordance with the provisions of the Act read with the Income Tax Rules, 1962 ('Rules') and making an adjustment of Rs. 72,65,88,412/-. 3. On the facts and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....alling India Pvt. Ltd. xi. TGL Enterprises Pvt. Ltd. xii. Swaminathan Enterprises Pvt. Ltd. xiii. Agile Electric Sub Assembly Pvt. Ltd. 7. On the facts and circumstance of the case and in contrary to law, the Ld. TPO erred in, and the Hon'ble DRP further erred in upholding / confirming the action of the Ld. TPO in :- a) In considering trade receivables from AE as a separate international transaction and further erred in proposing transfer pricing adjustment in the nature of interest on receivables amounting to INR 26,90,887/- b) Not appreciating that the instant transaction is not covered in the definition of international transaction as defined u/s 92B of the Act in the facts and circumstances of the case; c) Delinking the inter-company receivables arising from the main international transactions and proceeding to benchmark the same as a separate transaction. d) Not appreciating the fact that the Company has outstanding payables to its AE and the same can be used to net off outstanding receivables. e) Determining the arm's length interest on the alleged overdue receivables from overseas AEs at....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (supra). She submitted that as laid down by the Hon'ble Supreme Court in the said paragraph, an additional ground can be admitted only where a non-taxable item has been taxed or a permissible deduction has been denied. According to the Ld. DR, the present case does not fall in either of these situations and therefore the additional ground raised by the assessee cannot be admitted. She further submitted that the additional ground is not covered by Rule 11 of the ITAT Rules. Accordingly, she argued that the additional grounds raised by the assessee are liable to be rejected. 6. We have considered the rival submissions and perused the material available on record. In this regard, we have gone through para nos. 5 to 8 of the order of the Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd. Vs. CIT (supra), which is to the following effect: "5. Under section 254 of the Income-tax Act, 1961, the Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit. The power of the Tribunal in dealing with appeals....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... view of the powers of the Tribunal - vide, e.g., CIT v. Anand Prasad [1981] 128 ITR 388/ 5 Taxman 308 (Delhi), CIT v. Karamchand Premchand (P.) Ltd. [1969] 74 ITR 254 (Guj.) and CIT v. Cellulose Products of India Ltd. [1985] 151 ITR 499/[1984] 19 Taxman 278 (Guj.) (FB). Undoubtedly, the Tribunal will have the discretion to allow or not allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee. 8. The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the assessee. We remand the proceedings to the Tribunal for consideration of the new grounds raised by the assessee on the merits. " 6.1 On a perusal para no. 5 of the above, we find that the objection of the Ld. DR is misplaced. In the same paragraph,....
X X X X Extracts X X X X
X X X X Extracts X X X X
....above, it is seen that the rule 11 of the ITAT Rule merely provides that an appellant may raise an additional ground with the leave of the Tribunal and that before granting such leave, the other party should be afforded sufficient opportunity of being heard. In the present case, such opportunity has indeed been provided to the revenue. Hence, we find no merit in the objection raised by the Ld. DR. Therefore, the objection of the revenue is rejected. Accordingly, the additional grounds raised by the assessee are admitted for adjudication. 7. On perusal of the grounds of appeal of the assessee, we find that under the additional ground nos. 1 to 3 of the appeal, the assessee has raised a purely legal ground challenging the validity of the assessment order passed by the Ld. AO for AY 2020-21 under section 143(3) r.w.s. 144C(13) and 144B of the Act in accordance with the directions of the Learned Dispute Resolution Panel ("Ld. DRP") under section 144C(5) of the Act (hereinafter referred to as "the final assessment order"), on the ground that it is barred by the limitation prescribed under section 153 of the Act. In this regard, the Ld. AR submitted that the final assessment order pas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sue in favour of the assessee. Accordingly, the Ld. AR prayed before the Bench that the final assessment order is barred by limitation and liable to be quashed. 8. Per contra, the Ld. DR, inviting our attention to para no. 5(I) of M.A No.21/2022 in M.A. No.665/2021 in suo motu writ petition (C) No.3/2020 of the order of the Hon'ble Supreme Court, submitted that the Hon'ble Supreme Court has granted a general extension of the period from 15.03.2020 to 28.02.2022 for the purpose of calculation of limitation periods prescribed under any general or special law in respect of all judicial or quasi-judicial proceedings. The Ld. DR contended that the limitation period available to the Ld. AO for completion of the assessment stood extended for the period covered between 15.03.2020 to 28.02.2022 by virtue of the directions of the Hon'ble Supreme Court. Accordingly, she submitted that, if the said extended period is taken into account for computing the limitation for passing the assessment order by the Ld. AO, the order passed would fall within the period of limitation. 8.1 The Ld. DR also submitted that the section 144C of the Act begins with a non-obstante clause and there....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the rival submissions as well as the relevant material on record. In normal course the limitation for passing the assessment order was available for ITA.Nos. 125 & 474/Hyd./2022 the assessment year 2017-2018 up-to 31.12.2019. However, since there was a reference u/sec.92CA of the Act, the time period for completing the assessment gets extended up to 31.12.2020. Further, due to the Covid-2019 pandemic the Government has notified the TOLA whereby the time period was extended up to 30.09.2021 vide Notification dated 25.06.2021. Therefore, by considering the extension of time period by Notification of TOLA, the Assessing Officer was to complete the assessment by 30.09.2021, but, in the case in hand, the Assessing Officer has passed the impugned order on 26.02.2022 which is beyond the time limitation provided u/sec. 153 as well as extension by Notification of TOLA. The learned Authorized Representative of the Assessee has also relied upon Judgment of Hon'ble Supreme Court in suo motu Cognizance for Extension of Limitation (supra), for extending the limitation. However, in our considered view that the limitation extended by the Hon'ble Supreme Court is not applicable for passing....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... time frame fixed by the respective statutes. (iv) Wherever proceedings are pending, judicial or quasi- judicial which requires to be heard and disposed off, cannot come to a standstill by virtue of these extension orders. Those cases need to be adjudicated or disposed off either physically or through the virtual mode based on the prevailing policies and practices besides instructions if any. (v) The following actions such as scrutiny of returns, issuance of summons, search, enquiry or investigations and even consequential arrest in accordance with GST law would not be covered by the judgment of the Hon'ble Supreme Court. (vi) As regards issuance of show cause notice, granting time for replies and passing orders, the present Orders of the Hon'ble Supreme Court may not cover them even though they are quasi- judicial proceedings as the same has only been made applicable to relating to petitions/ applications/ suits, etc. matters 4. On the basis of the legal opinion, it is hereby clarified that various actions/ compliances under GST can be broadly categorised as follows :- (a) Proceedings that need to be initiated or compliances tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t there is no merit in the argument of the Ld. DR that the limitation for passing the assessment order was extended by the Hon'ble Supreme Court. 11. Now coming to the core issue i.e. whether the limitation period for passing the final assessment order is to be calculated as per the provisions of section 153(1) read with section 153(4) of the Act or as per the provisions of section 144C(13) of the Act. There is no dispute about the fact that for AY 2020-21, the last date available for passing of the final assessment order, if calculated as per the provisions of the section 153(1) read with section 153(4) of the Act was 30.09.2023. There is also no dispute about the facts that the final assessment order was passed by the Ld. AO on 29.07.2024, the draft assessment order under section 143(3) read with section 144C(1) of the Act was passed on 29.09.2023, and the directions of Ld. DRP under section 144C(5) of the Act were issued on 25.06.2024. The only issue before us is whether the limitation period for passing the final assessment order is (a) 30.09.2023, as per the provisions of section 153(1) read with section 153(4) of the Act, or (b) 31.07.2024, i.e., one month from the end....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e words "twelve months" had been substituted: (1A) xxxxx xxxxx (1B) xxxxx xxxxx (2) xxxxx xxxxx (3) xxxxx xxxxx (3A) xxxxx xxxxx (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 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer [or the Transfer Pricing Officer, as the case may be], wholly or partly, otherwise than by making a fresh assessment or reassessment [or fresh order under section 92CA, as the case may be], such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commission....
X X X X Extracts X X X X
X X X X Extracts X X X X
....sy 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 provisions of Section 153 are excluded by the non-obstante clause in section 144C(13) and hence the proceedings are not barred by limitation. Per contra, it has been contended by the learned senior counsels appearing for the respondent(s)/ assessees that the outer time limit under Section 153 is applicable to every proceedings on remand and the department having slept over the issue for several years, cannot now redo the proceedings afresh, after certain rights have vested with the assessees. Even if specific provisions are not there to de....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to be passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 144C and section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter- dependant and overlapping. On remand, prior to amendment as per Section 153 (2A), the Assessing officer is given 12 months to pass a fresh assessment order. Therefore, it is incumben....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ples 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 harmonize 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 that, if possible, effect should be given to both. This is the essence of the rule of "harmonious construction". (4) The courts have also to keep in mind that an interpretation which reduces one of the provisions as a "dead letter" or "useless lumber" is not harmonious construction. (5) To harmonise is not to destroy any statutory provision or to render it otiose." (ii) CIT v. Hindustan Bulk Carriers [2003] 126 Taxman 321/259 ITR 449: "16. The courts will have to reject that construction which will defeat the plain inten....
X X X X Extracts X X X X
X X X X Extracts X X X X
....w 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 conclude the proceedings as expeditiously as possible and the authority need not wait for the last date to pass the orders. The limitation prescribed under the statute is for the assessing officer and therefore, it is his duty to pass order in time irrespective of whether the directions are received from DRP or not. As held by us above, the DRP will have no authority to issue directions after nine months and a further period of one month as per section 144C(13) and three months under section 153(2A) is available, within which period no orders have been passed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 him to withhold the payment of the tax so collected. If a timely assessment is completed, the dues of the State can be conveniently ascertained and collected. Delay in completion of assessment often creates problems. The assessee would be required to keep up all the evidence in support of his transactions. Where evidence is necessary, with the lapse of time, there is scope for its being lost. Oral evidence as and when required to be produced by the assessing authority may not be available if a long period intervenes between the transactions and the consideration of th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ction 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. 19. Revisional jurisdiction, in our opinion, should ordinarily be exercised within a period of three years having regard to the purport in terms of the said Act. In any event, the same should not exceed the period of five years. The view of the High Court, thus, cannot be said to be unreasonable. Reasonable period, keeping in view the discussions made hereinbefore, must be found out from the statutory scheme. As indicated hereinbefore, maximum period of limitation provided for in sub-section (6) of Section 11 of the Act is five years. 21. In S.B. Gurbaksh Singh v. Union of India [(1976) 2 SCC 181 : 1976 SCC (Tax) 177 : (1976) 37 STC 425] Untwalia, J., speaking for the Benc....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 officer is to pass orders within the stipulated time, (d) In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the very purpose of extension is to ensure that orders are passed within the extended period, as otherwise the extension becomes meaningless. (e) The outer time limit of 33 months in case of reference to TPO under Section 153, would not refer to draft order, but only to final order....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 144C of the Act is applicable in the case of an eligible assessee. If Mr. Suresh Kumar was correct, then in our view, it would have been specifically so provided in section 153 of the Act. We would agree with Mr. Mistri that wherever the legislature intended extra time to be provided, it is expressly provided in section 153 of the Act. Sub- section (3) of section 153 of the Act also applies to fresh order under section 92 CA of the Act being passed in pursuance to an order under section 254 of the Act. Sub-section (4) of section 153 of the Act specifically....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nsidered 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 deems 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 Act. This is because, the procedure under section 144C(1) of the Act also has to be followed by the Assessing Officer only if he proposes to make any variation which is prejudicial to the interest of the eligible assessee. If the Assessing Officer did not wish to make any variation which is prejudicial to the interest of the eligible assessee, he need not go through the procedure prescribed under section 144C of the Act. 29. In our view, the assessment has to be concluded within twelve months as provided in section 153(3) of the Act when there has be....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 (supra), we hold that the assessment order passed by the Assessing Officer on 18.10.2024 is barred by limitation and consequently, the same is liable to be quashed. We order accordingly. 12. Since the issue is pending adjudication before the Hon'ble Supreme Court in the case of ACIT-[International Taxation] vs., Shelf Drilling Ron Tappmeyer Ltd., [2025] 177 taxmann.com 262 (SC) and the first attempt to resolve the dispute by the Hon'ble Supreme Court is not successful due to divergent views of the Division Bench of the Hon'ble Supreme Court an....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urt 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 accordingly set aside/quashed As a consequence, all the impugned orders getting quashed, the consequential orders passed by the respondent- Department pursuant to the notices also issued under Section 147 and 148 would get quashed and it is ordered accordingly. The reason we are quashing the consequential order is on the principles that when the initiation of the proceedings itself was procedurally wrong, the subsequent orders also gets nullified automatically. 37. The preliminary objection raised by the petitioner is sustained and all these w....