TaxTMI 
TaxTMI 
2025 (12) TMI 1351
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....he final assessment order passed u/s 143(3) r.w.s. 144C(13) r.w.s. 144B is beyond the time limit prescribed u/s 153 of the Act. 2.1. The Ld. AO ought to have appreciated that the time limit for completion of assessment u/s 153 has been lapsed, therefore the order passed is erroneous and bad-in-law. 2.2. The Ld. AO ought to have appreciated the fact that time limit prescribed u/s 153 would prevail over and above the time limit prescribed u/s 144C. Therefore the Final Assessment Order u/s 143(3) r.w.s 144C(13) r.w.s. 144B of the Income Tax Act is Void and bad in law 2.3. The Ld. AO ought to have appreciated the fact that, the assessment has to be completed within 18 months (shall be extended by twelve months, if any reference u/s 92CA is made) as per Section 153 of the Act. 2.4. The Ld. AO ought to have appreciated the fact that time limit for the completion of assessment u/s 153 has lapsed on 30-09-2023 and hence the order u/s 143(3) r.w.s 144C(13) is invalid and bad-in-law. 3. Erred in upholding the upward adjustment of Arm's Length Price for Rs. 28,87,492/- in respect of payment of Royalty 3.1. The Ld. AO erred in upholding....
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....en covered in the previous year where the Ld. TPO has accepted the assessee's determination of arm's length price and that no adjustment has been proposed. 4.0 Erred in upholding adjustment of Rs. 5,42,937/- towards international transaction of Interest on unsecured Compulsorily convertible debentures given to AE's. 4.1 The Ld. AO erred in upholding the adjustment of Rs. 5,42,937/-made to the total income u/s 92CA(3) of the Act. 4.2 The Ld. AO erred in holding that the TPO's use of LIBOR plus 200 basis points deemed appropriate in the appellant's case. 4.3 The Ld. AO has erred in holding that the TPO's approach of benchmarking the transaction against LIBOR rates is justified. 4.4 The Ld. AO has erred in holding that the RBI guidelines pertain to FDI policies and are not directly applicable for determining the Arm's length price of International transactions under the Income tax Act. 4.5 The Ld. AO erred in holding that the TPO had provided a robust analysis and reasonable basis for the adjustment of Rs. 5,42,937/- 4.6 The Ld. AO ought to have appreciated that the interest paid by the assessee....
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.... 5.9 The Ld. AO ought to have appreciated that no interest can be charged on receivables when the principal transaction is at arms length price which has been accepted by the TPO. 5.10 The Ld. AO ought to have appreciated that the outstanding receivables are foreign currency receivables and that the same have to be benchmarked with the LIBOR rate and not with SBI rate. 6. Appellant may, add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal." 2. Succinctly stated, the assessee company, which is engaged in the business of manufacturing and sale of Steel Doors and Industrial Doors and light hardware items, besides installation of doors and windows, had filed its return of income for AY 2020-21on 14/02/2021, declaring its total income at Rs. 16,95,19,720/-. The case of the assessee company was thereafter selected for scrutiny assessment under CASS based on its international transactions relating to the lending and borrowing of money. 3. During the course of the assessment proceedings, the AO for benchmarking the international transactions of the a....
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....f the authorities below, and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by them to drive home their respective contentions. 11. Before proceeding further, we deem it apposite to cull out the issues involved in the present appeal arising from the assessment order, DRP directions and grounds of appeal, viz., (i) TP adjustment towards payment of royalty to Associated Enterprises (AEs): Rs. 28,87,492/-; (ii) TP adjustment towards interest on unsecured compulsory convertible debentures (UCCDs): Rs. 5,42,937/-; and (iii) TP adjustment towards imputed interest on trade receivables: Rs. 1,19,659/-. 12. Shri P. Murali Mohan Rao, CA, the Learned Authorised Representative (for short, "Ld. AR") for the assessee company, at the threshold of hearing of the appeal assailed the validity of the final assessment order, dated 25/07/2024, on the ground that it is barred by limitation as per the mandate of section 153 of the Act. Elaborating on his contention, the Ld. AR submitted that for AY 2020-21, the statutory time limit for completion of assessment, even after extension of TP reference, expired on 30/09/2023. The L....
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....e Act, the subsequent issuance of an assessment order by drawing support from section 144C(13) of the Act cannot revive the jurisdiction. 17. We find that a coordinate Bench of the Tribunal, i.e., ITAT, Hyderabad, "A" Bench, had recently, in the case of Aveva Solutions India LLP, Hyderabad Vs. The ITO, Ward 8(1), Hyderabad, ITA No. 1170/Hyd/2024, dated 19.11.2025, followed the judgment of the Hon'ble High Court of Madras in the case of CIT. v. Roca Bathroom Products P. Ltd (supra), and had held the assessment order passed by the AO in the case before them as barred by limitation by observing as under: "7. We have considered the rival submissions as well as relevant material on record. In the case in hand, the assessee has challenged the validity of the assessment order passed u/sec.143(3) r.w.s.144C(13) of the Act dated 18.10.2024 being barred by limitation as provided u/sec.153 of the Act. At the outset, it is noted that the limitation for passing the assessment orders is provided u/sec.153 of the Act and the relevant provisions are in subsec.(1) and sub-sec.(4) of sec.153 reads as under: "153. Time limit for completion of assessment, reassessment and re-compu....
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....rder 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 Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be. Provided that where it is not possible for the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer [or the Transfer Pricing Officer, as the case may be], if satisfied, may allow an additional period of six months to give effect to the order. Provided further that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by ....
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....hat 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 assessee's. Even if specific provisions are not there to deal with this situation, the proceedings must be concluded within a reasonable time and hence the impugned proceedings are liable to be struck down and rightly done so by the learned Judge. 19. Admittedly, the facts including the dates are not under dispute. As regards the appeal in W.A.No.1854 of 2021, even though the remand was on 24.01.2013 and the assessee had received the order on 08.02.2013, the first notice by the DRP was issued on 19.02.2014 and the first hearing in the Chennai office was on 10.03.2014. Therefore, it is lucid that the DRP had the knowledge of the order before 19.02.2014. The matter was heard on various dates in Chennai office and written submissions were also filed. Thereafter, the files have been transferred to Bengaluru by the CBDT notification dated 31.12.2014. The Learned Judge relying upon the findings in the batch of cases which was decided first and ren....
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....ion 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 incumbent on him to do so, irrespective of the fact that DRP has completed the hearing and issued the directions or not. As rightly held by the learned judge, we are of the view that the DRP ought to have concluded the proceedings within 9 months from the date of receipt of the Tribunal's order, when it had issued a notice on 19.02.2014 and conducted the hearing as early as on 10.03.2014 and on several dates. The DRP at Chennai, in fact ought to have passed orders before 19.11.2014, even if the date of receipt of the notice is taken as 19.02.2014. In that event, the assessing officer ought to have passed the order before 31.12.2014 or at the latest before 31.03.2015 considering that the order was received during the Financial year 2013-14. The transfer of the files to Bengaluru, after the lapse of the time, will not indefinitely extend the time and can have no impact on the time lines. It is an ....
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....r" 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 intention of the legislature even though there may be some inexactitude in the language used. (See Salmon v. Duncombe [(1886) 11 AC 627 : 55 LJPC 69 : 55 LT 446 (PC)] AC at p. 634, Curtis v. Stovin [(1889) 22 QBD 513 : 58 LJQB 174 : 60 LT 772 (CA)] referred to in S. Teja Singh case [AIR 1959 SC 352 : (1959) 35 ITR 408). 18. The statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute. 19. The court must ascertain the intention of the legislature by directing its attention not merely to the clauses to be construed but to the entire statute; it must compare the clause with other parts of the law and the setting in which the clause to be interpreted occurs. (See R.S. Raghunath v. State of Karnataka [(1992) 1 SCC 335 : 199....
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.... 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 in the present cases. The reference made by the learned senior counsels on the judgments in Nokia India Private Ltd (supra) and Vedanta Ltd (Supra) is well founded. The timeline given under the Act is to be strictly followed. 24. Insofar as the challenge to the show cause notice issued is concerned, though generally, the High Court will be circumspected to interfere at the stage of show cause notice, the law on the point is well settled with exceptions carved in the following cases; a. when the notice is issued beyond the period of limitation, b. when the notice is without authority, c. when notice is issued without following the procedures under the applicable Act or the rules framed thereunder and d. when the notice is issued with a prejudiced mind. The challenge must be available ex-facie leaving no room....
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....ould 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 the matter by the assessing authority. Long delay thus is not in the interest of either the assessee or the State. In view of the fact that a period of limitation has been prescribed for bringing the escaped turnover into the net of taxation, such an eventuality cannot be grappled with appropriately unless timely assessment is completed. In several taxing statutes, even in a situation like this, where assessment under Section 11(3) or 28(3) of the respective Acts is contemplated, a period of limitation is provided. Until by statute, such a limitation is provided, it is proper for the State Governments to require, by statutory rules or appropriate instructions, to ensure completion of assessments with expedition and reasonable haste but subject to rules of natural justice." (ii) Govt. of India v. Citedal Fine Pharmaceuticals, [(1989) 3 SCC....
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....inbefore, 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 Bench, opined: (SCC p. 188, para 15) "15. Apropos the fourth and the last submission of the appellant, suffice it to say that even assuming that the revisional power cannot be exercised suo motu after an unduly long delay, on the facts of this case it is plain that it was not so done. Within a few months of the passing of the appellate order by the Assistant Commissioner, the Commissioner proceeded to revise and revised the said order. There was no undue or unreasonable delay made by the Commissioner. It may be stated here that an appeal has to be filed by an assessee within the prescribed time and so also a time-limit has been prescribed for the assessee to move in revision. The appellate or the revisional powers in an appeal or revision filed by an assessee can be exercised in due course. No time-limit has been prescribed for it. It may well be that f....
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....aft 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 and hence, the entire proceedings would have to be concluded within the time limits prescribed, (f) The non-obstante clause would not exclude the operation of Section 153 as a whole. It only implies that irrespective of availability of larger time to conclude the proceedings, final orders are to be passed within one month in line with the scheme of the Act, (g) When no period of limitation is prescribed, orders are to be passed within a reasonable time, which in any case cannot be beyond 3 years. However, when the statute prescribes a particular period within which orders are to be passed, then such period, irrespective of whether it is short or long, shall be applicable. 28. With the above directions, all the writ appeals are dismissed. However, there wi....
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....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. Subsection (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 provides that notwithstanding anything contained in sub-sections (1), (1-A), (2), (3) and (3-A) of the Act, where a reference under sub-section (1) of section 92 CA of the Act is made during the course of the proceeding for assessment or re-assessment, the period available for completion of assessment or re-assessment, as the case may be, under the said sub-sections (1), (1-A), (2), (3) and (3-A) of the Act shall be extended by twelve months. 25. Moreover, Explanation-1 below section 153 of the Act also provides for the periods which have to be excluded while computing the twelve months period mentioned in section 153 (3) of the Act. For example - it provides for exclusion of the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts au....
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....rejudicial 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 been remand to the AO by the ITAT under section 254 of the Act. Within this twelve months prescribed, the AO has to ensure that the entire procedure prescribed under section 144C is completed and pass a final assessment order. For this the AO has to be prompt in passing an order contemplated under section 144C(1) of the Act and not wait to be reminded like in this case and still take almost two years to start the process. Sub-section (13) of section 144C provides that an assessment officer shall, upon receipt of the directions, issued under sub-section (5), in conformity with the directions complete, notwithstanding anything to the contrary contained in section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month ....
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..... 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 and, therefore, the matter is required to be resolved by the Larger Bench of the Hon'ble Supreme Court. Since the matter is yet to be resolved by the Hon'ble Supreme Court, therefore, we allow the parties to get this appeal revived if the decision of the Hon'ble Supreme Court on this issue necessitates modification of this order. 13. The Hon'ble jurisdictional High Court in the case of Kotha Kantaiah vs., Income Tax Officer in WP.No.344 of 2025 vide order dated 24.04.2025 while dealing with the issue of validity of the notice issued u/sec.148 issued by the Jurisdictional Assessing Officer [in short "JAO"] instead of Faceless Assessing Officer [in short "FAO"] as per the Faceless Assessment Scheme has quashed the notice issued u/sec.148 by the JAO and consequently, re-assessment order, but, granted the liberty....
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....would also 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 writ petitions stands allowed on this very jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petitioner which stands reserved to be raised and contended in an appropriate proceedings. 38. Since the Hon'ble Supreme Court had, in the case of Ashish Agarwal, supra, as a one-time measure exercising the powers under Article 142 of the Constitution of India, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right conferred on the Revenue would remain reserved to 17 proceed further if they so want from the stage of the order of the Supreme Court in the case of Ashish Agarwal, supra. 18. We would only....