TaxTMI 
TaxTMI 
2026 (1) TMI 966
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....t towards purchase on supplier credit' as an external commercial borrowing and thereby calculating at its arm's length price. The authorities ought to have appreciated that the transaction undertaken by the Appellant is a trade payable and accordingly at arm's length price. 2. Without prejudice, the ld. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in computing the amount of transfer pricing adjustment. Payment for consultancy services availed 3. On the facts and circumstances of the case and in law, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in disregarding the Appellant's benchmarking analysis, the documentation maintained thereunder and determining the arm's length price of the transaction of Payment for consultancy services availed as Nil based on 'Other Method" purely on conjectures and surmises, without bringing on record any comparable instances in support thereof. Payment of Interest on NCDs 4. On the facts and circumstances of the case and in law, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in rejecting the App....
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....ubstitute and modify any of the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing the appeal." ITA.No.481/Hyd./2022 - A.Y. 2018-2019 : 4. The assessee has raised the following grounds : 1. "On the facts and circumstances of the case and in law, the assessment proceedings in the Appellant's case for AY 2018-19 are barred by limitation and accordingly the final assessment order dated 27 July 2022 ought to be quashed in-limine. 2. On the facts and circumstances of the case and in law, the final assessment order dated 27 July 2022 ought to be quashed in-limine as the same is without jurisdiction because it has been passed without following the mandatory directions of the Hon'ble Dispute Resolution Panel ('DRP'). Payment of interest towards purchase on supplier credit 3. On the facts and circumstances of the case and in law, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in re-characterizing the transaction of 'Payment of interest towards purchase on supplier credit as an external commercial borrowing and thereby calculating at its....
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.... appeal according to law." 6. For the assessment year 2018-2019 the assessee has also raised this legal ground in ground no.1 though raised for the first time before the Tribunal. The additional ground for the assessment year 2017-2018 and ground no.1 for the assessment year 2018-2019 are purely legal in nature challenging the validity of the assessment order passed by the Assessing Officer being barred by limitation as provided u/sec.153 of the Act. 7. We have heard the learned Authorised Representative of the Assessee and the learned DR on the admission of additional ground. There is no dispute that the additional ground raised by the assessee is purely legal in nature and goes to the root of the matter. It is also pertinent to note that for adjudication of this additional ground, no fresh material or record or facts are required to be investigated, verified or considered, but, the same can be adjudicated on the basis of the material and facts already on record. Accordingly, by following the Judgment of Hon'ble Supreme Court in the case of National Thermal Power Co. Ltd., vs., CIT [1998] 229 ITR 383 (SC) we admit the additional ground raised by the assessee for adjudication....
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....ase of an "eligible assessee" and, therefore, the non-obstante clause in sec.144C(13) excludes the provisions of sec.153 of the Act. Learned DR has submitted that sec.153 of the Act exists in the Income Tax Act for a consequently longer period of time, whereas sec.144C of the Act is relatively a new provision introduced in 2009 and, therefore, the effect of non-obstante clause in sec.144C makes it clear that the provisions of sec.144C would prevail over the provisions of sec.153 of the Act. The learned DR has further submitted that the Income Tax Act provides two different methods of assessment one for the "eligible assessee" as defined u/sec.144C(15)(b) of the Act and the "other method" is applicable for the assessees' who falls under the normal category. In case of ordinary or normal category of assessee, the assessment order must be completed within the limitation as provided u/sec.153(1) of the Act, whereas, if the matter is referred to the TPO u/sec.92CA of the Act, this period of limitation is 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 op....
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....icer has passed the impugned order on 15.02.2022 which is beyond the time limitation provided u/sec.153 as well as extension by Notification of TOLA. The learned Department Representative for the Revenue 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 the orders by the Tax Authorities beyond the limitation provided under the Act. The learned Authorised Representative of the Assessee has filed copy of the Circulars dated 157/13/2021 dated 20.07.2021 issued by the Central Board of Indirect Taxes and Customs [in short "CBITC"] whereby the CBITC has clarified this point that the extension of limitation was only with reference to the judicial and quasi-judicial proceedings in the nature of appeals/suits /petitions etc., and has not extended to every action or proceedings under the CGST Act, 2017. For ready reference, we reproduce the relevant part of the Circular dated 20.07.2021 vide Paras-3 to 5 as under : "3. Accordingly, legal opinion was solicited regarding ap....
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.... the Hon'ble Supreme Court may not cover them even though they are quasijudicial proceedings as the same has only been made applicable to matters relating to petitions/applications/suits, etc. 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 that need to be done by the taxpayers :- These actions would continue to be governed only by the statutory mechanism and time limit provided/ extensions granted under the statute itself. Various Orders of the Hon'ble Supreme Court would not apply to the said proceedings/compliances on part of the taxpayers Quasi-Judicial proceedings by tax authorities:- The tax authorities can continue to hear and dispose off proceedings where they are performing the functions as quasijudicial authority. This may interalia include disposal of application for refund, application for revocation of cancellation of registration, adjudication proceedings of demand notices, etc. Similarly, appeals which are filed and are pending, can continue to be heard and dispose....
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....and re-computation.- (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable. Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: Provided further that in respect of an order of assessment relating to the assessment year commencing on - (i) the 1st day of April, 2019, the provisions of this subsection shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted. (ii) the 1st day of April, 2020, the provisions of this subsection shall have effect, as if for the words "twenty-one months", the words "eighteen 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 t....
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....cument by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 shall be made within the time specified in subsection (3)." 8. A co-joined reading of sub-sec.(1) with third proviso of this sub-section of sec.153 makes it clear that in normal course, no order of assessment shall be made after the expiry of 9 months from the end of the assessment year in which the income was first assessable. The third proviso is relevant for the case in hand because the assessment year under consideration is 2021-2022 and, therefore, the period of 21 months from the end of the assessment year is reduced to 9 months. Sub-sec.(4) contemplates the cases where a reference u/sec.92CA(1) is made during the course of assessment proceedings, then, the period available for completion of 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, there....
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....ndered additional findings, which have been extracted in paragraphs 10 and 11 above, has allowed the writ petitions holding that the time limit under Section 153 (2A) was not adhered to and in any case, the proceedings have not been concluded within a reasonable time. 20. As rightly contended by the learned senior counsels and affirmed by the Learned Judge, the DRP proceedings is a continuation of assessment proceedings. To put it further, it is a part of assessment proceedings, once the objections are filed and under section 144C (12) a period of 9 months is prescribed, within which, directions are to be issued by the DRP, failing which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days 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, ....
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.... inter-department arrangement and it cannot defeat the rights of the assessee. 22. Insofar as the non-obstante clause in Section 144C(13) is concerned, we concur with the view of the Learned Judge. The exclusion of applicability of Section 153 or Section 153 B is for a limited purpose to ensure that dehors larger time is available, an order based on the directions of the DRP has to be passed within 30 days from the end of the month of receipt of such directions. The section and the sub-section have to be read as a whole with connected provisions to decipher the meaning and intentions. At this juncture it would be useful to refer to the following decisions: (i) Sultana Begum v. Prem Chand Jain [1997] 1 SCC 373 at page 381: "11. The statute has to be read as a whole to find out the real intention of the legislature. 12. In Canada Sugar Refining Co. v. R. [1898 AC 735: 67 LJPC 126], Lord Davy observed: "Every 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."......
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....(L&S) 286: (1992) 19 ATC 507: AIR 1992 SC 81].) Such a construction has the merit of avoiding any inconsistency or repugnancy either within a section or between two different sections or provisions of the same statute. It is the duty of the court to avoid a head-on clash between two sections of the same Act. (See Sultana Begum v. Prem Chand Jain [(1997) 1 SCC 373: AIR 1997 SC 1006])." (iii) Franklin Templeton Trustee Services (P.) Ltd. v. Amruta Garg [2021] 124 taxmann.com 326/164 SCL 720: "17. The concept of "absurdity" in the context of interpretation of statutes is construed to include any result which is unworkable, impracticable, illogical, futile or pointless, artificial, or productive of a disproportionate counter-mischief [See Bennion on Statutory Interpretation, 5th Edn., p. 969.]. Logic referred to herein is not formal or syllogistic logic, but acceptance that enacted law would not set a standard which is palpably 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 interpretat....
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....t to peruse or discuss intricate facts. In the present case, the challenge is on the ground of limitation and hence, we hold that the proceedings under Article 226 of the constitution are maintainable. 25. As regards the relief sought in other appeals viz., W.A.No.1517/2021 etc. batch, the findings rendered above are equally applicable. In these cases, for the assessment year 2009-10, the order of remand to the Assessing officer was passed on 18-12-2015 and insofar as the assessment year 2010-11 is concerned, for one issue, it was passed on 18-12-2015 and for other two issues, it was passed on 23-9-2016 after the amendment, by which time, the time limit was brought down to 9 months. As such, fresh orders ought to have been passed before 31-3-2017 for the assessment year 2009-10 and for one issue relating to the assessment year 2010-11 reckoning the 12 months from the financial year 2015-16 and on or before 31-12-2017 reckoning 9 months 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,....
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.... Learned counsel appearing for the respondents urged that Rule 12 is unreasonable and violative of Article 14 of the Constitution, as it does not provide for any period of limitation for the recovery of duty. He urged that in the absence of any prescribed period for recovery of the duty as contemplated by Rule 12, the officer may act arbitrarily in recovering the amount after lapse of long period of time. We find no substance in the submission. While it is true that Rule 12 does not prescribe any period within which recovery of any duty as contemplated by the rule is to be made, but that by itself does not render the rule unreasonable or violative of Article 14 of the Constitution. In the absence of any period of limitation it is settled that every authority is to exercise the power within a reasonable period. What would be reasonable period, would depend upon the facts of each case. Whenever a question regarding the inordinate delay in 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 d....
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....e suo motu power of revision also, the revisional authority has to initiate the proceeding within a reasonable time. Any unreasonable delay in exercise may affect its validity. What is a reasonable time, however, will depend upon the facts of each case." 23. The question as to what would be the reasonable period did not fall for consideration therein. The binding precedent of this Court, some of which had been referred to us here to before, had not been considered. The counsel appearing for the parties were remiss in bringing the same to the notice of this Court. Furthermore, from a perusal of the impugned notice dated 4-9-2006, it is apparent that the revisional authority did not assign any reason as to why such a notice was being issued after a period of 5½ years.' Generally, no hard and fast rule can be laid down to indicate what is a reasonable time. It though depends upon the facts of the each case, 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 reason....
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....d. 9. Thus, the Hon'ble Madras High Court has held that provisions of sec.144C and 153 are not mutually exclusive, but, are rather mutually inclusive. The period of limitation u/sec.153 is applicable for completing the assessment and sec.144C(13) is only in the nature of restricting the time period, within which, the Assessing Officer is required to pass the Final Assessment Order after the Directions of the DRP and not enlarging the limitation provided u/sec.153 of the Act. 10. Similar view has been taken by the Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd., vs., ACIT, International Taxation (supra) in Paras-23 to 34 as under : 23. No doubt, section 144C of the Act is a self contained code of assessment and time limits are inbuilt at each stage of the procedure contemplated. Section 144C envisions a special assessment, one which includes the determination of Arms Length Price (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 time....
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....se where an application made before the Income-tax Settlement Commission is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which an application was made before the Settlement Commission and ending with the date on which the order is received by the Principal Commissioner or Commissioner or where the period commencing from the date on which an application is made before the Authority for Advance Rulings or before the Board for Advance Rulings under sub-section 1 of section 245Q of the Act and ending with the date on which the Advance Ruling pronounced by it is received by the Commissioner or where reference for exchange for information is made by an authority competent under an agreement referred to in section 90 or section 90-A of the Act or where a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner etc., 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....
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.... the passing of the final assessment order. Twelve months as provided under section 153(3) would start from the end of the financial year in which the Principal Commissioner received the order under section 254 from the ITAT. The assessing officer should have taken steps to pass the final order under sub-section (13) of section 144C within 12 months period. 30. The exclusion of applicability of section 153, in so far as non-obstante clause in sub-section (13) of section 144C is concerned, it is for limited purpose to ensure that dehors larger time available, an order based on the directions of the DRP has to be passed within 30 days from the end of the receipt of such directions. The section and sub-section have to be read as a whole with connected provisions to decipher the meaning and intentions. 31. We would also observe that a similar non-obstante clause is also used in section 144C(4) of the Act with the same limited 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 ....
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.... Hon'ble Supreme Court on the identical issue. The relevant part of the Judgment of Hon'ble Jurisdictional High Court of Telangana in the case of Kotha Kantaiah vs., Income Tax Officer (supra) in Paras-15 to 18 of the said judgement is as under : 15. What is worrying this Bench more is the fact that an endeavour is being made whole heartedly to ensure not to generate further litigation on issues which have been laid to rest by a large number of High Courts all of whom have taken a consistent stand that the action of the Income Tax Department being violative of the Finance Act, 2020 and Finance Act, 2021. Now, in order to protect the interest of the Revenue as also that of the assessee, it would be trite at this juncture, if we dispose of the writ petition with an observation/direction that the disposal of the instant writ petition in terms of the judgment rendered by this High Court in the case of 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 co....
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....t petition, conscious of the fact that the earlier order of this High Court in the case of Kanakala Ravindra Reddy (1 supra) is subjected to challenge before the Hon'ble Supreme Court in SLP No.3574 of 2024, preferred by the Income Tax Department, we make it clear that allowing of the instant writ petition is subject to outcome of the aforesaid SLP preferred by the Revenue against the decision of this High Court in the case of Kanakala Ravindra Reddy (1 supra). This, in other words, would mean that either of the parties, if they so want, may move an appropriate petition seeking revival of this writ petition in the light of the decision of the Hon'ble Supreme Court in the pending SLP on the very same issue. 14. Accordingly, we dispose of this appeal on this legal issue and keep open the other issues raised by the assessee on the merits if the Hon'ble Supreme Court decides this issue otherwise." 12. Accordingly, to maintain the rule of consistency, we follow the earlier decisions of this Tribunal in the case of Aveva Solutions India LLP, Hyderabad vs., ITO, Ward-8(1), Hyderabad (supra) and hold that assessment order dated 15.02.2022 passed by the Assessing Officer....