TaxTMI 
TaxTMI 
2025 (11) TMI 2075
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....ustment of INR 16,86,23,336/- to the international transaction relating to Software development segment 1.1 The learned Assessing Officer ("AO")/Transfer Pricing Officer ("TPO")/Dispute Resolution Panel ("DRP") has erred in making an upward adjustment of INR 16,86,23,336/- to the total income of the Appellant by holding that the international transaction relating to the Software development services entered into by the Appellant with its Associated Enterprise ("AE") was not at arm's length. 1.2 The learned AO/TPO/DRP has erred in applying the following filters: 1. Data availability filter 2. Turnover filter 3. Persistent loss-making filter 4. RPT filter 1.3 The learned AO/TPO/DRP has erred in considering the following companies as comparable to the Appellate, despite the same not being comparable to that of the Appellate due to various factors such as functional comparability, research & development activities, presence of intangibles, advertisement and brand expenses, inadequate financial information, use of unreliable segment financials, extraordinary events/business restructuring, abnormal year, judicial preceden....
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....2.1 The learned AO/TPO have erred in disallowing working capital adjustment on the margin of the Appellate. 2.2 The learned AO/TPO has erred, both in laws and on facts, in incorrectly disallowing for the working capital adjustment to eliminate the difference in the working capital requirement of the Appellant and the comparable companies. 2.3 The Appellant submits that the learned AO/TPO be directed to recalculate the adjustment made by him to the Appellant's total income and to re-compute its total income and tax liability accordingly. 3. Erroneous rejection of market risk adjustment in respect of margin computation of the Appellant: 3.1 The learned AO/TPO have erred in disallowing market risk adjustment on the margin of the Appellate. 3.2 The learned AO/TPO has erred, both in laws and on facts, in incorrectly disallowing for the market risk adjustment to eliminate the difference in the risk level of the Appellant and the comparable companies. 3.3 The Appellant submits that the learned AO/TPO be directed to recalculate the adjustment made by him to the Appellant's total income and to re-compute its total income and tax ....
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....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 30th July 2022 ought to be quashed in-limine. 2. On the facts and circumstances of the case and in law, the learned Transfer Pricing Officer ('TPO') and the learned Assessing Officer ('AO'), under directions of the Hon'ble Dispute Resolution Panel ('DRP'), have erred in making an addition of Rs. 9,60,77,283/- to the total income of the Appellant by holding that the international transaction relating to the Software development services entered into by the Appellant with its Associated Enterprise ("AE") was not at arm's length. 3. On the facts and circumstances of the case and in law, the learned TPO and the learned AO, under the directions of the Hon'ble DRP, have erred in rejecting. comparable companies selected by the Appellant in the transfer pricing study report. 4. On the facts and circumstances of the case and in law, the learned TPO and the learned AO under the directions of the Hon'ble DRP, have erred in conducting a fresh search and modifying filters for ide....
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....cation dated 16.08.2023 under Rule 11 of ITAT Rules, 1963. The common additional ground raised by the assessee reads as under: "Final assessment order barred by limitation 1. On the facts and circumstances of the case and in law, Ld. AO erred in passing the final assessment order beyond time limit prescribed under section 153 of the Act and hence the same is liable to be quashed. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at the time of hearing of the appeal, so as to enable your Honours to decide this appeal according to law." 5. 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 ....
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....t. 7. On the other hand, learned DR has submitted that the provisions of sec. 144C begins with a non-obstante clause and, therefore, sec. 144C is a Code in itself so far as the assessments in case 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 peri....
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....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 28.01.2022 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 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 u....
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....ith 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 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 (b) Quasi-Judicial proceedings by tax authorities:- The tax authorities can continue to hear and dispose off proceedings where they are performing the functions as quasi-judicial authority. This may inter-alia include disposal of applicati....
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.... passing the assessment orders is provided u/sec. 153 of the Act and the relevant provisions are in sub-sec.(1) and sub-sec.(4) of sec. 153 reads as under : "153. Time limit for completion of assessment, reassessment 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 1^st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted. (ii) the 1^st day of April, 2020, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months....
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.... 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 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 sha....
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....sions 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 rendered 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 in be issued by the DRP, falling 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 las....
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....t 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 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) Suliana Begum v. Prem Chand Join [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 Canado Sugar Refining Co. v. R. [1898 AC 735:67 LJPC 125), Lord Davy observed " Every clause of a statute....
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....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 RS. Raghunath v. State of Karnataka [(1992) 1 SCC 335: 1992 SCC (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.) Lid. 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 ....
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.... 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-facic leaving no room for the court 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 dewn 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 201....
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....tions, 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 483: "6. 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 rais....
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....ision. 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 for an exercise of the 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 5% 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....
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....pplicable. 28. With the above directions, all the writ appeals are dismissed. However, there will be no order as to costs. Consequently, connected miscellaneous petitions are closed." 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 th....
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....n of the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited or inventory valued under sub-section (2-A) of section 142 of the Act or in a case 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 made before the Authority for Advance Rulings or before the Board for Advance Rulings under sub-section of section 2450 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 s....
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....oviding any further opportunity of being head to the assessee, within one month from the end of the month in which such direction is received. What is contemplated under section 144C (13) is 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 debers larger time available, an order hased 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 tim....
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....aceless Assessment Scheme has quashed the notice issued u/sec. 148 by the JAO and consequently, re-assessment order, but, granted the liberty to the parties to get the petition revived as per the outcome of the Judgment of the 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 Parus-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 howev....
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....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 further like to make observations that since we are inclined to dispose of the instant writ 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." 10. Accordingly, to maintain th....