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2015 (9) TMI 846 - AT - Income TaxValidity of assessment order - Time limit for passing of the draft order by AO - TPA - challenge to the final assessment order passed by the AO on the ground that the draft order passed by the AO and also the order passed by the Transfer Pricing Officer (TPO) were barred by limitation - DR made contentions that the time limit is to be reckoned from the date on which the information is received by the Principal Commissioner or Commissioner and not the Director of Income-tax, as has been the case under consideration Held that - The term draft order has been recognized as and is actually different in ambit from the term assessment order . With the insertion of section 144C, which led to the birth of the draft order, the legislature did not substitute the term order of assessment with the term draft order in section 153. If the intention of the legislature had been to substitute the hitherto time limit for passing of the assessment order as the time limit for the passing of draft order henceforth, on shifting the time limit for passing of the final assessment order to section 144C(4) or (13), then it would have made necessary changes in section 153 by substituting the term draft order with the term order of assessment . We are unable to read the term draft order interchangeably with the term assessment order in the context of section 153 or practically for any other purpose. It is a settled legal position that where no time limit is prescribed for passing an order, then such order should be passed within a reasonable time. The time limit for completion of assessment, or in other words, passing of the final assessment order pursuant to the order of the TPO, is contained in section 144C(4) and (13); the time limit given u/s 153 has no relation whatsoever with the passing of the draft order, which should be passed within a reasonable time; and the time limit given in section 153 is relevant for determining the time available with the TPO for passing order u/s 92CA(3). Turning to the facts of the instant case, we find that the AO passed the final assessment order on 29.1.2015, which is well within a period of one month from the end of the month in which direction was received from the DRP on 24.12.2014. As such, we hold that the final assessment order passed by the AO is within the time prescribed u/s 144C(13). Further since the draft order has also been passed within a reasonable time, the same is also not barred by limitation. The contention of the ld. AR that the draft order passed in this case was barred by limitation, is therefore, found to be without any substance and hence repelled. Time limit for passing of order by the TPO - Held that - Having held that the time limit given in sub-section (3A) of section 92CA is mandatory for the passing of the order by the TPO, let us find out the time available with the TPO for the passing of his order. It has been noticed above that the time limit as per section 153(1) read with the third proviso and clause (viii) of the Explanation to the section, comes at 7th June, 2014. Period of 60 days prior to such time limit coming as per section 153, available with the TPO for passing his order, comes to an end on 8th April, 2014. As against this, the order was actually passed by the TPO on 31st May, 2014. Thus, the order passed by the TPO is patently time barred. Consequences of valid draft order and TPO s time barred order - Held that - When an order is passed without jurisdiction or beyond the permissible time, it is considered as null and void. The effect of passing a null and void order is that it is considered as non est, meaning thereby, that it entails all the consequences of not having been passed at all and is ignored for all practical purposes. The Hon ble Madras High Court in Vijay Television (P.) Ltd. v. DRP 2014 (6) TMI 540 - MADRAS HIGH COURT considered a case in which the assessment order was directly passed without routing through draft order or DRP. The Hon ble Court held it to be a non-curable defect and resultantly the assessment was quashed. It was held that when there is an omission on the part of the AO to follow the mandatory procedure prescribed under the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. Extantly, we are confronted with a situation in which the draft order has been passed in time but the lapse has come in the passing of the order by the TPO. The consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a non-curable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions by the TPO as emanating from his time barred order, would be unsustainable. We hold accordingly and direct the deletion of addition on account of transfer pricing adjustment made in the final assessment order. - Decided in favour of assessee.
Issues Involved:
1. Time limit for passing of the draft assessment order by the Assessing Officer (AO). 2. Time limit for passing of the order by the Transfer Pricing Officer (TPO). 3. Consequences of a valid draft order and a time-barred TPO order. Issue-wise Analysis: 1. Time Limit for Passing of the Draft Assessment Order by the AO: The primary issue raised by the assessee was that the draft assessment order passed by the AO on 11.7.2014 was barred by limitation under section 153(1) of the Income-tax Act, 1961. The assessee argued that the draft order should have been passed by 7.6.2014, considering the time limit for completion of assessments and reassessments. The tribunal examined section 153(1) and its third proviso, which extended the time limit to three years from the end of the assessment year when a reference is made to the TPO. The tribunal noted that the relevant period for exclusion in computing the limitation period, as per Explanation 1 clause (viii) to section 153, was from the date of reference for exchange of information to the date on which the information was last received. In this case, the information was received by the Director of Income-tax (DIT) on 2.4.2014, and the tribunal held that the time limit for passing the draft order was extended to 7.6.2014. The tribunal concluded that the draft order passed on 11.7.2014 was beyond this period, but it emphasized that section 153 pertains to the final assessment order, not the draft order. The final assessment order was passed within the time prescribed under section 144C(13), making the draft order valid as it was passed within a reasonable time. 2. Time Limit for Passing of the Order by the TPO: The assessee also challenged the TPO's order dated 31.5.2014 as time-barred under section 92CA(3A). The tribunal highlighted that section 92CA(3A) mandates the TPO to pass the order at least sixty days before the expiry of the time limit for the AO to complete the assessment under section 153. The tribunal determined that the time limit for the AO to complete the assessment was 7.6.2014, making the deadline for the TPO's order 8.4.2014. Since the TPO's order was passed on 31.5.2014, it was deemed time-barred. The tribunal rejected the argument that the word "may" in section 92CA(3A) implies a directory rather than a mandatory time limit, affirming that the TPO's order was invalid. 3. Consequences of a Valid Draft Order and a Time-barred TPO Order: The tribunal addressed the consequences of having a valid draft order but a time-barred TPO order. It emphasized that an invalid TPO order is considered null and void, effectively non-existent for practical purposes. Consequently, the final assessment order, which included the transfer pricing adjustment based on the TPO's time-barred order, was unsustainable. The tribunal directed the deletion of the transfer pricing adjustment from the final assessment order, rendering the addition on account of transfer pricing adjustment invalid. This decision rendered it unnecessary to address the merits of the transfer pricing adjustment. Conclusion: The tribunal concluded that while the draft order was valid as it was passed within a reasonable time, the TPO's order was time-barred, leading to the deletion of the transfer pricing adjustment from the final assessment order. The appeal was partly allowed, emphasizing the importance of adhering to statutory time limits in transfer pricing assessments.
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