2021 (6) TMI 1114 - HC - Income Tax

Assessment u/s 153 - Period of limitation for proceedings for making a reference under Section 92CA(1) - HELD THAT - Admittedly in the present case, the proceedings for making a reference under Section 92CA(1) of the Income Tax Act, 1961 by the 3rd respondent/Additional Commissioner of Income Tax to the Jurisdictional Commissioner of Income Tax started prior to expiry of normal period of limitation under the 1st proviso to Section 153(1) of the Income Tax Act, 1961 and during the course of assessment. The permission was also granted by the CIT on 18.11.2008 to make a reference under Section 92CA(1) though the actual reference was made only on 17.02.2009. Since the case of the petitioner falls under Chapter X of the Income Tax Act, 1961, special period of limitation under the 2ndproviso to Section 153(1) was attracted for completing the assessment. On perusing the records, it is noticed that the petitioner has wholeheartedly participated in the proceedings before the 2nd respondent/Transfer Pricing Officer pursuant to the reference made on 17.02.2009 by the 3rd respondent/Additional Commissioner of Income Tax. Before the 2nd respondent/Transfer Pricing Officer also no objection was raised by the petitioner regarding limitation. After, the 2nd respondent/Transfer Pricing Officer passed a Transfer Pricing Order dated 30.10.2009 under Section 92CA (2) of the Income Tax Act, 1961, the petitioner was also issued with a Show Cause Notice dated 23.11.2009 by the 3rd respondent/Additional Commissioner of Income Tax. Even before the 3rd respondent, before the Draft Assessment Order was passed on 31.12.2009, the petitioner did not raise any objection regarding limitation. It is for the first time before the 1st respondent/Dispute Resolution Panel, the Petitioner raised the objection regarding the limitation to proceed with the assessment for the first time which has been rightly overruled by the 1st respondent/Dispute Resolution Panel. Therefore, it is not open for the petitioner to challenge the jurisdiction of the 3rd respondent/Additional Commissioner of Income Tax to refer to the 2nd respondent/Transfer Pricing Officer to pass a Transfer Pricing Order after 31.12.2008. Since the petitioner had also not questioned the jurisdiction of the 2nd respondent/Transfer Pricing Officer when the reference was made on 17.02.2009, there was also acquisence by the petitioner to the reference to the 2nd respondent/Transfer Pricing Officer. The petitioner is therefore estopped form questioning the aforesaid reference made to the 2nd respondent/Transfer Pricing Officer. Both 1st and the 2nd proviso to Section 153(1) of the Income Tax Act, 1961 only specify the time-limit within which assessment has to be completed. Both operate under different circumstances. Former applies in the case of normal assessment while the later applies where Chapter X is attracted. The 2nd proviso to Section 153(1) of the Income Tax Act, 1961 does not state that the reference also should be made before the expiry of 21 months where chapter X of the Income Tax Act, 1961 are attracted for completing the assessment. Therefore, there is no merits in the present writ petition. The present Writ Petition is therefore liable to be dismissed.

Summary

Issues Involved:
1. Limitation period for assessment under Section 153(1) of the Income Tax Act, 1961.
2. Validity of the reference to the Transfer Pricing Officer (TPO) under Section 92CA of the Income Tax Act, 1961.
3. Jurisdiction of the Dispute Resolution Panel (DRP) and the Additional Commissioner of Income Tax.

Issue-wise Detailed Analysis:

1. Limitation Period for Assessment:
The petitioner argued that the assessment for the year 2006-2007 was time-barred as it was completed beyond the prescribed period of 21 months from the end of the assessment year, which expired on 31.12.2008. The petitioner contended that the reference to the TPO on 17.02.2009 was beyond this period, thus rendering the assessment invalid.

The court examined Section 153(1) of the Income Tax Act, 1961, which mandates that assessments must be completed within 21 months. However, the second proviso to Section 153(1) extends this period to 33 months if a reference is made to the TPO under Section 92CA. The court clarified that this extension applies irrespective of whether the reference to the TPO is made before or after the expiry of the 21-month period.

2. Validity of the Reference to the TPO:
The petitioner claimed that the reference to the TPO was invalid as it was made after the 21-month period. The court noted that the decision to refer the case to the TPO was made on 11.11.2008, and the approval was granted by the Commissioner on 18.11.2008. The actual reference to the TPO was made on 17.02.2009.

The court held that the second proviso to Section 153(1) does not require the reference to be made within the 21-month period. It only extends the time limit for completing the assessment by another 12 months if a reference is made to the TPO during the assessment proceedings. Therefore, the reference to the TPO was valid, and the assessment was not time-barred.

3. Jurisdiction of the DRP and the Additional Commissioner of Income Tax:
The petitioner challenged the jurisdiction of the DRP and the Additional Commissioner of Income Tax, arguing that the assessment was completed beyond the prescribed period. The court observed that the petitioner did not raise any objections regarding the limitation period before the TPO or during the assessment proceedings.

The court noted that the petitioner participated in the proceedings before the TPO and the Additional Commissioner without raising any objections. It was only before the DRP that the petitioner raised the issue of limitation. The court held that the petitioner was estopped from questioning the jurisdiction of the authorities as they had acquiesced to the proceedings.

Conclusion:
The court dismissed the writ petition, holding that the assessment was completed within the extended time limit of 33 months as provided under the second proviso to Section 153(1) of the Income Tax Act, 1961. The reference to the TPO was valid, and the petitioner was estopped from challenging the jurisdiction of the authorities. The court emphasized that the provisions of the Income Tax Act must be interpreted in a manner that is equitable to both parties, and the petitioner’s arguments were found to be without merit.