2024 (3) TMI 1323 - AT - Income Tax

Final Assessment Order u/s 144C(13) passed beyond Limitation Period - Relevant date - Revenue contends that for the purposes of determination of limitation, the relevant date is 02.05.2022 on which the DRP directions were actually received by the jurisdictional AO in its Case History Noting to enable it to proceed and continue with the assessment proceedings. HELD THAT - The revenue despite having raised long drawn defense, failed to furnish any material of evidentiary value towards the date on the DRP directions came to the privy of FAO which was in turn uploaded to the case history noting of the pending assessment of JAO on 2nd May 2022. In the absence of any affirmative evidence in this regard, the inference needs to be drawn from the chain of events mentioned in order sheet, systems report and affidavit of the JAO. The inference thus needs to be drawn adverse to the revenue for the reason that order sheet provides for transfer of assessment case in April 2022 and the FAO has uploaded the DRP directions in May 2022. In the absence of any material to indicate that the FAO also received the DRP directions in May 2022 for its onward transmission to JAO on 2/05/2022, we are in no position to dislodge the order sheet notings indicating transfer of records in the month of April 2022. The limitation thus stands expired in May 2022 in the present case. Claim of the Revenue that assessment unit was served with the DRP order electronically on 02.05.2022 do not resonate with the records available before us. This date only signifies the date of receipt of order by JAO whereas the limitation would be counted from the date on which the DRP directions were received by FAO prior to its onward uploading to JAO in terms of approval u/s 144B(8) of the Act. The combined reading of three documents extracted above as analysed, gives an infallible impression that FAO being designated assessment unit (even if considered distinct from NFAC) was privy to DRP order in April 2022. Therefore, the limitation in extreme case scenario would run from April 2022 and will end on 31st May, 2022. The assessment order however has been passed on 30th June, 2022 and thus is clearly time barred and outside the limitation period assigned under Section 144C(13) of the Act. As decided in Fiberhome India P. Ltd 2024 (2) TMI 1382 - DELHI HIGH COURT that the time lines as provided under section 144C(13) are mandatory in character. The judgment squarely supports the case of the Assessee. Also see Louis Drefus company India Private Limited 2024 (3) TMI 62 - DELHI HIGH COURT Assessee appeal allowed.

Issues Involved:

1. Validity of the assessment order due to bar of limitation.
2. Characterization and categorization of AMP expenditure as an international transaction.
3. Application of Bright Line Test (BLT) for transfer pricing adjustment.
4. Errors in benchmarking AMP expenditure.
5. Non-consideration of economic adjustments in AMP expenditure.
6. Disallowance of bonus u/s 43B.
7. Levying of interest u/s 234B and 234C.

Summary of the Judgment:

1. Validity of the Assessment Order Due to Bar of Limitation:

The assessee challenged the final assessment order on the grounds of being barred by limitation u/s 144C(13) of the Act. The DRP directions were issued on March 17, 2022, and uploaded on the ITBA portal on March 30, 2022. The AO passed the final assessment order on June 30, 2022. The Tribunal noted that the assessment case was transferred on April 22, 2022, and the DRP directions were uploaded in the case history noting on May 2, 2022. The Tribunal concluded that the limitation period expired in May 2022, rendering the assessment order passed on June 30, 2022, as time-barred and void.

2. Characterization and Categorization of AMP Expenditure as an International Transaction:

The assessee contended that the AMP expenditure did not constitute an international transaction under Chapter X of the Act. The Tribunal did not delve into this issue, as the assessment order was already found to be barred by limitation.

3. Application of Bright Line Test (BLT) for Transfer Pricing Adjustment:

The assessee argued against the application of the BLT for making transfer pricing adjustments. The Tribunal did not address this issue due to the primary finding of the assessment order being time-barred.

4. Errors in Benchmarking AMP Expenditure:

The assessee claimed errors in the benchmarking process of AMP expenditure by the AO/TPO. This issue was not adjudicated by the Tribunal as the assessment order was declared void due to the limitation bar.

5. Non-Consideration of Economic Adjustments in AMP Expenditure:

The assessee argued that the AO/DRP/TPO did not grant quantitative/economic adjustments while quantifying the arm's length price of the AMP expenditure. The Tribunal did not address this issue due to the primary finding of the assessment order being time-barred.

6. Disallowance of Bonus u/s 43B:

The assessee contested the disallowance of bonus paid amounting to INR 10,44,363 u/s 43B of the Act. The Tribunal did not address this issue as the assessment order was declared void due to the limitation bar.

7. Levying of Interest u/s 234B and 234C:

The assessee challenged the levying of interest u/s 234B and 234C of the Act. The Tribunal did not address this issue due to the primary finding of the assessment order being time-barred.

Conclusion:

The Tribunal allowed the appeal of the assessee, declaring the assessment order passed on June 30, 2022, as barred by limitation and void. The other grounds of appeal were not adjudicated due to the primary finding on the issue of limitation.

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