2019 (10) TMI 992 - AT - Income Tax

Assessment order under the scheme of section 144C - applicability of limitations provided under section 153 - HELD THAT - AO cannot tinker or apply anything further than what was mentioned in the draft assessment order except what is directed by the learned dispute resolution panel. The provisions of principles of natural justice are ingrained in the provisions of section 144C of the act. It further says a time limit of 9 months from the end of the month when the draft order is forwarded to the assessee for passing of issue of any directions. Upon receipt of the direction the AO shall pass an order of final assessment which is in conformity with the direction of the dispute resolution panel within one month from the end of the month in which the directions are received. There is no further provision of granting any opportunity to the assessee of further hearing. Thus the above provisions are a self-contained code. In this code, the role of the assessing officer ends the movement, the objections are filed by the assessee or draft order is accepted by the assessee. Therefore, the learned assessing officer cannot make any upward adjustment to the income of the assessee after passing of the draft assessment order. He also cannot initiate any further penalties which are attached to the assessment order if same are not initiated in the draft order. The rights of the variation to the income of the assessee are solely rest with the dispute resolution panel. Therefore the dispute resolution panel has a correcting power to the draft assessment order. AO does not have any power to do so. Therefore it is apparent that on the plain reading of the above provisions for all practical purposes the role of the assessing officer comes to an and the movement he passes the draft order. He is only authorized to pass the final assessment order which is according to the directions of the learned dispute resolution panel. The above provisions also contained the separate time limits and it has its own timelines which binds the revenue as well as the assessee. The honourable Madras High Court in Sanmina SCI India private limited 2017 (8) TMI 663 - MADRAS HIGH COURT has held that it is a self-contained code in itself. Thus the provisions contained therein only determine the timelines of the passing of such order and not as provided u/s 153 of the act. Thus this argument of the assessee deserves to be rejected. It may also be possible that in certain circumstances the provisions of section 263 of the income tax act also do not apply to orders passed under directions of the dispute resolution panel. Thus law has seen the assessment passed in pursuance of direction u/s 144C of the act different from the regular assessment as envisaged u/s 153 of the act. No doubt, the final order of assessment is passed pursuant to the direction of the learned dispute resolution panel but it cannot be said that that limitations provided under section 153 applies to it. As we have already held that it is a complete code in itself as held by the honourable Madras High Court, which also provides for specific limitations ,if a particular procedure adopted by the assessee, then timelines provided therein will only apply.

Summary

Issues Involved:
1. Whether the assessment order passed by the Assessing Officer (AO) is barred by limitation.
2. Whether the provisions of Section 144C override the limitation period provided under Section 153 of the Income Tax Act, 1961.

Detailed Analysis:

1. Whether the assessment order passed by the Assessing Officer (AO) is barred by limitation:
The appellant contended that the assessment order passed under Section 143(3)/144C(13) of the Income Tax Act, 1961, is barred by limitation. The appellant argued that the overall limitation for making an assessment, including in the case of an eligible assessee, is three years from the end of the relevant assessment year as provided under Section 153 of the Act. The appellant further submitted that the time limitation in Section 144C(4) or Section 144C(13) are only sub-limits, subsumed within the overall limitation of three years.

The appellant elucidated the scheme of the Act with respect to assessment and limitation, emphasizing that the time limit for completion of assessment in terms of Section 153(1) of the Act is ordinarily two years from the end of the relevant assessment year, extended to three years in cases where a reference is made to the Transfer Pricing Officer (TPO). The appellant argued that the provisions of Section 144C do not override the limitation enshrined in Section 153 of the Act.

2. Whether the provisions of Section 144C override the limitation period provided under Section 153 of the Income Tax Act, 1961:
The Revenue contended that the provisions of Section 144C override the limitation period provided under Section 153 of the Act. The Revenue argued that the proceedings before the Dispute Resolution Panel (DRP) are akin to appellate proceedings, and the final assessment order passed by the AO under Section 144C(13) is akin to the appeal effect order. The Revenue relied on the decision of the Delhi Bench of the Tribunal in the case of Honda Trading Corporation vs. CIT, which held that the provisions of Section 144C override the provisions of Section 153 of the Act.

The Tribunal, after considering the rival contentions, held that the issues argued by the appellant are squarely covered against the assessee by the decision of the coordinate bench in ITA No. 1132/Del/2015. The Tribunal observed that the provisions of the Income Tax Act set out a special scheme for the assessment of an entity engaged in international transactions under Chapter X of the Act. The Tribunal noted that the scheme under Section 144C is a self-contained code, which includes specific timelines for passing the draft assessment order, filing objections before the DRP, and passing the final assessment order.

The Tribunal further observed that the draft assessment order is different in ambit from the assessment order and does not have any independent existence in law. The Tribunal held that the final assessment order passed pursuant to the directions of the DRP is within the time prescribed under Section 144C(13) and is not barred by limitation. The Tribunal also drew support from the decisions of the coordinate bench in the cases of Volvo India Private Limited vs. ACIT and Acer India Pvt Ltd vs. DCIT, which held that if the assessment orders are passed within the timelines provided under Section 144C, they are not time-barred irrespective of the timelines prescribed under Section 153 of the Act.

Conclusion:
The Tribunal dismissed the additional ground raised by the assessee, holding that the assessment order passed by the AO under Section 143(3)/144C(13) is not barred by limitation. The Tribunal directed the registry to post the hearing of the appeal on other grounds before the regular bench in due course. The order was pronounced in the open court on 10/10/2019.