2021 (4) TMI 355 - HC - Income Tax

Assessment u/s 144C(13) - Time limit for completion of assessments and reassessments - submission of the revenue is that Section 144C is a complete code by itself, not governed by the time lines set out in Section 153 - whether the proceedings before the DRP are circumscribed by the limits of time imposed by Section 153? - HELD THAT - No doubt, Section 144C is a self contained code of assessment and time limits are inbuilt 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 the assessee. The DRP was constituted bearing in mind the necessity for an expert body to look into intricate matters concerning valuation and transfer pricing and it is for this reason that specific timelines have been drawn within the framework of Section 144C to ensure prompt and expeditious finalisation of this special assessment. The purpose is to fast-track a specific type of assessment. This does not however lead to the conclusion that overall time limits have been eschewed in the process. In fact, the argument to the effect that proceedings before the DRP are unfettered by limitation would run counter to the avowed object of setting up of the DRP a high powered and specialised body set up for dealing with matters of transfer pricing. Having set time limits every step of the way, it does not stand to reason that proceedings on remand to the DRP may be done at leisure sans the imposition of any time limit at all. Sub-section (13) to Section 144C, imposes a restriction on the Assessing Officer and denies him the benefit of the more expansive time limit available under Section 153 to pass a final order of assessment as he has to do so within one month from the end of the month when the directions of the DRP are received by him, even without hearing the assessee concerned. Nothing in the language of Section 144C or 153 to lead me to the conclusion that the latter is operated from the operation of the former. The specific exclusion of Section 153 from Section 144C(13) can be read only in the context of that specific sub-section and once again, reiterates the urgency that sets the tone for the interpretation of Section 144C itself. Thus the impugned notices issued by the DRP after a period of four years from the date of order of the Tribunal would be barred by limitation by application of the provisions of Section 153(2A) of the Act. These Writ Petitions are allowed.

Summary

Issues Involved:
1. Jurisdiction and limitation of notices issued by the Dispute Resolution Panel (DRP) for AY 2009-10 and AY 2010-11.
2. Applicability of Section 153(2A) and Section 153(3) of the Income Tax Act, 1961 to the proceedings before the DRP.
3. Whether Section 144C operates independently of the time limits prescribed in Section 153.

Detailed Analysis:

1. Jurisdiction and Limitation of Notices Issued by the DRP:
The petitioner challenged the notices dated 06.01.2020 issued by the DRP for AY 2009-10 and AY 2010-11 as being bereft of jurisdiction and barred by limitation. The petitioner sought writs of prohibition to restrain the respondents from continuing with the assessment proceedings for these years. The High Court concluded that the notices were indeed barred by limitation as per the time limits prescribed under Section 153(2A) and Section 153(3) of the Income Tax Act, 1961.

2. Applicability of Section 153(2A) and Section 153(3) of the Income Tax Act, 1961:
The court examined the provisions of Section 153(2A) and Section 153(3) to determine the time limits for completing fresh assessments. For AY 2009-10, the Tribunal's order dated 18.12.2015 was received in FY 2015-16, making the deadline for assessment 31.03.2017. For AY 2010-11, the Tribunal's order was received in FY 2016-17, making the deadline 31.12.2017. The court found that the impugned notices dated 06.01.2020 were issued well beyond these deadlines, rendering them time-barred.

3. Whether Section 144C Operates Independently of the Time Limits Prescribed in Section 153:
The revenue argued that Section 144C is a standalone provision with its own timelines, independent of Section 153. However, the court noted that while Section 144C does have specific timelines for various stages of assessment, it does not exclude the applicability of Section 153's overall time limits. The court emphasized that the exclusion of Section 153 in Section 144C(13) is specific to the final assessment order stage and does not apply to other stages of the proceedings under Section 144C.

The court referred to precedents, including the Bombay High Court's decision in PCIT V. Lion Bridge Technologies Pvt. Ltd. and the Delhi High Court's decision in Nokia India Private Ltd. V. DCIT, which supported the view that the time limits under Section 153 apply to proceedings under Section 144C. The court concluded that the DRP's inaction and the delayed issuance of notices were not justified and were barred by the limitation period prescribed under Section 153(2A) and Section 153(3).

Conclusion:
The High Court allowed the writ petitions, holding that the impugned notices issued by the DRP were barred by limitation. The court emphasized the importance of adhering to statutory time limits to ensure prompt and expeditious finalization of assessments, particularly in cases involving transfer pricing and international transactions. The court also noted that the proper course of action would have been for the Assessing Authority to give effect to the Tribunal's orders promptly and in accordance with the prescribed procedures.