2022 (4) TMI 808 - HC - Income Tax

Validity of the orders passed by the first appellant u/s 92CA (3) on the ground of limitation as contemplated u/s 153 of the Act - Scope of the work may - Period of limitation applicable to TPO u/s 92CA(3A) and incidentally u/s 153 - HELD THAT - In the present cases, the Financial Year is 2015-16 and the assessment year is 2016-17. The period of 21 months would commence on 31.03.2017, the assessment year ended on 31.12.2018 normally and the extended period would end on 31.12.2019 and not on 01.01.2020. The contention of the appellants that the time to pass the assessment order would end at 00.00 hours on 01.01.2020, is fallacious as 31.12.2019 would end at 23 59 59 and 00.00 is regarded as the next day. A day for the purpose of reckoning the date ends before the stroke of midnight and the next date would commence at midnight immediately after the expiry of the previous day. The last date would be the last day of the month (31.12.2019), which cannot be the first day of the next month (01.01.2020). The date must not be reckoned with respect to sun rise but with respect to the time of 24 hours in a day. The moment last minute of the day expires, the day ends and the next moment which is the first moment of the next day becomes irrelevant for the purpose of reckoning the period of limitation. A reference can also be made to various insurance policies, wherein the beginning of the day is reckoned as 00.00 hours and the end of the day at 23 59 59 hours. Even as per the contentions of the appellants, the assessing officer has time upto 23 59 59 hours on 31.12.2019 to pass assessment orders. However, according to them, the time limit expires at/on 00.00 hours of 01.01.2020. The fallacy in such contention is that 00.00 hours of 01.01.2020 denotes not only the beginning of the next day of the month, but also the fact that it comes after 23 59 59 hours on 31.12.2019 and by such time, the time limit had already expired. By resorting to such fallacious argument, the department wants to relate 00 00 hours of 01.01.2020 to 31.12.2019 and stretch it to 01.01.2020 to extend the period of limitation for the entire day of 01.01.2020, which cannot be permitted. Even as per Section 153, no order can be passed at any time after expiry of twenty one month s implying that the order has to be passed before 23 59 59 hours on 31.12.2019. The provision cannot be considered ignoring the words at any time after expiry , in the opinion of this court. Even the employment of the General Clauses Act will not aid the Revenue, the reason of which will be disclosed a little later in this judgment. But, right now, it is relevant to consider the scope of the word to . The word to is used as a preposition or as an adverb. In popular sense, it is used to express the direction in which a person, thing, or time travels. The flow of direction is to be gauged from the preceding word or words used, like prior to or upto . Keeping the same in mind, if we look at the wording of Section 92CA (3A), we cannot accept the contention of the Revenue that the time to be reckoned is from 31.12.2019 and not 30.12.2019 as has been rightly done by the learned Judge. The word date in section 92CA(3A) would indicate 31.12.2019. But the preceding words prior to would indicate that for the purpose of calculating the 60 days, 31.12.2019 must be excluded. The usage of the word prior is not without significance. It is not open to this court to just consider the word to by ignoring prior . The word prior in the present context, not only denotes the flow of direction, but also actual date from which the period of 60 days is to be calculated. It is settled law that while interpreting a statute, it is not for the courts to treat any word(s) as redundant or superfluous and ignore the same. The language employed is simple. 31.12.2019 is the last date for the assessing officer to pass his order under Section 153. TPO has to pass order before 60 days prior to the last date. The 60 days is to be calculated excluding the last date because of the use of the words prior to and the TPO has to pass order before the 60th day. In the present case, the word before used before 60 days would indicate that an order has to be passed before 1/11/2019 i.e on or before 31.10.2019 as rightly held by the Learned Judge. Even considering for the purpose of alternate interpretation, the scope of Section 9 of the General Clauses Act, it is to be noted that an inverted calculation of the period of limitation takes place here. If the last date is taken to be the first date from which the period of 60 days is to be calculated, reading down the provision with the use of the word from , which denotes the starting point or period of direction in general parlance, would mean that 60 days from the last date . Even going by Section 9 of the General Clauses Act, when the word from is used, then, that date is to be excluded, implying here that 31.12.2019 must be excluded. After excluding 31.12.2019, if the period of 60 days is calculated, the 60th day would fall on 01.11.2019 and the TPO must have passed the order on or before 31.10.2019 as orders are to be passed before the 60th day. Therefore, either way the contention of the Revenue is a fallacy and has no legs to stand. From Section 153, the regular time for passing the assessment order ends on 31.12.2018 and with extension on the matter being referred to TPO, the time limit to pass assessment order would lapse on 31.12.2019. What is not to be forgotten, while interpreting a taxing statute, is the explicit and clear language used by the parliament while enacting the law. If the language employed in any statute is clear and unambiguous from its plain and natural meaning, external aid for interpretation are unnecessary. In the present case, we are called upon to adjudicate the period of limitation applicable to TPO under Section 92CA(3A) and incidentally under Section 153. Usage of the word may in Section 92CA (3A) indicates that the time fixed is only directory, a guideline, not mandatory and is for the sake of internal proceedings - Upon consideration of the judgments and the scheme of the Act, we are of the opinion that the word may used therein has to be construed as shall and the time period fixed therein has to be scrupulously followed. The word may is used there to imply that an order can be passed any day before 60 days and it is not that the order must be made on the day before the 60th day. The impact of the proviso to the sub-section clarifies the mandatory nature of the time schedule. The word may cannot be interpreted to say that the legislature never wanted the authority to pass an order within 60 days and it gave a discretion. Therefore, the learned Judge rightly held the orders impugned in the writ petitions as barred by limitation, as the Board, in the Central Action Plan, has specified 31.10.2019 as the date on which orders are to be passed by the TPO, reiterating the time limit to be mandatory.

Summary

Issues Involved:
1. Validity of the Transfer Pricing Officer's (TPO) order dated 01.11.2019 under Section 92CA(3) of the Income Tax Act, 1961, on the grounds of limitation.
2. Availability and necessity of alternative remedies.
3. Interpretation of statutory provisions related to the computation of time limits under Sections 92CA(3A) and 153 of the Income Tax Act.
4. The mandatory or directory nature of the time limit prescribed under Section 92CA(3A).

Issue-wise Detailed Analysis:

1. Validity of the TPO's Order on Grounds of Limitation:
The respondents challenged the TPO's order dated 01.11.2019, arguing it was beyond the period of limitation stipulated under Section 92CA(3A) of the Income Tax Act. They contended that the order should have been passed on or before 31.10.2019, as the time limit for the TPO to pass the order is 60 days prior to the date on which the period of limitation under Section 153 expires, which is 31.12.2019. The appellants argued that the order was within the time limit, interpreting the 60-day period to include 31.12.2019, making 01.11.2019 the last day for passing the order.

2. Availability and Necessity of Alternative Remedies:
The appellants contended that the writ petitions were not maintainable as the respondents had alternative remedies available under the Income Tax Act, such as filing objections before the Dispute Resolution Panel (DRP) or appealing to the appellate authority. The court, however, held that the writ petitions were maintainable as the issue of limitation goes to the root of the jurisdiction and authority of the TPO, making it a pure question of law suitable for adjudication under Article 226 of the Constitution of India.

3. Interpretation of Statutory Provisions Related to Time Limits:
The court examined the provisions of Sections 92CA(3A) and 153 of the Income Tax Act, along with Section 9 of the General Clauses Act. It held that the period of 21 months for passing the assessment order ends on 31.12.2019, not 01.01.2020. The court clarified that the last date for passing the order is 31.12.2019, which ends at 23:59:59 hours, and the next day begins at 00:00 hours. Therefore, the 60-day period for the TPO to pass the order should be calculated excluding 31.12.2019, making 01.11.2019 the 60th day, and the order should have been passed on or before 31.10.2019.

4. Mandatory or Directory Nature of the Time Limit:
The appellants argued that the word "may" in Section 92CA(3A) indicates that the time limit is directory and not mandatory. The court, however, held that the time limit is mandatory, as the language of the statute, the scheme of the Act, and the consequences of not adhering to the time limit indicate that the TPO must pass the order within the prescribed period. The court also noted that the proviso to Section 92CA(3A) extends the period if the remaining time is less than 60 days, further emphasizing the mandatory nature of the time limit.

Conclusion:
The court dismissed the intra-court appeals, upholding the learned Judge's order that the TPO's order dated 01.11.2019 was barred by limitation. The court held that the time limit prescribed under Section 92CA(3A) is mandatory, and the TPO should have passed the order on or before 31.10.2019. The writ petitions were maintainable as the issue of limitation is a pure question of law affecting the jurisdiction of the TPO. The court also clarified the interpretation of the statutory provisions related to the computation of time limits.