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2022 (6) TMI 848 - HC - Income TaxTP Adjustment - assessment barred by Limitation - Timelines u/s 92CA, 144C and 153 - Reference to DRP - order of remand passed by the Tribunal, the Assessing Officer has not taken up the assessment proceedings within a reasonable time and therefore, the entire proceedings are vitiated by reason of delay - as per assessee outer time limit u/s 153 is applicable to every proceedings on remand and the department having slept over the issue for several years, cannot now redo the proceedings afresh, after certain rights have vested with the assessees - main contentions of the Department,that Section 144C is a code in itself and hence on remand by the ITAT, the power of DRP to take up the dispute on additions by TPO, is not circumscribed by Section 153 and that in the absence of any express time limits contemplated under the Act, the time limits under Section 153 for reassessment cannot be read into Section 144C more particularly when the provisions of Section 153 are excluded by the non-obstante clause in section 144C(13) and hence the proceedings are not barred by limitation HELD THAT - As rightly contended by the learned senior counsels and affirmed by the Learned Judge, the DRP proceedings is a continuation of assessment proceedings. To put it further, it is a part of assessment proceedings, once the objections are filed and under section 144C (12) a period of 9 months is prescribed, within which, directions are to be issued by the DRP, failing which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given 9 months time and thereafter, within one month from the end of the month of receipt of directions from DRP, the final order is to be passed. This court is not in consonance with the contention of the learned senior panel counsel for the appellants/ revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had issued the notices. If the contention of the appellants / revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years. The assessment has to be concluded within 21 months when there is no reference and when there is a reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to be passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 144C and section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter-dependant and overlapping. As rightly held by the learned judge, we are of the view that the DRP ought to have concluded the proceedings within 9 months from the date of receipt of the Tribunal s order, when it had issued a notice on 19.02.2014 and conducted the hearing as early as on 10.03.2014 and on several dates. DRP at Chennai, in fact ought to have passed orders before 19.11.2014, even if the date of receipt of the notice is taken as 19.02.2014. In that event, the assessing officer ought to have passed the order before 31.12.2014 or at the latest before 31.03.2015 considering that the order was received during the Financial year 2013-14. The transfer of the files to Bengaluru, after the lapse of the time, will not indefinitely extend the time and can have no impact on the time lines. It is an inter-department arrangement and it cannot defeat the rights of the assessee. Insofar as the non-obstante clause in Section 144C(13) is concerned, we concur with the view of the Learned Judge. The exclusion of applicability of Section 153 or Section 153 B is for a limited purpose to ensure that dehors larger time is available, an order based on the directions of the DRP has to be passed within 30 days from the end of the month of receipt of such directions. The section and the sub-section have to be read as a whole with connected provisions to decipher the meaning and intentions The limitation prescribed under the statute is for the assessing officer and therefore, it is his duty to pass order in time irrespective of whether the directions are received from DRP or not. As held by us above, the DRP will have no authority to issue directions after nine months and a further period of one month as per section 144C (13) and three months under section 153 (2A) is available, within which period no orders have been passed in the present cases. The reference made by the learned senior counsels on the judgments in Nokia India Private Ltd ( 2017 (9) TMI 1298 - DELHI HIGH COURT and Vedanta Ltd ( 2020 (1) TMI 168 - MADRAS HIGH COURT is well founded. The timeline given under the Act is to be strictly followed. We conclude as under (a) The provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under Section 153 (2A) or 153 (3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders. (b) Even in case of remand, the TPO or the DRP have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under Section 144C (12) of the Income Tax Act, (c) Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time, (d) In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the very purpose of extension is to ensure that orders are passed within the extended period, as otherwise the extension becomes meaningless. (e) The outer time limit of 33 months in case of reference to TPO under Section 153, would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within the time limits prescribed, (f) The non-obstante clause would not exclude the operation of Section 153 as a whole. It only implies that irrespective of availability of larger time to conclude the proceedings, final orders are to be passed within one month in line with the scheme of the Act, (g) When no period of limitation is prescribed, orders are to be passed within a reasonable time, which in any case cannot be beyond 3 years. However, when the statute prescribes a particular period within which orders are to be passed, then such period, irrespective of whether it is short or long, shall be applicable.
Issues Involved:
1. Limitation period for assessment and reassessment. 2. Validity of show cause notices issued beyond the prescribed time limit. 3. Applicability of Section 153 and Section 144C of the Income Tax Act. 4. Reasonableness of the time taken by the Dispute Resolution Panel (DRP) and Assessing Officer (AO) in completing remand proceedings. Detailed Analysis: 1. Limitation Period for Assessment and Reassessment: The court examined the statutory timelines under Sections 92CA, 144C, and 153 of the Income Tax Act. The court noted that the TPO must pass an order within 60 days prior to the expiry of the assessment period under Section 153. The AO must then forward a draft assessment order to the assessee, who has 30 days to file objections with the DRP. The DRP must issue directions within nine months from the end of the month in which the draft order is forwarded. The AO must complete the assessment within one month from the end of the month in which the DRP's directions are received. The court concluded that the provisions of Sections 144C and 153 are not mutually exclusive but rather mutually inclusive. The period of limitation prescribed under Section 153 (2A) or 153 (3) applies when matters are remanded back, irrespective of whether it is to the AO, TPO, or DRP. The duty is on the AO to pass orders within the stipulated time. 2. Validity of Show Cause Notices Issued Beyond the Prescribed Time Limit: The court held that the show cause notices issued by the DRP were barred by limitation. The notices were issued several years after the remand orders from the Tribunal, which violated the statutory timelines. The court emphasized that the DRP must conclude its proceedings within nine months, and the AO must pass the final order within the time limits prescribed under Section 153. 3. Applicability of Section 153 and Section 144C of the Income Tax Act: The court rejected the appellants' argument that Section 144C is a self-contained code and that the time limits under Section 153 do not apply to DRP proceedings. The court held that the provisions under Sections 144C and 153 are interdependent and overlapping. The non-obstante clause in Section 144C(13) is limited to ensuring that final orders are passed within one month from the end of the month in which the DRP's directions are received, irrespective of the larger time available under Section 153. 4. Reasonableness of the Time Taken by the DRP and AO in Completing Remand Proceedings: The court emphasized that even if no specific time limit is prescribed, the proceedings must be concluded within a reasonable time. The court found that the DRP and AO took an unreasonable amount of time (more than five years in one case and four years in others) to complete the remand proceedings. The court held that such delays are unacceptable and violate the statutory timelines. Conclusion: The court dismissed all the writ appeals, holding that the DRP and AO failed to adhere to the statutory timelines under Sections 144C and 153. The court directed that the entire proceedings, including the hearing and directions by the DRP, must be completed within nine months, and the AO must pass the final order within the stipulated time. The court also held that when no period of limitation is prescribed, orders must be passed within a reasonable time, which cannot exceed three years.
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