2023 (8) TMI 1010 - AT - Income Tax

Validity of TP order u/s 92CA (3) - period of limitation for making the assessment order as per Section 153(3) - HELD THAT - The period of limitation for making the assessment order as per Section 153(3) was 31/03/2014, i.e., 24 months from the end of the assessment year. The extension of period of limitation made u/s. 92CA (3) and also as per proviso to Section 153(1) was upto 31/03/2015 i.e. after a period of 12 months. The proceedings for the assessment have been completed before 31/03/2015 and prior to the date of which limitation expires as per Section 92CA(3A) was 29/01/2015 as the date prior to the date of which limitation expires is 30/03/2015 and 60 days expires on 31/02/2015. Accordingly, in view of the Section 92CA(3), ld. TPO s order which has been passed u/s. 92CA(3) on 29/12/2015 wherein in this case it has been passed on 30/01/2015. We quashed the final assessment order being barred by period of limitation u/s. 92CA (3). Once we have quashed the assessment order then, all the grounds raised by the Revenue becomes infructuous. Disallowance of interest of late payment of service tax u/s. 37(1) - Though this ground will become infructuous because once the assessment order itself has been quashed on the ground of limitation, then Section does not survive but in any case the interest of late payment of service tax is not penal in nature and same is compensatory. Now this issue is very well settled by the judgment in the case of Mahalaxmi Sugar Mills 1980 (4) TMI 1 - SUPREME COURT and also by certain judgments of this Tribunal. Thus, on merits also, the disallowance is uncalled for.

Summary

Issues Involved:
1. Transfer Pricing Adjustment
2. Limitation Period for Passing Assessment Orders
3. Disallowance of Interest on Late Payment of Service Tax

Summary:

1. Transfer Pricing Adjustment:
The assessee and the Revenue filed cross appeals against the final assessment order dated 30/12/2014, which included a transfer pricing adjustment of Rs. 2,18,55,896/-. The assessee raised an additional ground that the transfer pricing order dated 30/01/2014 was barred by the law of limitation under sections 92CA(3A) and 153 of the Income Tax Act, 1961 (ITA), rendering it illegal. The Tribunal examined the chronology of events and statutory dates, concluding that the Transfer Pricing Officer (TPO) passed the order one day beyond the statutory due date of 29/01/2014. Consequently, the entire transfer pricing adjustment was quashed as it was barred by limitation.

2. Limitation Period for Passing Assessment Orders:
The Tribunal reviewed the statutory due dates for passing orders under sections 92CA(3A) and 153 of the ITA. The final assessment order was required to be passed by 31/03/2014, but it was passed on 30/12/2014, well beyond the statutory due date. The Tribunal relied on various judgments, including Pfizer Healthcare India Pvt. Ltd. vs. JCIT, to conclude that the TPO's order was time-barred, and therefore, the final assessment order was also invalid. The Tribunal emphasized that the time limits set forth in sections 92CA(3A) and 153 are mandatory and must be strictly followed.

3. Disallowance of Interest on Late Payment of Service Tax:
The Tribunal noted that the disallowance of interest on late payment of service tax amounting to Rs. 10,844/- under section 37(1) would become infructuous since the entire assessment order was quashed. However, it also stated that such interest is compensatory and not penal in nature, referencing the Supreme Court judgment in Mahalaxmi Sugar Mills vs. CIT, thereby indicating that the disallowance was not justified on merits as well.

Conclusion:
The appeal of the assessee was allowed, and the appeal of the Revenue was dismissed. The final assessment order was quashed due to being barred by the limitation period, and the disallowance of interest on late payment of service tax was also deemed uncalled for on merits.