2023 (5) TMI 1410 - AT - Income Tax

Validity of assessment order passed beyond period of limitation - period of limitation for making the order u/s. 92CA(3) - HELD THAT - The period of limitation for passing the assessment order in the instant case expires on 31/03/2014. The time limit for passing the order u/s. 92CA(3A) is sixty days prior to the date on which the limitation referred to in section 153B of the Act expires. Thus the limitation in the present case for passing the TP order u/s. 92CA(3) of the Act expires on 29/01/2014. And since the TPO has passed the order u/s. 92CA(3) of the Act on 30/01/2014 consequently the order passed by T.P.O. u/s. 92CA(3) of the Act is time barred by one day and we hold it to be bad in law and so is non- est in eyes of law. Assessment order (final) framed by AO on 27.05.2014 as barred by limitation - The expression two months used in clause 43(2) in the aforesaid circular to specify the period of limitation may not necessarily be equal to sixty days as specified in the Act. It is trite that the words/expressions used in Statute cannot be substituted in Explanatory notes or Board Circulars. If the limitation period is mentioned in days in the Act the same expression has to be necessarily used in Circulars. Since delegated power of Board cannot over-ride the Act passed by the Parliament/Legislature. Therefore Two months as mentioned in Circular can be more or even less than sixty days. Therefore expression stipulated in Act to calculate limitation period has to be scrupulously adhered to. Assailing the action of AO in this case to frame draft assessment order when the TPO order was bad in law the Ld. AR pointed out that assessee is not qualifying as eligible assessee as per the definition given in sub-section (15) to section 144C of the Act.

Summary

Issues Involved:

1. Whether the Transfer Pricing Officer's (TPO) order and the Assessing Officer's (AO) final order were barred by limitation and thus void ab initio.
2. Whether the assessee qualifies as an "Eligible Assessee" under section 144C of the Income Tax Act, 1961.

Detailed Analysis:

1. Limitation on Transfer Pricing Officer's and Assessing Officer's Orders:

The primary issue was whether the TPO's order dated 30.01.2014 and the AO's final assessment order dated 27.05.2014 were passed beyond the statutory time limits, rendering them void ab initio. The assessee argued that the TPO's order should have been passed by 29.01.2014, as per section 92CA(3A) of the Act, which mandates that the order must be made at least sixty days before the expiration of the period of limitation under section 153B. The tribunal accepted this argument, noting that the TPO's order was indeed delayed by one day, making it barred by limitation and non-est in the eyes of law. This conclusion was supported by judicial precedents from the Madras High Court and various ITAT benches, which have consistently held that orders passed beyond the statutory time limits are invalid.

2. Eligibility as an "Eligible Assessee":

The second issue was whether the assessee qualified as an "Eligible Assessee" under section 144C(15) of the Act, which would necessitate the issuance of a draft assessment order. The tribunal found that since the TPO's order was invalid due to being time-barred, the assessee could not be considered an "Eligible Assessee" as defined under section 144C(15). The definition requires a valid TPO order under section 92CA(3), which was absent in this case. Consequently, the AO should not have issued a draft assessment order but instead should have completed the assessment by 31.03.2014. The final assessment order dated 27.05.2014 was thus also deemed to be barred by limitation and invalid.

Conclusion:

The tribunal allowed the assessee's cross-objection, quashing the TPO's and AO's orders as barred by limitation. The department's appeal was dismissed as academic. The tribunal's decision was based on a thorough interpretation of the statutory provisions and supported by relevant judicial precedents, emphasizing the mandatory nature of the time limits prescribed in the Act. The tribunal also noted that no arguments were made regarding other grounds of appeal, leaving them open for future adjudication if necessary.