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2024 (5) TMI 1085 - HC - Income TaxValidity of order passed u/s 92CA - jurisdiction to pass an assessment order post limitation period - second reference made to TPO - objection of limitation noting that Section 144C (8) - petitioners had argued that the period of nine months when computed from the passing of the order of the ITAT would have come to an end on 31 December 2018 - HELD THAT - The order of the ITAT dated 14 July 2017 and to the extent that certain aspects were remanded for the consideration of the TPO directly were neither questioned nor assailed at any time by the respondents. In fact, and as the writ petitioners have rightly pointed out, the aforesaid directions as framed were duly acknowledged and accepted and which fact becomes evident from not only the various notices which were issued by the jurisdictional AO and form part of our record such as but also by the action of the TPO itself which had proceeded to pass an order on 17 October 2017. It thus becomes apparent that the principal order of the ITAT dated 14 July 2017 had come to be duly implemented by the TPO on 17 October 2017 itself. Once the TPO had proceeded to pass the order of 17 October 2017, all that the AO was obliged to do was pass an assessment order in accordance with the procedure prescribed in Section 92CA (4) of the Act. The original order of assessment dated 21 February 2014 ceased to exist in light of the directions as framed by the ITAT on 14 July 2017. Consequently and in terms of the aforesaid order of the ITAT, a fresh order of assessment was liable to be drawn before the expiry of nine months from the end of the relevant financial year. It is conceded on behalf of the respondents that the aforesaid period undoubtedly came to an end on 31 December 2018. We, additionally, find that the prescription of nine months would also be applicable to a fresh order which is liable to be made in accordance with Section 92CA of the Act. This since Section 153 of the Act speaks not merely of assessments but also orders that are liable to be framed u/s 92CA. The order which is spoken of in Section 92CA of the Act, as explained above, is the one which the TPO may come to make in accordance with sub-section (3) thereof. It is thus manifest that the assessment exercise was liable to be concluded within a period of nine months when computed from 14 July 2017. Although the TPO had acted in pursuance of the order of the ITAT and proceeded to pass an order on 17 October 2017, the jurisdictional AO for reasons unknown and undisclosed, chose not to pass a consequential assessment order as mandated by Section 92CA (4) of the Act. What the AO, however, chose to do was make a fresh reference on 27 December 2018 requiring the TPO to pass an order in accordance with the judgment of the ITAT dated 14 July 2017. That reference was clearly unmerited since the TPO was obliged to act in accordance with the directions of the ITAT. It had in any case already taken all consequential steps in terms thereof and passed an order on 17 October 2017. We are therefore of the firm opinion that in light of the directions as were formulated by the ITAT and stood embodied in its order of 14 July 2017, no fresh reference as the AO chose to make was warranted. Once the ITAT had chosen to remit the matter directly to the TPO, the said authority was legally obliged to proceed in accordance therewith and did not need to derive any authority from a reference being independently made by the AO. Section 92CA (1) reference rests solely upon the AO being of the opinion that a reference is required to be made to the TPO for computation of ALP. That power stands conferred upon the AO and is available to be exercised in the course of assessment. Section 153 (3) of the Act speaks of assessments as well as orders under Section 92CA that may be required to be made pursuant to an order passed by an ITAT in exercise of its appellate jurisdiction comprised in Section 254 of the Act. In our considered opinion, the reference which the AO proceeded to frame on 27 December 2018 was thus clearly superfluous and in any case cannot be sustained on the basis of Section 153 (4) of the Act. Whether Order of 14 July 2017 should be construed as being a reference governed by Section 153 (4) and consequently the expanded period of limitation of twelve months becoming applicable? - We find ourselves unable to sustain that submission bearing in mind the indubitable position which emerges from a plain reading of Section 153 (3) of the Act and which encompasses and makes adequate provisions for a fresh order u/s 92CA (4) being liable to be made pursuant to an order of the ITAT u/s 254 of the Act. Since the aforesaid contingency is already provisioned for in sub-section (3), there would exist no justification for such an order of the ITAT being placed or viewed as traceable to sub-section (4) of Section 153 of the Act. Tested on the undisputed facts, we find that the period of nine months when reckoned from 14 July 2017 undoubtedly came to an end on 31 December 2018. Once that terminal point was reached, the respondent clearly stood deprived of jurisdiction or authority to pass an order of assessment pursuant to the directions of the ITAT. We have already found that the TPO had acting in terms of the directions as framed by the ITAT already passed a consequential order on 17 October 2017. All that was required of the respondents thereafter was for the AO to frame an order of assessment in accordance therewith. This, for reasons unfathomable, was something which the AO failed to do. The second reference which was thereafter framed by the AO and was dated 27 December 2018 for reasons aforenoted was clearly unwarranted and in any case cannot be viewed as conferring a fresh lease of life to the power to assess. Thus while we refuse to interfere with the order of the DRP impugned herein, we allow the instant writ petition and hold that the second respondent stands barred in law from passing any further orders of final assessment pertaining to AY 2009-10. The petitioner shall consequently be entitled to all consequential reliefs.
Issues Involved:
1. Legality of the DRP order dated 29 January 2021. 2. Authority of the TPO to frame an order on 17 October 2017. 3. Validity of the reference made by the AO on 27 December 2018. 4. Applicability of the limitation period u/s 153 of the Income Tax Act. Summary: 1. Legality of the DRP Order: The petitioner challenged the DRP order dated 29 January 2021, which upheld the draft assessment order dated 31 March 2013. The DRP refused to entertain the limitation objection, noting that its jurisdiction u/s 144C(8) restricts it to confirming, reducing, or enhancing the variations proposed in the draft order. 2. Authority of the TPO to Frame an Order on 17 October 2017: The TPO had framed an order on 17 October 2017 to give effect to the ITAT order dated 14 July 2017. The petitioner argued that the TPO was divested of any authority to undertake an identical exercise based on a subsequent reference by the AO on 27 December 2018. The court held that once the ITAT remitted the matter to the TPO, the TPO was legally obliged to proceed in accordance with the ITAT's directions, and no fresh reference was warranted. 3. Validity of the Reference Made by the AO on 27 December 2018: The court found the reference made by the AO on 27 December 2018 to be superfluous and unwarranted. The ITAT had already remitted the matter directly to the TPO, and the TPO had acted upon it by passing an order on 17 October 2017. The court held that the AO's reference did not confer a fresh lease of life to the power to assess. 4. Applicability of the Limitation Period u/s 153: The court held that the period of nine months for completing the assessment, as prescribed u/s 153(3) of the Act, expired on 31 December 2018. The court rejected the argument that the extended period of twelve months u/s 153(4) was applicable, as it pertains to references made by the AO during the course of assessment or reassessment. The court concluded that the respondents were barred from passing any further orders of final assessment for AY 2009-10. Conclusion: The court allowed the writ petition, holding that the respondents were barred from passing any further orders of final assessment for AY 2009-10 and the petitioner was entitled to all consequential reliefs.
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