2024 (8) TMI 937 - HC - Income Tax

Applicability of the provisions of Section 153, being the limitation provision to the proceedings u/s 144C - whether the period of eleven months as envisaged u/s 144C, should be over and above the time limit prescribed u/s 153 (1) r/w. 153 (4) - whether such time period needs to be subsumed within the timelines stipulated u/s 153? - HELD THAT - We are not persuaded to accept Respondents s submission that as merely large number of proceedings are pending in which the stake of about Rs.5 lakh crores in tax is involved on such issue, we need to take a different view of the matter including to refer the issue for consideration of a Larger Bench. In our opinion, such approach would not bring about any concrete conclusion as such question of law is pending determination before the Supreme Court, arising not only from the decision of this Court, but also from the decision of the other High Courts. It would be thus appropriate and desirable, that this Court awaits the decision of the Supreme Court in the pending proceedings in Shelf Drilling Ron Tappmeyer Limited 2023 (8) TMI 460 - BOMBAY HIGH COURT and Roca Bathroom Products Pvt. Ltd 2022 (6) TMI 848 - MADRAS HIGH COURT We may also observe that Petitioner has also tendered circulars issued by the Revenue to all its representatives in Mumbai to seek adjournments in all pending cases involving this issue before the Income-tax Appellate Tribunal to submit that the piling up of the cases and the size of the amount involved is because the Revenue not pursuing the matters, awaiting the Supreme Court to decide the appeals. Insofar as the interim relief in the present petition is concerned, we may observe that assessees similarly placed as the petitioner, have succeeded before the Madras High Court inter alia in Roca Bathroom Products Pvt. Ltd. (supra) as also before the Delhi High Court in Nokia India Pvt. Ltd 2017 (9) TMI 1298 - DELHI HIGH COURT As noted above, proceedings arising from such decisions of the Madras and the Delhi High Courts are pending before the Supreme Court. The orders of the High Courts setting aside the assessment orders are not stayed by the Supreme Court. Thus, in similar proceedings the assessees having succeeded before the other High Courts. Rule. Respondents waive service. As and by way of interim relief, ad-interim order dated 28 June, 2024 shall continue to operate till the final disposal of this petition.

Summary

Issues Involved:
1. Validity of the final assessment order dated 17 October 2023.
2. Validity of the demand notice dated 17 October 2023.
3. Validity of penalty notices dated 30 July 2023 and 17 October 2023.
4. Validity of the draft assessment order dated 30 August 2023.
5. Validity of the Transfer Pricing Officer (TPO) order dated 29 July 2023.
6. Applicability of Section 153 to proceedings under Section 144C of the Income-tax Act.

Detailed Analysis:

1. Validity of the Final Assessment Order Dated 17 October 2023:
The petitioner contends that the final assessment order is illegal and void ab initio due to being barred by limitation under Section 153 of the Income-tax Act. The prescribed limitation period for completing the assessment expired on 30 September 2023, whereas the impugned order was passed on 17 October 2023. The petitioner argues that the statutory time limit under Section 153 (1) read with Section 153(4) was not adhered to, making the assessment order time-barred.

2. Validity of the Demand Notice Dated 17 October 2023:
The demand notice issued under Section 156 of the Act is challenged on the grounds that it is consequential to the final assessment order, which the petitioner claims is void due to being issued beyond the statutory period of limitation.

3. Validity of Penalty Notices Dated 30 July 2023 and 17 October 2023:
The penalty notices issued under Sections 274 read with 271G and 270A of the Act are also contested as they are consequential to the assessment order. The petitioner asserts that since the final assessment order is time-barred, the penalty notices are also invalid.

4. Validity of the Draft Assessment Order Dated 30 August 2023:
The draft assessment order issued under Section 144C (1) is challenged as part of the broader argument that all proceedings related to the impugned final assessment order are void due to the expiration of the statutory time limit under Section 153.

5. Validity of the Transfer Pricing Officer (TPO) Order Dated 29 July 2023:
The TPO order under Section 92CA is contested as it forms part of the assessment proceedings that the petitioner claims are time-barred. The petitioner argues that any orders or notices stemming from these proceedings are consequently invalid.

6. Applicability of Section 153 to Proceedings Under Section 144C of the Income-tax Act:
The core issue revolves around whether the limitation period under Section 153 applies to proceedings under Section 144C. The petitioner relies on the decision in Shelf Drilling Ron Tappmeyer Limited vs. Assistant Commissioner of Income Tax, which held that the limitation period under Section 153 applies to Section 144C proceedings. However, the Revenue argues that Section 144C is a self-contained code with its own limitation provisions, independent of Section 153. The Revenue contends that Section 144C proceedings are not subject to the time limits prescribed under Section 153, supported by various High Courts' decisions.

Court's Observations and Interim Order:
The court noted that the issue of the applicability of Section 153 to Section 144C proceedings is pending before the Supreme Court in multiple cases, including Shelf Drilling Ron Tappmeyer Limited and Roca Bathroom Products Pvt. Ltd. The court decided not to take a definitive stance on the issue, given the Supreme Court's pending adjudication.

The court granted interim relief, continuing the ad-interim order dated 28 June 2024, until the final disposal of the petition. The court also allowed the parties to apply for modifications based on any relevant orders or final decisions by the Supreme Court on the matter.

Conclusion:
The High Court has deferred a final decision on the issues pending the Supreme Court's determination on the applicability of Section 153 to Section 144C proceedings. The interim relief granted maintains the status quo, preventing the enforcement of the impugned orders and notices until the petition is finally resolved.