9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2025 (2) TMI 499 - HC - Income TaxInterpretation of Section 144C (13) - period of limitation - whether the time limit provided under this sub-section for completing the assessment as per the directions of the DRP is mandatory or directory and consequences thereto? - HELD THAT - Section 144C (13) of the Act overrides the time limit provided u/s 153 which means that on receipt of the directions from the DRP and by adding one month from the end of the month in which such directions are received the AO has to pass an order on or before expiry of end of the month in which directions are received. This is in consonance with the objective for which the dispute resolution mechanism was inserted by virtue of Section 144C of the Act. Section 144C (13) is reincarnation of Section 153 which provides for time limit for completion of the assessments. If the provisions of Section 153 are to be construed mandatorily then we fail to understand as to how the provisions of Section 144C (13) cannot be construed mandatorily moreso looking at the object of insertion of Section 144C and the consequences and the effect of completion of the assessment proceedings. The law of limitation is intended to give certainty and finality of tax proceedings and to avoid exposure to risk of litigation for indefinite period on future unforeseen events. Application of Section 144C (13) to Present Case - Provisions of Sections 144C (6) and 144C (7) requires the DRP to carry out enquiry before any directions under Section 144C (5) are issued to the AO. This clearly shows post Section 144C (5) directions no authority other than AO intervenes. Therefore looked from any angle in our view the final assessment order made on 27 February 2015 is beyond the limitation period provided under Section 144C (13) of the Act. Period of Section 144C (13) cannot be counted from the end of the month in which the transfer pricing officer gives effect of the direction of the DRP under Section 144C (5) of the Act. This is so because Section 153 (5A) provides that the assessment pursuant to the TPO giving effect of the order or direction under Section 263 should be completed within two months from the end of the month in which such an order of the TPO received. If the intention of the legislature was to calculate the time limit provided under Section 144C (13) to start from the TPO s order giving effect to the direction under Section 144C (5) then there would have been a similar provision like Section 153 (5A) of the Act. Therefore even on this count post direction of the DRP the AO has to complete the assessment within one month from the end of the month in which the direction of the DRP are received which would include any intervening exercise if at all required to be done. As in the case of Vodafone Idea Limited 2023 (11) TMI 449 - BOMBAY HIGH COURT held that Section 144C (13) of the Act time limit is mandatory. Court concluded the importance of time and it be strictly adhered/respected. Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core legal question considered in this judgment was whether the time limit provided under Section 144C (13) of the Income Tax Act, 1961, for completing the assessment as per the directions of the Dispute Resolution Panel (DRP), is mandatory or directory. The court examined whether the assessment order passed beyond this time limit is barred by limitation. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents Section 144C of the Income Tax Act provides a mechanism for resolving disputes involving international transactions by allowing eligible assessees to object to draft assessment orders before the DRP. The DRP issues directions to the Assessing Officer (AO), who must complete the assessment within one month from the end of the month in which the DRP's directions are received. The court analyzed Section 144C's scheme, including subsections (4), (12), and (13), to determine the mandatory nature of the time limit. Court's Interpretation and Reasoning The court held that the time limit under Section 144C (13) is mandatory. It emphasized that the provision's language, using the word "shall," indicates a legislative intent for the time limit to be imperative. The court reasoned that the provision aims to ensure expeditious resolution of disputes, aligning with the objective of Section 144C to facilitate speedy disposal of cases involving multinational companies. Key Evidence and Findings The court noted that the directions from the DRP were received by the AO on December 23, 2014, and the final assessment order was passed on February 27, 2015. This was beyond the one-month period ending January 31, 2015, making the assessment order time-barred. Application of Law to Facts The court applied the statutory time limit strictly, concluding that the assessment order dated February 27, 2015, was invalid as it was passed beyond the period prescribed by Section 144C (13). The court rejected the argument that the time limit was merely directory, emphasizing the importance of adhering to statutory deadlines in fiscal statutes. Treatment of Competing Arguments The appellant-revenue argued that the time limit was directory, citing precedents suggesting flexibility in procedural timelines. However, the court dismissed these arguments, stating that equitable considerations are not applicable in construing limitation provisions in fiscal statutes. The court relied on precedents that emphasized strict adherence to statutory time limits. Conclusions The court concluded that the assessment order was barred by limitation due to non-compliance with the mandatory time limit under Section 144C (13). The appeal by the revenue was dismissed, and the court upheld the Tribunal's decision that the assessment order was invalid. SIGNIFICANT HOLDINGS The court held that Section 144C (13) is mandatory, not directory, emphasizing the legislative intent for expeditious resolution of disputes. The court stated: "The phrase 'shall ... complete the assessment ... within one month ... received' indicates the imperative nature of the time limit." The court reiterated that statutory deadlines in fiscal statutes must be strictly adhered to, rejecting arguments for flexibility based on procedural considerations. The court affirmed the Tribunal's decision, dismissing the revenue's appeal and ruling in favor of the respondent-assessee. The judgment does not preclude the revenue from initiating fresh proceedings if permissible under the law.
|
