2017 (6) TMI 401 - AT - Income Tax

Transfer pricing adjustment - order passed by the TPO u/s 92CA(3)making upward adjustment to the international transactions - period of limitation - Held that - The provisions of section 153(2) of the Act lays down the time limit for re-assessment and it is provided that where the notice under section 148 of the Act is served on or after 1st day of April, 2005 but before the 1st day of April, 2011, then for completing the assessment or re-assessment or re-computation under section 147 of the Act, the period is nine months from the end of financial year in which notice under section 148 of the Act was issued. Where the notice under section 148 of the Act was served upon the assessee on 24.01.2011, therefore, the period of nine months would expire by 31.12.2011. The assessment in the case has been completed on 29.02.2012 vide order passed under section 144 r.w.s. 148 of the Act. The CIT(A) has correctly quashed the re-assessment proceedings and held the assessment order to be invalid. - Decided against revenue

Summary

Issues:
- Validity of assessment order under section 144 r.w.s. 147 of the Income-tax Act, 1961
- Time limitation for completion of assessments and reassessments under section 153(2) of the Act

Validity of Assessment Order:
The appeal filed by the Revenue challenged the order of CIT(A)-IT/TP, Pune, regarding the assessment year 2007-08 under section 144 r.w.s. 147 of the Income-tax Act, 1961. The Revenue contended that the assessment order was not barred by limitation. The assessee had filed a return of Nil income, and a notice under section 148 was issued due to adjustments in international transactions by the Transfer Pricing Officer (TPO). The Assessing Officer proposed an adjustment under section 144, which the assessee failed to respond to, leading to the assessment order under section 144 r.w.s. 147. The CIT(A) held the re-assessment proceedings to be time-barred, quashing the assessment order.

Time Limitation for Assessments:
The CIT(A) based the decision on the provisions of section 153(2) of the Act, which specify time limits for re-assessment. The notice under section 148 was served on the assessee on 24.01.2011, requiring completion of assessment within nine months from the end of the financial year, i.e., by 31.12.2011. However, the assessment was completed on 29.02.2012, leading the CIT(A) to rule the assessment order as invalid. The CIT(A) correctly interpreted the provisions, noting that the reference to the TPO was made before the re-assessment proceedings, thus the fourth proviso to section 153(2) did not apply. Consequently, the second proviso applied, making the assessment order time-barred.

In conclusion, the appeal by the Revenue was dismissed as the CIT(A) correctly applied the provisions of section 153(2) of the Act, determining the assessment order to be invalid due to exceeding the time limit. The judgment highlights the importance of adhering to statutory time limits for assessments and reassessments under the Income-tax Act, ensuring procedural compliance and fairness in tax proceedings.