2022 (7) TMI 497 - HC - Income Tax

TP Assessment proceedings - period of limitation - sufficient compliance of the procedures as contemplated under Section 153 or not? - Whether the reference to TPO is barred by limitation or not? - HELD THAT - If the time provided to the TPO to pass an order and for the assessee to submit their objections as per 144C (2) are also considered along with the time period for the DRP and the assessing officer, it is beyond any doubt that the extended period is 12 months and not 9 months. Further, when one proviso provides a time limit and when another proviso extends such time under certain circumstances, it cannot be held that both the provisos are independent. Therefore, the proviso which has altered the original time limit from 24 months to 21 months vide amendment in Finance Act, 2006 with effect from 01.06.2006 and the second proviso inserted by Finance Act 2007, extending the time for completion of assessment, when a reference has been made to TPO, during the course of assessment proceedings, have to be read in tandem and together. Our decision is also fortified by the fact that Section 153 was repealed and substituted with effect from 01.06.2016, where under Section 153 (1) it is clearly mentioned that the period of assessment is 21 months and under 153 (4), it is clearly mentioned that in case of reference under 92CA (1) during the course of assessment proceedings, the period of assessment would be extended by twelve months clarifying the mischief caused on account of the interpretation adopted by the officials. Therefore, when the extended time provided for the department is 12 months, the department cannot contend that it is only 9 months as because the reference was not made in time. Similarly, we also disagree with the findings of the Learned Judge, who has embarked much on the circular regarding the necessity for more time for TPO and the reason for the amendment losing sight of the time provided in the amendment and period within which the reference is to be made. Contention on estoppel - We have already held that the question of limitation is a legal plea, which goes to the root of the jurisdiction of the authorities. A legal plea can be raised at any stage of the proceedings. Waiver of a statutory right - legal plea can be raised at any stage and there cannot be any waiver of a statutory right - In the present case, though the appellant/ petitioner has participated in the proceedings before TPO and the assessing officer, it is their specific stand that they have raised the issue before the DRP and also that, when they submitted their objections and documents to the TPO, the date of reference was not known to them. This stand is not factually objected by the department. Further, there is no acquiescence, waiver or estoppel in taxing laws. The law on this point is well settled. The Levy and collection of tax must be within the four corners of law in compliance with the substantial and procedural mandates of connected legislations. Therefore, we again disagree with the findings of the learned Judge. If the reference is bad, then as a sequitur, all further proceedings, in furtherance of the same are also bad. In the present case, because of a reference after the permissible period, the time line has been missed by the department at every stage. Therefore, the appellant is entitled to succeed in the appeal.

Summary

Issues Involved:
1. Validity of the Reference to Transfer Pricing Officer (TPO)
2. Limitation Period for Assessment
3. Jurisdiction and Authority of the Assessing Officer
4. Estoppel and Waiver of Statutory Rights

Detailed Analysis:

1. Validity of the Reference to Transfer Pricing Officer (TPO):
The appellant contended that the reference made by the Assessing Officer to the TPO was contrary to the mandate under Section 153 of the Income Tax Act, which prescribes a time limit of 21 months from the end of the assessment year for completing the assessment. The reference to the TPO was made on 17.02.2009, after the expiration of the 21-month period on 31.12.2008, rendering the entire assessment proceedings invalid and barred by limitation. The court held that the words "during the course of the proceedings for the assessment of total income" in Section 153 indicate that the reference must be made within the 21-month period. The reference made after the expiration of this period is legally unsustainable, and the extended period of 33 months for completing the assessment is contingent upon a valid reference made during the course of the assessment proceedings.

2. Limitation Period for Assessment:
The court emphasized that the limitation period for completing the assessment is 21 months from the end of the assessment year, as per Section 153. The extended period of 33 months is applicable only if a reference to the TPO is made within the 21-month period. The court rejected the contention that the reference could be made within 24 months and the extended period would be 9 months. The court clarified that the extended period is 12 months, making the total period for completing the assessment 33 months. The court also noted that the time limit to pass the final assessment order would end on 31.12.2009, and in this case, the order of the DRP was dated 24.09.2010, which was beyond the permissible period.

3. Jurisdiction and Authority of the Assessing Officer:
The court held that the jurisdiction of the Assessing Officer to refer the matter to the TPO is limited by the time frame prescribed under Section 153. The reference made after the expiration of the 21-month period is invalid, and the Assessing Officer becomes functus officio, losing the authority to make such a reference. The court emphasized that the statutory provisions conferring jurisdiction cannot be waived or created by consent, and any procedural lapse in this regard cannot be overlooked.

4. Estoppel and Waiver of Statutory Rights:
The court rejected the contention that the appellant was estopped from challenging the reference to the TPO due to their participation in the proceedings. The court reiterated that a legal plea, especially one that goes to the root of jurisdiction, can be raised at any stage. The court also emphasized that there cannot be any waiver of a statutory requirement or provision that goes to the jurisdiction of assessment. The court cited several judgments to support the view that jurisdictional issues can be raised at any stage and that there is no estoppel or waiver in matters of jurisdiction.

Conclusion:
The court concluded that the reference to the TPO was invalid as it was made after the expiration of the permissible period, rendering all subsequent proceedings void. The appeal was allowed, and the writ petition was granted, quashing the assessment proceedings. The court emphasized the importance of adhering to statutory timelines and the non-waivability of jurisdictional requirements in tax matters.