2024 (12) TMI 629 - AT - Income Tax

Validity of TP order beyond limit prescribed u/s 153(4) - HELD THAT - The case made out by the assessee is this that in order to adhere to the provision of Section 92CA(3A) of the Act, the TPO s order should have been issued in time, before 60 days prior to the due date for completion of assessment u/s 153 of the Act read with Section 92CA(3A) of the Act i.e. 31st October, 2019, whereas the Ld. TPO issued the order after the said date, only on 1st November, 2019. Limitation period prescribed under the provision of Section 92CA(3A) of the Act is mandatoryTPO has no authority to breach such statutory provision and to pass order beyond the prescribed time as mentioned hereinabove. Further that the word may though have been used by legislature u/s 92CA(3A) of the Act, it should be construed as shall as the TPO would otherwise to allow more time to pass the transfer pricing order by implication and this would violate the provision of Section 153 r.w.s. Section 92CA(3) of the Act prescribing the time limit for completion of assessment by the AO. Therefore, the TP order issued admittedly after the expiry of aforesaid period, is unforeseeable in the eye of law. Maintainability of the Transfer Pricing Officer s order has been decided in favour of the assessee holding the same barred by limitation since the said order was passed beyond the time-limit prescribed under Section 92CA(3A) of the Act read with Section 153 of the Act. The impugned order therein was found to have been passed violating the mandates prescribed under 92CA(3A) of the Act after expiry of 60 days to the date on which the period of limitation is referred in Section 153 of the Act for making the order of assessment and, thus, held invalid. In that view of the matter the Assessing Officer was also not made available with the extended period of limitation for passing of the assessment order in terms of provisions of Section 153(4). Decided in favour of assessee.

Summary

Issues Involved:

1. Validity of the Transfer Pricing Officer's (TPO) order due to alleged time-barred issuance.
2. Consequences on the draft assessment order and final assessment order if the TPO's order is invalid.

Detailed Analysis:

1. Validity of the TPO's Order:

The primary issue in this case was whether the TPO's order dated 1st November 2019 was issued beyond the statutory time limit prescribed under Section 92CA(3A) read with Section 153(4) of the Income Tax Act, 1961. The provision mandates that the TPO's order must be passed at least 60 days before the date on which the period of limitation for completing the assessment under Section 153 expires. In this case, the due date for completing the assessment was 31st December 2019, which means the TPO's order should have been passed on or before 31st October 2019. The Tribunal found that the TPO's order was indeed passed one day late, on 1st November 2019, thereby rendering it invalid and barred by limitation.

The Tribunal relied on several judicial precedents, including the judgment of the Madras High Court in the case of Pfizer Healthcare India Pvt. Ltd., which held that the computation of the 60-day period should exclude the last date for completing the assessment, i.e., 31st December 2019. Therefore, the period of 60 days expired on 1st November 2019, making the TPO's order passed on that date invalid.

2. Consequences on the Draft and Final Assessment Orders:

With the TPO's order being invalid, the draft assessment order, which was based on the TPO's findings, was also rendered invalid. The Tribunal observed that the draft assessment order could not have been passed without a valid TPO order, as the assessee would no longer qualify as an "eligible assessee" under Section 144C of the Act. This section requires a valid TPO order to treat an assessee as "eligible" for the purpose of issuing a draft assessment order.

The Tribunal further noted that the final assessment order dated 30th April 2021 was also beyond the prescribed time limit for completing the assessment. Since the TPO's order was invalid, the extended period of limitation under Section 153(4) was not available to the Assessing Officer. Consequently, the final assessment order was quashed as it was passed beyond the statutory time limit.

In conclusion, the Tribunal allowed the appeal filed by the assessee, quashing both the TPO's order and the subsequent assessment orders due to the time-barred issuance of the TPO's order, thereby rendering the entire assessment proceedings invalid.