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TMI Blog2023 (4) TMI 30X X X X Extracts X X X X X X X X Extracts X X X X ..... ITA No. 979/Mum/2021 for A.Y.2016-17 preferred by the order against the final assessment order passed by the Assessing Officer dated 31/03/2021 u/s.143(3) r.w.s. 144C(13) and 144C(13 r.w.s.143(3A) 143(3B) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 19/03/2021 for the A.Y.2016-17. 2. Though the assessee has raised several grounds of appeal before us, first we would like to address ground No.3 wherein the assessee has submitted that the order of the ld. TPO u/s.92CA(3) of the Act dated 01/11/2019 is barred by limitation and hence, invalid in law. 3. The assessee has also filed additional ground before us on 18/07/2022 wherein it had stated that since the order of the ld. TPO is barred by limitation, the assessee does not become eligible assessee u/s.144C of the Act and hence, the draft assessment order dated 07/12/2019 and final assessment order passed by the ld. AO on 31/03/2021 using the extended period provided in third proviso to Section 153 of the Act would also be barred by limitation. 4. We have heard rival submissions and perused the materials av ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of limitation for making an order of assessment as per section 153 of the Income-tax Act, 1961 [ the Act ] (Without TP) 21 months from the end of the Assessment Year i.e. 31.12.2018 2. Extension of period of limitation in case reference is made u/s. 92CA of the Act. 12 months 3. Assessment proceedings (if TP) should be completed on / or before 31.12.2019 4. Date prior to the date on which period of limitation expires (stated in Sr. No. 3 above) 30.12.2019 5. Sixty day period expires on December = 30 days (excluding 31.12.2019) November = 30 days 01.11.2019 6. Transfer Pricing Order u/s. 92CA(3) of the Act to be passed on/ or before 31.10.2019 7. Date on which Transfer Pricing Order u/s. 92CA(3) is passed 01.11.2019 8. Draft Assessment order passed on 07.12.2019 9. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1.11.2019 is well within the time. 1.7 When the word to is specifically incorporated in Sec 92CA(3A), any other interpretation excluding the last day would be against the plain language of the statute and the intent of the legislature. 1.8 The period of limitation computed by the assessee in the additional ground is not as per the letter and spirit contained in the Act. The Section 92CA(3A) states that an order u/s.92CA(3) may be made at any time before 60 days prior to the date on which the period of limitation referred to in Section 153 expires . The Section refers that an order may be made at any time before 60 days and these 60 days have to be prior to the date on which Sec. 153 limitation expires. It needs to be noted that the word used regarding limitation in Section 153 is expires that implies that the date on that particular time ceases to exist, that is not alive and it has expired. The last day expires on 00.00 am. It is only after the expiry of this date that an order may not be passed. Therefore, while computing the 60 days period, the last day of December has to be counted for computing the time limitation If the same is counted, then working reverse the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires:] 4.5. From the bare reading of the aforesaid provisions of Section 92CA(3A) of the Act, we find that the time limit prescribed in Section 153 of the Act for completion of assessment is 31/12/2019 for A.Y.2016-17 considering the extended period of one year as per third proviso thereon. The provisions of Section 92CA(3A) mandates that ld. TPO should pass an order u/s.92CA(3) of the Act at any time before 60 days prior to the date on which the period of limitation referred to in Section 153 of the Act for making the order of assessment or re-assessment expires. As stated earlier, the time limit for completion of assessment u/s.153 of the Act is 31/12/2019. In order to reckon 60 days prior to that date, obviously the date of 31/12/2019 should be ignored. Hence, 60 days prior to 31/12/2019 would fall on 31/10/2019 i.e. 30 days in December and 30 days in November. Hence, the due date for passing the order by the ld. TPO u/s.92CA(3) of the Act would be 31/10/2019. In other words, the ld. TPO as per Section 92CA(3A) of the Act is bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been raised by the learned senior standing counsel for the appellants is that the usage of the word may in section 92CA (3A) indicates that the time fixed is only directory, a guideline, not mandatory and is for the sake of internal proceedings. 32. Let us now examine the relevant procedures relating to Transfer Pricing. After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-section (1) of section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under section 92CA (3) of the Act. As per section 92CA(3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G.P.Singh on the interpretation of statutes, Principles of Statutory Interpretation (1st Edn., Lexis Nexis 2015), which is quoted below for ready reference: The intention of the legislature thus assimilates two aspects: In one aspect it carries the concept of meaning i.e. what the words mean and in another aspect, it conveys the concept of purpose and object or the reason and spirit pervading through the statute. The process of construction, therefore, combines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the cardinal principle of construction . 38. In case of assessments involving transfer pricing, fixing of time limits at various stages sets forth that the object of the provisions is to facilitate faster assessment involving such determination. In the present case, as rightly held by the learned Jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aised by the assessee is hereby admitted and taken up for adjudication. 4.7. We find that once we hold that the order of the ld. TPO dated 01/11/2019 is barred by limitation, then the assessee would be outside the ambit of becoming eligible assessee u/s.144C(15)(b)(i) of the Act. Accordingly, the extended time period provided in Section 153 of the Act vide third proviso thereof would not be applicable to the facts of the instant case. By this process, the draft assessment order passed by the ld. AO on 07/12/2019 for A.Y.2016-17 also becomes barred by limitation. Because of the draft assessment order getting barred by limitation, it becomes an order void ab initio. Accordingly, any subsequent proceedings emanating from the illegal and invalid order i.e. DRP directions dated 19/03/2021 and final assessment order dated 31/03/2021 also becomes void ab initio. In support of this, the ld. AR before us placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of Mondelez India Foods Pvt. Ltd. vs. Addl. CIT in ITA No.1492/Mum/2015 dated 14/11/2022 and Atos India Pvt. Ltd vs. DCIT in ITA No.1795/Mum/2017 dated 23/02/2023. Per contra, the ld. DR placed relian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is no valid order under section 92CA(3) of the Act in the case of assessee. Therefore, the assessment framed on the basis of non-est order of TPO is unsustainable. The ld.Counsel for the assessee further asserted that the assessment order dated 21/05/2015 is time barred as the limitation of pasing the assessment order got over on 31/03/2014. 8. Per contra, Ms. Vatsala Jha representing the Department vehemently submitted that the order passed by TPO u/s.92CA(3)of the Act is a valid order passed within the period of limitation. The ld. Departmental Representative submits that CBDT vide Circular No.3/2008 dated 12/03/2008 in the Explanatory Notes on the provisions of the Finance Act, 2007 has explained that with a view that TPO gets sufficient time to make the audit of Transfer Pricing and also to provide the Assessing Officer sufficient time to make assessment in the case involving international transactions, the time limit specified in section 153 of the Act has been extended by 12 months, where reference is made to the TPO. Further, it has also been provided that the TPO shall determine the ALP at least two months before the expiry of statutory time limit for making the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /03/2014 A.O Passed draft assessment order 19/12/2014 Directions of the DRP u/s.144C(15) of the Act 29/01/2015 Final assessment order. The contention of the assessee is that the order passed u/s.92CA(3) of the Act is time barred by one day. The period of limitation for passing the order u/s. 92CA(3) of the Act is computed by the assessee as under:- Events Relevant Dates Assessment Year ( AY ) 2010-11 End of Assessment Year 31-03-2011 Due date for completion of assessment under Third Proviso to section 153(1) of the Act (i.e. 3 years from the end of AY) 31-03-2014 Time limit for passing the order under section 92CA(3A) of the Act 60 days Less: Date on which limitation expires under section 153 of the Act i.e. 31-03-2014 1 day Less: Remaining days of March 2014 30 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d been substituted A conjoint reading of the relevant provisions of section 92CA(3A) and 153(1) of the Act would show that the TPO is required to pass order u/s. 92CA(3) of the Act at any time before sixty days prior to the date on which the period of limitation referred to in section 153 of the Act for making assessment order expires. 13. The Hon ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. vs. JCIT (supra) has explained as to how period of limitation for making the order u/s. 92CA(3) of the Act has to be worked out. The relevant extract of the same is reproduced herein below: 30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 am of 1-1-2020. However, this would mean that an order of assessment can be passed at 12 am on 1-1-2020, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering a statute is to gather the mens or sententia legis of the legislature. Where the words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or alternating (sic altering) the statutory provisions. Wherever the language is clear the intention of the legislature is to be gathered from the language used. While doing so, what has been said in the statute as also what has not been said has to be noted. The construction which requires for its support addition or substitution of words or which results in rejection of words has to be avoided. As stated by the Privy Council in Crawford v. Spooner [(1846) 6 Moore PC 1 : 4 MIA 179] we cannot aid the legislature s defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there . In case of an ordinary word there should be no attempt to substitute or paraphrase of general application. Attention should be confined to what is necessary for deciding the particular case. This principle is too well settled and reference to a few decisions of this Court w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of section 92B, a reference is made to the TPO under sub-section (1) of section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under section 92CA (3) of the Act. As per section 92CA(3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Sub-section (5) of section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is empowered to issue such direction as it thinks fit for the guidance of the Assessing Officer after considering various details provided in Clauses (A) to (G) thereof. Sub-section (13) of section 144C of the Act provides that upon receipt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t pervading through the statute. The process of construction, therefore, combines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the cardinal principle of construction . 38. In case of assessments involving transfer pricing, fixing of time limits at various stages sets forth that the object of the provisions is to facilitate faster assessment involving such determination. In the present case, as rightly held by the learned Judge in paragraphs 22 to 29 of the order dated 7-9-2020, the order of the TPO or the failure to pass an order before 60 days will have an impact in the order to be passed by the Assessing Officer, for which an outer time limit has been prescribed under sections 144C and 153 and is hence mandatory. What is also not to be forgotten, considering the scheme of the Act, the inter-relatability and int ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uted in Explanatory notes or Board Circulars. If the limitation period is mentioned in days in the Act, the same expression has to be used in Circulars. Otherwise it will lead to confusion and ambiguity. Two months as mentioned in Circular can be more or even less than sixty days. Therefore, expression issued to evaluate limitation period as specified in the Act has to be strictly followed. 16. The ld.Counsel for the assessee has further pointed that reference to DRP can only be made by eligible assessee . The expression eligible assessee has been defined in sub-section (15) to section 144C of the Act . The definition of eligible assessee is reproduced herein below: (b) eligible assessee means (i) Any person in whose case the variation referred to in sub-section(1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) (ii) any non-resident not being a company, or any foreign company A perusal of the above definition would show that eligible assessee mean any person in whose case variation arises as a consequence of the order of the TPO passed u/s. 92CA(3) of the Act. The order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, any variation which is prejudicial to the interest of such assessee. . . . (15) For the purposes of this section, (a) Dispute Resolution Panel means (b) eligible assessee means, (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company. 31.The aforesaid section envisages that, AO in the first instance has to forward a draft of the proposed order of assessment to the eligible assessee , if he proposes to make any variation which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an eligible assessee , which means that, for this section to apply a person has to be an eligible assessee Here, the draft assessment order is to be forwarded only to an eligible assessee and not to every assessee under the Act. 32.Thus, under the aforesaid provision, the expression eligible assessee is followed by an expression means and there are two categories referred therein (i) any person ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... there from, the entailing consequence in instant case is that the appellant cannot be said to be an eligible assessee under section 144C(15)(b)(ii) of the Act. 35. Accordingly, once the assessee becomes an ineligible assessee , the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, all consequential proceedings on the basis of the said order fail. In the instant case, a reference was made by the Ld. AO to the Ld. TPO as per the provisions of section 92CA(1) of the Act and accordingly the timelines prescribed u/s 153 of the Act remain extended by a year in view of the 3rd proviso of section 153 of the Act. Accordingly, the time limit to complete assessment proceedings u/s 143(3) of the Act in the instant case expired on 31 March 2016. As on the date of passing draft assessment order u/s 144C(1) of the Act i.e. on 29 March 2016, the Ld. AO had already received the order passed by the Ld. TPO dated 31 January 2016, which as discussed above, is time barred, illegal and void ab initio, thereby making the Appellant not an eligible assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in treating an assessee as eligible assessee where it is otherwise not one and vice-versa results in fatality, since it becomes a jurisdictional defect and goes on to the roots in deciding the validity of the entire assessment proceedings against the revenue. In this context, on the issue of passing a correct assessment order in first instance (either a draft or a final one), the findings of the Hon ble Madras High Court in case of ACIT v. Vijay Television (P.) Ltd [2018] 95 taxmann.com 101 (Madras) are extremely critical which reads as follows: 47. The necessity for the Parliament to incorporate Section 144-C is not only to safeguard the Revenue, but also the assessee and any mistake committed by any one of them, the said party is supposed to face the consequences and cannot put the hands of the clock back and start afresh. 39. Further, in case of Zuari Cements Ltd. v. ACIT [Writ Petition No. 5557 of 2012, dated 21-2-2013] (Andhra Pradesh), the Division Bench (DB) of the Andhra Pradesh High Court categorically held that the failure to pass a draft assessment order under Section 144C (1) of the Act would result in rendering the final assessment order without jurisdic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le jurisdictional High Court in case of International Air Transport Association (supra) and Dimension Data Asia Pacific PTE Ltd. (supra) forties appellant s contentions and the irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act and creates/ envisages special rights upon the eligible assessee . If such an order is passed on an assessee who is not an eligible assessee as defined in section 144C(15)(b)(i) of the Act, then it would render the entire proceedings pursuant to such order null and void. 43.We find that section 153(1) of the Act, as it stood applicable for the AY 2012-13, provided a time limit of 3 years from the end of AY 2012-13 for completion of assessment under section 143(3) of the Act, i.e., on or before 31 March 2016. 44.In such a case if the Ld. AO invokes the provisions of section 144C of the Act and passes the final assessment order after 31 January 2016 i.e. beyond the period of limitation as stated above, such final assessment order u/s 143(3) r.w.s 144C of the Act is liable to be quashed as being barred by limitation. 45. In a recent decision of the Hon ble Madras High Cour ..... X X X X Extracts X X X X X X X X Extracts X X X X
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