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TMI Blog2023 (8) TMI 460X X X X Extracts X X X X X X X X Extracts X X X X ..... itioner is engaged in the business of shallow water drilling for clients engaged in the oil and gas industry. Petitioner has been filing its Return of Income under the Income Tax Act, 1961. The petition is concerned with Assessment Year 2014-15. 2. The parent group of Petitioner on a global basis had acquired 38 rigs from one Transocean group sometime in late 2012 for which an Asset purchase Agreement had been executed. Pursuant to the said agreement, Petitioner had acquired a rig by name J.T. Angel (the said rig) which was recorded in the books of account of Petitioner at USD 13.6 million equivalent to Rs. 74,22,94,527/- The said rig was already in operation for a contract between Oil and Natural Gas Corporation (ONGC) and Transocean Drilling Services (India) Pvt. Ltd. The said rig was on a bareboat charter basis. The arrangement continued upto July 2013 and from August 2013 to November 2013, the said rig was used under a nomination contract for providing drilling services to ONGC. From December 2013 to March 2014, the said rig required and underwent major repairs and refurbishment at the Pipavav Defence and Offshore Engineering Company Limited. After the repairs and refurbishmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ggrieved by the said final assessment order, Petitioner filed an Appeal before the Income Tax Appellate Tribunal (ITAT). Petitioner made various submissions before the ITAT and after hearing the parties ITAT held that Respondent no. 1 and DRP erred in rejecting the books of account of Petitioner without considering the books and other documentary evidences. By its order dated 4th October 2019, disposing the appeal, the ITAT remanded the matter to the Assessing Officer (AO) for fresh adjudication. 6. Since the ITAT had remanded the matter back to the AO, Petitioner, by a communication dated 5th February 2020, informed AO about the order and requested for an early disposal of the same. This was followed by oral requests. On 22nd February 2021, over one year later, Petitioner was called upon by Respondent no. 1 to produce the details of contracts entered into by it and the reasons for incurring a loss during assessment year 2014-15. Petitioner provided all documents and details called for. By a notice dated 10th September 2021 issued by Respondent no. 1 under Section 142(1) of the Act, Petitioner was directed to furnish details of month-wise operational expenses and income. Petitione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ervices or facilities in connection with prospecting for or extraction or production of mineral oils (the said business). As per the said Section, 10% of the gross revenues as referred to in Sub-Section(2) thereof, is regarded as income from the said business. Sub-Section (3) thereof, enables an assessee to opt out of the said presumptive basis of taxation provided it keeps and maintains such books of account and other documents as required under Section 44AA(2) and gets the same audited and furnishes a report as required under Section 44AB of the Act. In a case where the assessee has opted out of the said provision, its income is to be computed on a net basis in accordance with Sections 30 to 43D of the Act. It is an admitted position that Petitioner qualifies for computation of its income on the basis of Section 44BB of the Act. For the year under consideration, i.e., assessment year 2014-15, it has opted out of the said provision and has fulfilled the conditions as required under Sub-Section (3) thereof. In the first round of proceedings, the then Respondent No. 1, referring to various aspects in the assessment order rejected Petitioner's books of account by invoking the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere raised on 20.09.2021 and 23.09.2021. Further, there are several aspects which do not find any reference in the notices issued by Respondent No. 1. Finally, the impugned order dated 28.09.2021 has been passed rejecting Petitioner's books of accounts and effectively computing Petitioner's income based on the computation methodology provided in Section 44BB(1), despite the fact that Petitioner had opted out from the same. 11. Mr. Mistri submitted that:- (a) Limitation as provided in Section 153 is the outermost limit provided for passing the final assessment order under the Act. The draft assessment order, the DRP's order on the objections raised by the assessee and the final assessment order ought to have been passed within the said limitation, i.e., by 30th September 2021. Division Bench of the Hon'ble Madras High Court has upheld this position in the case of Commissioner of Income-tax v. Roca Bathroom Products (P) Ltd. (2022) 140 taxmann.com 304 (Madras) [Roca Bathroom (DB)]. The Division Bench had confirmed the law laid down by a learned single Judge of Madras High Court in Roca Bathroom Products (P) Ltd. vs. Dispute Resolution Panel-2, Bangalore (2021) 127 taxmann.com 332 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on'ble Madras High Court in the case of CIT vs Sanmina SCI India (P.) Ltd [2017] 85 taxmann.com 29 (Madras). The finding that Section 144C of the Act is a complete code is also there in the decision of the single judge in Roca Bathroom (SB) (Supra). Once 144C of the Act is held to be a complete code then for all things dealt by it, it would prevail over other provisions including Section 153 of the Act. Hence the decision of the Hon'ble High Court that the time limit given under Section 153 of the Act would prevail over and subsume the time limit prescribed under Section 144C of the Act is per incuriam. It is settled law that a self-contained code/ complete code takes precedence for all things dealt by it. The Hon'ble Apex Court and High Courts have reiterated this position. 15. The provision of Section 144C of the act with a non-obstante clause was inserted later than the incorporation of the non-obstante clause in Section 153 of the Act. Thus the Legislature was aware of the non-obstante clause in Section 153 of the Act when the similar non-obstante clause was inserted in Section 144C of the Act. The later non-obstante clause shall prevail over the already existing one. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of October, 2009, any variation which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing Officer shall, notwithstanding anything contained in section 153 or 153B, pass the assessment order under sub-section (3) within one month from the end of the month in which,- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 153B, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) ***** (15) For the purposes of this section,- (a) ***** (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.' Time limit for completion of assessments and reassessments and re-computation. 153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable: Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: [Provided further that in respect of an order of assessment relating to the assessment year co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner or Principal Commissioner or Commissioner, as the case may be] : Provided that where the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,] on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted. [(3A) Notwithstanding anything contained in sub-sections (1), (1A), (2) and (3), where an assessment or reassessment is pending on the date of initiation of search under section 132 or making of requisition under section 132A, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections shall,- (a) in a case where such search is initiated under section 132 or such requisition is made under section 132A; (b) in the case of an assessee, to whom any money, bullion, jewellery or other valuable article or thing seized or re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... time specified in sub-section (3). [(5A) Where the Transfer Pricing Officer gives effect to an order or direction under section 263 by an order under section 92CA and forwards such order to the Assessing Officer, the Assessing Officer shall proceed to modify the order of assessment or reassessment or re-computation, in conformity with such order of the Transfer Pricing Officer, within two months from the end of the month in which such order of the Transfer Pricing Officer is received by him.] (6) Nothing contained in sub-sections (1) [,(1A)] and (2) shall apply to the following classes of assessments, reassessments and re-computation which may, subject to the provisions of 51[sub-sections (3), (5) and (5A)], be completed- (i) where the assessment, reassessment or re-computation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, section 254, section 260, section 262, section 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, on or before the expiry of twelve months from the end of the month in which such order is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 29; or (ii) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (iii) the period commencing from the date on which the Assessing Officer intimates the Central Government or the prescribed authority, the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) [,under clause (i) of the first proviso] to sub-section (3) of section 143 and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those clauses is received by the Assessing Officer; or (iv) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited [or inventory valued] under sub-section (2A) of section 142 and- (a) ending with the last date on which the assessee is required to furnish a report of such audit [or inventory valuation] under that sub-section; or (b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or (v) the period commencing from the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion (5) of the said section is received by the [Assessing Officer; or (xii) the period (not exceeding one hundred and eighty days) commencing from the date on which a search is initiated under section 132 or a requisition is made under section 132A and ending on the date on which the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing seized under section 132 or requisitioned under section 132A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee,- (a) in whose case such search is initiated under section 132 or such requisition is made under section 132A; or (b) to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to; or (c) to whom any books of account or documents seized or requisitioned pertains or pertain to, or any information contained therein, relates to; or] [(xiii) the period commencing from the date on which the Assessing Officer makes a reference to the Principal Commissioner or Commissioner under the second proviso to sub-section (3) of section 143 and ending with the date on which the copy of the order under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that for the purposes of determining the period of limitation under sections 149, 154 and 155, and for the purposes of payment of interest under section 244A, the provisions of the fourth proviso shall apply accordingly.] Explanation 2.-For the purposes of this section, where, by an order referred to in clause (i) of sub-section (6),- (a) any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order; or (b) any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, if such other person was given an opportunity of being heard before the said order was passed." MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) NOTIFICATION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r notified under the Benami Act falls, for the completion of such action; and (ii) the 30th day of September, 2021 shall be the end date to which the time limit for completion of such action shall stand extended. 20. Sub-Sections (5) to (12) of Section 144C of the Act set out the procedure for receipt, adjudication and disposal of objections by the DRP. Sub-Section (5) states that the DRP shall issue such directions as it thinks fit for the guidance of the Assessing Officer in completing the assessment. In issuing the guidelines, as per Sub-Section (6) the DRP shall take into account the draft order, objections, evidences, reports of authorities and records etc. Sub-Section (7) empowers the DRP to make further enquiry, if thought necessary and Sub-Section (8) confines the power of confirmation, rejection or enhancement of the variations proposed in the draft order. Sub-Sections (9) and (10) state that the opinion of the majority of the members shall prevail and that the directions of the DRP bind the Assessing Officer. Sub-Section (11) provides for an opportunity of hearing to the assessee prior to issuance of the directions. For disposal of the objections received, Sub-Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case may be, on or after 1st April 2019, the provisions of this Sub-Section shall have effect, as if for the words "nine months", the words "twelve months" have been substituted. In this case, since the order has been passed by the ITAT on 4th October 2019, the time will be twelve months from the end of the financial year in which the order under Section 254 was received. The Chronology of dates and events is as under: a. Date of ITAT order - 4th October 2019. b. Due date as per Section 153(3) read with proviso - 31st March 2021. c. In view of the extension granted by the Notification under the Relaxation Act, the extended date would be 30th September 2021. d. Date of passing of draft assessment order - 28th September 2021. No final order was passed until filing of the petition though stay, for the first time, was granted by this court only on 30th March 2022. 23. No doubt, Section 144C of the Act is a self-contained code of assessment and time limits are inbuilt at each stage of the procedure contemplated. Section 144C envisions a special assessment, one which includes the determination of Arms Length Price (ALP) of international transactions engaged in by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncing from the date on which the Assessing Officer directs the assessee to get his accounts audited or inventory valued under Sub-Section (2-A) of Section 142 of the Act or in a case where an application made before the Income Tax Settlement Commission is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which an application was made before the Settlement Commission and ending with the date on which the order is received by the Principal Commissioner or Commissioner or where the period commencing from the date on which an application is made before the Authority for Advance Rulings or before the Board for Advance Rulings under Sub-Section 1 of Section 245Q of the Act and ending with the date on which the Advance Ruling pronounced by it is received by the Commissioner or where reference for exchange for information is made by an authority competent under an agreement referred to in Section 90 or Section 90-A of the Act or where a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner etc., shall be excluded. There is no mention anywhere about Section 144C of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the assessee, within one month from the end of the month in which such direction is received. What is contemplated under Section 144C (13) is the passing of the final assessment order. Twelve months as provided under Section 153(3) would start from the end of the financial year in which the Principal Commissioner received the order under Section 254 from the ITAT. The assessing officer should have taken steps to pass the final order under Sub-Section (13) of Section 144C within 12 months period. 30. The exclusion of applicability of Section 153, in so far as non-obstante clause in Sub-Section (13) of Section 144C is concerned, it is for limited purpose to ensure that dehors larger time available, an order based on the directions of the DRP has to be passed within 30 days from the end of the receipt of such directions. The Section and Sub-Section have to be read as a whole with connected provisions to decipher the meaning and intentions. 31. We would also observe that a similar non-obstante clause is also used in Section 144C(4) of the Act with the same limited purpose to imply, even though there might be a larger time limit under Section 153, once the matter is remanded to AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... limitation set out in Section 153 of the Act. As the original assessment orders are in question, the period of limitation required to be adhered to is Section 153(1) of the Act. The applicable Assessment Year being A.Y. 2018-19, the due date as per Section 153(1) was eighteen (18) months from the end of the Assessment Year. The original due date, therefore, would be 30th September 2020. But in view of the extention given by virtue of the Relaxation Act, any due date of assessment proceedings falling between 20th March 2020 and 31st December 2020 was extended to 31st March 2021. As per Notifications No. 10/2021 dated 27th February 2021, No. 38/2021 dated 27th April 2021 and No. 74/2021 dated 25th June 2021, time was extended to 30th April 2021, 30th June 2021 and finally to 30th September 2021, respectively. Hence, the conclusion arrived in Writ Petition Nos. 2340 of 2021 and 2661 of 2021 will squarely apply to these Writ Petitions as well. There is no difference in the legal principle falling for consideration in these two Petitions and Writ Petition No. 2661 of 2021 and Writ Petition No. 2340 of 2021. The limitation of Writ Petition 2661 of 2021 and Writ Petition No. 2340 of 2021 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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