2023 (4) TMI 1355 - AT - Income Tax

Validity of TP adjustment order as barred by limitation - HELD THAT - TPO has passed the order on 30th January 2014 which should have been passed on or before 29th January 2014 and therefore there is delay of one day in passing the transfer pricing order. Therefore the adjustment proposed by TPO is barred by limitation. As the transfer pricing adjustment are invalid the assessee is not falling in the definition of eligible assessee as per provision of Section 144C (15) of the Act as assessee is not a foreign company. Assessment order should have been passed on or before 31st March 2014 but has been passed on 27th May 2014. The final assessment order passed is also barred by limitation. On identical facts and circumstances in Atos India Private Limited V 2023 (2) TMI 1112 - ITAT MUMBAI wherein it has been held that when assessee does not remain eligible assessee there is no extension of time limit available for making order of TP to the learned Transfer Pricing Officer of further one year and therefore the final assessment order passed also becomes barred by limitation. Therefore we hold that the assessment order passed by AO is also barred by the limitation and hence quashed. Assessee appeal is allowed.

Summary

Issues:
1. Transfer pricing adjustment based on CUP method.
2. Jurisdictional issue regarding time limits for passing orders.
3. Validity of transfer pricing order and assessment order.

Analysis:

Issue 1: Transfer pricing adjustment based on CUP method
The appeal involved a dispute regarding the Transfer Pricing Officer's adjustment of an international transaction amounting to &8377; 5,979,23,256 under the Comparable Uncontrolled Price (CUP) method. The Assessing Officer contended that the adjustment was not at arm's length as per sections 92C(1) and 92C(2) of the Income-tax Act, 1961. The CIT (A) had rejected the CUP method and adopted the Profit Method instead. The appellant challenged the rejection of the CUP method, arguing that the data used was contemporaneous, and the net present value was determined with a reasonable discount factor. The dispute centered on the methodology used for the transfer pricing adjustment.

Issue 2: Jurisdictional issue regarding time limits for passing orders
The jurisdictional issue arose concerning the time limits for passing orders under Section 153B and Section 92CA(3) of the Act. The search conducted by the Income Tax Department led to the issuance of a notice under Section 153A in February 2011. The Transfer Pricing Officer passed the order under Section 92CA(3) in January 2014. However, the order was delayed by one day, rendering the adjustment proposed by the Transfer Pricing Officer barred by limitation. The assessment order was passed beyond the prescribed time limit, raising questions about the validity of the orders issued by the authorities.

Issue 3: Validity of transfer pricing order and assessment order
The Tribunal considered the jurisdictional issue crucial, as it impacted the eligibility of the assessee under Section 144C(15) of the Act. Citing precedents, the Tribunal held that the delay in passing the transfer pricing order affected the validity of the assessment order. Referring to a similar case, the Tribunal concluded that when an assessee ceases to be an eligible assessee, there is no extension of time limit available for making transfer pricing orders. Consequently, the assessment order passed by the Assessing Officer was deemed invalid and quashed. The Tribunal allowed the additional ground of appeal filed by the assessee, rendering the other grounds in the appeal and cross-objection irrelevant and dismissing them.

In conclusion, the Tribunal allowed the appeal of the assessee, dismissed the cross-objection, and the appeal of the Assessing Officer. The decision was pronounced in open court on 28th April 2023.