2025 (5) TMI 817 - AT - Income Tax

Validity of Revision u/s 263 - revise the assessment order passed u/s 143(3) r/w section 144C(3)(a) which itself is barred by limitation - HELD THAT - As perused the provisions of Section 153(1) of the Act which provides that no assessment shall be framed u/s 143(3) or 144 of the Act after expiry of 21 months from the end of the relevant assessment year in which the income was first assessable. Accordingly we note that the assessment got time barred on 31.12.2016 whereas the order of assessment was passed on 21.02.2017. In our opinion the assessment is hopelessly barred by limitation. Now the issue before us whether the ld. Pr. CIT has a power to revise the same on the ground of being erroneous and prejudicial to the interest of the Revenue. Assessee has raised this issue in the collateral proceeding before us challenging the validity order framed passed u/s 143(3) of the Act which is in our opinion is within the legitimate rights of the assessee. Considering the facts of the case in the light of the aforesaid decision we are of the view that the jurisdiction u/s 263 is invalid and accordingly the same is quashed and so is the order passed u/s 263 of the Act. Appeal of the assessee is allowed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal are:

(a) Whether the assessment order passed under section 143(3) read with section 144C(3)(a) of the Income-tax Act for the assessment year 2014-15 was valid or barred by limitation as per section 153(1) of the Act.

(b) Whether the Commissioner of Income Tax (International Taxation & Transfer Pricing) had jurisdiction under section 263 of the Act to revise the assessment order dated 21.02.2017, which was allegedly barred by limitation and thus invalid.

(c) Whether the revisionary order passed under section 263 of the Act was erroneous and prejudicial to the interest of the Revenue, particularly for non-referral of international transactions to the Transfer Pricing Officer as mandated under section 92CA(3) of the Act.

(d) Whether the assessee could raise the limitation issue at the appellate stage before the Tribunal, despite not having raised it before the lower authorities.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Validity of the assessment order dated 21.02.2017 under section 143(3) read with section 144C(3)(a) of the Act in light of limitation under section 153(1)

Relevant legal framework and precedents: Section 153(1) of the Income-tax Act prescribes a time limit of 21 months from the end of the relevant assessment year within which an assessment order under sections 143(3) or 144 can be passed. Any order passed beyond this period is barred by limitation and invalid.

Court's interpretation and reasoning: The Tribunal noted that the assessment year in question is 2014-15, and the 21-month limitation period expired on 31.12.2016. The assessment order was passed on 21.02.2017, which is beyond the prescribed limitation period. Therefore, the assessment order is "hopelessly barred by limitation" and is invalid and nullity.

Key evidence and findings: The date of filing of return (28.11.2014), date of assessment order (21.02.2017), and the calculation of limitation period as per section 153(1) were undisputed facts on record.

Application of law to facts: Applying the statutory limitation period strictly, the order passed after expiry of 21 months from the end of the assessment year is invalid. The Tribunal held that the assessment order dated 21.02.2017 was barred by limitation and therefore void ab initio.

Treatment of competing arguments: The Revenue did not dispute the limitation period but contended that the issue was not raised before the lower authorities and should not be allowed at this stage. The Tribunal rejected this contention, holding that the limitation issue is a legal question that can be raised at any stage, including appellate proceedings.

Conclusion: The assessment order dated 21.02.2017 is invalid as it was passed beyond the limitation period prescribed under section 153(1) of the Act.

Issue (b): Validity of revisionary jurisdiction exercised under section 263 of the Act over an assessment order barred by limitation

Relevant legal framework and precedents: Section 263 of the Income-tax Act empowers the Commissioner to revise an assessment order if it is found to be erroneous and prejudicial to the interest of the Revenue. However, the power under section 263 cannot be exercised to revise an order that is invalid or void ab initio, such as an order barred by limitation.

Court's interpretation and reasoning: The Tribunal observed that since the assessment order itself was barred by limitation and invalid, the Commissioner had no jurisdiction to revise such an order under section 263. The revisionary jurisdiction cannot be exercised to give validity to an otherwise invalid assessment order.

Key evidence and findings: The impugned revisionary order dated 27.03.2019 was passed under section 263 seeking to revise the assessment order dated 21.02.2017. The Tribunal found that the foundational order sought to be revised was itself void.

Application of law to facts: The Tribunal applied the principle that a void order cannot be revised or corrected by a subsequent revisionary order. The revisionary order passed under section 263 was therefore held to be without jurisdiction and invalid.

Treatment of competing arguments: The Revenue argued that the revisionary jurisdiction was rightly exercised as the assessment order was erroneous and prejudicial to Revenue's interest for not referring international transactions to the Transfer Pricing Officer. The Tribunal declined to entertain this argument since the assessment order itself was invalid due to limitation.

Conclusion: The revisionary order passed under section 263 of the Act is invalid and quashed as the assessment order sought to be revised was barred by limitation and void.

Issue (c): Whether the assessment order was erroneous and prejudicial for non-referral to Transfer Pricing Officer under section 92CA(3)

Relevant legal framework and precedents: Section 92CA(3) mandates that the Assessing Officer refer the international transactions to the Transfer Pricing Officer for determining the Arm's Length Price if such transactions exist. Failure to do so may render the assessment order erroneous and prejudicial to Revenue's interest.

Court's interpretation and reasoning: The Commissioner had noted that the AO did not refer the international transactions to the TPO despite issuing notices and receiving replies. The Commissioner held the assessment order erroneous and prejudicial for this reason and passed the revisionary order directing the AO to refer the matter to the TPO.

Key evidence and findings: The record showed international transactions requiring benchmarking, the AO's failure to refer to the TPO, and the Commissioner's show cause notice and revisionary order.

Application of law to facts: While the Commissioner's concern was valid, the Tribunal held that since the assessment order was barred by limitation and invalid, the revisionary jurisdiction could not be exercised on this ground.

Treatment of competing arguments: The Revenue relied on this ground to justify the revisionary order. The Tribunal acknowledged the merit but held that the invalidity of the assessment order on limitation grounds precluded exercise of revisionary jurisdiction.

Conclusion: The issue of non-referral to the TPO, though valid, could not sustain the revisionary order as the assessment order was invalid.

Issue (d): Whether the assessee can raise limitation issue at the appellate stage before the Tribunal

Relevant legal framework and precedents: Legal questions such as limitation can be raised at any stage of proceedings, including appellate proceedings, even if not raised before lower authorities.

Court's interpretation and reasoning: The Tribunal held that the assessee was within its legitimate rights to raise the limitation issue before the Tribunal despite not having raised it earlier. The limitation issue goes to the validity of the assessment order itself and can be examined at any stage.

Key evidence and findings: The assessee raised the limitation ground by way of additional ground in the appeal and argued it during the hearing.

Application of law to facts: The Tribunal applied settled principles that limitation is a jurisdictional bar and can be raised at any stage.

Treatment of competing arguments: The Revenue argued against allowing the issue at this stage, but the Tribunal rejected this contention.

Conclusion: The limitation issue was rightly entertained and decided by the Tribunal.

3. SIGNIFICANT HOLDINGS

"The assessment order dated 21.02.2017 was hopelessly barred by limitation as per section 153(1) of the Act and hence is invalid and nullity."

"The jurisdiction under section 263 of the Act cannot be exercised to revise an assessment order which itself is barred by limitation and therefore void ab initio."

"The assessee is entitled to raise the limitation issue at the appellate stage before the Tribunal even if not raised before the lower authorities."

"Though the failure to refer international transactions to the Transfer Pricing Officer under section 92CA(3) may render the assessment order erroneous and prejudicial to the interest of the Revenue, such ground cannot validate an otherwise time-barred and invalid assessment order."

The Tribunal quashed the revisionary order passed under section 263 and allowed the appeal of the assessee on the ground that the assessment order was barred by limitation and the revisionary jurisdiction could not be exercised over such invalid order.