TMI Blog2019 (10) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, the learned assessing officer cannot make any upward adjustment to the income of the assessee after passing of the draft assessment order. He also cannot initiate any further penalties which are attached to the assessment order if same are not initiated in the draft order. The rights of the variation to the income of the assessee are solely rest with the dispute resolution panel. Therefore the dispute resolution panel has a correcting power to the draft assessment order. AO does not have any power to do so. Therefore it is apparent that on the plain reading of the above provisions for all practical purposes the role of the assessing officer comes to an and the movement he passes the draft order. He is only authorized to pass the final assessment order which is according to the directions of the learned dispute resolution panel. The above provisions also contained the separate time limits and it has its own timelines which binds the revenue as well as the assessee. The honourable Madras High Court in Sanmina SCI India private limited [ 2017 (8) TMI 663 - MADRAS HIGH COURT] has held that it is a self-contained code in itself. Thus the provisions contained therein onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer passed order u/s 143(3) read with Section 144C of the Act on 30.01.2014. On the above facts in the appeal Assessee has raised an additional grounds as under 3. That on the facts and circumstances of the case and in law, the impugned order passed by the Assessing Officer is barred by limitation and therefore, is liable to be quashed. 4. The ld AR adverting to the additional ground pressed for its admission submitted as under:- The aforesaid additional ground of appeal raises a purely legal issue which does not require any fresh investigation into facts; facts already being on records. The aforesaid additional ground of appeal calls for being admitted and adjudicated on merits in view of the discretion conferred on your Honours under Rule 11 of the Income-tax (Appellate Tribunal) Rules, 1963 and the Supreme Court decision in the case of National Thermal Power Co. Ltd. vs. CIT : [1998] 229 ITR 383 (SC). It is further settled law that the question of limitation goes to the root of the matter and can be raised at any stage of the proceedings. [Refer: ITW Signode India Ltd. vs. CCE (2004) 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thin the stipulated time. After collating the necessary details that may be required from the assessee and after granting an assessee adequate opportunity of being heard, the assessing officer would pass the assessment under section 143(3) of the Act. Where the assessee had entered into international transactions within the meaning of section 92B of the Act, ( eligible assessee ) the assessing officer is required to make a reference to the Transfer Pricing Officer ( TPO ) to determine the arm s length price ( ALP ) in respect of such international transactions. In case of such an eligible assessee, (as also defined in subsection 15(b) of section 144C of the Act), the assessing officer is mandatorily required to pass proposed order of assessment (hereinafter referred to as draft assessment order ). Once the draft assessment order is passed by the assessing officer and served on the eligible assessee, the eligible assessee may within 30 days of receipt thereof either (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with the Dispute Resolution Panel ( DRP ). [Refer section 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Principal Commissioner or Commissioner may, if he objects to any direction issued by the Dispute Resolution Panel under subsection (5) of section 144C in respect of any objection filed on or after the 1st day of July, 2012, by the assessee under sub-section (2) of section 144C in pursuance of which the Assessing Officer has passed an order completing the assessment or reassessment, direct the Assessing Officer to appeal to the Appellate Tribunal against the order. The assessment order passed by the assessing officer pursuant to the directions of the DRP is under section 143(3) read with section 144C(13) of the Act only. Such an order cannot be construed as having been passed independently and on a stand-alone basis under section 144C(13) of the Act. To put it differently, the order passed pursuant to the directions of the DRP under section 144C(13) of the Act is regarded as the assessment order. The same is the only operative assessment in case of an eligible assessee. B. Scheme of the Act with respect to limitation: The relevant provisions of section153 of the Act as applicable at the relevant time rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not made subject to provisions of section 144C of the Act nor do provisions of the latter section override the former, notwithstanding the non-obstante clause in sub-sections (4) and (13) thereof. The provision of section 144C(1) of the Act mandating passing of draft assessment order in case of an eligible assessee, is an exception to the ordinary rule wherein the assessing officer has to pass only one order, i.e., assessment order under section 143(3) of the Act without making a draft assessment order. The non-obstante provision in section 144C(1) of the Act is to make it mandatory for the assessing officer to pass draft assessment order in the case of an eligible assessee, contrary to the scheme of the Act wherein the assessing officer is required to pass one and only assessment order in the case of all other assessees. Having regard to the aforesaid, the non-obstante clause in section 144C(1) of the Act requiring passing of a draft assessment order in case of an eligible assessee is, therefore, to be read limited to the context, i.e., exception to the ordinary rule that there will be only one assessment order passed by the assessing officer on culmination o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44C in the statute clarified the legislative intent in the following terms: The dispute resolution mechanism presently in place is time consuming and finality in high demand cases is attained only after a long drawn litigation till Supreme Court. Flow of foreign investment is extremely sensitive to prolonged uncertainity in tax related matter. Therefore, it is proposed to amend the Income-tax Act to provide for an alternate dispute resolution mechanism which will facilitate expeditious resolution of disputes in a fast track basis It is submitted that if the non-obstante clause in sections144C(4)/ 144C(13) of the Act is interpreted as allowing the assessing officer additional time over and above the limit provided under section 153of the Act, the same would defeat the entire purpose of expediting the dispute resolution process, by enlarging the time available for completion of assessment to almost five years from the end of the relevant previous year (four years from the end of the relevant assessment year) as explained hereinafter. C. Import of non obstante clause: It is settled law tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tead of the WTO. This is the limited function and purpose of the said non obstante clause 'notwithstanding anything contained in sub-section (1)' in section 7(3) ................. To similar effect are the judgments of the Hon ble apex Court in the cases of R.S. Raghunath vs. State of Karnataka (1992) 1 SCC 335, ICICI Bank Ltd. vs. SIDCO Ltd. (2006) 10 SCC 452,Ramdev Food Products (P.) Ltd. vs. ArvindbhaiRambhai Patel (2006) 8 SCC 726and Central Bank of India vs. State of Kerala (2009) 4 SCC 94, reiterating that, while interpreting a nonobstante provision, the Court is required to keep in mind the intent of the Legislature and any statutory construction of such a provision is to be limited to the context/ purpose for which the same was intended. It may be useful to the refer to the observations in the case of Geeta vs. State of U.P. (2010) 13 SCC 686, whereinafter exhaustively citing the earlier legal precedents and interpretative guidelines on the subject, the Hon ble Court held as under: 38. Interpretation of non obstante clauses has come up for consideration before this Court in a large number of decisions. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in A.G. Varadarajulu v. State of T.N. [(1998) 4 SCC 231], observed that: (SCC p. 236, para 16) 16. It is well settled that while dealing with a non obstante clause under which the legislature wants to give overriding effect to a section, the Court must try to find out the extent to which the legislature had intended to give one provision overriding effect over another provision. 42. The Bench in A.G. Varadarajulu case [(1998) 4 SCC 231] referred to the principle in the Constitution Bench decision in Madhav Rao Jivaji Rao Scindia v. Union of India [(1971) 1 SCC 85] wherein this Court held that: (A.G. Varadarajulu case [(1998) 4 SCC 231] , SCC p. 236, para 16) 16. the non obstante clause [was] a very potent clause intended to exclude every consideration arising from other provisions of the same statute or other statute but for that reason alone we must determine the scope of that provision strictly. When the section containing the said clause does not refer to any particular provisions which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it excludes the wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment, viz., (i) assessment completed without recourse to section 144C; and (ii) assessment completed in pursuance of directions of DRP. Such an artificial bifurcation is not warranted by the scheme of the Act which countenances only one assessment, whether under section 143(3) or under section 143(3) read with section 144C(13) of the Act. Further, if section 153(1) of the Act were to apply only to cases of non-eligible assessees, then, in that situation, the said section would have read as under: No order of assessment .. other than an assessment completed in pursuance of directions of the DRP . (words inserted) shall be made under section 143 or section 144 at any time after the expiry of ... In such a situation, exception to the applicability of section 153 of the Act would be done by doing violence to the language of the said section and reading words into the statute which are conspicuous by their absence. It is settled rule of interpretation of statutes to interpret the statute as it is; further, it is contrary to all rules of construction to read words into a statute which the Legis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o read words into a statute or to read down the words of a statute, which the Legislature in its wisdom has or has not deliberately incorporated. The applicability of the aforementioned principle in the context of taxing statutes, particularly the Income Tax Act, 1961, has been repeatedly affirmed by the Hon ble apex Court. Attention in this regard is invited to the judgment in the case of CIT vs. Ajax Products Ltd. [1965] 55 ITR 741 (SC), wherein the Hon ble apex Court, citing with approval the observations of Rowlatt J. in Cape Brandy Syndicate vs. IRC [1921] 1 KB 64, observed as under: The rule of construction of a taxing statute has been pithily stated by Rowlatt J. in Cape Brandy Syndicate v. Inland Revenue Commissioners [1921] 1 K.B. 64, 71 thus : In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used . To put it in other words, the subject is not to be taxed unless the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not used the term 'processing' in section 35(1)(B) of the Act, it would be erroneous to incorporate the word in the section and then interpret the Statute. In this view of the matter Chowgule Co. (P.) Ltd.'s case (supra) and Nilgiri Ceylon Tea Supplying Co.'s case (supra) dealt with by this court in Chowgule Co. (P.) Ltd.'s case (supra) are clearly distinguishable because of the language of the statutes. 62. The intention of the Legislature has to be gathered from the language used in the statute which means that attention should be paid to what has been said as also to what has not been said. 63. In Union of India v. Deoki Nandan Aggarwal 1992 Suppl. (1) SCC 323, a three-Judge Bench of this court held that it is not the duty of the court either to enlarge the scope of legislation or the intention of the Legislature, when the language of the provision is plain. The court cannot rewrite the legislation for the reason that it had no power to legislate. The power to legislate has not been conferred on the courts. The court cannot add words to a statute or read words into it which are not there. 64. In State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e are absolutely clear and unambiguous, recourse cannot be had to the principles of interpretation other than the literal rule (Swedish Match AB v. SEBI AIR 2004 SC 4219, CIT v. Ajax Products Ltd. [1965] 55 ITR 741 (SC). Lastly, reference may be made to the judgment of the Hon ble Andhra Pradesh High Court in the case of Managing Director, M/s. LVSR Farms Pvt Ltd. vs. Official Liquidator, High Court of A.P. (2012) 6 ALD 630 (AP), succinctly outlining and summarizing the legal position in the following words: 44 A provision must be construed according to the natural meaning of the language used. The Court, in interpreting a statute, must therefore proceed without seeking to add words which are not to be found in the statute . (Southern Petrochemical Industries Co. Ltd. v. Electricity Inspector 6B ETIO37: (2007) 5 SCC 447; Union of India v. Mohindra Supply Co.: AIR 1962 SC 256; Bank of England v. Vagliano Bros 39 LR (1891) AC 107; CIT v. Anjum M.H. Ghaswala 40: (2002) 1 SCC 633; J. Srinivasa Rao v. Govt. of A.P.: (2006) 12 SCC 607. Statutory language must always be given presumptively the most natural and ordinary meaning which is app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tself. (D.D. Joshi v. Union of India: (1983) 2 SCC 235. The other rules of interpretation i.e., the mischief rule, purposive interpretation, etc. can only be resorted to when the plain words of a statute are ambiguous or lead to no intelligible results or, if read literally, would nullify the very object of the statute. Where the words of a statute are clear and unambiguous, recourse cannot be had to principles of interpretation other than the literal rule (Swedish Match AB v. Securities and Exchange Board of India: AIR 2004 SC 4219; Raghunath Rai Bareja). 46. Resort can be had to the legislative intent for the purpose of interpreting a provision of law, when the language employed by the legislature is doubtful or susceptible of meanings more than one . (Ombalika das v. Hulisa Shaw.: (2002) 4 SCC 539. Unless there is any ambiguity it would not be open to the Court to depart from the normal rule of construction which is that the intention of the Legislature should be primarily gathered from the words which are used. It is only when the words used are ambiguous that they would stand to be examined and construed in the light of surrounding circumstances. (CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hether section 144C completely bypasses section 153? In case it is held that section 144C is an independent / self-contained code and that the limitation in section 153 of the Act would not apply in case of an eligible assessee, then, the consequence would be that there would be no limitation qua passing of the draft assessment order. In other words, the assessing officer would be at liberty to pass the draft assessment at any time, at his whims and fancies and the only limitation that would apply in such a situation would be under section 144C(4) or section 144C(13) of the Act, as the case maybe. Such an interpretation would clearly be contrary to the legislative intent of expeditious dispute resolution and the scheme of the Act. Such an interpretation cannot, therefore, be countenanced. In view of the aforesaid, it is respectfully submitted that the order dated 30.01.2014passed under sections 143(3) / 144C(13) of the Act is clearly barred by limitation and, therefore, is unlawful and is liable to be quashed. 8. On the merits he submitted that the issue is squarely covered in favour of the revenue by the order of the coordina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s till such time a final order of assessment which is appealable is passed by the Assessing Officer. In view of the aforesaid, it is submitted that the contention of the Revenue that proceedings before the DRP are appellate proceedings is contrary to provisions of the Act and is liable to be rejected. II. Reliance was further placed by the ld CIT DR on the decision of the Hon ble Supreme Court in the case of Aswini Kumar Ghosh and Another vs. Arabinda Bose and Another : 1952 AIR SC 369 for the proposition that by virtue of the non-obstante clause in section 144C(13), the limitation enshrined in section 153 of the Act has been overridden. In particular attention was invited to the following observations made by the apex Court in the said judgement: it is one of the settled rules of construction that to ascertain he legislative intent, all the constituent parts of a statute are to be taken together and each word, phrase or sentence is to be considered in the light of the general purpose and object of the Act itself. . . As elaborately submitted infra, thenon-obstante clause in section 144C(13) has to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incumbent upon the AO to determine the ALP of the international transactions. For the A.Y. 2002-03, the time limit for completion of assessment, after determining the ALP, as was earlier applicable also, continued to be governed by section 153(1)(a) which stood at two years from the end of the assessment year. Section 92CA with the caption 'Reference to the Transfer Pricing Officer' was brought into existence by the Finance Act, 2002 w.e.f. 1.6.2002. Under this provision, the onus of computing ALP of the international transactions in certain cases was shifted to the TPO, who was supposed to pass his order under sub-section (3). There was no separate time limit for passing of the order by the TPO. The AO was obliged to pass the assessment order having regard to the ALP, within the overall time limit permitted by section 153, that is, two years from the end of the relevant assessment year. This position continued till the Finance Act, 2007, when sub-section (3A) to section 92CA was inserted w.e.f. 1.6.2007 providing a distinct time limit for the passing of the order by the TPO, being a period of sixty days prior to the date of completion of assessment as per section 153. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssible as this section ab initio contains general time limit for completion of all assessments and reassessments and it is/was never confined only to the orders passed pursuant to the determination of the ALP by the TPO. Then the course open was either to insert a sunset clause in this regard in section 153 itself or add a non-obstante clause in section 144C(4) and (13). The legislature chose the second option and made it unequivocal by mentioning in sub-sections (4) and (13) that the provisions of section 153 shall not apply. There is a reason for not adding a sunset clause in section 153. The reason is that section 92CA mandating the TPO to pass order determining the ALP of international transactions, also contains sub-section (3A), which provides time limit for the passing of the order by the TPO. As per this provision inserted by the Finance Act, 2007 w.e.f.1.6.2007, the TPO may pass order u/s 92CA(3) 'at any time before sixty days prior to the date on which the period of limitation referred to in section 153, .. for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires'. Since the time limit for passing of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of assessment, this will leave no other provision setting out the time-frame for passing of the draft assessment order. . . We find that, in fact, no time limit has been prescribed for the passing of the draft order. It is also equally relevant to note that prior to the introduction of sub-section (3A) to section 92CA by the Finance Act, 2007, there was no time limit for the passing of the order by the TPO, though sub-section (3) requiring the passing of order by the TPO, was inserted by the Finance Act, 2002. It means that during the interregnum, though there was a requirement for the passing of order by the TPO, but there was no specific time limit for the passing of such order. The mere fact that no time limit has been prescribed for the passing a draft order, does not and cannot mean that the time limit for the completion of assessment given u/s 153 should be inferred as that for passing a draft order. . . It is respectfully submitted that the decision of the Hon ble bench in the case of Honda Trading Corporation (supra) does not lay down the correct position in law. While the Tribunal has rightly come to the conclusion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been retained only for the purpose of passing of the order by the TPO, which is the first step in the process of assessment of an eligible assessee. For the aforesaid reasons, it is respectfully submitted that the decision in the case of Honda Trading Corporation (supra) being contrary to law is not required to be followed as a binding precedent. IV. In the case of Envestnet Asset Management (India) Pvt. Ltd. : 53 taxmann.com 430 (Cochin) relied by the Ld. Departmental Representative, the facts were that after the Transfer Pricing assessment, directions of the Dispute Resolution Panel (DRP) were issued vide order dated 29-11-2013 and the final assessment order was passed on 28-03-2014. The assessing officer was however, not willing to disclose the date on which the order passed by the DRP was received by him. The assessee in that case, therefore, contended that the final assessment order dated 28-03-2014, passed by the assessing officer, was barred by limitation as the same was passed beyond the period of 30 days after the date on which the directions issued by the DRP were received by the assessing officer, as provided in sub-section (13) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible to pick out a word or a sentence from the judgment of this Court, divorced from the context of the question under consideration and treat it to be the complete 'law' declared by this Court. The judgment must be read as a whole and the observations from the judgment have to be considered in the light of the questions which were before this Court. A decision of this Court takes its colour from the questions involved in the case in which it is rendered and while applying the decision to a latter case, the Courts must carefully try to ascertain the true principle laid down by the decision of this Court and not to pick out words or sentences from the judgment, divorced from the context of the questions under consideration by this Court, to support their reasonings. In view of the aforesaid, it is respectfully submitted that the order dated 30.01.2014passed under sections 143(3) / 144C(13) of the Act is clearly barred by limitation and, therefore, is unlawful and is liable to be quashed. 10. We have carefully considered the rival contentions and perused the orders of the lower authorities as well as the time lines which are under challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of assessment and does not have any independent existence in law. It is not accompanied by notice of demand, not appealable and cannot be the basis of initiation of penalty. He therefore, submitted that draft order of assessment cannot be equated with the assessment completed in pursuance of direction of DRP u/s 143(3) read with section 144C(13) of the Act. The argument of the ld AR though looks attractive but on careful examination of the same we are not impressed. The provisions of the income tax act 1961 sets out a special scheme for the assessment of an entity engaged in international transaction under Chapter X of the income tax act in terms of section 144C (1) to section 144C (14) of the income tax act. Therefore it is apparent that it is not an assessment scheme as applicable to other assesses. It is a scheme of assessment in respect of matters that included the transfer pricing adjustment. According to the provisions of section 144C (1) and order of the draft assessment proposing a variation to the income or loss as returned by the assessee is to be forwarded to the assessee by the assessing officer. On receipt of that order assessee is given 2 options to be exercised ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te resolution panel. Therefore the dispute resolution panel has a correcting power to the draft assessment order. AO does not have any power to do so. Therefore it is apparent that on the plain reading of the above provisions for all practical purposes the role of the assessing officer comes to an and the movement he passes the draft order. He is only authorized to pass the final assessment order which is according to the directions of the learned dispute resolution panel. The above provisions also contained the separate time limits and it has its own timelines which binds the revenue as well as the assessee. The honourable Madras High Court in 398 ITR 645 (2017) CIT vs Sanmina SCI India private limited in para number 7 has held that it is a self-contained code in itself. Thus , the provisions contained therein only determine the timelines of the passing of such order and not as provided u/s 153 of the act. Thus this argument of the assessee deserves to be rejected. 13. Further according to the provisions of section 253 of The act pertaining to appeals to the tribunal, clause (d) of subsection 1 also separately carves out the appealable order as order passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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