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TMI Blog2021 (9) TMI 178X X X X Extracts X X X X X X X X Extracts X X X X ..... iled. After considering the same and upon hearing both the sides, we condone the delay and admit the appeal for hearing. 2. At the outset, the Ld. A.R. for the assessee Shri Akkal Dudhwewala submitted that ITA No. 2652/Kol/2019 is preferred by the Revenue against the order of the Ld. CIT(A) for AY 2012-13 dated 24.07.2019, wherein the Revenue has challenged the action of the Ld. CIT(A) to have decided the appeal in favour of the assessee by upholding the legal issue raised by the assessee i.e. that since the AO's final assessment order u/s. 143(3) r.w.s. 144C(3) of the Act dated 28.12.2018 has been passed beyond the limitation time prescribed by the statute u/s. 153 of the Act, therefore, is non-est in the eyes of law. Against this action of the Ld. CIT(A) the Revenue has preferred the appeal numbered as ITA No. 2652/Kol/2019 and the assessee has filed a Cross Objection (C.O. No. 15/Kol/2020) against the merit of the addition made by the AO vide assessment order dated 28.12.2018. 3. Further the Ld. AR submitted that ITA No. 112/Kol/2021 has been preferred by the assessee against the order of the Ld. Pr. CIT passed u/s. 263 of the Act dated 23.03.2021 for AY 2012-13 wherein the Ld ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es situated in Abu Dhabi and Saudi Arabia. For the relevant AY 2012-13, the assessee had filed the return of income on 31.10.2013. The assessee did not file any Form 3CEB, since it had claimed that it did not have any international transactions u/s 92B of the Act with its foreign branches. The AO, vide order sheet entry dated 11.03.2015, stated that the assessee had entered into international transactions with its foreign branches and therefore proposed that the case may be referred for transfer pricing scrutiny u/s 92CA of the Act. The assessee by letter dated 24.03.2015 contended that the transfer pricing provisions were not applicable and therefore no reference ought to be made to the TPO. It is however noted that the AO referred the case to the TPO u/s 92CA of the Act. Thereafter, the TPO by notice dated 15.04.2015 issued u/s 92CA(2) of the Act calling upon the assessee company to furnish several details/information in connection with transfer pricing proceedings for the relevant AY 2012-13. Before the TPO, the assessee again objected to the reference made u/s 92CA of the Act on the same ground that it did not had carried out any international transactions with its foreign bran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer to refer the matter to the TPO. As noted above, the assessing officer had invoked the provisions of Section 92CA of the Income Tax Act, 1961 in issuing the show cause notice. Section 92CA (1) of the Act of 1961 is as follows : ....... By the circular dated March 10, 2016, the department is of the view that, the transactions noted in clause 3.3 thereof if involved, would give rise to a jurisdictional requirement. The assessing officer is required to record his satisfaction that, there is an income or a potential of an income arising and/or being affected on determination of the arm's length pricing of an international transaction or specified domestic transaction. The circular in clause 3.4 goes on to say that the assessing officer must provide an opportunity of hearing to the assessee before recording his satisfaction or otherwise. He should also pass an speaking order so as to comply with the principles of natural justice. In the facts of the present case, although the circular was not in vogue at the material point of time, the applicability of the principles of natural justice and the requirement of the assessing officer deciding on a jurisdictional fact cannot be den ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Arms Length Price (ALP) u/s 92CA of the Act. The TPO accordingly issued fresh notices u/s 92CA(2) of the Act and thereafter completed the Transfer Pricing assessment u/s 92CA(3) by order dated 31.10.2018 wherein he proposed an adjustment of Rs. 4,57,20,215/-. Upon receipt of the transfer pricing order, the AO issued notice u/s 142(1) of the Act dated 26.11.2018 calling for several information/details and thereafter completed the assessment u/s 143(3)/144C by order dated 28.12.2018. 9. Before the Ld. CIT(A), the assessee had objected to the validity of the order dated 28.12.2018 passed by the AO and also the merits of the transfer pricing adjustment of Rs. 4,57,20,215/-made therein. The Ld. CIT(A) found merit in the preliminary ground of the assessee that the order impugned was barred by limitation and therefore held the order dated 28.12.2018 to be bad in law and thus ab initio void. The Ld. CIT(A) also found merit in the assessee's contention that it did not have any international transactions with its foreign branches and therefore the reference made by the AO u/s 92CA(2) of the Act was held to be bad in law and in gross violation of the Board Instruction No. 3 of 2016 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The case was selected for scrutiny u/s 143(3) of the Act, Along with the return of income, the company furnished tax audit report in Form 3CD as well. Since the Indian HQ of the company did not have 'international transactions' with the foreign branches within the meaning of Section 92B of the Act, the company did not file Form 3CEB, In the course of original assessment the appellant was show caused as to why it's case should not be referred for transfer pricing scrutiny. The appellant company vide letter dated 24.03.2015 Objected to the proposed reference u/s 92CA of the Act. It was contended that the company did not have any international transactions in terms of Section 92B of the Act and therefore no reference u/s 92CA was legally permissible. It was also explained that merely because the company had foreign branches did not ipso facto warrant transfer pricing scrutiny. The AO however without disposing off the objections raised by the appellant straightaway referred it's case for transfer pricing scrutiny without even spelling out the specific "international transaction" which in his opinion warranted transfer pricing scrutiny. Before the TPO also the appellant obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing officer has acted in the breach of the principles of natural Justice in doing so. The assumption of the jurisdiction by the TPO and subsequently the ultimate reference to the dispute resolution panel are therefore at fault, in the facts of the present case. In the facts of the present case, interest of justice would be sub served by setting aside the writing dated April 16, 2015 of the TPO and the dispute resolution panel subsequent thereto. The assumption of jurisdiction by the TPO is set aside. The assessing officer is requested to proceed on the basis of show cause issued by him dated March 11, 2015 and the reply given thereto by the assessing concerned contained in the writing dated March 24, 2015,in accordance with the law, and in consonance with the circular of the department dated March 10, 2016. " The certified true copy of the order of the Hon'ble Calcutta High Nigh Court was served on the Department on 25.08.2017, evidence thereof is enclosed at Page 134-138 of the paper book. Subsequent to receipt of the said order, the AO issued fresh show cause dated 06.10.2017 requiring the assessee to explain as to why the case should not be referred for transfer pric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a consequence and in terms of the extent provisions of Section 153(6), the impugned order was barred by limitation and hence bad in law. The appellant thus submits that the impugned order being passed beyond the period of limitation deserves to be cancelled and be held ab initio void." 10. On the aforesaid submissions of the Ld. AR in respect of the legal issue raised by the assessee, the Ld. CIT(A) has decided in favour of the assessee by holding as under: "I have carefully considered the submission of the Ld. ARs of the appellant and also perused the findings of the Ld. AO in the impugned order. I have also gone through the material placed in the paper book and true factual background of the case. The issues involved in these grounds being interlinked and interconnected are dealt together. In Ground No.1 the appellant has objected to the validity of the Ld. AO's order dated 28.12.2018 on the ground of being barred by limitation. From the facts of the case and the sequence of events as narrated in the submissions of the Ld. ARs, it is apparent that the draft order u/s 144C was originally passed by the Dy.CIT, CC-l(3), Kolkata on 10.03.2016. Being aggrieved by the said order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r partly, otherwise than by making a fresh assessment or reassessment, such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner : Provided that where it is not possible for the Assessing Officer to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer, if satisfied, may allow an additional period of six months to give effect to the order : Provided further that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 250 or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5) of Section 153 cannot therefore be pressed into service in deciding the issue where the Ld. AO has passed the order pursuant to the directions contained in the order of High Court passed on the Writ petition of the assessee, In the circumstances therefore no fault can be found with the Ld. AO's order with regard to period of limitation prescribed in sub-section (5) of Section 153 of the Act. 4. Coming to provisions of clause (i) of sub-section (6) of Section 153, I observe that this deals with assessment, reassessment, re-computation to be made on the assessee or any person in consequence of or to give effect to any finding or directions contained in an order under Section 250, 254, 260, 262, 263, 264 or in order of any Court in a proceedings otherwise than by way of appeal or reference under this Act. In such case order of assessment, reassessment or re-computation is required to be made on or before the expiry of twelve months from the end of the month in which such order is received or passed by the Commissioner, as the case may be. From the material on record, it is evident that the order impugned in this appeal was passed with a view to give effect to the directions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 filed on 31.10.2013 2. Notice u/s. 143(2) issued by the AO on 02.09.2014 3. Notice u/s. 142(1) issued by the AO on 06.08.2015 4. Transfer Pricing Order passed u/s. 92CA(3) on 29.01.2016 5. Draft Assessment order passed u/s. 144C on 10.03.2016 6. Objections filed before the Dispute Resolution Panel 11.04.2016 7. Order passed by the Hon'ble Calcutta HC in WP No. 214 of 2016 11.08.2017 8. Intimation given to the AO regarding the above WP order on 29.08.2017 9. Order passed by DRP disposing off appeal 26.09.2017 10. Show Cause Notice issued by the AO on 06.10.2017 11. Order passed by the AO disposing off objections on 20.11.2017 12. Transfer Pricing Order passed u/s. 92CA(3) on 30.10.2018 13. Notice u/s. 142(1) issued by the AO on 26.11.2018 14. Order passed u/s. 14393) by the AO on 28.12.2018 13. Before we controvert to the legal issue held in favour of the assessee by the Ld. CIT(A), let us look into section 153 which reads as under: "Time limit for completion of assessment, reassessment and recomputation 153. (1) No order of assessment shall be made under section 143 or section 144 at any time after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le for completion of assessment or reassessment, as the case may be, under the said sub-sections (1), (2) and (3) shall be extended by twelve months. (5) Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer, wholly or partly, otherwise than by making a fresh assessment or reassessment, such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Commissioner or Commissioner : Provided that where it is not possible for the Assessing Officer to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer, if satisfied, may allow an additional period of six months to give effect to the order : 86[Provided further that where an order under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val or within the period specified in this section or sub-section (1) of section 153B, whichever is later. (9) The provisions of this section as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or Re-computation made before the 1st day of June, 2016: 86a[Provided that where a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 has been issued prior to the 1st day of June, 2016 and the assessment or reassessment has not been completed by such date due to exclusion of time referred to in Explanation 1, such assessment or reassessment shall be completed in accordance with the provisions of this section as it stood immediately before its substitution by the Finance Act, 2016 (28 of 2016).] Explanation 1.-For the purposes of this section, in computing the period of limitation- (i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be re-heard under the proviso to section 129; or (ii) the period during which the assessment proceeding is stayed by an order or injunction of any cour ..... 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(ix) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under sub-section (7) of section 245R; or (x) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; or (xi) the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner or Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the Assessing Officer, shall be excluded : Provided that where immediately after the exclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as given an opportunity of being heard before the said order was passed.]" 14. We note that section 153 of the Act contains the statutory time limits prescribed by the Parliament for the completion of assessment, reassessment and re-computation. It is noted that the provisions of Section 153 of the Act was amended by the Finance Act 2016. The earlier time limits for completion of assessment, reassessment or computation were substituted. The time limits prescribed there-under are as follows: − Clause (1) of Section 153 provides that the time limit for completion of assessment under Section 143(3)/144 of the Act is twenty-one months from the end of the relevant assessment year. The words "twenty-one months" was substituted by the words "eighteen months" from 01.04.2018 and again substituted for the words "twelve months" and "nine months" w.e.f from 01.04.2019 and 01.04.2021 respectively. − Clause (2) of Section 153 of the Act states that the time limit for completion of assessment u/s 147 of the Act is nine months from the end of the Financial Year in which the notice u/s 148 of the Act is served. The words "nine months" was substituted by the words "twelve months" i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iv) order u/s 262 passed by Supreme Court or (v) Revision order u/s 263/264 passed by Pr.CIT or (vi) in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, then such order has to be passed before the expiry of twelve months from the end of the month in which such order is received or passed by the CIT. − Sub-clause (ii) of Clause (6) of Section 153 of the Act states that where in case of a Firm, an assessment is to be made on its partner in consequence of an assessment made on the firm u/s 147 of the Act then, such order has to be passed within a period of twelve months from the end of the month in which the assessment order in case of the firm is passed. − Clause (7) of Section 153 of the Act states that where the effect to any order or finding or direction under clauses (5) or (6) is to be given in respect of orders received or passed before 01.06.2016, then such order has to be passed on or before 31.03.2017. − Clause (8) of Section 153 of the Act states that nothing contained in the foregoing clauses shall apply where the order of assessment or re-assessment relating to any year stands revised under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal or reference is received by CIT or the order u/s 263/264 is passed by CIT (6)(ii) Assessment of partner in consequence to an order of assessment made on firm u/s 147 of the Act 12 months from the end of the month in which the assessment order is passed in the case of the firm (7) Any order to be passed in terms of sub-section (5) & (6) in relation to such order which was received or passed prior to 01.06.2016 Applicable only to orders which were passed before 01.06.2016. The orders giving effect to such orders have to be passed on or before 31.03.2017 16. In view of the above provisions contained in Section 153 of the Act, let us now examine the facts of the present case. From the above table, it is undoubtedly clear that sub-sections (1) to (4) are not applicable in the facts of the present case. Sub-section (7) of Section 153 of the Act is applicable in relation to the orders passed on or before 01.06.2016 which is also not relevant in the present case. Therefore the only relevant sub-sections to be examined are (5) and (6) of Section 153 of the Act. 17. Sub-section (5) of Section 153 of the Act applies in relation to those orders which are to be passed by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-section (6) of Section 153 viz., an order passed by the AO in consequence of any finding or direction contained in an order by any Court in a proceeding other than appeal or reference under this Act. In such a case, the AO is required to pass the order within twelve months from the end of the month in which the order has been received by the CIT. As rightly observed by the Ld. CIT(A), the case of the assessee falls under this sub-category contained in clause (i) of Section 153(6) of the Act. For the sake of convenience, the relevant dates to adjudicate this preliminary issue as to whether the impugned order was barred by limitation or not is summarized below: Particulars Date Date of order passed by High Court in WP No. 214 of 2016 11.08.2017 Intimation given by the assessee to the AO 29.08.2017 Fresh Notice issued by the AO in consequence of the order of the High Court 06.10.2017 Order u/s 144C/143(3) was passed on 28.12.2018 19. Having regard to the fact that the AO had issued fresh show cause notice dated 06.10.2017 in consequence of the directions contained in the order passed by the Hon'ble High Court dated 11.08.2017 in Writ Petion No 214 of 2016, it can b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me infructuous being academic in nature. 23. Coming to the appeal preferred by the assessee against the impugned order of the Ld. Pr. CIT passed u/s. 263 of the Act dated 23.03.2021 in AY 2012-13 (ITA No. 112/Kol/2020), we find that the Ld. Pr. CIT has interdicted with the assessment order passed by the AO dated 28.12.2018 u/s. 143(3) read with section 144C of the Act, which has been held to be non-est in the eyes of law by the Ld. CIT(A), which decision has now been upheld by us (supra). Therefore, the action of the Ld. Pr. CIT is unsustainable since the assessment order dated 28.12.2018 itself is bad in law. Therefore, the Ld. Pr. CIT has interdicted a non-est order of AO dated 28.12.2018. This issue is squarely covered by the legal maxim "subleto fundamento credit opus" meaning thereby in a case where foundation is removed the super structure falls. The Hon'ble Supreme Court in Badrinath Vs. Government of Tamil nadu & Ors. AIR 2000 SC 3243 had held that once the basis of the proceeding is gone, all consequential orders and action would fall on the ground automatically which is applicable to judicial and quasi judicial proceedings. Therefore, since the foundation (the order of t ..... 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