TMI Blog2016 (7) TMI 1633X X X X Extracts X X X X X X X X Extracts X X X X ..... directed for deletion of addition on account of transfer pricing adjustment made in the final assessment order. Thus the order of the ld. TPO passed on 31.12.2014 is barred by limitation and liable to be quashed. Therefore, consequently, the addition on account of transfer pricing adjustment does not survive. In view of this ground No. 2 of the appeal of the assessee is allowed. - ITA No. 6143/Del/2015 - - - Dated:- 18-7-2016 - Smt. Diva Singh, Judicial Member And Shri Prashant Maharishi, Accountant Member For the Assessee : Sh. Deepak Chopra, Adv Sh. Amit Shrivastava, Adv Ms. Manasvini Bajpai, Adv. For the Revenue : Sh. Sanjay Kumar, Sr. DR. ORDER PER PRASHANT MAHARISHI, A. M. 1. This is appeal filed by the assessee against the order u/s 143(3) of the Income Tax Act [ hereinafter referred to as the Act ] of the ld. DCIT International Taxation, circle- Noida [hereinafter referred to as AO or Assessing officer ] dated 21.10.2015 framed pursuant to direction of the Learned Dispute Resolution panel -2 [ hereinafter referred to as DRP ] New Delhi u/s 144C (5) of the act for the Assessment Year 2009-10. 2. Appellant is a company incorporated in T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal:- Ground 1: That on the facts and in law, the Learned Deputy Commissioner of Income-tax, Noida (hereinafter referred to as AO ) erred in assessing the income of the Appellant for the relevant assessment year at ₹ 104,113,380/- as against the returned income of ₹ 20,698,486/-. Ground 2: That on the facts and in law, the AO/ Hon ble Dispute Resolution Panel (hereinafter referred to as DRP ) erred in not giving due cognizance to the fact that the order passed by the TPO is time barred under the provisions of section 153 read with section 92CA(3A) of the Act and hence, liable to be quashed. Ground 3: That on the facts and in law, the TPO erred in concluding that there existed a Permanent establishment of the Appellant in India which was not the mandate accorded to him under section 92CA. Ground 4: That on the facts and in law, the TPO acted contrary to the jurisdiction vested in him by concluding that the profit arises from the offshore supplies are taxable in India owing to existence of Permanent establishment in India. Ground 5: That on the facts and in law, the TPO/DRP failed in not appreciating that the adjustmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Proviso to section 92C of the Act and has failed to allow the Appellant the benefit of downward variation of 5 percent in determining the ALP. 4. Ground No. 1 of the appeal is general in nature and no specific arguments were advanced by the parties before us, therefore same is dismissed. 5. Ground No. 2 of the appeal is a legal ground contesting that order passed by the ld. TPO is time barred and liable to be quashed. Before us the ld. AR contends that the order passed by the ld. TPO is time barred under the provisions of section 153 rws 92CA(3) of the Act and hence it is liable to be quashed. He referred to the provisions of section 153(1) and submitted that reference u/s 92CA (3) of the act was received by the ld. TPO on 28.12.2011 and therefore date of limitation for passing of the order by ld. TPO was 27.11.2014 which was passed on 31.12.2014, therefore, the order passed by the ld. TPO is barred by the limitation. He further excluded the time period pertaining to the application before AAR and information sought as per DTAA and consequently excluded 668 days for the same. Therefore according to him the order of Transfer Pricing Officer is barred by limitation and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 144 at any time after the expiry of- (a) two years from the end of the assessment year in which the income was first assessable ; or (b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later :] 41 [Provided that in case the assessment year in which the income was first assessable is the assessment year commencing 41a [on or after the 1st day of April, 2004 but before the 1st day of April, 2010], the provisions of clause (a) shall have effect as if for the words two years , the words twenty-one months had been substituted :] 42 [Provided further that in case the assessment year in which the income was first assessable is the assessment year commencing 42a [on or after the 1st day of April, 2005 but before the 1st day of April, 2009] and during the course of the proceeding for the assessment of total income, a reference under sub-section (1) of section 92CA- (i) was made before the 1st day of June, 2007 but an order under sub-section (3) o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.12.2013 6 Date on which the ld. TPO received the information vide letter dated 07.11.2014 20.11.2014 According to the clause (viii) of Explanation 1 to section 153 the period excluded from the date of reference made ending with date on which the information last received or a period of one year whichever is less. Here the reference was first sent on 11.12.2013 as per Sl No. 3 and ended on 20.11.2014 resulting into exclusion of 344 days. 7 Date by which the order should have been passed as per the explanation 1 of section 153 28.01.2015 The date before which the order should have been passed according to section 153 was 31.03.2013. The date of 31.03.2013 is required to be extended by a period 322 days as per Sl No. 4 and 344 days as per Sl No. 6 of the chart which extends the date for passing of the order by 668 days which makes the time limit of passing of the order of 31.03.2013 extended to 28.01.2015. [though in the chart date mentioned by ld. AR is 26.01.2015 but according to us it is 28.01.2015] ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quashing of the final assessment order. In the opposition, the ld. DR supported the Revenue s stand. 6.2. We have heard the rival submissions and perused the relevant material on record. It has been noticed above that the provisions of section 92CA requiring the passing of the order by the TPO determining the ALP of the international transactions, came into being by the Finance Act, 2002. As per sub-section (3) of section 92C, the TPO is required to pass the order determining the ALP of the international transactions. No time limit was initially given for the passing of order by the TPO. It is only by the Finance Act, 2007, that sub-section (3A) was inserted providing time limit for the passing an order by the TPO. No amendment has been carried out in this provision thereafter. Sub-section (3A) of section 92CA containing the relevant time limit for the passing of the order by the TPO, reads as under : - `(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee a reasonable opportunity of being heard before the transfer of case by the Chief Commissioner, in the backdrop of the use of the word may in the provision, be considered as mandatory. The Hon ble Bombay High Court has held that the word may in section 127 should be read as shall and hence the granting opportunity to the assessee is mandatory. 6.7. Section 16 of the Wealth-tax Act, 1957 deals with the assessment of wealth. Section 16A having marginal note of Reference to Valuation Officer provides through sub-section (1) that : `For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules in Schedule III, the market value of any asset is to be taken into account in such assessment, the Assessing Officer may refer the valuation of any asset to a Valuation Officer- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer if the Assessing Officer is of opinion that the val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision and the context in which such a word has been used. 6.8. Reverting to section 92CA, we find that the Finance Act, 2007 inserted sub-section (3A) carrying the time limit of sixty days for passing of the order by the TPO before the expiry of time limit for completion of assessment by the AO u/s 153. Despite the use of the word may , the time limit for passing the order by the TPO is mandatory, as in the otherwise situation of the TPO having been allowed more time by implication, say of three months or more, could at that time have frustrated the provisions of section 153 for the passing of the assessment order by the AO. Thus we have no hesitation in holding that the use of the word may in sub-section (3A) of section 92CA is to be construed as shall , thereby making this time limit as mandatory and not directory. As such, it is held that the TPO is bound by the given time limit for passing of his order. 6.9. Having held that the word may in section 92CA(3A) should be read as shall , we once again note that prior to the insertion of section 144C by the Finance Act, 2009, the time limit for completion of assessment was contained in section 153 and accordingly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Madras High Court in Vijay Television (P.) Ltd. vs. DRP (2014) 369 ITR 113 (Mad) considered a case in which the assessment order was directly passed without routing through draft order or DRP. The Hon ble Court held it to be a noncurable defect and resultantly the assessment was quashed. It was held that when there is an omission on the part of the AO to follow the mandatory procedure prescribed under the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. Extantly, we are confronted with a situation in which the draft order has been passed in time but the lapse has come in the passing of the order by the TPO. The consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a non-curable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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