TMI Blog2023 (5) TMI 797X X X X Extracts X X X X X X X X Extracts X X X X ..... For the Revenue : Shri Manoj Kumar ORDER PER M. BALAGANESH (A.M): This appeal in ITA No. 1180/Mum/2021 for A.Y.2016-17 preferred by the order against the final assessment order passed by the Assessing Officer dated 17/04/2021 u/s.143(3) r.w.s. 144C(13) of the Income Tax Act, hereinafter referred to as Act, pursuant to the directions of the ld. Dispute Resolution Panel (DRP in short) u/s.144C(5) of the Act dated 20/03/2021 for the A.Y.2016-17. 2. Though the assessee has raised several grounds of appeal before us, first we would like to address ground No.2 wherein the assessee has submitted that the order of the ld. TPO u/s.92CA(3) of the Act dated 01/11/2019 is barred by limitation and hence, invalid in law. 3. The assessee has also filed additional ground before us on 23/04/2022 wherein it had stated that since the order of the ld. TPO is barred by limitation, the assessee does not become eligible assessee u/s.144C of the Act and hence, the draft assessment order dated 27/12/2019 and final assessment order passed by the ld. AO on 17/04/2021 using the extended period provided in third proviso to Section 153 of the Act would also be barred by limitati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch includes the addition made by the ld. TPO towards ALP adjustment in the sum of Rs.65,23,86,518/-; disallowance of depreciation on intangible asset of Rs.90,65,75,040/-; and disallowance u/s.14A of the Act of Rs.7,84,950/-. The assessee preferred objections before the ld. DRP. The ld. DRP issued directions u/s.144C(5) of the Act on 20/03/2021. Pursuant to the directions of the ld. DRP, the ld. AO passed the final assessment order u/s.143(3) r.w.s. 144C(13) of the Act on 17/04/2021 which is same as the income determined in the draft assessment order. Against this final assessment order, the assessee is in appeal before us. 4.2. The ld. AR before us stated that the transfer pricing order passed by the ld. TPO u/s.92CA(3) on 01/11/2019 is clearly barred by limitation as it is passed in violation of provisions of Section 92CA(3A) of the Act. He placed on record the following table to buttress this argument:- Sr. No. Particulars Relevant date/ period Assessment Year involved 2016-17 1. Period of limitation for making an order of assessment a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires:] 4.4. From the bare reading of the aforesaid provisions of Section 92CA(3A) of the Act, we find that the time limit prescribed in Section 153 of the Act for completion of assessment is 31/12/2019 for A.Y.2016-17 considering the extended period of one year as per third proviso thereon. The provisions of Section 92CA(3A) mandates that ld. TPO should pass an order u/s.92CA(3) of the Act at any time before 60 days prior to the date on which the period of limitation referred to in Section 153 of the Act for making the order of assessment or re-assessment expires. As stated earlier, the time limit for completion of assessment u/s.153 of the Act is 31/12/2019. In order to reckon 60 days prior to that date, obviously the date of 31/12/2019 should be ignored. Hence, 60 days prior to 31/12/2019 would fall on 31/10/2019 i.e. 30 days in December and 30 days in November. Hence, the due date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the 60th day. Therefore, either way the contention of the Revenue is a fallacy and has no legs to stand. Mandatory or Directory 31. The next contention that has been raised by the learned senior standing counsel for the appellants is that the usage of the word may in section 92CA (3A) indicates that the time fixed is only directory, a guideline, not mandatory and is for the sake of internal proceedings. 32. Let us now examine the relevant procedures relating to Transfer Pricing. After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-section (1) of section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under section 92CA (3) of the Act. As per section 92CA(3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions would have to be considered while determining whether it is mandatory or directory. 37. At this juncture, it is noteworthy to mention the commentary of Justice G.P.Singh on the interpretation of statutes, Principles of Statutory Interpretation (1st Edn., Lexis Nexis 2015), which is quoted below for ready reference: 'The intention of the legislature thus assimilates two aspects: In one aspect it carries the concept of meaning i.e. what the words mean and in another aspect, it conveys the concept of purpose and object or the reason and spirit pervading through the statute. The process of construction, therefore, combines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the cardinal principle of construction .' 38. In case of assessments involving transfer pricing, fixing of time lim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gal issue and does not require any verification of facts. Hence, in view of the decision of the Hon‟ble Supreme Court in the case of NTPC Ltd reported in 229 ITR 383, the additional ground raised by the assessee is hereby admitted and taken up for adjudication. 4.6. We find that once we hold that the order of the ld. TPO dated 01/11/2019 is barred by limitation, then the assessee would be outside the ambit of becoming eligible assessee u/s.144C(15)(b)(i) of the Act. Accordingly, the extended time period provided in Section 153 of the Act vide third proviso thereof would not be applicable to the facts of the instant case. By this process, the draft assessment order passed by the ld. AO on 27/12/2019 for A.Y.2016-17 also becomes barred by limitation. Because of the draft assessment order getting barred by limitation, it becomes an order void ab initio. Accordingly, any subsequent proceedings emanating from the illegal and invalid order i.e. DRP directions dated 20/03/2021 and final assessment order dated 17/04/2021 also becomes void ab initio. In support of this, the ld. AR before us placed reliance on the decision of the Co-ordinate Bench of this Tribunal in the case of M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld.Counsel for the assessee again draws support from the decision of Hon'ble Madras High Court in the case of Saint Gobain India (P) Ltd.,(supra) to buttress his arguments, that the assessee in the present case is not eligible assessee as there is no valid order under section 92CA(3) of the Act in the case of assessee. Therefore, the assessment framed on the basis of non-est order of TPO is unsustainable. The ld.Counsel for the assessee further asserted that the assessment order dated 21/05/2015 is time barred as the limitation of pasing the assessment order got over on 31/03/2014. 8. Per contra, Ms. Vatsala Jha representing the Department vehemently submitted that the order passed by TPO u/s.92CA(3)of the Act is a valid order passed within the period of limitation. The ld. Departmental Representative submits that CBDT vide Circular No.3/2008 dated 12/03/2008 in the Explanatory Notes on the provisions of the Finance Act, 2007 has explained that with a view that TPO gets sufficient time to make the audit of Transfer Pricing and also to provide the Assessing Officer sufficient time to make assessment in the case involving international transactions, the time limit specifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to adjudicate this issue it would be imperative to have a glance on the relevant dates. Date Events 30/01/2014 TPO passed order u/s. 92CA of the Act 28/03/2014 A.O Passed draft assessment order 19/12/2014 Directions of the DRP u/s.144C(15) of the Act 29/01/2015 Final assessment order. The contention of the assessee is that the order passed u/s.92CA(3) of the Act is time barred by one day. The period of limitation for passing the order u/s. 92CA(3) of the Act is computed by the assessee as under:- Events Relevant Dates Assessment Year ( AY') 2010-11 End of Assessment Year 31-03-2011 Due date for completion of assessment under Third Proviso to section 153(1) of the Act (i.e. 3 years from the end of AY) 31-03-2014 Time limit for passing the order under section 92CA(3A) of the Act 60 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... section 92CA is made, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words two years the words three years had been substituted A conjoint reading of the relevant provisions of section 92CA(3A) and 153(1) of the Act would show that the TPO is required to pass order u/s. 92CA(3) of the Act at any time before sixty days prior to the date on which the period of limitation referred to in section 153 of the Act for making assessment order expires. 13. The Hon'ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. vs. JCIT (supra) has explained as to how period of limitation for making the order u/s. 92CA(3) of the Act has to be worked out. The relevant extract of the same is reproduced herein below: 30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion and every word must be looked at generally and in the context in which it is used. It is said that every statute is an edict of the legislature. The elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the legislature. Where the words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or alternating (sic altering) the statutory provisions. Wherever the language is clear the intention of the legislature is to be gathered from the language used. While doing so, what has been said in the statute as also what has not been said has to be noted. The construction which requires for its support addition or substitution of words or which results in rejection of words has to be avoided. As stated by the Privy Council in Crawford v. Spooner [(1846) 6 Moore PC 1 : 4 MIA 179] we cannot aid the legislature's defective phrasing of an Act, we cannot add or mend and, by construction make up deficiencies which are left there . In case of an ordinary word there should be no attempt to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a guideline, not mandatory and is for the sake of internal proceedings. 32. Let us now examine the relevant procedures relating to Transfer Pricing. After an international transaction is noticed subject to satisfaction of section 92B, a reference is made to the TPO under sub-section (1) of section 92CA of the Act. The TPO after considering the documents submitted by the assessee is to pass an order under section 92CA (3) of the Act. As per section 92CA(3A), the order has to be passed before the expiry of 60 days prior to the date on which the period of limitation under section 153 expires. As per 92CA(4), the assessing officer has to pass an order in conformity with the order of the TPO. After receipt of the order from the TPO determining ALP, the assessing officer is to forward a draft assessment order to the assessee, who has an option either to file his acceptance of the variation of the assessment or file his objection to any such variation with the Dispute Resolution Panel and also the Assessing Officer. Subsection (5) of section 144C of the Act provides that if any objections are raised by the assessee before the Dispute Resolution Panel, the Panel is empowered to issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e intention of the legislature thus assimilates two aspects: In one aspect it carries the concept of meaning i.e. what the words mean and in another aspect, it conveys the concept of purpose and object or the reason and spirit pervading through the statute. The process of construction, therefore, combines both literal and purposive approaches. In other words the legislative intention i.e. the true or legal meaning of an enactment is derived by considering the meaning of the words used in the enactment in the light of any discernible purpose or object which comprehends the mischief and its remedy to which the enactment is directed. This formulation later received the approval of the Supreme Court and was called the cardinal principle of construction .' 38. In case of assessments involving transfer pricing, fixing of time limits at various stages sets forth that the object of the provisions is to facilitate faster assessment involving such determination. In the present case, as rightly held by the learned Judge in paragraphs 22 to 29 of the order dated 7-9-2020, the order of the TPO or the failure to pass an order before 60 days will have an impact in the order to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ays . The expression two months used in clause 43(2) in the aforesaid circular to specify the period of limitation may not necessarily be equal to sixty days as specified in the Act. The words/expressions used in statute cannot be substituted in Explanatory notes or Board Circulars. If the limitation period is mentioned in days in the Act, the same expression has to be used in Circulars. Otherwise it will lead to confusion and ambiguity. Two months as mentioned in Circular can be more or even less than sixty days. Therefore, expression issued to evaluate limitation period as specified in the Act has to be strictly followed. 16. The ld.Counsel for the assessee has further pointed that reference to DRP can only be made by eligible assessee . The expression eligible assessee has been defined in sub-section (15) to section 144C of the Act . The definition of eligible assessee is reproduced herein below: (b) eligible assessee means (i) Any person in whose case the variation referred to in sub-section(1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) (ii) any non-resident not be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation which is prejudicial to the interest of such assessee. . . . (15) For the purposes of thissection, (a) Dispute Resolution Panel means (b) eligible assessee means, (i) any person in whose case the variation referred to in subsection (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92CA; and (ii) any non-resident not being a company, or any foreign company. 31. The aforesaid section envisages that, AO in the first instance has to forward a draft of the proposed order of assessment to the eligible assessee , if he proposes to make any variation which is prejudicial to the interest of such assessee. The draft assessment order is to be forwarded to an eligible assessee , which means that, for this section to apply a person has to be an eligible assessee Here, the draft assessment order is to be f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is that it has to be considered as non-est, meaning thereby, that it entails all the consequences of not having been passed at all and is ignored for all practical purposes. Thus, in absence of any transfer pricing order being passed at all and any variations arising there from, the entailing consequence in instant case is that the appellant cannot be said to be an eligible assessee under section 144C(15)(b)(ii) of the Act. 35. Accordingly, once the assessee becomes an ineligible assessee , the very foundation for proceeding to pass the draft assessment order does not survive, meaning thereby, that the draft assessment order passed in the instant case becomes legally invalid and hence, all consequential proceedings on the basis of the said order fail. In the instant case, a reference was made by the Ld. AO to the Ld. TPO as per the provisions of section 92CA(1) of the Act and accordingly the timelines prescribed u/s 153 of the Act remain extended by a year in view of the 3rd proviso of section 153 of the Act. Accordingly, the time limit to complete assessment proceedings u/s 143(3) of the Act in the instant case expired on 31 March 2016. As on the date of passing draft as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and provides for a special code which must be strictly followed since it impacts the rights of an assessee substantively, i.e., the ability to accept or object a draft order proposition, file objections before the Dispute Resolution Panel and ensure a speedy disposal thereof. Any lapse in treating an assessee as eligible assessee where it is otherwise not one and vice-versa results in fatality, since it becomes a jurisdictional defect and goes on to the roots in deciding the validity of the entire assessment proceedings against the revenue. In this context, on the issue of passing a correct assessment order in first instance (either a draft or a final one), the findings of the Hon ble Madras High Court in case of ACIT v. Vijay Television (P.) Ltd [2018] 95 taxmann.com 101 (Madras) are extremely critical which reads as follows: 47. The necessity for the Parliament to incorporate Section 144-C is not only to safeguard the Revenue, but also the assessee and any mistake committed by any one of them, the said party is supposed to face the consequences and cannot put the hands of the clock back and start afresh. 39. Further, in case of Zuari Cements Ltd. v. ACIT [Writ Pe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e made to the Ld. TPO is valid, in absence of a legally valid transfer pricing order and a valid draft assessment order, the Ld. AO cannot assume jurisdiction to proceed with the assessment under Section 144C of the Act and pass the consequential final assessment order. The decisions of the Hon ble jurisdictional High Court in case of International Air Transport Association (supra) and Dimension Data Asia Pacific PTE Ltd. (supra) forties appellant s contentions and the irresistible conclusion that the draft assessment order imbibes a jurisdictional power in terms of Sec. 144C(1) of the Act and creates/ envisages special rights upon the eligible assessee . If such an order is passed on an assessee who is not an 'eligible assessee' as defined in section 144C(15)(b)(i) of the Act, then it would render the entire proceedings pursuant to such order null and void. 43. We find that section 153(1) of the Act, as it stood applicable for the AY 2012- 13, provided a time limit of 3 years from the end of AY 2012-13 for completion of assessment under section 143(3) of the Act, i.e., on or before 31 March 2016. 44.In such a case if the Ld. AO invokes the provisions of section 144C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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