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Facts
The assessee filed its return of income, and its case was selected for scrutiny due to international transactions. The TPO proposed an addition of Rs. 1,55,84,878/- towards management fees, which was confirmed by the DRP. The AO passed the final assessment order based on the DRP's directions.
Held
The Tribunal held that the final assessment order passed by the AO was barred by limitation as it was not passed within the stipulated time after receiving the DRP's directions. Therefore, the assessment order was set aside as void-ab-initio.
Key Issues
Whether the assessment order passed by the AO was barred by limitation as per Section 144C(13) of the Income Tax Act, 1961?
Sections Cited
143(3), 144C, 92C, 92B, 92CA, 144C(13), 143(3) r.w.s. 144C, 143(3), 142(1)
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Income Tax Appellate Tribunal, DELHI BENCH “H”, DELHI
Before: AND SH. SUDHIR KUMAR
Date of hearing: 12/03/2026 Date of Pronouncement: 17/04/2026 ORDER PER SUDHIR KUMAR, JUDICIAL MEMBER:
This appeal by the assessee is directed against the final assessment order dated 31-07-2022 passed under section 143(3) r.w.s. 144C of the of the Income Tax Act [hereinafter referred “the Act”] in pursuance of the DRP directions dated 30- 12-2021 under section 144C (5) of the Act. 2. The assessee has raised the following grounds in appeal:
1. The Learned (Ld.) assessing Officer (AO) /Ld. Dispute Resolution Panel (DRP) are erroneous in law and on the facts of the case.
2. The Ld. DRP/AO is not justified in making an adjustment of Rs.1,55,84,878/- in respect of management fees. 3.The Ld. DRP /AO ought to have accepted the CPM Method as the Most Appropriate Method for benchmarking the management fees as per the provisions, u/s 92C (1) of the Income Tax Act, 1961.
4. The Ld. DRP/AO erred in disregarding the transfer pricing study report and the information documents and clarification provided by the assessee to evidence the arm’s length nature of management fees.
5. The Ld. TPO erred in arriving ALP as Rs. Nil by CUP Method as the Most Appropriate Method without providing the basis for application of methodology.
6. Without prejudice to the above the Ld. DRP/AO failed to appreciate the fact that the management fee of INR Rs.1,55,84,878/- was noy debited to the P&L Account as the same was capitalized during the year under consideration.
7. Any other ground that may be urged at the time of hearing with the prior approval of the Hon’ble Tribunal.
An application has moved by the assessee to raise the additional ground of appeal
under rule 11 of the Income Tax (appellate Tribunal) Rules 1963 and stated that the final assessment order dated 31-07-2022 passed by the Ld. AO u/s 143(3) read with section 143(3) is barred by the time limitation. He further stated that tribunal has power to admit any additional grounds. Reliance is placed on the followings decisions of the Hon’ble Supreme Court. (i)Jute Corporation of India Ltd. Vs. CIT[1990]53 taxman
85. (ii) CIT vs. Nellippan [1967] ITR722(SC) (iii)CIT vs. Jai Parabolic Springs Ltd. [2008] ITR42(Delhi) In the case of national Thermal Power Co. Ltd. Vs. CIT[1998]229 ITR 383 (SC) the Hon’ble Apex Court held as under “The view that the Tribunal is confined only to issue arising out of the appeal before the Commissioner of Income Tax (Appeals) takes too narrow view of the powers of the Appellate Tribunal. Undoubtedly, the Tribunal will have the discretion to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.
We have heard the parties and perused the material available on record. In the view of the above sited judgments the additional ground raised by the assessee are admitted, which is under:
8. On the facts and circumstances of the case & law, the final assessment order under section 143(3) of the Income Tax- Act, 1961 (The Act) dated 31 July 2022 is barred by the time limitation provided under section 144C(13) of the Act and hence, deserves to be held as void -ab-initio, bad in law and time barred.
3. The brief facts of the case are that the assessee company filed its return of income on 30-11-2017 declaring total income of Rs.3,37,670/-. The case of the assessee was selected for scrutiny under CASS for the following reasons; International transaction. Notice under section 143(3) of the Act was issued and thereafter notice under section 142(1) of the Act was issued. During the assessment year under consideration the assessee entered into international transactions as envisaged in section 92B of the Act. After considering the auditor’s report in Form 3CEB it was felt that case be transferred to the Transfer Pricing Officer (TPO) for determining Arm’s Length Price under section 92CA (1) of the Act. The Ld. TPO passed the order after considering the reply filed by the Assessee and directed the AO to make the addition of Rs. 1,55,84,878/-. Against the direction of the Ld. TPO the assessee filed the appeal before the Hon’ble DRP who by order dated 30-12-2021 confirmed the order of the Ld. TPO and directed the AO to incorporate the findings of the Panel. In the compliance of the Hon’ble DRP direction the Assessing Officer framed the Assessment order on 31-07-2022 after making the addition of Rs. 1,55,84,878/-. Aggrieved, by the action of the AO the assessee preferred this appeal before the tribunal.
4. The ld. AR of the assessee raised the legal ground no 8 and submitted that the assessment order dated 31-07-2022 passed by the Ld. AO under section 143(3) r.w.s. 143 (3) of the Act is time barred. He submitted that as per the provisions of section 144C(13) of the Act the Ld. AO should have passed the assessment order till 31-01-2022 from the receiving the direction of the Hon’ble DRP, which was received on 30-12- 2021. Reliance is placed on the decision of Hon’ble Jurisdictional High Court in case of PCIT v. Fiberhome India (P.)
Ltd [2024] 159 taxmann.com 772(Delhi). The written submission for the assessee as under:
5.The information received by the assessee under RTI ACT 2005 re -produce as under:
Ld. DR has relied upon the order of the Assessing Officer and submitted that order was passed as per the direction of the Hon’ble DRP. We have heard the parties and perused the material available on record. In this case the DRP issued the direction on 30-12-2021 which was received to the Ld. AO on the same day on the ITBA module. The Ld. Officer passed the final assessment order as per the direction of the Hon’ble DRP on 31-07-2022 which was passed after one month and mandatory requirement of the one month was not followed by the Ld. Assessing officer. Thus, the final assessment order passed by the Ld. AO is time barred and liable to be set-a-side.