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Facts
The assessee filed its return of income and was selected for scrutiny due to international transactions. The Transfer Pricing Officer (TPO) proposed additions for management fees and loan repayment, which the Dispute Resolution Panel (DRP) confirmed. The Assessing Officer (AO) passed the final assessment order incorporating these additions.
Held
The Tribunal held that the assessment order was passed beyond the prescribed time limit under section 144C(13) of the Income Tax Act, rendering it time-barred. Consequently, the assessment order was set aside.
Key Issues
Whether the final assessment order passed by the AO was barred by limitation under section 144C(13) of the Income Tax Act, 1961, and whether the AO complied with the mandatory time limits after receiving DRP directions.
Sections Cited
143(3), 144C, 144C(5), 144C(13), 92B, 92CA(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “H”, DELHI
Before: SH. RAMIT KOCHAR & 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 final assessment order dated 22-02-2022 passed under section 143(3) r.w.s. 144C of the Income Tax Act (hereinafter referred “the Act”) in the pursuance of the DRP directions under section 144C(5) of the Act dated 14-12-2021.
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.1,03,95,878/- in respect of management fees.
3. 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.
4. The Ld. TPO erred by applying CUP Method as the Most Appropriate Method and there by determining the ALP for the international transaction as Nil.
5. Without prejudice to the above the Ld. DRP/AO failed to appreciate the fact that the management fee of INR Rs.1,03,95,878/- was noy debited to the P&L Account as the same was capitalized during the year under consideration.
6. The Ld. AO erred in totally ignoring the order passed by Ld. TPO giving effect to directions of Ld. DRP wherein the adjustment of Rs. 1,72,00,000/- had been deleted and wrongly retained the adjustment in the Final Assessment order.
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 been 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 22-02-2022 passed by the Ld. AO u/s 143(3) read with section 144C(13) is barred by the time limitation. He further stated that tribunal has power to admit any additional grounds. Reliance is placed on the following 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 cited judgments the additional grounds raised by the assessee are admitted, which are under:
“8. On the facts and circumstances of the case & law, the final assessment order under section 143(3) r.w.s.
144(13) of the Income Tax- Act, 19961 (The Act) dated
22 February 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.
9. On the facts and circumstances of the case & law,
the final assessment order dated 22 February 2022 having been made in non-conformity with the specific binding mandates and directions passed by the Ld.
DRP dated 14 December 2021 in gross violation of provisions of section 144C(13) of the Act.; is erroneous without jurisdiction and deserves to be held null and void-ab-initio.”
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.2,25,110/-. The case of the assessee was selected for scrutiny under CASS for the following reasons; International transaction. Statutory notices were issued to the assessee.
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. 1,03,95,878/- as adjustment on account of Management Fees and RS. 1,72,00,000/- an adjustment on account of Loan repaid. Against the direction of the Ld. TPO the assessee filed the appeal before the DRP who by order dated 14-12-2021 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 22-02-2022 after making the addition of Rs. 2,75,95,878/-. Aggrieved, by the action of the AO the assessee preferred this appeal before the tribunal.
The ld. AR of the assessee raised the legal ground no 8 and submitted that the assessment order dated 22-02-2022 passed by the Ld. AO under section 143(3) r.w.s. 144C (13) of the Act is time barred. He submitted that as per the provisions of section 144C(13) of the Act the Ld. AO should passed the assessment order till 31-01-2022 from the receiving the direction of the Hon’ble DRP, which was received on 14-12- 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:
The information received by the assessee under RTI ACT 2005 is reproduced as under:
The 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 14-12-2021 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 22-02-2022 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 is time barred and liable to be set-a-side.
Respectfully following the judicial pronouncements cited above we allowed the legal ground no 8 raised by the assessee and set-aside the assessment. Since we have decided the legal ground in favour of the assessee, the other grounds have become academic and keep them open for adjudication.
In the result the appeal of the assessee is allowed.
Order pronounced in the open court on 17.4.2026.