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Income Tax Appellate Tribunal, PUNE BENCH “C”, PUNE
Before: SHRI R.S. SYAL & SHRI S.S. VISWANETHRA RAVI
PER R.S.SYAL, VP :
A short but interesting point has been raised in this appeal, which emanates from the final assessment order dated 24.10.2019 passed by the Assessing Officer (AO) u/s. 144C(13) r.w.s. 143(3) of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2015-16.
Succinctly, the factual panorama of the case is that the assessee is a non-resident company having its head office at
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Germany and as such a tax resident of Germany. The assessee has
a global presence in terms of having manufacturing plants,
research and design centres and sales offices etc. throughout the
world. The assessee established two subsidiaries in India, viz.,
EPCOS India Private Limited, Nashik and EPCOS Ferrites
Limited, Kolkata. A return of income was filed declaring total
income of Rs.33,09,92,550/-. The assessee reported certain
international transactions. The AO made a reference to the
Transfer Pricing Officer (TPO) for determining the arm’s length
price (ALP) of the international transactions. Pursuant to the order
passed by the TPO, the AO passed a draft order dated 21.12.2018
determining total income at Rs.33.48 crore by making an addition
of Rs.38,77,566/- on account of `Income from fees for technical
services’. The draft order was admittedly served on the assessee
on 24.12.2018. The assessee filed objections in Form No. 35A
before the Dispute Resolution Panel (DRP) on 24.01.2019. The
DRP, considering the provisions of section 144C(2), opined that
the objections in Form No.35A ought to have filed within 30 days
of receipt of the draft order, which was actually delayed by one
day. The DRP called upon the assessee to submit as to why the
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objections be not dismissed at the threshold as not maintainable.
The assessee raised certain issues urging the DRP to proceed with
the matter after condoning the delay, which bore no fruit.
Eventually, the DRP dismissed the assessee’s objection in limine
as time barred vide its direction dated 27.09.2019. The AO passed
the final assessment order on 24.10.2019 u/s.144C(13) r.w.s.143(3)
of the Act determining the total income at Rs.33.48 crore, being,
the same amount as was determined in the draft order. Aggrieved
thereby, the assessee is in appeal before the Tribunal.
We have heard the rival submissions and gone through the
relevant material on record. Section 144C of the Act with the
marginal note ‘Reference to dispute resolution panel’ provides
through sub-section (1) that the AO, in the first instance, shall
forward a draft of the proposed order of the assessment to the
eligible assessee if he proposes to make any variation in the
income returned. Sub-section (2) of section 144C states that: ‘On
receipt of the draft order, the eligible assessee shall, within thirty
days of the receipt by him of the draft order, - (a) . . . . . . (b) file
his objections, if any, to such variation with, -(i) the Dispute
Resolution Panel; and (ii) the Assessing Officer’. The Income-tax
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(Dispute Resolution Panel) Rules, 2009 lay down the procedure for
filing objections through Rule 4. Sub-rule (1) provides that ‘the
objections, if any, of the eligible assessee to the draft order may be
filed in person or through his agent within the specified period in
Form 35A’. These rules do not spell out any meaning of the term
`specified period’ for filing of Form 35A and as such, the term
takes its genesis from section 144C(2) of the Act. Ergo, it becomes
overt that an assessee, on receipt of the draft order, is obliged to
file objections, if any, to the variation in the income before the
DRP/AO within 30 days of the receipt of the draft order.
Before proceeding further, let us have a quick look at the
following relevant dates of the case under consideration, which are
material for our decision:-
Date of the Draft order 21.12.2018
Date on which Draft order was received by assessee24.12.2018
Date on which objections filed before DRP 24.01.2019
Date of the DRP direction 27.09.2019
Date of the final assessment order u/s 144C(13) 24.10.2019
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As the draft order in this case was admittedly received by the
assessee on 24.12.2018, the period of 30 days for filing Form No.
35A, in terms of sub-section (2) of section 144C, expired on
23.01.2019. As against this, the assessee actually filed Form
No.35A on 24.01.2019, thereby causing a delay of one day in
raising objections against the draft order. The DRP has canvassed
a view that it has no power to condone the delay in as much as
such power is absent in section 144C or Income-tax (DRP) Rules,
2009. The DRP fortified its view in dismissing the objections filed
by the assessee in limine by mainly relying on the judgment of
Hon’ble Bombay High court in CIT Vs. Grasim Industries Ltd.
(2009) 319 ITR 154 (Bom) in which the Hon’ble High Court has
held that it has no power to condone the delay in filing appeal u/s.
260A of the Income-tax Act. Under these circumstances, the moot
question is whether the DRP was justified in not condoning the
delay of one day and consequently dismissing the objections raised
by the assessee at the entry level without delving into their merits.
It is trite that filing of an appeal or an application under any
Act is a right provided by the concerned statute. This right carries
certain obligations including adhering to the time limit prescribed
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in the statute for filing of such an appeal or application. In the
context of the Income-tax Act, 1961, an appeal can be filed before
the CIT(A) within 30 days as prescribed u/s. 249(2) of the Act. In
the same manner, an appeal can be filed before the Tribunal within
60 days as prescribed u/s. 253(3) of the Act and before the Hon’ble
High Court within 120 days as per section 260A(2) of the Act.
Apart from the appeals, an application u/s. 264 for revision can be
filed by the assessee within one year as per section 264(3) of the
Act. In the same manner, certain other time limits have also been
outlined in the Act for moving applications etc. One of such
instances is section 144C(2), which obligates an assessee to file
objections against the draft order before the DRP within 30 days.
Sometimes the relevant statute carves out exceptions by
granting the competent authority/forum a power to entertain an
appeal or application beyond the prescribed period on sufficient
cause. It is in the hue of such an express authorization that the
concerned authority/forum can exercise its discretion and condone
the delay, if satisfied with the reasonableness of the cause in late
presentation. Although section 249(2) of the Act requires the
filing of an appeal before the CIT(A) within 30 days, sub-section
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(3) empowers the CIT(A) to admit an appeal after the expiry of the
said period if he is satisfied that the appellant had sufficient cause
for not presenting the appeal within the period.
Similarly albeit section 253(3) requires the filing of an appeal
before the Tribunal within sixty days, sub-section (5) empowers
the Tribunal to admit an appeal after the expiry of the period of
sixty days. As against the power of the Tribunal to admit an
appeal belatedly after the expiry of relevant period in terms of sub-
section (5) of section 253A, no specific provision has been
enshrined empowering the Tribunal to entertain a Miscellaneous
Application u/s. 254(2) of the Act beyond the period of six months
from the end of the month in which the order was passed.
Prior to the insertion of sub-section (2A) of section 260A by
the Finance Act, 2010 with retrospective effect from 01-10.1998,
no specific provision was there in the Act empowering a High
Court to admit an appeal after the expiry of period of 120 days as
referred to in sub-section (2) of section 260A. In the period pre-
insertion of sub-section (2A), there was a cleavage of opinion as to
whether a High Court can condone the delay beyond the period
prescribed in sub-section (2) of section 260A. The full Bench of
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Hon’ble Bombay High Court in CIT Vs. Velingkar Brothers (2007)
289 ITR 382 (Bom.) (FB) observed that sub-section (2) of section
260A does not make section 29(2) of the Limitation Act, 1963
inapplicable and accordingly held that the power to condone delay
in filing appeal must be read to be existent. Thereafter, the Hon’ble
Supreme Court had an occasion to consider this issue in the
context of Excise Act in Commissioner of Central Excise and
Customs Vs. Hongo India (P) Ld. and Another (2009) 223 CTR
225 (SC) in which it held that a High Court has no power to
condone the delay in filing reference applications beyond the
prescribed period. Similar issue once again came up for
consideration before the Hon’ble Bombay High Court in CIT Vs.
Grasim Industries Ltd. (2009) 319 ITR 154 (Bom.) in which the
Revenue sought condonation of delay by relying on the earlier Full
Bench judgment of the Hon’ble Bombay High Court in Velangkar
Brothers (supra). Considering the later judgment of the Hon’ble
Supreme Court in Hongo India (P) Ld. and Another (supra), the
Hon’ble Bombay High court held that the earlier view of the Full
Bench in Velingkar Brothers (supra) was not a good law in view of
the later judgment of the Hon’ble Supreme Court. It is this
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judgment of the Hon’ble Bombay High Court in Grasim Industries
Ltd. (supra) which has been chiefly relied by the DRP in not
condoning the delay. It is the Finance Act, 2010 which has
retrospectively inserted sub-section (2A) to section 260A
permitting the filing of appeal belatedly on showing sufficient
cause. Now with the aid of sub-section (2A) of section 260A, a
High Court has also been empowered to entertain an appeal filed
beyond the period prescribed in section 260A(2) of the Act in case
sufficient cause for the delay is established.
In the same manner, although sub-section (3) of section 264
empowers an assessee to file revision petition within one year,
proviso to sub-section (3) enables the Pr. CIT to accept a revision
application u/s. 264 beyond the prescribed period if he is satisfied
that the assessee was prevented by sufficient cause from making an
application within that period.
It follows from the above discussion that whenever the
parliament intended to empower the competent authority/forum to
condone the delay and accept an appeal or an application beyond
the stipulated time, it expressly stated so by inserting a specific
provision in the Act. In the absence of such an enabling provision,
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no competent authority/forum can usurp the statutory power and
bestow upon itself the power to condone the delay. The fortiori is
that any application moved after the prescribed period, in the
absence of an express provision in this regard, is liable to be
dismissed as time barred.
Section 144C(2) of the Act provides a period of 30 days for
filing of objections before the DRP. Unlike certain other
provisions empowering the respective competent
authorities/forums to condone the delay, no empowerment has
been endowed upon the DRP to condone the delay and accept
Form No. 35A beyond the prescribed period of 30 days. Sub-
section (2) of section 144C not only uses the word ‘shall’ requiring
the assessee to file objections before the DRP within 30 days but
also does not contain any provision authorizing the DRP to
condone the delay. In the absence of such an express power to
condone the delay, in our considered opinion the DRP rightly held
itself to be incompetent to condone the delay.
One needs to appreciate that either the power to condone the
delay exists or does not exist. It cannot be a hybrid situation in the
sense of conferring a bridled power of condoning the delay in
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favour of the competent authority/forum so that the delay may be
condoned if it is up to a specific length of time. We have noted
above that sub-section (2) obligates an assessee to file objections
against the draft order in Form No. 35A within a period of thirty
days. Sub-section (12) of section 144C places an embargo of
limitation on the DRP not to issue any direction u/s. 144C(5) after
nine months from the end of the month in which the draft order is
forwarded to the eligible assessee. If we accept the contention of
the assessee that the DRP was empowered to condone the delay of
one day in filing objections and countenance the same, there may
be a case in which such a delay is for one year instead of one day
and such a delay may also be on a sufficient cause. The logic is
that if delay of one day can be condoned on sufficient cause then
there can be no reason for not condoning the delay of one year
equally on sufficient cause. If such a hypothetical delay of one year
is allowed to be condoned, the DRP will run out of time to issue
direction under sub-section (5) within a period of nine months
from the end of the month in which the draft order is forwarded to
the eligible assessee in terms of section 144C(12) of the Act. It is
in view of such inter-weaving of the time limits that the legislature
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did not confer any power on the DRP to condone the delay in
accepting the objections from the assessee beyond the prescribed
period. The sequitur is that in the absence of any express provision,
non-condonation of delay by the DRP in the facts of the extant
case has to be held as perfectly justified. We, ergo, approve the
action of the DRP in this regard.
There is another facet of the case. Once it is held that filing of
objections by the assessee beyond the period of thirty days is
barred by limitation and hence inconsequential, it must also meet
the resultant effects as well.
The scheme of the relevant provisions in this regard is that
when the AO makes a reference to the TPO, the latter passes an
order u/s. 92CA(3) of the Act. On receipt of the order from the
TPO, the AO passes a draft order u/s. 144C(1). If dissatisfied with
the draft order, the assessee has an option to either approach the
DRP route by filing objections before the DRP or choose the
appellate recourse by filing an appeal before the CIT(A). If an
assessee opts to be governed by the procedure enshrined for the
DRP reference, then the DRP is supposed to issue directions within
nine months from the end of the month in which the draft order is
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forwarded to the eligible assessee as per sub-section (12) of section
144C. Sub-section (13) provides that upon a receipt of the
direction in sub-section (5), the AO shall complete assessment
within one month from the end of the month in which such a
direction is received. At this juncture, it is significant to have a
glance at the mandate of sub-section (3) of section 144C, which
runs as under :-
`The Assessing Officer shall complete the assessment on the basis of the draft order, if— (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2).’
The crux of section 144C(3) in so far as clause (a) is
concerned is that if an assessee accepts the variation as per the
draft order, then there is no need to sail through the DRP or the
appellate route. In that scenario, the AO, in terms of section
144C(4)(a), will be required to complete the assessment on the
basis of the draft order within a period of one month from the end
of the month in which the acceptance is received. Clause (b) of
section 144C(3) deals with a situation of completing the
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assessment on the basis of the draft order in a case in which no
objections are received within the period specified in sub-section
(2). In the latter situation, clause (b) of section 144C(4) provides
that the AO will pass the assessment order within one month from
the end of the month in which the period of filing the objections
under sub-section (2), expires. It means that if an assessee does not
file objections against the draft order before the DRP within a
period of thirty days as per sub-section (2), the AO, without
waiting for anything else, will have to complete the assessment
within one month from the end of the month in which the period of
filing of objections under sub-section (2) expires. The DRP
dismissed the objections of the assessee in limine by opining that
the assessee could not have filed objections outside the time limit
provided under sub-section (2) of section 144C. The net effect of
the order of the DRP is that the objections filed by the assessee
were time barred and hence no cognizance could have been taken
of them. Once the objections filed by the assessee are time barred,
the natural corollary is that no valid objections were filed by the
assessee. One cannot contemplate a situation that the objections are
invalid for the DRP so as not to issue any direction u/s 144C(5)
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and valid for the AO so as to pass order u/s 144C(13) of the Act. If
the objections are invalid as time barred having not been filed
within the time prescribed under sub-section (2) of section 1444C,
the AO will have to act in terms of Section 144C(3)(b) and
complete the assessment within the time prescribed u/s 144C(4)(b)
of the Act, namely, within one month from the end of the month in
which the period of filing of objections under sub-section (2)
expires.
Adverting to the facts of the instant case, it is found that, the
period of 30 days for filing objections within sub-section (2) of
section 144C expired on 23.01.2019. Going by the mandate of sub-
section (3) of section 144C(3)/144C(4), the AO was supposed to
complete the assessment on the basis of the draft order by
February, 2019. As against this, the AO actually completed the
assessment u/s. 144C(13) on 24.10.2019. Such a completion of
assessment not only under the wrong provision but also beyond the
limitation period is ultra vires and hence cannot stand. We declare
the assessment order to be time barred and ex consequenti null and
void, with the effect that the returned income will automatically get
accepted as finally assessed income.
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In the result, the appeal is allowed.
Order pronounced in the Open Court on 26th February,
2020.
Sd/- Sd/- (S.S. VISWANETHRA RAVI) (R.S.SYAL) JUDICIAL MEMBER VICE PRESIDENT
पुणे Pune; �दनांक Dated : 26th February, 2020 सतीश
आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत/Copy of the Order is forwarded to: आदेश क� क� �ितिलिप �ितिलिप अ�ेिषत अ�ेिषत आदेश आदेश अपीलाथ� / The Appellant; 1. ��यथ� / The Respondent; 2. 3. The CIT(A)-13, Pune 4. The Pr. CIT -5, Pune िवभागीय �ितिनिध, आयकर अपीलीय अिधकरण, पुणे 5. “सी” / DR ‘C’, ITAT, Pune गाड� फाईल / Guard file 6. आदेशानुसार आदेशानुसार आदेशानुसार/ BY ORDER, आदेशानुसार // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune
ITA No.1810/PUN/2019 TDK Electronics AG
Date 1. Draft dictated on 24-02-2020 Sr.PS 2. Draft placed before author 25-02-2020 Sr.PS 3. Draft proposed & placed JM before the second member 4. Draft discussed/approved JM by Second Member. 5. Approved Draft comes to Sr.PS the Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *