JOINT COMMISSIONER OF INCOME TAX (OSD), I/C. DY. COMMISSIONER OF INCOME TAX, CIRCLE-1(1)(1), MUMBAI vs. ANHEUSER BUSCH INBEV INDIA LIMITED, MUMBAI

The brief facts of the case are that the assessee company filed its return of income for the Assessment Year 2017-18 declaring Nil income (loss). During the course of assessment proceedings, the Assessing Officer observed that since the assessee had entered into international transactions with its Associated Enterprises (AEs), he made a reference to the Transfer Pricing Officer under section 92CA(1) of the Act. The Transfer Pricing Officer made certain transfer pricing adjustments amounting to ₹31,87,57,992/-. Based on the order of the Transfer Pricing Officer, the Assessing Officer passed a draft assessment order under section 144C(1) of the Act making various transfer pricing adjustments, towards disallowance of management fees, commission paid for procurement of raw materials, adjustment with respect to production, distribution and commercialisation of Miller branded products while also sustaining the adjustment made under section 143(1) of the Act relating to contribution to gratuity fund under section 43B of the Act. The assessee, vide letter dated 07.10.2021 informed the Assessing Officer that it did not intend to file objections before the Dispute Resolution Panel and wanted to pursue the normal remedy before the Commissioner of Income-tax (Appeals). Thereafter, the the Assessing Officer passed the final assessment order under section 143(3) read with sections 144C(3) and 144B of the Act dated 12.03.2022 assessing the total income at ₹31,87,57,992/-.

The assessee filed appeal before the CIT(Appeals) and contended that the final assessment order had been passed beyond the limitation prescribed under section 144C(4) of the Act and was, therefore, barred by limitation. The CIT(Appeals) examined the statutory scheme contained in section 144C and the chronology of events. The CIT(Appeals) observed that the assessee had informed the Assessing Officer that it would not file objections before the Dispute Resolution Panel and this fact had also been acknowledged by the Assessing Officer while passing the final assessment order. The CIT(Appeals) further noted that the assessee had also specifically informed the Department that the limitation for passing the final assessment order had expired on 30.11.2021. According to the CIT(Appeals), once the assessee had either communicated its acceptance of the draft assessment order or had not filed objections before the Dispute Resolution Panel within the prescribed period, section 144C(4) mandatory requires the Assessing Officer to pass the final assessment order within one month from the end of the month in which the period for filing objections expired. The CIT(Appeals) observed that although the Assessing Officer had passed the draft assessment order on 30.09.2021 and the statutory time limit expired on 30.11.2021, the final assessment order was passed only on 12.03.2022, which was well beyond the period prescribed under the Act. The CIT(Appeals) held that the time limit prescribed under section 144C of the Act is mandatory in nature and assessment order passed beyond such statutory period is void and without jurisdiction. The CIT(Appeals) further held that violation of section 144C is a jurisdictional defect which cannot be cured under section 292B of the Act. Accordingly, the CIT(Appeals) held that the assessment order dated 12.03.2022 was barred by limitation and liable to be quashed.

The Revenue is in appeal before us against the order passed by the CIT(Appeals) holding that the assessment order passed under section 143(3) read with section 144C(3) of the Act was barred by limitation and consequently quashing the assessment order.

We have heard the rival contentions and perused the material available on record.

Before examining the rival submissions, it would be useful to refer to the statutory scheme contained in section 144C of the Act. Section 144C was introduced by the Finance (No. 2) Act, 2009 with effect from 01.10.2009 with the object of providing an alternate dispute resolution mechanism in cases relating to eligible assessees. The provisions prescribe a complete code governing the procedure to be followed by the Assessing Officer from the stage of passing of the draft assessment order till the passing of the final assessment order.

It would be useful to reproduce the relevant statutory provisions of section 144C of the Act:

In light of the aforesaid statutory framework, let us now examine the chronology of events in the present to see whether the assessment order dated 12.03.2022 satisfies the mandatory requirement contained in section 144C(4) of the Act. Thereafter, we shall examine the judicial precedents on the subject all of which have consistently held that the limitation prescribed under section 144C is mandatory and that any assessment order passed beyond the prescribed period is void and liable to be quashed.

In the present case, the draft assessment order was passed on 30.09.2021. The assessee, by its letter dated 07.10.2021, informed the Assessing Officer that it was not filing objections before the Dispute Resolution Panel. Even otherwise, the statutory period of thirty days under section 144C(2) of the Act for filing objections before DRP expired during October, 2021. Consequently, in terms of section 144C(4), the Assessing Officer was statutorily obliged to pass the final assessment order within one month from the end of October, 2021, i.e., on or before 30.11.2021. However, the final assessment order was passed by the Assessing Officer only on 12.03.2022, which is more than three months after the expiry of the statutory period prescribed under section 144C(4). The factual position in this regard is undisputed.

We find that the learned CIT(Appeals) has examined the aforesaid chronology in the light of the statutory provisions and has rightly concluded that the assessment order was barred by limitation. Once the assessee had exercised its option not to approach the Dispute Resolution Panel, the Assessing Officer did not have any discretion to postpone the passing of the final assessment order nor was he vested with any authority to increase the limitation prescribed under section 144C(4) of the Act. The limitation contained therein being mandatory, the jurisdiction of the Assessing Officer to frame the assessment came to an end upon expiry of the prescribed period.

We are of the considered view that learned CIT(Appeals) has correctly held that that the limitation prescribed under section 144C of the Act is jurisdictional in nature. The expression "shall" used in section 144C(4) of the Act, coupled with the overriding non obstante clause, show that the legislative intent is that the final assessment order must be passed within the prescribed period. An assessment order passed beyond such period is without jurisdiction.

Applying the aforesaid settled principles to the facts of the present case, we are of the considered view that the final assessment order dated 12.03.2022 was passed beyond the statutory period prescribed under section 144C(4) of the Act. The learned CIT(Appeals), in our considered opinion, has correctly appreciated both the statutory provisions and the settled legal position while holding that the impugned assessment order is barred by limitation. We, therefore, find no infirmity in the order passed by the learned CIT(Appeals) so as to call for any interference.

In the result, appeal of the Department is dismissed.