INVESCO(INDIA) PRIVATE LIMITED,HYDERABAD vs. ITO WARD-12(1), HYDERABAD

Succinctly stated, the assessee company, which is engaged in the business of computer and related services, including software development and other IT- enabled services, filed its return of income for AY 2018-19 on 28.11.2018, 4 declaring an income of Rs. Nil under the normal provisions of the Act and “book loss” of (-) Rs. 7,26,30,847/- under the provisions of Section 115JB of the Act. Subsequently, the assessee company's case was selected for scrutiny assessment under the Computer Aided Scrutiny Selection (CASS).

During the course of assessment proceedings, the AO, on perusal of Form 3CEB, observed that the assessee company had entered into international transactions with its Associated Enterprises (AEs) aggregating to Rs. 304,46,09,674/-. The AO, after obtaining approval of the Principal Commissioner of Income Tax (for short, “PCIT”), made a reference under Section 92CA(1) of the Act on 12.01.2021 to the Deputy Commissioner of Income Tax, Transfer Pricing, Hyderabad (for short, “the TPO”), for determination of the Arm’s Length Price (ALP) of the international transactions of the assessee company.

The TPO, vide his order passed under Section 92CA(3) of the Act dated 31.07.2021, proposed an adjustment of Rs. 67,96,21,139/- to the ALP of the international transactions of the assessee company, as under:

Thereafter, the AO passed a draft assessment order under Section 143(3) r.w Section 144C of the Act dated 10.09.2021, wherein he proposed certain adjustments/disallowance to the returned income of the assessee company, viz. (i). transfer Pricing adjustment in respect of the international transactions relating to sale of products and services to its AEs: Rs. 67,96,21,139/-; and (ii). disallowance of the assessee’s claim for depreciation on goodwill: Rs. 2,64,80,655/-.

Accordingly, the AO, vide his draft assessment order passed under Section 143(3) r.w Section 144C of the Act dated 10.09.2021, proposed to assess the income of the assessee company at Rs. 94,47,38,650/-.

The assessee company filed its objections before the Dispute Resolution Panel-1, Bangalore (for short, “the DRP”). The DRP, vide its order passed under Section 144C(5) of the Act dated 14.06.2022, issued directions to the AO, which, for better understanding, read along with the adjustments made by the TPO, are tabulated as under:

Thereafter, the AO passed the final assessment order under Section 143(3) r.w Section 144C(13) of the Act dated 29.07.2022. The AO, after giving effect to the DRP's directions, determined the assessee company's income at Rs. 12,46,07,318/-.

Aggrieved by the final assessment order, the assessee company has carried the matter in appeal before us. 10. We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them to drive home their respective contentions.

Shri Sriram Seshadri, CA, Ld. Authorised Representative (for short, “Ld. AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that the impugned order passed by the AO under Section 143(3) r.w Section 144C(13) of the Act dated 29.07.2022 was passed after the expiry of the prescribed period of limitation, which expired on 31.07.2022, and therefore, the same is barred by limitation, void ab initio and liable to be quashed.

Elaborating on his aforesaid contention, the Ld. AR submitted that an assessment order can be said to have been validly passed only when such order determining the assessed income, tax liability and demand is duly issued under the signature of the AO. It was submitted that the AO had initially passed a draft assessment order dated 10.09.2021 under Section 144C(1) of the Act. The Ld. AR submitted that as the assessee company had not agreed with the proposed variations, it filed objections before the DRP-1, Bangalore, which disposed of the same vide its directions dated 14.06.2022 issued under Section 144C(5) of the Act.

Carrying his contention further, the Ld. AR submitted that the DRP directions, bearing Document No. ITBA/DRP/M/144C(5)/2022- 23/1043449579(1) was uploaded on the ITBA portal on 15.06.2022. It was submitted that an intimation letter bearing No. ITBA/DRP/S/91/2022- 23/1043449646(1) was also generated in this regard. Subsequently, physical copies of the said DRP directions, along with the intimation letter, were forwarded to the National Faceless Assessment Center (NaFAC) and the jurisdictional Assessing Officer (JAO), i.e., the Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad, on the same date.

The Ld. AR, in support of his aforesaid factual contention, had drawn our attention to Annexure 1/Page 4 of his “Synopsis”, which is a letter dated 16.03.2023 issued by the DRP, wherein it was confirmed that the physical copy of the DRP directions was sent to NaFAC on 15.06.2022 through Speed Post bearing Acknowledgment No. EK7223806191IN. It was further stated that the physical copies of the DRP directions were forwarded to the jurisdictional AO, TPO and Additional CIT on 15.06.2022 by the office of DRP-1, Bengaluru.

The Ld. AR submitted that, as per Section 144C(13) of the Act, the final assessment order is required to be passed within one month from the end of the month in which the directions issued by the DRP are received by the AO. Elaborating further on his contention, the Ld. AR submitted that since the DRP directions were received by the AO on 15.06.2022, the period of limitation for passing the final assessment order as per Section 144C(13) of the Act expired on 31.07.2022. 16. The Ld. AR submitted that, in the present case, the final assessment order passed under Section 143(3) r.w Section 144C(13) of the Act, along with the computation sheet and demand notice, dated 29.07.2022, were forwarded by the Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad, to the email account of the assessee company, viz., “Nishant.Mohta@invesco.com”, on 03.08.2022 at 05:43 PM. The Ld. AR, in order to buttress the aforesaid factual contention, had drawn our attention to Annexure 2/Page 7 of the synopsis, which is an email titled “[Invesco India Private Limited – AY 2018-19 – Reg]”, which revealed that the impugned assessment order for AY 2018-19 was forwarded by the Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad, to the email account of the assessee company, viz., “Nishant.Mohta@invesco.com”, on 03.08.2022 at 05:43 PM. The Ld. AR further submitted that neither of the documents, viz., final assessment order, computation sheet and demand notice, which were served on the email account of the assessee company, viz., “Nishant.Mohta@Invesco.com”, on 03.08.2022 at 05:43 PM, contained a digital signature and that the same were manually signed by the AO. The Ld. AR, to support his aforesaid contention, had taken us through the assessment order (Page 13), computation sheet (Page 06) and demand notice (Page 01), placed at Page Nos. 20, 26 and 27 of the appeal set. Accordingly, the Ld. AR submitted that the assessment order was not passed within the prescribed period of limitation and was therefore barred by limitation. 17. Carrying his contention further, the Ld. AR submitted that the aforesaid documents/order viz. (i). Final assessment order dated 29.07.2022, bearing DIN ITBA/AST/S/143(3)/2022-23/1044405149(1); (ii) Computation sheet dated 29.07.2022, bearing DIN ITBA/AST/S/186/2022-23/1044405166(1); and (iii) Demand notice dated 29.07.2022, bearing DIN ITBA/AST/S/156/2022- 23/1044405158(1), all dated 29.07.2022, were generated/issued on the ITBA portal without a digital signature on 01.08.2022 at 07:50:05 PM. Also, he submitted that the aforesaid documents, as reflected on the e-Proceedings portal account of the assessee company, revealed that none of the said documents/orders bore either the digital or the manual signature of the AO.

The Ld. AR, to fortify his aforesaid contention that the final order of assessment was barred by limitation, had drawn our attention to Annexure 4/Page 11 of the synopsis, which revealed that, as per the document properties, the final assessment order (impugned order) was created on 01.08.2022 at 07:50:05 PM. The Ld. AR further drew our attention to Annexure 5/Page 12 of the synopsis, which is a screenshot of the e-Proceedings portal, revealing that the date of 10 generation/issuance of the final assessment order was 01.08.2022. The Ld. AR further took us through the aforesaid documents/order and submitted that a perusal of the impugned final assessment order and the other documents reflected in the e-Proceedings section of the Income Tax e-Filing portal of the assessee company revealed that none of the documents bore either the digital signature or the manual signature of the AO. 19. The Ld. AR, based on the aforesaid facts, submitted that the final assessment order could not be regarded as having been validly passed on 29.07.2022. According to him, the documents were generated/issued on the ITBA portal only on 01.08.2022, which was beyond the prescribed limitation period. Accordingly, the assessment order was barred by limitation, void ab initio and invalid.

Further, the Ld. AR took us through Annexure 6/Page 14 of the synopsis, which is a screenshot of the e-Filing portal showing the date of closure of the assessment proceedings for AY 2018-19, indicating they were closed on 01.08.2022.

Elaborating further on his contention, the Ld. AR submitted that the final assessment order, computation sheet, and demand notice were served upon the assessee company after being manually signed by the AO on 03.08.2022, and were received by the assessee company at 05:43 PM via email. It was further submitted by him that all the aforesaid documents were generated on 01.08.2022 on the ITBA portal without digital signatures and were subsequently modified by the AO on 03.08.2022 at 03:52:36 PM by affixing manual signatures to the last page of each document. It was submitted that the said modified documents, bearing the AO's manual signatures, were thereafter served upon the assessee company by email on 03.08.2022 at 05:43 PM. The Ld. AR, to buttress his contention, had drawn our attention to Annexure 7/Page 16 of the synopsis, which revealed that the impugned final assessment order was modified on 03.08.2022 at 03:52:36 PM. Reiterating his contention, the Ld. AR submitted that the final assessment order served upon the assessee company on 03.08.2022 cannot be considered to have been passed within the prescribed limitation period, i.e., on or before 31.07.2022, since the said order was entered in the ITBA system only after the expiry of the prescribed period.

The Ld. AR submitted that since the final assessment order itself was neither complete nor generated on or before 31.07.2022, there was no question of the said order having been validly signed by the AO within the prescribed period of limitation.

Alternatively, the Ld. AR submitted that the unsigned order, as reflected on the e-Proceedings portal, as well as the manually signed order served upon the assessee company, were issued under the Act without jurisdiction and were void ab initio. The Ld. AR, to buttress his contention that any notice, order or other document issued by an income-tax authority ought to be signed by such authority in order to constitute a legally valid and binding document, relied upon the judgment of the Hon’ble Supreme Court in the case of CIT Vs. Kilasho Devi Burman (1996) 219 ITR 214 (SC). Also, reliance was placed upon the judgment of the Hon’ble High Court of Bombay in the case of Prakash Krisnavtar Bhardwaj Vs. ITO, Ward 2(1), Thane (2023) 451 ITR 27 (Bom.), wherein the High Court has held that a notice issued under Section 148 of the Act without the signature of the AO would render the notice invalid under the provisions of the Act and, consequently, the AO would have no jurisdiction or authority to reassess the case of the assessee. It was further observed that absence of the signature on the notice could not be considered to be a mistake or error curable under Section 292B of the Act. Apart from the aforesaid judicial pronouncements, the Ld. AR placed reliance upon CBDT Instruction No. 01 of 2018 dated 12.02.2018, which mandates that all orders, communications, notices, etc., issued by the Income Tax Authority to the assessee through the e-Proceedings facility are required to be digitally signed by the AO. The Ld. AR also relied upon the judgment of the Hon’ble High Court of Karnataka in the case of Toyota Tsusho India Pvt. Ltd. Vs. Dy. CIT (TP) (2024) 468 ITR 29 (Karnataka), wherein it was concluded that affixing the digital signature of the TPO to the transfer pricing order is an essential and mandatory requirement under the provisions of the Act, failing which the order of the TPO would be rendered invalid, illegal and non-est in the eyes of law. The Ld. AR submitted that the Hon’ble High Court had consequently quashed the draft assessment order issued pursuant to such illegal and invalid transfer pricing order.

Based on his aforesaid submissions, the Ld. AR contended as under:

Accordingly, the Ld. AR submitted that since the final assessment order passed by the AO was beyond the time limit contemplated under Section 144C(13) of the Act, the assessment could not be sustained and was liable to be quashed.

Per contra, Smt. Seema Meena, the Ld. CIT-Departmental Representative (for short, “CIT-DR”), pursuant to the directions of the Tribunal, obtained a report from the Deputy Commissioner of Income Tax, Circle 2(1), Hyderabad (through proper channel), dated 25.03.2026 (copy placed on record), wherein it was, inter alia, stated as under:

Although the AO’s report stated that the sequence of events mentioned by the assessee company was not entirely correct, with the year having been incorrectly mentioned as 2023 instead of 2022 at Serial No. 227 of the synopsis, it is nevertheless admitted by him that the creation/modification of the unsigned copy of the final assessment order was carried out on 01.08.2022 at 07:50:05 PM. It is also admitted that the assessment proceedings, as per the Income Tax e-Filing portal, were closed on 01.08.2022.

The Ld. CIT-DR, however, submitted that as the assessment order bears the date 29.07.2022, therefore, the assessment should be treated as having been completed within the prescribed period. It was submitted that the subsequent uploading/service of the order should not invalidate the assessment, particularly when the order itself bears a date prior to the expiry of limitation.

We have heard the Ld. Authorized Representatives of both parties, perused the orders of the authorities below and the material available on record, as well as considered the judicial pronouncements pressed into service by them to drive home their respective contentions.

The controversy involved in the present appeal lies in a narrow compass, i.e., whether the impugned final assessment order can be said to have been validly completed within the period prescribed under section 144C(13) of the Act?

We find that Section 144C(13) of the Act, as applicable to the assessment year under consideration, provides that upon receipt of the directions issued by the DRP under section 144C(5), the AO shall, in conformity with such directions, complete the assessment within one month from the end of the month in which such directions are received. For the sake of clarity, we deem it apposite to cull out Section 144C(13) of the Act, as under:

As observed by us hereinabove, there is no dispute that the DRP directions were issued on 14.06.2022 and were uploaded/forwarded to the concerned authorities on 15.06.2022. The assessee has also placed on record a confirmation 16 from the office of the DRP-1, Benagulru, regarding the forwarding of the directions to NaFAC and the jurisdictional AO on 15.06.2022. Thus, the period prescribed under section 144C(13) expired on 31.07.2022.

We find that the crucial question, therefore, is whether the final assessment order can be regarded as having been “completed” on 29.07.2022 merely because that date is mentioned on the order. In our considered view, the same is to be answered in the negative. We say so, for the reason that it is well settled that an assessment order is not brought into existence merely by assigning a date to an unsigned document. The Hon'ble Supreme Court in Kalyan Kumar Ray v. CIT (1991) 191 ITR 634 (SC), while considering the requirement of an order within the prescribed period, held that there must be some writing, initialed or signed by the Income-tax Officer, before expiry of the period of limitation, in which the tax payable is determined. The principle emerging from the said decision is that the statutory act of assessment must be completed within the prescribed period and cannot be established merely by reference to an undated or unsigned working document. The aforesaid principle has subsequently been applied by the ITAT, Mumbai in the context of electronic assessments in its order passed in the case of Bennett Coleman & Co. Ltd. v. NFAC, ITA Nos. 1387 & 1520/Mum/2023, dated 30.09.2024. The Tribunal, in its order, observed that an assessment order bearing an earlier date but digitally signed only after the expiry of limitation has no legal value, and that signing the assessment order is an integral part of completing an e-assessment. The Tribunal accordingly held that the assessment was barred by limitation. Also, the Tribunal in Reuters Asia Pacific Ltd. v. DCIT, [2023] 157 taxmann.com 705 (Mumbai-Trib.), has held that signing of an assessment order is a mandatory requirement and not merely a procedural formality, and that the date of signature is material for determining the date of passing of the assessment order.

Coming to the facts of the present case before us, we find that the factual position is even clearer as the Revenue itself has furnished a report admitting that:

In our view, on applying the aforesaid principle to the facts involved in the case before us, the impugned final assessment order cannot be said to have been completed on or before 31.07.2022. On the contrary, the first electronic record relied upon by the Revenue itself shows creation/modification of the unsigned order on 01.08.2022, followed by manual authentication on 03.08.2022. We are also unable to accept the Ld. DR’s contention that the assessment should nevertheless be treated as having been completed on 29.07.2022 merely because the order bears that date, because such an approach would effectively permit the statutory period of limitation to be defeated by assigning an earlier date to an order which was not actually completed or authenticated until after the expiry of limitation. We say so, for the reason that the requirement of limitation is a statutory safeguard and has to be given effect in its true spirit. Once the statute prescribes a definite outer limit for completion of the assessment, the Revenue cannot extend such period by relying upon a subsequently generated document bearing an earlier date.

At this stage, we may also note that the present case is not one where there is merely a dispute regarding the date on which an otherwise duly signed order was served upon the assessee company. Rather, the present case concerns the more fundamental question of whether a final assessment order existed at all within the statutory period. As observed by us hereinabove, the material available on record demonstrates that the order was unsigned as on 31.07.2022 and was generated only on 01.08.2022, with manual authentication taking place on 03.08.2022. In our view, where an order is duly made and authenticated within limitation, the question of its subsequent service may stand on a different footing. However, as in the present case before us, where the very act of completion of the assessment took place after the expiry of the limitation period, subsequent service or retrospective mention of an earlier date cannot cure the defect.

We thus, in terms of our aforesaid observations, hold that the final assessment order passed by the AO under Section 143(3) r.w Section 144C(13) of the Act was not validly passed within the period prescribed under Section 144C(13). Accordingly, the impugned assessment order is quashed as being barred by limitation and is rendered non-est in the eyes of law.

As we have quashed the final assessment order passed by the AO under Section 143(3) r.w Section 144C(13) of the Act, dated 29.07.2022 as barred by limitation, we refrain from adverting to and adjudicating the other grounds of appeal, which, thus, are left open.

In the result, the appeal filed by the assessee company is allowed in terms of our aforesaid observations.