TITAN COMPANY LIMITED,KRISHNAGIRI vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-8(1), CHENNAI

आदेश /O R D E R

PER MAHAVIR SINGH, VP:

This appeal by the assessee is arising out of the directions of the Dispute Resolution Panel-2, Bengaluru dated 19.03.2021. The assessment was framed by the Additional/Joint/Deputy/Asst. Commissioner of Income Tax/Income Tax Officer, National e- Assessment Centre, Delhi for the assessment year 2016-17

IT(TP)A No.36/Chny/2021 2 u/s.143(3) r.w.s. 144C(13) r.w.s.144B of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 23.04.2021.

IT(TP)A No.36/Chny/2021 3 these grounds was neither deliberate nor out of negligence for the reason that under identical circumstances, Hon’ble Jurisdictional High Court in its recent judgment in the case of Pfizer Healthcare India (P) Ltd., vs. JCIT, (2021) 433 ITR 28 has decided the legal issue of limitation. Hence, the assessee raised this issue before the Tribunal for the first time. The ld.counsel for the assessee also relied on the admissibility of legal issue in view of the decision of the National Thermal Power Co. Ltd. vs CIT, (1998) 229 ITR 383.

IT(TP)A No.36/Chny/2021 4 6. Before us, the ld.AR for the assessee stated that the order of TPO dated 01.11.2019 passed for assessment year 2016-17 is barred by limitation as it was passed beyond the time period prescribed u/s.92CA(3A) of the Act, which expired on 31.10.2019. The ld.AR stated that even the final assessment order passed by the AO on 23.04.2021 is also consequently barred by limitation as it had been passed beyond the period of limitation as provided u/s.153(1) r.w.s.153(4) of the Act. The ld.AR drew our attention to the dates and events cited before us and all details were available in assessee’s paper-book at the relevant mentioned pages:- Date Date (Verizon Data Services Description (Appellant’s case for AY India Pvt. Ltd., for AY 2016-17) 2016-17) Date of order passed by the 01.11.2019 (Page No.81 of 01.11.2019 (Page No.945 Ld.TPO u/s.92CA(3) PB-1) of PB-III) Date of Draft Order passed 30.12.2019 (Page No.101 30.12.2019 (Page No.945 u/s 144C(1) of PB-1) of PB-III) Date of Filing Objection 28.01.2020 (Page No.872A 29.01.2020 (Page No.945 before the DRP of PB-II) of PB-III) Date of DRP Direction u/s 19.03.2021 (Page No.136 26.03.2021 (Page No.945 144C(5) of PB-I) of PB-III) Date of Final Assessment 23.04.2021 (Page No.159 30.04.2021 (Page No.945 Order of PB-1) of PB-III)

IT(TP)A No.36/Chny/2021 5 that of single judge and also division Bench by observing vide paras 4 to 8 as under:- “4. The first and foremost contention raised by Ld. Sr. Counsel is that the order passed by Ld. TPO on 01.11.2019 is barred by limitation since as per explicit language of Sec.92CA(3A), the order of TPO should have been passed on or before 31.10.2019. Since this order is time barred, the same is null and void / non est. The consequent of the same would be that the assessee would cease to be an eligible assessee u/s 144C(15)(b) and therefore, the machinery of Sec.144C would not be triggered. Ergo, the AO is not required to pass the draft assessment order; DRP would not have any jurisdiction to adjudicate the matter. Consequently, the final assessment order passed on 30.04.2021 would be barred by limitation since in terms of Sec. 153(1), the same should have been passed within a period of 21 months from the end of the relevant assessment year i.e., on or before 31.12.2018. Even considering the extended time period as envisaged u/s 153(4), the last date to make the assessment would be 31.12.2019 whereas final assessment order has been passed on 30.04.2021 which is clearly barred by statutory limitation. For the same, Ld. Sr. Counsel drew support from the decision of Hon’ble High Court of Madras in the case of M/s Roca Bathroom Products Pvt. Ltd. (445 ITR 537) and the decision of Delhi Tribunal in Super Brands Ltd. vs. ADIT (ITA No.3115/Del/2009 & ors. order dated 20.09.2022) wherein it has been held that the provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The time period provided in Sec. 153(1) and 153(4) are for passing the final assessment order and this would include the proceedings before TPO and DRP. The third legal proposition raised by Ld. Sr. Counsel is that the final order passed by Ld. AO is not in line with the binding directions of DRP and therefore the same would be null and void as per the decision of Delhi Tribunal in Olympus Medical Systems Pvt. Ltd. (ITA No.873/Del/2021). On the contrary, Ld. CIT-DR maintained the position that the orders have been passed in consonance with statutory time limit but no contrary decision of any authority could be shown to us. Having heard rival submissions and after due consideration of relevant material on record, our adjudication would be as under. 5. The undisputed fact that emerges is that for AY 2016-17, the order has been passed by Ld. TPO u/s 92CA (3) on 01.11.2019. As per the decision of Hon’ble Single Judge in cited decision of M/s Pfizer Healthcare India Pvt. Ltd. & ors.

IT(TP)A No.36/Chny/2021 6 (supra), this order would be barred by limitation. In this decision, bunch of assessee invoked writ jurisdiction of Hon’ble Court on the ground that the order passed u/s 92CA(3) was barred by limitation by one day. It was noted that in terms of Sec.92CA(3A), an order has to be passed by TPO before 60 days prior to the last day on which the period of limitation referred to in Sec.153 for making assessment expires. The assessment is to be completed within 21 months from end of assessment year in which the income was first assessable. Therefore. Counting from 31.03.2017, the assessment was to be framed on or before 31.12.2019. The period of 60 days prior thereto would run till 01.11.2019 and any date prior thereto would mean 31st of October or before. Since the order was passed on 01.11.2019, the same would be barred by limitation. The relevant observations were as under: -

“19. The revenue relies on the amendment to Section 92CA(4) which requires the Assessing Officer to compute total income of an assessee after receipt of the transfer pricing order. Prior to 01.06.2007, it was mandatory for the Assessing Authority to accept the ALP determined by the TPO and the phrase used in the provision was ‘having regard to’. Post amendment, the provision made it compulsory for the Assessing Authority to adopt the ALP as determined by the TPO and the phrase ‘having regard to’ was replaced by the phrase ‘in conformity with’. Thus, according to the revenue, the AO hardly need apply his mind with respect to the ALP determined and the prescription of 60 days is merely for internal convenience of the different officers to facilitate step by step completion of assessment. 20. Much has been stated about the use of the words in the computation itself, such as ‘may’, ‘shall’, the absence of reference to ‘month’ as it may have led to an ambiguity of whether the period should be reckoned as 30 or 31 days and the absence of the phrase ‘no order shall be made’ as used in Section 153. This, according to the revenue, leads to the conclusion that there is nothing sacrosanct about the period of 60 days which must be construed as flexible. 21. On the question of alternate remedy, I see no reason to relegate the petitioners to the Assessing Authority for completion of draft assessment that may be challenged before the DRP. Limitation, which is the issue raised in these writ petitions, is a mixed question of law and facts, but there are no disputes on factual aspects in the present case. The writ petitions are thus, held to be maintainable. 22. Limitation has been prescribed for each stage/process in an assessment, commencing with the filing of a return, transfer pricing proceedings under Section 92, filing of objections to draft assessment order in terms of Section 144C(2), passing of final order of assessment

IT(TP)A No.36/Chny/2021 7 after expiry of the period for filing of objections in terms of Section 144C(4), issuance of directions by the DRP in terms of Section 144C(12) and passing of final assessment order after receipt of directions from the DRP in terms of Section 144C(13). An assessment involving issues of transfer pricing is thus measured by limitation at every step. 23. On the question of interpretation of the language employed in the provisions, the following judgements of the Supreme Court settle the position that one should not proceed blindly on the basis of the words/phrases employed in Statute, whether ‘may’, ‘shall’, ‘no order shall be passed’ or ‘within’ and the scheme of assessment in entirety as well as the intention of Legislature qua that scheme of assessment must be taken into account.”

Drawing support from various judicial precedents, it was finally held by Hon’ble Court as under: -

29.The provisions of Section 144C prescribe mandatory time limits both pre and post the stage of passing of a transfer pricing order. Assessments involving transfer pricing issues are different and distinct from regular assessments and the intention of Legislature is to fast track such assessments. Bearing in mind the specialized nature of such assessments, a separate set of Officers attend to the framing of assessments and the DRP has been constituted for redressal of disputes involving TP issues, in a timely fashion. In this scheme of things, I am unable to accept the submission that the period of 60 days stipulated for passing of an order of transfer pricing, is only directory or a rough and ready guideline. This argument is rejected. 30. Now, coming to the question of how the 60 day period is to be computed, the critical question would be whether the period of 60 days would be computed including the 31st of December or excluding it. Section 153 states that no order of assessment shall be made at any time after the expiry of 21 months from the end of the assessment year in which the income was first assessable. The submission of the revenue is to the effect that limitation expires only on 12 a m of 01.01.2020. However, this would mean that an order of assessment can be passed at 12 a m on 01.01.2020, whereas, in my view, such an order would be held to be barred by limitation as proceedings for assessment should be completed before 11.59.59 of 31.12.2019. The period of 21 months therefore, expires on 31.12.2019 that must stand excluded since Section 92CA(3A) states ’before 60 days prior to the date on which the period of limitation referred to Section 153 expires’. Excluding 31.12.2019, the period of 60 days would expire on 01.11.2019 and the transfer pricing orders thus ought to have been passed on 31.10.2019 or any date prior thereto. Incidentally, the Board, in the Central Action Plan also indicates

IT(TP)A No.36/Chny/2021 8 the date by which the Transfer Pricing orders are to be passed as 31.10.2019. The impugned orders are thus, held to be barred by limitation. It has been pointed out that the present assessee was also a party to this litigation. Since at that stage, the draft assessment order was under challenge by assessee before Ld. DRP, it was directed by Hon’ble Court that the petitioner would pursue the remedy opted by them. 6. The revenue’s writ appeals against this decision came up for hearing before Division Bench of Hon’ble Court which was disposedoff on 31.03.2022 wherein the writ appeals were dismissed and the adjudication of Ld. Judge was confirmed. With respect to assessee, the revenue preferred similar WA No.2051 of 2021 which was disposed-off on 16.09.2021 wherein it was held that since the assessee chose to avail alternative provided under the Act by approaching DRP, it would be open for the assessee to canvass all legal and factual issues before Tribunal before which the appeal was pending at that stage. 7. The assessee raised similar legal plea before Ld. DRP who held that the intention was never to make this time limit of 60 days mandatory since the expression used in Sec. 92CA(3A) is “may” in contrast to “shall” as used in Sec. 92CA(4). The word “may” could not be read as “shall” and therefore, the time period was not mandatory. It was further observed by Ld. DRP that the department has not accepted the ruling and preferred Writ Appeals with the division bench and therefore, to keep the matter alive, the objection raised by the assessee were dismissed. Aggrieved, the assessee is in further appeal before us. 8. The undisputed position that emerges is that now the division bench has dismissed the Writ appeals of the revenue and confirmed the adjudication of Hon’ble Single Judge. Accordingly, the legal plea as raised by Ld. Sr. Counsel squarely favors the case of the assessee. Therefore, we would hold that considering the statutory time limit, the order passed by Ld. TPO u/s 92CA(3) on 01.11.2019 would be barred by limitation and consequence as mentioned in para4 would follow. In other words, this order would be time barred as a result of which the assessee would cease to be an eligible assessee and therefore, the machinery of Sec.144C would not be triggered. The Ld. AO is not required to pass the draft assessment order; DRP would not have any jurisdiction to adjudicate the matter. Consequently, the final assessment order passed on 30.04.2021 would be barred by limitation since in terms of Sec. 153(1) r.w.s. 153(4), the same should have been passed on or before 31.12.2019. The same is accordingly, liable to be quashed. Accepting first two legal propositions of Ld. Sr. Counsel, we would hold that the assessment would be nullity since it is barred by limitation. Delving

IT(TP)A No.36/Chny/2021 9 into other legal ground as well as entering into the merits of the assessment has been rendered merely academic in nature.”

In view of the above fact situation, we are of the view that not only the TPO’s order is barred by limitation, even the order passed u/s.143(e) of the Act i.e., final assessment order is also barred by limitation. In view of the above, we quash the final assessment order and allow this ground raised by assessee.

Order pronounced in the open court on 14th July, 2023 at Chennai.

Sd/- Sd/- (महावीर �सह ) (मनोज कुमार अ�वाल) (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) उपा�य� /VICE PRESIDENT लेखा सद�य /ACCOUNTANT MEMBER चे�ई/Chennai, �दनांक/Dated, the 14th July, 2023 RSR आदेश क� �ितिलिप अ�ेिषत/Copy to: 1. अपीलाथ�/Appellant 2. ��यथ�/Respondent 3. आयकर आयु� /CIT 4. िवभागीय �ितिनिध/DR 5. गाड� फाईल/GF.