DCIT, CIRCLE - 1 (1),, CHENNAI vs. M/S. AVO CARBON INDIA PVT. LTD, CHENNAI

आदेश /O R D E R

PER MANJUNATHA. G, ACCOUNTANT MEMBER:

This appeal filed by the revenue is directed against the order passed by the learned Commissioner of Income Tax (Appeals)-16, Chennai, dated 26.09.2022 and pertains to assessment year 2016-17.

:-2-: IT(TP)A. No: 75/Chny/2022 2. The revenue has filed the following grounds of appeal: “1. The ld. CIT(A) erred in holding that the order of the TPO cannot be treated to be valid. 2. The ld. CIT(A) erred in holding that the TP adjustment carried out pursuant to order of the TPO cannot be held as valid. 3. The ld. CIT(A) erred in holding that filing of SLP by the Department cannot be a factor that can be considered in taking decision on the matter, particularly in view of the fact that the Supreme Court has admitted the Department’s SLP.”

:-3-: IT(TP)A. No: 75/Chny/2022 has passed draft assessment order u/s. 144C(1) of the Act and sent to the assessee to facilitate filing of objections if any before the Dispute Resolution Panel (DRP). The assessee vide letter dated 03.01.2020 informed the Assessing Officer to prefer an appeal before the CIT(A) instead of filing objections before the DRP. Thereafter, the Assessing Officer passed final assessment order u/s. 143(3) r.w.s. 144C(3) of the Act 06.01.2020 and determined total income at Rs. 19,19,39,279/- by making additions towards TP adjustment as suggested by the TPO.

:-4-: IT(TP)A. No: 75/Chny/2022 order has been passed beyond limitation prescribed u/s. 92CA(3A) of the Act. Being aggrieved by the CIT(A) order, the revenue is in appeal before us.

:-5-: IT(TP)A. No: 75/Chny/2022 regard, he relied upon the decision of ITAT Chennai Benches in the case of M/s. Verizon Data Services India Pvt Ltd vs ITO in ITA 37/Chny/2021 dated 18.11.2022.

:-6-: IT(TP)A. No: 75/Chny/2022 October is beyond limitation as prescribed u/s. 153(4) of the Act. The relevant findings of the Tribunal are as under: 6. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. An undisputed fact that emerges from the records is that for the assessment year 2016-17, the TPO has passed order u/s. 92CA of the Act, on 01.11.2019. As per provisions of section 153(1) & 153(4) of the Act, the period of 60 days prior thereto would run till 01st November, 2019 and any order passed prior to that date would mean 31st October, 2019 or before. Since, the order was passed on 01.11.2019, the same would be barred by limitation, as held by the Hon’ble Madras High Court in the case of M/s. Pfizer Healthcare India Pvt Ltd & ors. (WP Nos. 32688 of 2019 & ors.) order dated 07.09.2020. A similar view has been taken by the coordinate bench of ITAT in the case of M/s. Verizon Data Services India Pvt Ltd (Supra), where the Tribunal by following the decision of Hon’ble Madras High Court in the case of M/s. Pfizer Healthcare India Pvt Ltd & ors. (Supra), held that final assessment order passed after 31st October is beyond limitation as prescribed u/s. 153(4) of the Act. The relevant findings of the Tribunal are 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. (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

:-7-: IT(TP)A. No: 75/Chny/2022 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 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

:-8-: IT(TP)A. No: 75/Chny/2022 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 the date

:-9-: IT(TP)A. No: 75/Chny/2022 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 disposed-off 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 para-4 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

:-10-: IT(TP)A. No: 75/Chny/2022 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 into other legal ground as well as entering into the merits of the assessment has been rendered merely academic in nature.”