M/S TOYOTA TAUSHO INDIA PRIVATE LIMITED vs. DEPUTY COMMISSIONER OF INCOME TAX

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WP/19053/2021HC KarnatakaKAHC01038787202113 February 2024Author: S.R.KRISHNA KUMAR11 pages
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What did the High Court hold?

The High Court held that the impugned Transfer Pricing Order (TPO order) dated July 31, 2021, was illegal and non-est in the eyes of law. The court noted that it was an undisputed fact that the TPO order was not signed digitally or physically/manually on July 31, 2021, as evidenced by the email dated August 2, 2021, which enclosed an unsigned copy. Even the revenue admitted a technical glitch prevented digital signing on that date. The court emphasized that a digitally signed order, in terms of CBDT Circular dated February 12, 2018, read with Section 282A of the Income Tax Act, 1961, was incumbent. The TPO order was physically/manually signed only on August 12, 2021, and uploaded on August 16, 2021, both dates being beyond the limitation period of July 31, 2021. The court concluded that as on the last date of limitation, a legally valid TPO order had not been passed. Therefore, the impugned TPO order and the consequent draft assessment order were quashed.

What were the facts?

The petitioner, M/s Toyota Taisho India Private Limited, received a digitally show cause notice on July 14, 2021, from the Transfer Pricing Officer (TPO) regarding its transfer pricing analysis for Assessment Year 2018-19. The last date for the TPO to pass an order under Section 92CA(3) was July 31, 2021. The petitioner received an unsigned TPO order via email on August 2, 2021, purportedly passed on July 31, 2021. This order was neither digitally nor physically signed and was not available on the ITBA portal. Subsequently, on August 13, 2021, the petitioner received another email enclosing a physically signed TPO order dated July 31, 2021. The unsigned TPO order was uploaded to the ITBA portal on August 16, 2021, after the limitation period and without authentication. Based on this unsigned and allegedly illegal TPO order, a draft assessment order was issued on September 29, 2021, which the petitioner contends violates principles of natural justice.

What were the issues?

1. Whether the Transfer Pricing Officer's order dated July 31, 2021, passed under Section 92CA(3) of the Income Tax Act, 1961, is illegal and non-est in law due to not being digitally or physically signed on the date of its purported passing and upload. Assessee's contentions: The TPO order was not passed on the last date of limitation (July 31, 2021). Even if generated, it was not signed digitally or physically on that date, rendering it illegal, invalid, and barred by limitation. The order was not uploaded on the ITBA portal by the due date. The subsequent signing and uploading were done after the limitation period. The digital/physical signature is a mandatory requirement. Revenue's contentions: The TPO order was passed on July 31, 2021. A technical glitch prevented digital signature. Reminders were issued to send a signed copy. A physically signed copy was provided. The DIN number generation indicates the order was passed. The lack of signature on the upload date does not invalidate the order passed within the limitation period.

Which sections of the Income-tax Act were involved?

Section 92CA(3),Section 282A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 13TH DAY OF FEBRUARY, 2024 BEFORE THE HON'BLE MR JUSTICE S.R.KRISHNA KUMAR WRIT PETITION NO. 19053 OF 2021 (T-IT) BETWEEN:

M/S TOYOTA TAUSHO INDIA PRIVATE LIMITED PLOT NO.33 AND 34, BIDADI INDUSTRIAL AREA RAMANAGARA TALUK, KARNATAKA-562109 REPRESENTED BY ITS GENERAL MANAGER, MR SOUMENDRA KUMAR MAHAPATRA, AGED ABOUT 51 YEARS. …PETITIONER (BY SRI. NAGESHWAR RAO., ADVOCATE FOR SRI. MOHAN MAIYA G L.,ADVOCATE)

AND:

1.

DEPUTY COMMISSIONER OF INCOME TAX (TRANSFER PRICING) CIRCLE 2(2)(2), BMTC BUILDING, 80 FEET ROAD,

BANGALORE – 560 095.

2.

NATIONAL FACELESS ASSESSMENT CENTRE NORTH BLOCK, NEW DELHI-110 001.

3.

DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(1) (1), BANGALORE, BMTC BUILDING, 80 FEET ROAD, BANGALORE-560 095.

4.

PRINCIPAL COMMISSIONER OF INCOME TAX BMTC BUILDING, 5TH FLOOR, 80 FEET ROAD,

BANGALORE-560 095

Digitally signed by VANDANA S Location: High Court of Karnataka

5.

UNION OF INDIA MINISTRY OF FINANCE, THROUGH THE SECRETARY, DEPARTMENT OF REVENUE, ROOM NO.46, NORTH BLOCK, NEW DELHI-110 001. …RESPONDENTS

(BY SRI. RAVI RAJ Y V.,ADVOCATE FOR R-1 TO R-4 SRI. H. SHANTHI BHUSHAN, DSGI FOR R-5)

THIS W.P. IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO QUASH THE IMPUGNED TRANSFER PRICING ORDER DTD.31.7.2021 VIDE ANNEXURE-C UNDER SECTION 92CA(3) IN RELATING TO ASSESSMENT YEAR 2018-19 AND IMPUGNED DRAFT ASSESSMENT ORDER DTD.29.9.2021 VIDE ANNEXURE-N PASSED PURSUANT THERETO AND ETC.

THIS PETITION, COMING ON FOR FURTHER HEARING THIS DAY, THE COURT MADE THE FOLLOWING:

ORDER

In this petition, petitioner has sought for the following reliefs:-

“ a) Issue writ in the nature of certiorari or any other appropriate writ, order or direction quashing the impugned transfer pricing order ITBA/TPO/F/92CA3/2021- 22/1034559725(1) dated: 31.07.2021 (vide Annexure-C) under Section 92CA(3) in relation to assessment year 2018-

and impugned draft order ITBA/AST/F/144C/2021-22/1036016749(1) 29.09.2021 (vide Annexure-M) passed pursuant thereto;

b) Issue writ in the nature of Prohibition or any other appropriate writ, order or direction staying all further proceedings pursuant to impugned transfer pricing order ITBA/TPO/F/92CA3/2021-22/1034559725(1) 31.07.2021 (vide Annexure –C) and impugned draft order ITBA/AST/F/144C/2021-

22/1036016749(1) dated: 29.09.2021 (vide Annexure-M) in relation to assessment Year 2018-19.

c) Issue writ in the nature of Mandamus or any other writ, order or direction restraining the Respondent, their superiors, subordinates, servants and/or agents from giving any effect to and/ or in furtherance of the impugned unsigned transfer pricing order ITBA/TPO/F/92CA3/2021- 22/1034559725(1) dated: 31.07.2021 (vide Annexure –C) and impugned draft order ITBA/AST/F/144C/2021-22/1036016749(1) 29.09.2021 (vide Annexure-M) in relation to assessment Year 2018-19.

d) for ad-interim relief in terms prayer(b) and (c) above;

e) Such further and/or other orders be made and /or directions be given as would afford complete relief to the Petitioner.”

2.

Heard learned counsel for the petitioner and learned counsel for the respondents – revenue and perused the material on record.

3.

Briefly stated the facts and contentions urged on behalf of the petitioner are as follows:-

Petitioner is a private limited company to whom a digitally show cause notice dated 14.07.2021 was issued by the 1st respondent – Transfer Pricing Officer (TPO) rejecting the transfer

pricing analysis submitted by the petitioner for the assessment year 2018-19. The petitioner submits its response dated 19.07.2021 and the last date prescribed for passing an order by the 1st respondent under Section 92CA (3) of the Income Tax Act, 1961 (for short ‘ the I.T.Act’) was 31.07.2021. It is contended that on 02.08.2021, the petitioner received an e-mail enclosing a copy of an unsigned order purported / alleged to have been passed on the last date i.e., 31.07.2021. The said enclosed order was both digitally and physically unsigned as can be seen from the order itself, which was also not available on the ITBA portal. Subsequently, the petitioner received one more email on 13.08.2021 purporting to enclose a copy of physically / manually signed TPO order dated 31.07.2021. So also, on 16.08.2021, the unsigned TPO order was uploaded in the ITBA portal after expiry of time limit and without even being authenticated by the TPO’s digital signature.

3.1 Petitioner contends that based on the aforesaid unsigned an illegal TPO order, which was passed beyond the prescribed period of limitation, the 2nd respondent issued show cause notice, to which, the petitioner sought for sufficient and reasonable opportunity to submit its reply and due to paucity of time, the petitioner submitted a reply on 27.09.2021 culminating in

the impugned order passed immediately thereafter on 29.09.2021 in violation of principles of natural justice and as such, the petitioner is before this Court by way of the present petition.

4.

The respondents have filed its statement of objections interalia contending that the TPO order was passed on 31.07.2021 itself and due to technical glitch / error in the ITBA portal, the order was generated without digital signature. It is contended that on 02.08.2021, the 2nd respondent realised this mistake in the TPO order not being digitally signed before being uploaded on 31.07.2021 and accordingly, issued a reminder dated 02.08.021 to send a signed copy immediately for necessary action. So also, one more reminder dated 16.08.2021 was issued by the 2nd respondent in this regard to provide a signed copy of TPO order, since the same was not digitally signed at the time of being uploaded on 31.07.2021. It is further contended that a physically / manually signed TPO order was provided to the petitioner on 02.08.2021 and 13.08.2021. It is contended that the DIN number shown in the TPO order is generated only after the same was passed and uploaded on the ITBA portal and consequently, merely because the TPO order dated 31.07.2021 had not been signed either digitally or

physically / manually on that day when it was uploaded, it cannot be said that the TPO order was not passed within the period of limitation. Under these circumstances, the respondents sought for dismissal of the petition.

5.

The petitioner has filed its rejoinder interalia denying and disputing the various contentions urged in the statement of objections by the respondents. It is contended that the TPO order was not passed on 31.07.2021 as contended by the respondents. It is alternatively submitted that even assuming the TPO order was generated on 31.07.2021, the same was uploaded subsequently on 13.08.2021 along with physically / manually signed TPO order, which was never digitally signed at any point in time. It is therefore contended that the various contentions urged by the respondents are liable to be rejected and the petition deserves to be allowed.

6.

I have given my anxious consideration to the rival submissions and perused the material on record.

7.

The material on record and the rival contentions will indicate that it is an undisputed fact that the impugned TPO order was not signed digitally or physically / manually on 31.07.2021 as is evident from the email dated 02.08.2021 sent to the petitioner by

the respondents enclosing a copy of the unsigned TPO order. In fact, even according to the respondents, the TPO order could not be signed digitally on 31.07.2021 due to a technical glitch / error in the ITBA portal. It follows therefrom that what was alleged to be passed and uploaded on the ITBA portal on 31.07.2021 i.e., the last date of limitation was only digitally unsigned TPO order which was also not signed physically or manually. In this context, it is relevant to state that it was incumbent upon the TPO order to be digitally signed in terms of the CBDT Circular dated 12.02.2018 r/w Section 282A of the I.T.Act. Under these circumstances, it is clear that the TPO order having not been signed digitally before purporting to be passed and uploaded on 31.07.2021 is clearly illegal and non-est and the same deserves to be quashed.

8.

The material on record also discloses that in its email dated 02.08.2021, the respondents purport to enclose a copy of the TPO order dated 31.07.2021 which is undisputedly unsigned as on that day. In fact, as is clear from the emails at Annexures-R2 and R3 dated 02.08.2021 addressed by the 2nd respondent to the 1st respondent – TPO, the impugned order had not been digitally signed and the TPO was instructed to take necessary steps to sign

the order which was done physically / manually by him subsequently and furnished to the petitioner along with the email dated 13.08.2021. The undisputed fact that the TPO order was not digitally signed on 31.07.2021 or subsequently even on 02.08.2021 when the respondent addressed an email to the petitioner and that the same was subsequently physically / manually signed on 12.08.2021 and furnished to the petitioner along with an email on 13.08.2021 is clearly borne out from the material on record. In other words, despite recognising, confirming and affirming that the TPO order was not signed either physically or digitally on 31.07.2021, the 1st respondent signed the same physically only subsequent on 12.08.2021 and it is this manually / physically signed copy that was uploaded on the ITBA portal on 16.08.2021, thereby leading to the sole inference that as on the last date of limitation i.e., 31.07.2021, a legally valid TPO order had not been passed by the 1st respondent and as such, the impugned order deserves to be quashed.

9.

The sequence of events that emerge from the material on record including the rival pleadings and documents can be summarised as under:-

(i) The TPO order was not passed on the last date of limitation i.e., 31.07.2021 as contended by the respondents;

(ii) The TPO order, even if passed, had not been digitally or physically / manually signed by 1st respondent on the last date i.e., 31.07.2021, thereby rendering the same illegal, invalid and barred by limitation;

(iii) The TPO order had not been uploaded on the ITBA portal on 31.07.2021, the last date of limitation;

(iv) The 2nd respondent addressed an email on 02.08.2021 to the 1st respondent confirming that the TPO order had not been digitally signed and asked him to take necessary action, thereby also indicating that the TPO order had not been physically / manually signed even as on 02.08.2021;

(v) The petitioner received an email on 02.08.2021 enclosing a copy of the TPO order which was neither signed digitally nor manually / physically as on that day, thereby rendering the same invalid, illegal and barred by limitation.

(vi) The petitioner received an email on 13.08.2021 enclosing a copy of the TPO order which was physically / manually signed only on 12.08.2021, much beyond the last date of limitation i.e., 31.07.2021;

(vii) The undisputed fact that the 2nd respondent noticed that the TPO order was digitally unsigned on 31.07.2021 as evident from the email addressed by him to the 1st respondent on 02.08.2021 is sufficient to come to the conclusion that digital / physical / manual signature of the TPO on the order is an essential and mandatory requirement, failing which, the TPO order would be rendered invalid, illegal, and non-est in the eye of law.

(viii) The physically / manually signed TPO order was also uploaded in the ITBA portal only on 16.08.2021, much beyond the last date of limitation i.e., 31.07.2021.

(ix) The mere generation of DIN number in the TPO order is not sufficient to cure the various inherent defects, lacunae, omissions and deficiencies in the TPO order which was barred by limitation warranting interference by this Court in the present petition.

10.

In view of the aforesaid facts and circumstances, the impugned Transfer Pricing Order at Annexure-C said to have been passed on 31.07.2021 and the consequent draft assessment order at Annexure-M dated 29.09.2021 are illegal and arbitrary and deserves to be quashed.

11.

In the result, I pass the following:-

ORDER

(i) Petition is hereby allowed.

(ii) The impugned Transfer Pricing Order at Annexure-C said to have been passed on 31.07.2021 and the consequent draft assessment order at Annexure-M dated 29.09.2021 are hereby quashed; SD/- JUDGE

Srl.

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