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Income Tax Appellate Tribunal, DELHI ‘D’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI SUDHANSHU SRIVASTAVA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
The above captioned separate appeals by the assessee are preferred
against the separate orders of the Assessing Officer dated 30.10.2017
framed u/s 144C(13) r.w.s 254 r.w.s 143(3) of the Income-tax Act, 1961
[hereinafter referred to as 'The Act'] pertaining to A.Ys 2005-06 to 2008-
09.
Since all these appeals pertain to same assessee and were heard
together involving identical issues, these are being disposed of by this
common order for the sake of convenience and brevity.
Common grounds raised in all the appeals read as under:
“Each of the grounds given below is independent and without prejudice to the other grounds of appeal preferred by the Appellant.
On the facts and in the circumstances of the case, the Assessing officer (AO) in pursuance of the directions of the Hon'ble Dispute Resolution Panel ('Hon'ble DRP')
Erred in applying the provisions of section 9(l)(vi)(c) of the Income-tax Act, 1961 ('the Act') and Article 12(7)(b) of India-US tax treaty ('tax treaty') for bringing to tax, the royalty income received by the Assessee from the non-resident Original Equipment Manufacturers ('OEMs') under the Subscriber Unit License A gree men f a nd Infra structure Equipment License Agreement.
Failed to appreciate that the proceedings pursuant to remand are time barred in terms of the provisions of section 153(2A) of the Act by 31 March 2016 i.e. one year from the end of the year in which the AO passed the consequential orders on March 12, 2015 accepting the order of the Hon'ble ITAT dated February 20, 2015.
Failed to bring anything new on record and not furnished any additional evidence in response to the matters remanded by the Hon'ble ITAT vide its order dated February 20, 2017:
3.1 Not established whether a CDMA handset registered with a service provider could be used on any Code Division Multiple Access ('CDMA') network at the unfettered discretion of the subscriber
3.2 Has merely relied on orders passed by the Hon'ble ITAT in the case of two OEMs, Huwaei and ZTE, for contending that all the non-resident OEMs with whom the Assessee has entered
into agreements, have a Permanent Establishment ('PE') in India without establishing whether royalty earned by the Assessee was for the purposes of business carried on by such PE in India.
3.2 Not established whether royalty paid by the non-resident OEMs for use of patents was in the manufacturing process of the handsets or in the use of the patented technology embedded in the CDMA handsets. Instead the AO has adopted multiple positions stating that OEMs, network carriers as well as end users are users of patents.
3.4 Not determined under section 9(l)(vi)(c) of the Act, that income earned by the OEMs constitute a source of income in India. Instead irrelevant references drawn to the sale of chipsets by the QCT division of the Assessee which never was the subject matter of dispute.
Has disregarded the agreements and submissions and the findings in the technical expert certificate furnished by the Assessee, without providing reasons as to why they would not hold good for addressing the matters remanded by the Hon'ble ITAT.
Has brought irrelevant facts/ documents on record which do not address the issues under remand:
5.1 Technical Opinion issued by two Technical Experts, Mr. Ambrish Agarwal and Mr. Vishwajit Mitra, which have not answered the issue of whether a CDMA handset could function on any network.
5.2 Technical Service Agreements entered with network carriers in India, Reliance Communications and Tata Teleservices, which do not contain any details regarding use of patents of the Assessee in manufacture
5.3 Orders passed by the Hon'ble ITAT in the case of two OEMs, ZTE and Huawei, which do not establish live link between the royalty earned by the Assessee and PE of the said OEMs.
Erred in holding that the royalties earned by the Assessee were for the use of intellectual property of the Assessee through chispet/ ASIC embedded in the CDMA products sold in India.
Has deviated from the matters under remand by relying on the following irrelevant data:
7.1 Press Reports gathered from the internet regarding business and commercial negotiations between Assessee and network operators in India even after the Hon'ble ITAT had
noted that reliance cannot be placed on external articles/ press reports.
7.2 Concepts of Transfer of Technology, difference between CDMA and GSM and TDMA technologies
Erred in law on initiation of penalty proceedings under section 271(l)(c) of the Act.
Erred in levying interest under section 234B the Act without following the binding decision of the jurisdictional High Court in favour of the Assessee
Erred in levying interest under section 234C of the Act on assessed income instead of on returned income.”
Vide application dated 29.12.2020, the assessee has raised
additional grounds which reads as under:
“Each of the grounds given below are independent and without prejudice to the other grounds of appeal preferred by the Appellant.
that the Draft Assessment Order passed u/s 144C(1) of the Income Tax Act, 1961 (Act), the Directions issued by the Dispute Resolution Panel u/ s 144C(5) of the Act and the Final Assessment Order passed u/s 143(3) read with section 144C(13) of the Act, are without jurisdiction and void ab initio.
that the Final Assessment order dated October 31, 2017 passed u/s 143(3) read with section 144C(13) of the Act for the subject AY i.e. AY 2005-06 is barred by limitation and therefore bad in law.”
A perusal of the aforementioned additional grounds shows that it
does not require investigation of new facts and the issues are purely legal
in nature and go to the root of the matter ascertaining the validity of the
draft assessment order/DRP directions and final assessment order. The
same is admitted in light of the ratio laid down by the Hon’ble Supreme
Court in the case of NTPC 229 ITR 383.
Representatives of both the sides were heard at length on the
additional grounds which go to the root of the matter. Case records
carefully perused and relevant documentary evidences have been duly
considered in light of Rule 18(6) of the ITAT rules along with judicial
decisions relied upon by both the representatives.
The underlying facts in the additional grounds are that this Tribunal
in ITA Nos. 3701 and 3702/DEL/2009, 5343/DEL/2010 and 4608/DEL/2011
for the captioned A.Ys has set aside the issue of taxability of Royalty
earned from licensing agreement with OEMS after investigation in the
facts and after giving opportunity to the assessee of being heard and,
thereafter, passed a fresh assessment order. Such findings of the co-
ordinate bench can be found at Paras 27 to 35, 75 to 77, 95 to 97 and 99.
Pursuant to the directions of the Tribunal [supra], the Assessing
Officer passed a consequential order on 12.03.2015 giving partial effect
to the order of the Tribunal deleting the addition of Royalty earned from
licensing of BREW Software.
Since the Assessing Officer has passed a consequential order
partially giving effect to the order of the Tribunal dated 20.02.2015 on
123.03.2015, it is clear that the remaining effect by way of passing of
order under section 144C(1)1 of the Act ought to have been passed on or
before 31.03.2016, that is, the period of limitation of one year from the
end of F.Y. 2014–15, which order has been received by the revenue
authorities as provided under section 153(2A) of the Act.
The draft assessment order in connection with the captioned
appeals is passed on 27.12.2016 which is nine months after expiry of time
limitation prescribed under section 153(2A) of the Act and the final
assessment order is dated 30.10.2017, which is also framed after expiry
of time limit prescribed under section 153(2A) of the Act.
The ld. DR strongly stated that the assessment is well within the
period of limitation as the order of the Tribunal was received by the
Office of the Commissioner, Income Tax – 3, New Delhi on 29.04.2015,
hence the one-year period for passing orders under section 152(2A) of the
Act expired only on 31.032017 and, therefore, the draft assessment order
dated 27.12.2016 is well within the period of limitation.
The entire quarrel boils down to two issues –
(i) when it can be said that the order has been received by the
appellant/respondent ?
(ii) when would the period of limitation start?
Before proceeding further, let us first examine the provisions of
section 153(2A) of the Act as it stood then:
“[(2A) Notwithstanding anything contained in sub-sections (1) 17[, (1A), (1B)]and (2), in relation to the assessment year commencing on the 1st day of April, 1971, and any subsequent assessment year, an order of fresh assessment in pursuance of an order under section 250 or section 254 or section 263 or section 264, setting aside or cancelling an assessment, may be made at any time before the expiry of one year from the end of the financial year in which the order under section 250 or section 254 is received by the Chief Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the Chief Commissioner or Commissioner:
The aforesaid section is considered in light of provisions of section
260A of the Act which reads as under:
260A. (1) An appeal shall lie to the High Court from every order passed in appeal by the Appellate Tribunal before the date of establishment of the National Tax Tribunal, if the High Court is satisfied that the case involves a substantial question of law.
(2) The Principal Chief Commissioner or Chief Commissioner or the Principal Commissioner or Commissioner or an assessee aggrieved by any order passed by the Appellate Tribunal may file an appeal to the High Court and such appeal under this sub-section shall be—
(a) filed within one hundred and twenty days from the date on which the order appealed against is received by the assessee or the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner; (b) [***] (c) in the form of a memorandum of appeal precisely stating therein the substantial question of law involved.”
It can be seen from the above two sections that they are similarly
worded. Now the question arises is as to ‘what is the meaning by received
by Principal CIT or Chief Commissioner or Principal Commissioner or
Commissioner?.
This has been answered by the Hon’ble High Court of Delhi in the
case of Odeon Builders Private Limited 393 ITR 27 though this judgement
is delivered in the context of section 260(2A) of the Act but, as exhibited
elsewhere, provisions of section 153(2A) are similarly worded as section
260(2A) of the Act.
The Hon'ble High Court, thus, observed as under:
“1. The central question that arises for consideration before this Bench is whether the words "the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner" in Section 260A (2) (a) of the Income Tax Act, 1961 ('Act') mean only the 'jurisdictional' Principal or Chief Commissioner of Income-tax (CIT) or could it include any CIT including the CIT (Judicial)?
The question assumes significance in light of the stand of the Revenue that unless the 'jurisdictional' CIT receives a certified copy of the order of the Income Tax Appellate Tribunal (ITAT), the limitation of 120 days within which an appeal has to be filed does not commence. It requires to be clarified at the outset that the expressions 'Revenue' and 'Department' are used interchangeably throughout the judgment. Both expressions refer to the Income Tax Department.”
Facts were explained by the Hon’ble High Court as under:
This appeal by the Revenue through the CIT-7 is against an order dated 16th May 2014 of the ITAT. At the hearing of the appeal on 1st September 2015, counsel for the Assessee raised a preliminary objection as regards limitation. It was pointed out by him that the photocopy of the certified copy of the impugned order of the ITAT bore a date stamp which showed that a copy had been received in the office of the CIT (Judicial) on 23rd July 2014. There were two other date stamps on the first page. One dated 25th July 2014 was in Hindi and was of the CIT, Central, New Delhi. The other was the stamp of the Office of CIT, Delhi- V with the date of 19th September, 2014. In para 6 of the memorandum of appeal, it was stated that the impugned order of the ITAT was served on the CIT-7 on 29th September, 2014 although there was no such date stamp anywhere on the first page of the photocopy of the impugned order. The counsel
for the Assessee therefore contended that if a copy of the impugned order was available with the CIT (Judicial) on 23rd July 2014 or with the CIT (Central) on 25th July, 2014, then the present appeal which has been filed on 14th January, 2015 was beyond 120 days from the date of the receipt of the certified copy. There was no application for condonation of delay as of that date.”
With the above nutshell of the facts, the Hon’ble High Court was
seized with the following questions which were referred to the Larger
Bench for decision:
“13. In the above background, by the order dated 19th October 2015 in ITA Nos. 755 and 756 of 2015, the following questions were referred to the larger Bench for decision:
(i) What is the correct interpretation to be placed on the expression "received by the Assessee or the Principal Chief Commissioner or the Chief Commissioner or Principal Commissioner" in Section 260A (2) (a) of the Act? Does it mean 'received' by any of the named officers including the CIT (Judicial)?
(ii) Does limitation begin to run for the purposes of Section 260A (2) (a) only when a certified copy of the order of the ITAT is received by the 'concerned' CIT within whose jurisdiction the case of the Assessee falls notwithstanding that it may have been received by any
other CIT, including the CIT (Judicial) prior thereto? Is it open to the Court to read the word 'concerned' into Section 260 A (2) (a) of the Act as a prefix to any of the officers of the Department named therein?
(iii) In the context of Section 254 (3) of the Act, is there an obligation on the ITAT to send a certified copy of its order to a CIT other than the one whose details are given to it during the pendency of the appeal? Will change in the jurisdiction concerning the case of the Respondent Assessee to another CIT subsequent to the order of the ITAT have the effect of postponing the time, from which limitation would begin to run in terms of Section 260 A (2) (a) of the Act, to when such CIT receives the order of the ITAT?
(iv) After the decision of this Court in CIT v. Sudhir Choudhrie (2005) 278 ITR 490, do the decisions in CIT v. Arvind Construction Co. (P.) Ltd. (1992) 193 ITR 330 and CIT v. ITAT (2000) 245 ITR 659 (Del) require to be reconsidered, explained or reconciled?
(v) After the change of procedure where orders of the ITAT are pronounced in the open, is it incumbent on the Department through its DR or CIT (Judicial) to apply for a certified copy of the order of the ITAT and should limitation for the purposes of Section 260A (2) (a) be computed from the date on which such certified copy is made ready for delivery by the ITAT?
(vi) Whether the receipt of a certified copy of the order of the ITAT by the CIT (Judicial) is sufficient to trigger the commencement of the limitation period under Section 260 A (2) (a) of the Act?
(vii) In the context of a common order of the ITAT covering several appeals, whether limitation for all the appeals would begin to run when the certified copy is received first by either the CIT (Judicial) or any one of the officers of the Department mentioned in Section 260 A (2) (a) or only when the CIT 'concerned' receives it? Where the same CIT has jurisdiction over more than one Assessee in the batch, will limitation begin to run for all such appeals when such CIT receives the order in either of the Assessee's cases?
(viii) Whether administrative instructions issued by the Department for its own administrative convenience can have the effect of altering the time from which limitation will begin to run for the purposes of Section 260 A (2) (a) of the Act?”
After referring the aforesaid questions to the Larger Bench, the
Hon’ble High Court referred to the decision in the case of Sudhir
Chaudhrie 278 ITR 490 and the same reads as under:
The decision in CIT v. Sudhir Choudhrie 22.1 In CIT v. Sudhir Choudhrie (supra), the Court noted that orders of the ITAT were not being served upon the Department for years together. It was stated
by the counsel for the Revenue appearing in those appeals that "the orders are duly communicated or served upon the authorities but sometimes they decline to accept the same and the delay is not attributable to the Registrar of the Income Tax Appellate Tribunal".
22.2 The Court was essentially dealing with the issue of the pronouncement of the final orders by the ITAT. The contention was that it was not obligatory to pronounce the final orders after listing them in Court, since Rule 35 Income Tax Appellate Tribunal Rules, 1963 (ITAT Rules) only required the orders to be communicated to the parties. It was explained that the ITAT had not been following such a direction "and does not wish to start the same being not a mandate of law".
22.3 Rule 35 of the ITAT Rules states: "The Tribunal shall, after the order is signed, cause it to be communicated to the assessee and to the Commissioner". The word „Commissioner‟ in the said rule is not qualified by the word „concerned'. The second factor to be noticed is that Rule 35 still uses the word „communicated to‟ and not „received by‟ which is used in Section 260A (2) (a) after the amendment by the Finance Act, 1999.
22.4 In CIT v. Sudhir Choudhrie (supra), reference was made to Section 254 of the Act which deals with "Orders of Appellate Tribunal". The provision envisaged that once the ITAT passed an order then under Section 254(3), it was to "send a copy of any orders passed under this section to the assessee and to the Chief
Commissioner or Principal Commissioner or Commissioner". The Court emphasised that Section 254 on a plain reading (or by necessary implication) nowhere indicated that ITAT "could decline to pronounce the orders which are obviously to be dated and signed on a given date to make such orders effective and binding".
22.5 The Court in CIT v. Sudhir Choudhrie (supra) proceeded to hold: "Known precepts of procedural law would necessarily impose an obligation upon any forum or Tribunal, judicially determining the rights of the parties to declare its order on the date it is signed and declared". It further observed: "The requirement of letting the parties to know the contents of the order upon its declaration (when its dated and signed by the Bench of the Tribunal) would be the minimum requirement to the principles of natural justice. This requirement transcends all technical rules of procedure". The rational explanation was that the "pronouncement of an order would certainly put the parties at notice and they would be able to take recourse to the remedies available to them under law with some urgency, if required".
22.6 The Court in CIT v. Sudhir Choudhrie (supra) then proceeded to direct the ITAT to pronounce its judgment and orders "in open hearing and upon enlisting them for a given date."
Thereafter the Hon’ble High Court referred to the earlier decisions
as under:
“25. There has been no decision as such interpreting the words "received by the assessee or the Principal Chief Commissioner" occurring in Section 260A (2) (a) of the Act. The date of such receipt is the trigger for the commencement of the limitation period of 120 days for filing the appeal. Reliance has been placed by the Revenue on two decisions of this Court, which were rendered in the context of Section 256 of the Act.
26.1 The first is the decision in CIT v. Arvind Construction Co. (P) Ltd (supra). One of the questions considered was whether the application by the Revenue seeking reference was barred by time. It was pointed out that the order of the ITAT under Section 256 (1) of the Act was sent to the „Chief Commissioner, Central Revenue Building‟.
26.2 The Assessee urged that the date on which the order was received in that office i.e., 22nd May 1989 should have been the starting point for computation of the period of limitation and if so computed, the reference application would be barred by time. The revenue, on the other hand, urged that the concerned Commissioner i.e., the Commissioner, Delhi, Central-II, received the ITAT's order only on 14th August 1989, which should be the starting point for
computation and limitation and not 22nd May 1989 when the order under Section 256 (1) "was sent to the Chief Commissioner".
26.3 The Court noted that the reference application under Section 256 (1) of the Act had to be filed "not by the Income Tax Officer but by the Commissioner". It observed that: "It is obviously the Commissioner of Income-tax who is in charge of the Assessing Officer who would have the jurisdiction to file an application under section 256(1)". The Court held that service of such an order on the Chief Commissioner was of no consequence and that "It is only when the order was served on the Commissioner of Income-tax (Central II), that the limitation would commence". The Court noted that after filing of an application under Section 256 of the Act, "the jurisdiction of the Commissioner may change. But, we are not, in the present case, dealing with such a controversy".
The above decision was reiterated in Commissioner of Income Tax v. Income Tax Appellate Tribunal (supra). In that case, the controversy was whether the period of limitation would commence from the service of the certified copy of the ITAT's order on the concerned Commissioner or on the Commissioner (Central-I) who had no jurisdiction. The Court followed the decision in CIT v. Arvind Construction Co. (P) Ltd. (supra). It was reiterated: "It is the Commissioner concerned who alone has the jurisdiction to file application and it is imperative that it is he who should be served with a copy of order either under Section 254 or 256 (1)".
The above decisions under Section 256 (3) are clearly distinguishable. The limitation for the purpose of Section 256 begins to run the moment the order is communicated to the parties. Another distinction to be drawn is that the word used in Section 256 of the Act „served‟ whereas under Section 260A it is „received‟. The word „received' has to be seen in the context of the decision in CIT v. Sudhir Choudhrie (supra), which made it mandatory for pronouncement of the orders of the ITAT. At the time of such pronouncement, apart from the AR of the Assessee, the DR is expected to remain present. Through him the Department becomes immediately aware of the said judgment of the ITAT.
The main thrust of the submissions of learned counsel for the Revenue is that it is only the 'concerned' CIT or Principal Commissioner of Income Tax (Pr CIT) who has the jurisdiction over the case who can be a 'party' to the appeal and not any and every CIT or Pr CIT. It is further pointed out that in the context of appeals by or against the Revenue, it is not that the Revenue as a whole that is the aggrieved party but only the concerned officer dealing with a case or having jurisdiction over the AO of the concerned case, who would be "the concerned party." Only such CIT or Pr CIT could file an appeal for the Revenue.
In light of the aforesaid observations/discussions, the Hon’ble High
Court at para 37 onwards held as under:
“37. At the outset, the Court would like to observe that in any matter arising from an order passed by the ITAT against the Department, an „aggrieved‟ person is the entire Department. It is not any individual officer of the Department who can be said to be 'aggrieved'. It would be factually and legally incorrect to state that only that AO, CIT or Pr CIT within whose jurisdiction the Assessee's returns are scrutinised will be the aggrieved party and not any other officer of the Department. The CIT or the Pr CIT is a representative of the Department which is the party aggrieved.
In other words, there can be no doubt that in all cases where the decision of the ITAT has gone against the Revenue, it is the Revenue as a whole which is the 'aggrieved party'. An individual CIT or Pr CIT can prefer the appeal on behalf of the Revenue as an aggrieved party. If the legislative intent was to confer the power to file an appeal only by the 'concerned' CIT or Pr CIT or Chief CIT, then words to that effect ought to have been used. The use of the prefix 'the' preceding the words CIT or Pr CIT in Section 260 A (2) (a) serves only the grammatical correctness of a preposition and nothing more. It is not to be read as meaning "that particular CIT" or the "concerned CIT".
The interpretation of the prefix "the" has to be both purposive and contextual. The object of the provision is to enable the filing of appeals within a period of limitation. As it is, the period of limitation (120 days) is considerably longer than in routine cases (30, 60 or a maximum of 90 days). The interpretation has to serve the purpose of not lengthening the period of limitation further, but to ensure that the time limit is strictly adhered to. Relaxation of the period of limitation in such cases has to be an exception and not the rule. The decisions in Consolidated Coffee v. Coffee Board (supra) and Shree Ishar Alloys Steels Ltd. v. Jayaswal Neco (supra) were rendered in the context of different statutes where the wording of the provisions in question dictated the result of the interpretative exercise. They are not useful in the interpretation of the word "the" which precedes the words CIT or Pr CIT in Section 260 A (2)(a) of the Act.
The context in which the interpretive exercise is to be undertaken is that of the statute of limitation. Usually, the commencement of limitation is that point when there is 'knowledge' of an order or judgment. In the context of Section 260A(2)(a), the question that should be asked is: "when was the Department/Revenue aware of the order" and not "when was that particular CIT or Pr CIT having jurisdiction have knowledge of the order". Once a responsible officer or representative of the Department such as its DR or the CIT (Judicial) is aware of the order, then from that point it is a purely internal administrative arrangement as to how the said officer obtains and further communicates the order to the officer who has to
take a decision on filing the appeal. Of course, the time taken to obtain a copy of the order by such DR or CIT (Judicial) would be excluded. However, the period of limitation will not cease to run only because the 'concerned' officer has not yet received the order.
The counsel for the Revenue point out that the requirement that the ITAT should pronounce orders was not a statutory one but was brought about by a decision of this Court. Whilst this is correct, Rule 34 of the ITAT Rules equally provides the statutory underpinning of this principle. The fact that the jurisdictional CIT was not present at the time of pronouncement of the order of the ITAT will make no difference. The first officer of the Department who receives the certified copy should be taken to have „received‟ it on behalf of all the officers of the Department. How such officer who first receives the copy ensures that it reaches the particular officer who has to take a decision on filing an appeal is for the Department to figure out. That internal issue of the Department cannot possibly extend the time for filing of the appeal beyond 120 days as provided under Section 260A (2) (a) of the Act
The problem can also be viewed from the angle of the frequent transfers and posting of the income tax officers including CIT/Pr CIT on account of the allocation/re-allocation of duties and other administrative exigencies. It is possible that the CIT who was the „concerned‟ CIT at the time of dispatch by the ITAT of the copy of the order ceases to be such when he receives the copy. That will not give rise to a fresh period of limitation or postpone the
commencement of limitation till such time the substitute 'concerned' Pr CIT/CIT receives a copy of the said order. Given the fact that, legislatively, a larger period of limitation has been granted for filing appeals, there is no warrant for any flexibility in the interpretation thereby giving a discretion to officers of the Department to extend the period of limitation beyond what is envisaged by the statute. In these very cases, the impugned order was received by a particular CIT (Judicial) and then sent to the „concerned‟ CIT, who was shifted out by the time a copy reached him. Meanwhile, the period of 120 days lapsed. The period of 120 days cannot be sought to be stretched indefinitely till the 'concerned' CIT receives the order. That would then defeat the legislative purpose.
Viewed differently, the contextual interpretation of the expression „receive‟ would be when the parties notified of the pronouncement are represented at that time in the open court. When pronounced, both parties are said to receive it. The agency which they choose for transmission to the official or executive component to authorise an appeal is not the concern of the judicial system.
Finally, the Hon’ble High Court answered the question as under:
“51. The answers to the questions referred to this Court are answered thus:
Q: (i) What is the correct interpretation to be placed on the expression "received by the Assessee or the Principal Chief Commissioner or the Chief Commissioner or Principal Commissioner" in Section 260A (2) (a) of the Act? Does it mean 'received' by any of the named officers including the CIT (Judicial)?
Ans: The word „received‟ occurring in Section 260A (2) (a) would mean received by any of the named officers of the Department, including CIT (Judicial). The provision at present names four particular officers i.e. the Principal Commissioner, Commissioner, Principal Chief Commissioner, and the Chief Commissioner of Income Tax. These are the only designations of the officers who could receive a copy of the order. In the absence of a qualifying prefix „concerned‟, the receipt of a copy of the order of the ITAT by any of those officers in the Department including the CIT (Judicial) will trigger the period of limitation.
Q: (ii) Does limitation begin to run for the purposes of Section 260A (2)
(a) only when a certified copy of the order of the ITAT is received by the 'concerned' CIT within whose jurisdiction the case of the Assessee falls notwithstanding that it may have been received by any other CIT, including the CIT (Judicial) prior thereto? Is it open to the Court to read the word 'concerned' into Section 260 A (2) (a) of the Act as a prefix to any of the officers of the Department named therein? Ans: In Section 260A (2) of the Act, the words CIT, Pr CIT
or Chief CIT are not prefixed or qualified by the word 'concerned'. There is no warrant for the Court to read into the provision such a qualifying word. The Court rejects the contention of the Revenue that limitation for the purposes of Section 260A (2) (a) begins to run only when a certified copy of the order of the ITAT is received by the 'concerned' CIT within whose jurisdiction the case of the Assessee falls notwithstanding that it may have been received by any other CIT, including the CIT (Judicial) prior thereto.
Q: (iii) In the context of Section 254 (3) of the Act, is there an obligation on the ITAT to send a certified copy of its order to a CIT other than the one whose details are given to it during the pendency of the appeal? Will change in the jurisdiction concerning the case of the Respondent Assessee to another CIT subsequent to the order of the ITAT have the effect of postponing the time, from which limitation would begin to run in terms of Section 260 A (2) (a) of the Act, to when such CIT receives the order of the ITAT?
Ans: As far as the obligation of the ITAT under Section 254 (3) of the Act is concerned, the said obligation is satisfied once the ITAT sends a copy of an order passed by it to the Assessee as well as to the Pr CIT or the CIT or even the CIT (Judicial). The ITAT has to be simply go by the details as provided to it in the memo of parties. If there is a change concerning the jurisdiction of the CIT and it is some other CIT who has jurisdiction, it will not have the effect of postponing the commencement of the period of limitation in terms of Section 260A (2) (a) of the Act. The statute is not concerned with
the internal arrangements that the Department may make by changing the jurisdiction of its officers. It is for the officer of the Department who first receives a copy of the ITAT‟s order to reach it in time to the officer who has to take a decision regarding the filing of an appeal.
Q: (iv) After the decision of this Court in CIT v. Sudhir Choudhrie (2005) 278 ITR 490, do the decisions in CIT v. Arvind Construction Co. (P.) Ltd. (1992) 193 ITR 330 and CIT v. ITAT (2000) 245 ITR 659 (Del) require to be reconsidered, explained or reconciled?
Ans: The decisions in CIT v. Arvind Construction Co. (supra) and CIT v. ITAT (supra) were rendered in the context of Section 256 of the Act (and not Section 260 A (2) (a) of the Act) and also prior to the decision in CIT v. Sudhir Choudhrie (supra). While the former decisions may not require reconsideration, they require to be reconciled with the latter decision in CIT v. Sudhir Choudhrie (supra). The decisions in CIT v. Arvind Construction Co. (supra) and CIT v. ITAT (supra) are of no assistance to the Revenue in its interpretation of Section 260 A (2) (a) of the Act.
Q: (v) After the change of procedure where orders of the ITAT are pronounced in the open, is it incumbent on the Department through its DR or CIT (Judicial) to apply for a certified copy of the order of the ITAT and should limitation for the purposes of Section 260A (2) (a)
be computed from the date on which such certified copy is made ready for delivery by the ITAT?
Ans: While there is no requirement for the DR or CIT (Judicial) to apply for a certified copy of the ITAT, in any event under the extant ITAT Rules, a copy of the order is sent to the CIT (Judicial). In the context of Section 260A(2)(a) of the Act, once an order is listed for pronouncement in the ITAT, the DR or the CIT (Judicial) should be taken to be aware of the order. From that point, it is a purely an internal administrative arrangement as to how the DR or CIT (Judicial) obtains and further communicates the order to the officer who has to take a decision on filing the appeal. It is possible that immediately after pronouncement, the AR or the DR or both may apply for a certified copy of the order of the ITAT. In that case, the time taken for the certified copy to be readied for collection by the applicant will be excluded while computing limitation. But here again, if earlier to such date, a copy is received by a party from the ITAT, then such earlier date will be the starting point for limitation.
Q: (vi) Whether the receipt of a certified copy of the order of the ITAT by the CIT (Judicial) is sufficient to trigger the commencement of the limitation period under Section 260 A (2) (a) of the Act?
Ans: The receipt of a certified copy of the order of the ITAT by CIT (Judicial) would trigger the commencement of the limitation period under Section 260 A (2) (a) of the Act.
Q: (vii) In the context of a common order of the ITAT covering several appeals, whether limitation for all the appeals would begin to run when the certified copy is received first by either the CIT (Judicial) or any one of the officers of the Department mentioned in Section 260 A (2) (a) or only when the CIT 'concerned' receives it? Where the same CIT has jurisdiction over more than one Assessee in the batch, will limitation begin to run for all such appeals when such CIT receives the order in either of the Assessee's cases?
Ans: Where there, is a common order of the ITAT covering the several appeals, limitation would begin to run when a certified copy is received first by either the CIT (Judicial) or one of the officers of the Department and not only when the CIT „concerned‟ receives it. When the same CIT has jurisdiction for more than one Assessee, the limitation begin to run for all from the earliest of the dates when the DR of CIT (Judicial) or any CIT first receives the order in any of the cases forming part of the batch disposed of by the common order. If there are four separate orders passed, then the limitation begins to run when such separate orders are received first by any officer of the Department.
Q: (viii) Whether administrative instructions issued by the Department for its own administrative convenience can have the effect of altering the time from which limitation will begin to run for the purposes of Section 260 A (2) (a) of the Act?
Ans: Instructions issued by the Department for its administrative convenience cannot alter the time when limitation would begin to run under Section 260A (2) (a) of the Act. To reiterate these administrative instructions are for the administrative convenience of the Department and will not override the statute, in particular, Section 260A (2) (a) of the Act.”
In her rebuttal, the ld. DR strongly relied upon the decision of the
Hon’ble Supreme Court in the case of the Deepak Agro Foods in Civil
Appeal No. 4327-28 of 2008 and referred to the following observations of
the Hon’ble Supreme Court:
“16. Proceedings for assessment under a fiscal statute are not in the nature of judicial proceedings, like proceedings in a suit inasmuch as the assessing officer does not adjudicate on a lis between an assessee and the State and, therefore, the law on the issue laid down under the civil law may not stricto sensu apply to assessment proceedings. Nevertheless, in order to appreciate the distinction between a "null and void" order and an "illegal or irregular" order, it would be profitable to notice a few decisions of this Court on the point.”
Citing the above observations, the ld. DR vehemently stated that it
is only a procedural lapse which can be cured.
Let us take an example. An assessment is getting barred by
limitation on 31.03.2021. The Assessing Officer framed assessment order
on 15.04.2021. Can this be accepted as procedural lapse? In our
considered opinion, no court will accept this to be a procedural lapse
because procedural lapse cannot be stretched to statutory period of
limitation.
Further, on a perusal of the judgement of the Hon’ble Supreme
Court (supra) we find that at para 13, the Hon’ble Supreme Court has
referred to the factual position in that case as under:
“13.As afore-stated, in the counter-affidavit as well as in the written submissions filed on behalf of the respondents, it is stated that the order of the Appellate Authority, dated 8th June, 2000, was received by the Assessing Authority on 13th July, 2000 and, therefore, fresh assessment, pursuant to the said order, could be completed by 12th July, 2002 (ignoring further period of six months, which could be extended by the Commissioner). That being so, even if it is assumed
that the assessment order, for the assessment year 1995-96, had, in fact, been passed on 29th June, 2002, as alleged by the appellant, it was still very much within the time limit prescribed under the afore- noted provision i.e. 12th July, 2002. We are, therefore, unable to accept the stand of the appellant that the assessment having been made after the expiry of the time limit, it was null and void and should have been annulled.”
And therefore, at para 15 made the following observations:
“15. All irregular or erroneous or even illegal orders cannot be held to be null and void as there is a fine distinction between the orders which are null and void and orders which are irregular, wrong or illegal. Where an authority making order lacks inherent jurisdiction, such order would be without jurisdiction, null, non est and void ab initio as defect of jurisdiction of an authority goes to the root of the matter and strikes at its very authority to pass any order and such a defect cannot be cured even by consent of the parties. (See: Kiran Singh & Ors. Vs. Chaman Paswan & Ors.1). However, exercise of jurisdiction in a wrongful manner cannot result in a nullity - it is an illegality, AIR 1954 SC 340 capable of being cured in a duly constituted legal proceedings.”
The Hon’ble High Court of Delhi once again in the case of GE Energy
Parts Inc 111 taxmann.com 56 had the occasion to consider a similar issue
relating to challenge of the order qua the period of limitation. The
relevant findings of the Hon’ble High Court read as under:
“23. It is pointed out by the Respondents that reliance by the Petitioners on the decision of the Full Bench of this Court in Commissioner of Income Tax v. Odeon Builders Private Limited (supra) is misplaced since that decision was in the context of limitation for filing an appeal under Section 260A (2) (a) of the Act i.e. filing an appeal in this Court against the order of the ITAT. However, in the present case the dispute regarding limitation was referable to Section 275 of the Act and was in a different context viz., levy of penalty. It is submitted that a penalty order can be passed by the jurisdictional AO which in this case is the CIT, International Taxation [CIT (IT)]. Therefore, it is contended that such till time the CIT (IT) receives the copy of the order of the ITAT, the period of limitation for initiating penalty proceedings does not commence. More or less the same plea has been taken by the Respondents in each of the other petitions.
This Court has heard the submissions of Mr. Sachit Jolly, learned counsel for the Petitioners, Mr. Sagar Suri, learned standing counsel
for Income Tax Department and Ms. Laxmi Gurung, learned senior standing counsel for the Revenue.
A consideration of the above submissions has to begin with an examination of Section 275(1) of the Act which reads as under:
"Bar of limitation for imposing penalties.
(1) No order imposing a penalty under this Chapter shall be passed--
(a) in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A or an appeal to the Appellate Tribunal under section 253, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which the order of the Commissioner (Appeals) or, as the case may be, the Appellate Tribunal is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever period expires later :
Provided that in a case where the relevant assessment or other order is the subject-matter of an appeal to the Commissioner (Appeals) under section 246 or section 246A, and the Commissioner (Appeals) passes the order on or after the 1st day of June, 2003 disposing of such appeal, an order imposing
penalty shall be passed before the expiry of the financial year in which the proceedings, in the course of which action for imposition of penalty has been initiated, are completed, or within one year from the end of the financial year in which the order of the Commissioner (Appeals) is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, whichever is later;
(b) in a case where the relevant assessment or other order is the subject-matter of revision under section 263 or section 264, after the expiry of six months from the end of the month in which such order of revision is passed;
(c) in any other case, after the expiry of the financial year in which the proceedings, in the course of which action for the imposition of penalty has been initiated, are completed, or six months from the end of the month in which action for imposition of penalty is initiated, whichever period expires later."
It is seen that more or less the same expression "Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner" as used in Section 260A of the Act finds place in Section 275(1) (a). The limitation begins to run on the expiry of six months from the end of the month in which the order of the ITAT is received by any of the above officers”.
The Hon’ble High Court further at para 30 observed as under:
“30. It is seen in the present case that an SCN was issued to the Assessee on 16th February, 2017 itself by the AO under Section 271 (1) (c) of the Act and this could not have happened if the AO was not already aware of the order of the ITAT. The appeal effect order passed on 22nd May, 2017 could not have been issued without a copy of the order of the ITAT. Therefore, in any event, the six-month period of limitation in terms of Section 275 (1) (a) of the Act would begin to run from 22nd May, 2017.”
After referring to the decision of the Full Bench of the Hon’ble High
Court of Delhi in the case of Odeon builders supra the Hon'ble High Court
held as under:
“34. The result of the above discussion is that the impugned orders of penalty dated 26th April 2018 were issued far beyond the six-month period of limitation in terms of Section 275 (1) (a) of the Act and were, therefore, invalid. On the date that the said orders were issued, i.e. 26th April, 2018 they were without jurisdiction.”
The ld. DR raised another issue that the assessment order referred
to in section 153(A) of the Act is in respect of an issue set aside and
matter remanded with a direction that the said issue has to be
determined afresh only then section 153(2A) would get attracted. It is the
say of the land DR that since no fresh assessment has been framed by the
AO, section 153(2A) would not apply.
The issue raised by the ld. DR has been answered by the Hon’ble
High Court of Delhi in the case of Nokia India Private Limited 251 taxman
The relevant findings of the Hon’ble High Court read as under:
“5. Aggrieved by the above assessment order, the Assessee filed an appeal being ITA No. 4559/Del/2011 before the Income Tax Appellate Tribunal ('ITAT'). The decision of the ITAT rendered in the aforementioned appeal on 18th May 2012 was as under:
a. As regards disallowance of expenditure incurred on issue of mobile handsets on 'free of cost' basis, the ITAT noted that on an identical issue for AY 2000-01 and 2001-02, as well as for AY 2006-07, the ITAT had set aside the assessment order and remanded the matter to the file of the AO. Accordingly, the impugned assessment order was set aside "to the file of the AO with the directions to decide the
issue afresh after affording the assessee a reasonable opportunity of being heard."
b. As regards the applicable rate of depreciation on computer peripherals, the ITAT allowed the Assessee's appeal and directed the AO to allow depreciation on computer peripherals at the rate of 60% instead of 15% as allowed in the original assessment order.
c. As regards disallowance of expenditure on account of price protection expenses, the ITAT observed that "Since we have admitted additional evidence in respect of other distributors to whom trade price protection has been allowed, we set aside this issue to the file of the AO with the directions to examine the case of the assessee in the light of additional evidence filed before this Tribunal and decide the issue on merits. Needless to say the AO will provide the assessee a reasonable opportunity of being heard."
d. As regards the TP adjustments in relation to provision of software development services to its AEs, the ITAT agreed with the Assessee that the DRP had obtained information under Section 133 (6) of the Act and had used such information without affording the Assessee an opportunity of being heard. Consequently, the ITAT held that "the assessment order needs to be aside to the file of the assessing officer who will refer the matter to DRP for providing necessary opportunity of being heard. We order accordingly."
e. As regards working capital adjustment for computing the arm's length price ('ALP') of the international transaction, the ITAT noted that for AY 2006-07, the ITAT had remanded the matter to the file of the AO/TPO for re-consideration in light of the fact that the said adjustment had been allowed to the Assessee in the earlier AYs. Accordingly, the ITAT set aside the matter to the file of the AO with the direction to examine the case of the assessee and decide the issue afresh in accordance with the provisions of law. The AO was asked to provide the Assessee the necessary opportunity of being heard.
f. As regards the addition on account of Advertising, Marketing and Promotion ('AMP') expenses, it was noted by the ITAT that both the parties agreed that the issue be set aside in the light of the amended provisions of Section 92B of the Act. Accordingly, the ITAT "set aside the matter to the file of the AO with the directions to decide the issue afresh after affording the assessee a reasonable opportunity of being heard."
g. As regards the power of the TPO to determine ALP in respect of international transactions not referred to him by the AO, the ITAT held that, in view of the amended provisions of Section 92CA of the Act with retrospective effect from 1st April 2002, this ground urged by the Assessee had become academic. It was accordingly rejected.
Thereafter, at para 10, the Hon’ble High Court observed as under:
“10. By the impugned order dated 2nd December 2015, the AO disposed of the above objections by holding that the case was not covered under Section 153 (2A) of the Act which, according to the AO, was applicable only when a fresh order of assessment has to be made pursuant to an order in appeal or revision. Since the assessment had not been totally set aside or cancelled by the ITAT and, in fact, had been partly upheld on certain issues, the objection regarding limitation was not valid. It was further pointed out that the Revenue was also in appeal before the High Court against the relief allowed by the ITAT as well as to some of the issues restored by the ITAT to the AO/TPO and even to the DRP.”
And at para 14 referred to the same question as raised by the ld. DR
before us:
“14. On the other hand, Mr. Sanjay Jain, learned Additional Solicitor General of India ('ASG'), submitted that Section 153 (2A) of the Act would apply only where the entire assessment was set aside or cancelled. However, as in the present case, where the AO was required to follow certain specific directions issued to him by the ITAT he was 'chained' as far as exercise of discretion was concerned. In such circumstances, Section 153 (2A) of the Act would not apply.
According to the learned ASG, it was only Section 153 (3) (ii) of the Act which would apply to the present case.”
Analysis and reasoning given by the Hon’ble High Court read as
under:
“22. Having perused the impugned order of the ITAT carefully and the operative portions qua which the assessment order was set aside and the matter remanded to the AO, the Court is unable to agree with the contention of learned ASG that the aforementioned order of the ITAT did not constitute a complete setting aside of the assessment with directions to the AO to pass a fresh order. The Court does not agree with the submission of the learned ASG that the AO was 'chained' by the ITAT's directions and could not have passed a fresh assessment order de novo pursuant to such remand.
The Court is also unable to agree with the contention that unless the entire assessment order is wholly set aside, the time limit for passing the fresh order under Section 153 (2A) would not be attracted. There is no warrant for such an interpretation. The object behind introduction of sub-section (2A) was to prescribe a time limit for completing the assessment proceedings upon the original assessment being set aside or being cancelled in appeal. Clearly, the intention was not to restrict the applicability of sub-section (2A) only to such cases where the 'entire' original assessment order is set aside. It was noted that, "Under the existing provisions of section
153 (3), such fresh assessments are not subject to any time limit." Indeed, Section 153, as it stood at that time, did not prescribe any time limits. Section 153 (3) (ii), in particular, did not require the order passed thereunder to be issued within any particular time limit. Further there is a distinction between an 'assessment' that is set aside and an 'assessment order' being set aside. When the assessment on an issue is set aside and the matter remanded, with a direction that the issue has to be determined afresh, Section 153 (2A) of the Act would get attracted.
What is important to note is that, along with the insertion of sub- section (2A), sub-section (3) underwent a simultaneous change. It was expressly made "subject to the provisions of sub-section (2A)." This meant that Section 153 (3) would thereafter apply only to such cases where Section 153 (2A) did not apply. In other words, in all instances of an AO having to pass a fresh assessment order upon remand where Section 153 (2A) would apply, the AO would be bound to follow the time- limit imposed by sub-section (2A). Where the AO was only giving effect to an appellate order, then Section 153 (3) (ii) of the Act would apply.
In the present case, of the seven issues, the assessment in respect of five was set aside and the issues remanded for a fresh determination. Whether the remand was to the TPO or the DRP would not make a difference as long as what results from the remand is a fresh assessment of the issue. Clearly, therefore, the time limit for completing that exercise was governed by Sec. 153 (2A) of the Act.”
And finally held as under:
“32. In the considered view of the Court, the aforesaid decision of the Gujarat High Court fully supports the case of the Assessee here. The decisions of the Madhya Pradesh High Court in Gulabchand Motilal v. Commissioner of Income-tax [1988] 174 ITR 117 (MP), the High Court of Punjab and Haryana in Bharti Engineering Corporation v. Union of India [2008] 298 ITR 400 (P&H) and Deep Chand Jain v. ITO [1984] 145 ITR 676 (P&H), and the Karnataka High Court in CIT v. Paul Noel Rodrigues [2015] 231 Taxman 811 (Kar), all hold likewise. The Kerala High Court in Patel R.P. v. ACIT 2015 (5) KHC 370 held that Section 153 (2A) of the Act would apply even where more than one issue is involved i.e. even where one of the issues has been remanded to the AO for a fresh determination.”
It would not be out of place to refer to the decision of the Hon’ble
High Court of Kerala in the case of Dr R.P Patel in WP(C) No. 29193 of
2008. Most relevant findings read as under:
“12. The resultant position therefore is that, even in a case where only one issue has been directed to be considered afresh, the limitation under Section 153(2A) would apply. It is clear from the passage in [(2008)300 ITR 176 (Delhi] (supra) extracted above that, sub section (3) of Section 153 applies to a different situation where only a
consequential order has to be passed in implementation of a direction issued by the appellate forum. In the present case, as already found above the direction was to consider the issue afresh. Therefore, Section 153(2A) of the Act is attracted. In view of the above, this is a case in which the Assessing Officer ought to have passed a consequential order within the time limit stipulated. Since no such order was passed the petitioner is entitled to succeed.
In view of the aove findings the writ petition is allowed. It is held that in so far as the issue that was remitted to the respondent Assessing Officer for fresh consideration, the time bar contained in Section 153(2A) of the Act operates. The petitioner shall therefore be entitled to the refund sought for, in accordance with law. It is made clear that on all other aspects the assessment order is final and binding on the assessee. Such refund shall be made as expeditiously as possible and at any rate within a period of three months of the date of receipt of a copy of this judgment.”
CONCLUSION
When the Assessing Officer framed order dated 12.03.2015 giving
appeal effect to the order of the Tribunal, he was in full knowledge of
the decision of the Tribunal. In our considered opinion, the word
“received” mentioned in section 153(2A) of the Act [supra] has to be
construed as “having knowledge”. Since the Assessing Officer had full
knowledge of the order of the Tribunal and pursuant to such knowledge,
he framed the appeal effect order dated 12.03.2015, therefore, the
remaining effect should also have been given on or before 31.03.2016.
The draft orders dated 27.12.2016 and final assessment orders dated
30.10.2017 are, therefore, barred by limitation in light of the judicial
decisions of the Hon'ble Jurisdiction High Court of Delhi [supra] and the
Hon'ble High Court of Kerala [supra]. Allowing the additional grounds
raised by the assessee, we hold that the draft assessment orders and final
assessment orders are barred by limitation.
Since we have quashed the assessment order as null and void being
barred by limitation, we do not find it necessary to dwell into the merits
of the case.
Since the appeals have been decided, the stay applications become
infructuous.
In the result, the appeals filed by the assessee in ITA Nos. 7890 to
7893/DEL/2021 are allowed.
The order is pronounced in the open court on 24.11.2021.
Sd/- Sd/-
[SUDHANSHU SRIVASTAVA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 24th November, 2021
VL/