DEPUTY COMMISSIONER OF INCOMETAX, CHENNAI vs. SAINT - GOBAIN INDIA PRIVATE LIMITED, CHENNAI

Facts relevant to the legal issue are that the Assessee Company filed its ITR/RoI for the AY 2016-17 on 30.11.2016 admitting total income of Rs.245,63,06,280/- under the normal provisions and book profits of Rs.392,27,00,897/-. Subsequently, the Assessee filed a revised return on 30.03.2018, revising the total income to Rs.247,98,23,940/- under the normal provisions and book profits of Rs.392,77,40,155/- under section 115JB of the Act and claimed a refund of Rs.34,77,56,250/-. A reference u/s 92CA of the Act was made to the TPO-3, Chennai wherein the TPO, vide order dated 01-11-2019, proposed a downward adjustment of Rs. 67,83,46,826.

However, against the aforesaid TPO Order dated 01 November 2019 the Assessee-company, Saint Gobain India Pvt Ltd, filed Writ Petition before Hon’ble High Court of Madras in WP No. 33751 of 2019 [etc. a batch of Writs]. The Hon’ble Single Bench vide order dated 07.09.2020 held that the TP order as barred by limitation. In this common decision, [of similar Assessee’s] Hon’ble High Court held that the TPO 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. And that the assessment is to be completed within 21 months from end of assessment & 1672/Chny/2024 (AY 2016-17) M/s. Saint Gobain India Pvt. Ltd. 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.

Meanwhile, the AO completed the assessment under section 143(3) r.w.s.144C of the Act on 28.02.2020 without incorporating the TPO additions in the Final Assessment Order, against which the Assessee preferred an appeal before the Ld. CIT (A).

Meanwhile, it is to be noted that the Revenue’s writ appeals against aforementioned Hon’ble Single Bench Order came up for hearing before the Division Bench of the Hon’ble Madras High Court in WA 1120 of 2021 etc. batch which was disposed-off vide order dated 31.03.2022 wherein the writ appeals were dismissed and the adjudication of the Ld. Single Bench was upheld/confirmed. This dismissal of Writ Appeal filed by Department has also been acknowledged by CIT(A) in his Order dated 22.03.2024 in Para 3.4 Page No. 12.[Copy of the order is placed before us for reference].

However, the Ld. CIT (A) proceed to adjudicate on the merits of the case, partly allowing the appeal. Aggrieved by this action of Ld CIT(A), the Assessee/Revenue has preferred this appeal before us.

During the course of hearing, the Assessee is noted to have filed additional grounds (supra), challenging the AO’s order as time-barred on the Jurisdictional ground that the Transfer Pricing Order dated 01.11.2019 and Final assessment order passed u/s 143(3) r.w.s 144C (3) of the Act dated 28.02.2020 is barred by limitation under section 153(1) r.w.s 153 (4) of the Act.

The Ld AR, assailing the impugned action of AO passing the Final assessment order on 28.02.2020 passed u/s 143(3) r.w.s 144C (3) of the Act, as time-barred under section 153(1) r.w.s 153 (4) of the Act, brought to our notice the sequence of events to demonstrate that the assessment order is time barred.

The Ld AR brought to our notice that in the case of M/s Pfizer Healthcare (cited supra) the Tribunal had relied upon the case of M/s Verizon Data Services India Pvt Ltd, IT (TP) A No. 37/Chny/2021 dated 18.11.2020 wherein this Tribunal took similar view for the same Assessment Year 2016–17 and held as under:

The appeal stand allowed in terms of our above order.”

And the Ld AR cited decisions of this Tribunal for the same assessment year in the following cases:

Based on the above position of law and judicial precedents, the Assessee pleads that the assessment concluded vide order dated 28.02.2020 to be held as barred by limitation and accordingly, as void- ab-initio.

Per contra, Ld.DR supported the action of the TPO/AO and opposed the contentions raised by assessee and submitted that unless TPO determines Arms Length Price (ALP) of the transaction referred to him, the AO couldn’t have passed the assessment order. According to the Ld.DR, the AO can’t be said to be clairvoyant (meaning have the power to predict the future). Therefore, the AO couldn’t have predicted the order passed by the Hon’ble High Court and pass assessment orders. According to the Ld.DR, hence the contention raised by the assessee is akin to AO being asked to perform an impossible task. Therefore, according to him, it is illogical to raise such a plea and therefore wants us to dismiss the legal issue and also referred to the following decisions of the Hon’ble Supreme Court:-

We have heard both parties and perused the records and we note that the assessee in this case had filed the ITR/ROI for the AY 2016-17 on 30.11.2016 admitting total income of Rs.2,45,63,06,280/- under the normal provisions and book profits of Rs.3,92,27,00,897/-. Subsequently, the Assessee filed a revised return on 30.03.2018 by revising the total & 1672/Chny/2024 (AY 2016-17) M/s. Saint Gobain India Pvt. Ltd. income to Rs.2,47,98,23,940/- under the normal provisions and book profits of Rs.3.92,77,40,155/- u/s.115JB of the Act and claimed a refund of Rs.34,77,56,250/-. Later, the ITR of assessee was selected for scrutiny and the AO made a reference u/s.92CA of the Act to the TPO, who vide order dated 01-11-2019, proposed a downward adjustment of Rs. 67,83,46,826/-. It is noted that the assessee company along with few other companies filed Writ Petition before the Hon’ble High Court (Single Bench), wherein they challenged the action of TPO order being barred by limitation. And their Lordship was pleased to uphold the plea of the assessee that TPO’s order dated 01.11.2019 for AY 2016-17 as barred by limitation. The Department is noted to have filed a Writ Appeal before the Hon’ble High Court (Divisional Bench) which is also noted to have been dismissed vide order dated 31.03.2022. From a perusal of the Hon’ble High Court’s order (Single Bench), it is noted that the Hon’ble High Court by relying on the decision in the case of M/s.Pfizer Healthcare India Pvt. Ltd. & Ors (supra), held 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. And 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 & 1672/Chny/2024 (AY 2016-17) M/s. Saint Gobain India Pvt. Ltd. and any date prior thereto would mean 31st of October or before. And since the TPO order was passed on 01.11.2019, the same would be barred by limitation. The Hon’ble Division Bench is noted to have confirmed this action.

Before us, the assessee had assailed the action of the AO passing final assessment order dated 28.02.2020 as barred by limitation. In this regard, we note from the date of events shown in the Chart supra (which has been verified by us), we note that the order dated 01.11.2019 passed by the TPO is non-est in the eyes of law. Consequently, the assessee would cease to be an eligible assessee as defined u/s.144C(15)(b) of the Act and therefore, the machinery provisions of Section 144C of the Act would not get activated in the instant assessee’s case. This being the position, the assessment in the case of the assessee ought to have been completed within 33 months from the end of the Assessment year as per Sec. 153(1) read with Section 153(4) of the Act, i.e., on or before 31.12.2019. However, since the impugned assessment has been concluded only on 28.02.2020 it is found to be barred by limitation.