SAXON GLOBAL INDIA PRIVATE LIMITED,HYDERABAD vs. ITO., WARD-3(1), HYDERABAD

The assessee has raised the additional ground of appeal, which reads as under :

The brief facts of the case are that, the assessee is engaged in the business of providing Recruitment Process Outsourcing (RPO) services to its Associated Enterprises. The assessee has filed its return of income for AY 2021-22 on 05.01.2022, declaring total income of Rs. 35,20,540/-. The case was selected for Complete Scrutiny under CASS on the parameter of T.P. Risk – International Related Party Transactions in Services. During the course of assessment proceedings, the A.O. issued notice under Section 143(2) of the Income-tax Act, 1961 was issued and called for details, and in response, the assessee furnished the return documents, audited financial statements, computation of income, and Form 3CEB reporting international transactions of Rs. 12,74,18,746/- towards provision of services. Considering the substantial international transactions, the A.O. made a reference under Section 92CA(1) of the Act, on 23.08.2022 to the Transfer Pricing Officer for determination of the arm’s length price.

During the Transfer Pricing proceedings, the TPO examined the TP documentation and noted that, the assessee had benchmarked its international transactions by applying TNMM as the most appropriate method with OP/OC as the PLI. The TPO, after considering the functional profile and the filters applied by the assessee, rejected the TP study on the ground that appropriate filters such as service-income filter, related-party transactions filter, export earnings filter, and computation of margins as per Rule 10CA were not applied. The TPO conducted an independent search of comparables and determined an arm’s length margin of 17.3%. Accordingly, the TPO, vide order dated 26.10.2023 passed under Section 92CA(3), proposed a TP adjustment of Rs. 1,84,63,415/- in respect of the international transactions relating to provision of RPO services. The A.O. thereafter, passed the draft assessment order under Section 144C(1) on 29.12.2023, determining the total income at Rs. 2,19,83,955/-.

Aggrieved, the assessee filed its objections before the Dispute Resolution Panel against the TP adjustment proposed in the draft assessment order. The Ld. DRP, after considering the submissions of the assessee and the material available on record, vide its 7 Saxon Global India Private Limited directions issued under Section 144C(5) of the Income-tax Act, 1961 on 19.09.2024, rejected all the objections raised by the assessee, including objections relating to rejection of the TP study, application of filters, selection and rejection of comparables, and computation of operating margins. The Ld. DRP upheld the action of the Ld. TPO and confirmed the TP adjustment. In pursuance of the DRP directions, the A.O. passed the final assessment order under Section 143(3) r.w.s. 144C(3) r.w.s. 144B on 28.10.2024, determining the total income at Rs. 2,19,83,955/- after making the TP adjustment of Rs. 1,84,63,415/-.

Aggrieved by the final assessment order, the assessee is now in appeal before us.

Before us, at the outset, the learned counsel for the assessee, Shri Prasanth GS, C.A. referring to the application filed by the assessee dated 13.03.2025 for admission of additional ground(s), submitted that, the assessee has filed certain additional grounds challenging the validity of the final assessment order passed by the A.O. under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961, in light of the provisions of Section 153 of 8 Saxon Global India Private Limited the Act, on the limitation and said grounds are purely legal issues which go to the root of the matter and can be taken at any time of the proceedings, including pending proceedings before the Tribunal. Further, to adjudicate the above legal grounds, there is no necessity to re-look at the facts and also the same can be adjudicated on the basis of facts already available on record. Therefore, in view of the decision of the Hon'ble Supreme Court in the case of National Thermal Power Co., Ltd., Vs. reported in (1998) 229 ITR 383 (SC), the additional grounds filed by the assessee should be admitted for adjudication.

Dr. Narendra Kumar Naik, Ld. CIT-DR for the Revenue, on the other hand, opposed the admission of additional grounds and submitted that, the assessee has taken these grounds for the first time before the Tribunal after a lapse of five years, without there being any facts which are necessary for adjudication of the additional grounds. Therefore, the legal grounds filed by the assessee should not be admitted.

We have heard both the parties, perused the material available on record and considered the relevant application filed 9 Saxon Global India Private Limited by the assessee for admission of additional grounds in light of the decision of the Hon'ble Supreme Court in the case of NTPC Vs. CIT (supra) and we find that, the assessee has challenged the final assessment order passed by the A.O. under Section 143(3) r.w.s. r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 in light of the provisions of Section 153 of the Act and in our considered view, the said grounds are purely legal grounds which go to the limitation provided under the Act, for passing the final assessment order and thus, the same can be admitted at appellate proceedings, including pending proceedings before the Tribunal. Further, to adjudicate the above legal grounds, there is no necessity to re-look into the facts, and the above grounds can be admitted based on the facts already available on record. Therefore, respectfully following the decision in the case of NTPC Vs. CIT (supra), we admit the additional grounds filed by the assessee.

The learned counsel for the assessee, referring to the final assessment order passed by the A.O. under Section 143(3) r.w.s. 144C(13) r.w.s. 144B dated 28.10.2024, submitted that the assessment order passed by the A.O. is barred by limitation in view of the provisions of Section 153(1) read with sub-section (4) of 10 Saxon Global India Private Limited the Act, which has been clearly laid down by the Hon'ble Madras High Court in the case of CIT Vs. Roca Bathroom Products Private Limited (2022) 445 ITR 537 (Madras) and the Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (2023) 457 ITR 161 (Bombay), wherein it has been held that the final assessment order passed by the A.O. beyond the time limit provided under Section 153(1) read with Section 153(4) of the Act is barred by limitation. The learned counsel for the assessee further referring to the dates and events in the present case submitted that the normal time limit for completion of assessment under Section 153(1) of the Act for the Assessment Year 2021-22 is 9 months from the end of the relevant assessment year, which would expire on 31.12.2022, and the period for completion of assessment shall stand extended by another 12 months, if any reference is made under Section 92CA of the Act, and the same would extend the time limit only up to 31.12.2023, whereas the A.O. passed the final assessment order only on 28.10.2024, which is clearly beyond the limitation provided under the Act and, therefore, cannot be sustained.

We have heard both parties, perused the material available on record and had gone through the orders of the authorities below. We have also carefully considered relevant case laws relied upon by the learned counsel for the assessee including the decision of the Hon'ble Madras High Court in the case of CIT Vs. 13 Saxon Global India Private Limited Roca Bathroom Products Private Limited (supra) and the Hon'ble Bombay High Court's decision in the case of Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (supra). It is an admitted fact that the Hon'ble Madras High Court in the case of CIT Vs. Roca Bathroom Products Private Limited (supra) has decided the issue in favour of the assessee and held that the upper time limit for passing the final assessment order under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act, is governed by the provisions of Section 153(1) and Section 153(4) of the Act and if the final assessment order passed by the A.O. is beyond the time limit provided under Section 153(1) and Section 153(4) of the Act then it is barred by limitation and is liable to be quashed. The relevant findings of the Hon'ble Madras High Court in the case of CIT Vs. Roca Bathroom Products Private Limited (supra) are as under:

As rightly contended by the learned senior counsels and affirmed by the Learned Judge, the DRP proceedings is a continuation of assessment proceedings. To put it further, it is a part of assessment proceedings, once the objections are filed and under section 144C (12) a period of 9 months is prescribed. within which, directions are in be issued by the DRP, falling which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given 9 months time and thereafter, within one month from the end of the month of receipt of directions from DRP, the final order is to be passed. This court is not in consonance with the contention of the learned senior panel counsel for the appellants revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had Issued the notices. If the contention of the appellants/revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years.

Insofar as the non-obstante clause in Section 144C(13) is concerned, we concur with the view of the Learned Judge. The exclusion of applicability of Section 153 or Section 153 B is for a limited purpose to ensure that dehors larger time is available, an order based on the directions of the DRP has to be passed within 30 days from the end of the month of receipt of such directions. The section and the sub-section have to be read as a whole with connected provisions to decipher the meaning and intentions. At this juncture it would be useful to refer to the following decisions: (i) Suliana Begum v. Prem Chand Join [1997] 1 SCC 373 at page 381: "11. The statute has to be read as a whole to find out the real intention of the legislature.

In S.B. Gurbaksh Singh v. Union of India ((1976) 2 SCC 181: 1976 SCC (Tax) 177:(1976) 37 STC 425) Untwalia, J., speaking for the Bench, opined: (SCC p. 188, para 15). "15. Apropos the fourth and the last submission of the appellant, suffice it to say that even assuming that the revisional power cannot be exercised sun motu after an unduly long delay, on the facts of this case it is plain that it was not so done. Within a few months of the passing of the appellate order by the Assistant Commissioner, the Commissioner proceeded to revise and revised the said order. There was no undue or unreasonable delay made by the Commissioner. It may be stated here that an appeal has to be filed by an assessee within the prescribed time and so also a time-limit has been prescribed for the assessee to move in revision. The appellate or the revisional powers in an appeal or revision filed by an assessee can be exercised in due course. No time-limit has been prescribed for it. It may well be that for an exercise of the suo motu power of revision also, the revisional authority has to initiate the proceeding within a reasonable time. Any unreasonable delay in exercise may affect its validity. What is a reasonable time, however, will depend upon the facts of each case."

The question as to what would be the reasonable period did not fall for consideration therein. The binding precedent of this Court, some of which had been referred to us heretobefore, had not been considered. The counsel appearing for the parties were remiss in bringing the same to the notice of this Court. Furthermore, from a perusal of the impugned notice dated 4-9-2006, it is apparent that the revisional authority did not assign any reason as to why such a notice was being issued after a period of 5% years. Generally, no hard and fast rule can be laid down to indicate what is a reasonable time. It though depends upon the facts of the each case, drawing a clue from Article 113 of the Limitation Act, the residual entry, it would be reasonable to conclude that in such cases, action is to be concluded within 3 years. Needless to say, if the statute prescribes shorter period, the doctrine of reasonable time will not be applicable and the timeline under the statute is to be strictly followed. 27. For the reasons set out herein before, we conclude as under : a) The provisions of Sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under Section 153 (2A) or 153 (3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders. b) Even in case of remand, the TPO or the DRP have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the DRP within 9 months as contemplated under section 144C(12) of the Income-tax Act. c) Irrespective of whether the DRP concludes the proceedings and issues directions or not, within 9 months, the Assessing officer is to pass orders within the stipulated time, d) In matter involving transfer pricing, upon remand to DRP, the Assessing officer is to pass a denova draft order and the entire proceedings as in the original assessment, would have to be completed within 12 months, as the very purpose of extension is to ensure that orders are passed within the extended period, as otherwise the extension becomes meaningless. e) The outer time limit of 33 months in case of reference to TPO under Section 153, would not refer to draft order, but only to final order and hence, the entire proceedings would have to be concluded within the time limits prescribed, f) The non-obstante clause would not exclude the operation of Section 153 as a whole. It only implies that irrespective of availability of larger time to conclude the proceedings, final orders are to be passed within one month in line with the scheme of the Act, g) When no period of limitation is prescribed, orders are to be passed within a reasonable time, which in any case cannot be beyond 3 years.

A similar view has been taken by the Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (supra) and after considering the relevant facts in paragraphs 23 to 34 of the order, it has been held as under :

We find it difficult to accept the submissions of Mr. Suresh Kumar because it would in fact mean that. notwithstanding the twelve month period prescribed under section 153 (3) of the Act, where it says that an order of fresh assessment in pursuance of an order under section 254 of the Act may be made at any time before the expiry of twelve months from the end of the financial year in which order under section 254 of the Act is received by the Commissioner, would not apply to a case where section 144C of the Act is applicable. It would also mean that the time prescribed in section 153 (1) of the Act cannot apply where section 144C of the Act is applicable in the case of an eligible assessee. If Mr. Suresh Kumar was correct, then in our view, it would have been specifically so provided in section 153 of the Act. We would agree with Mr. Mistri that wherever the legislature intended extra time to be provided, it is 22 Saxon Global India Private Limited expressly provided in section 153 of the Act. Sub-section (3) of section 153 of the Act also applies to fresh order under section 92 CA of the Act being passed in pursuance to an order under section 254 of the Act. Sub-section (4) of section 153 of the Act specifically provides that notwithstanding anything contained in sub-sections (1), (1-A), (2), (3) and (3-A) of the Act, where a reference under sub-section (1) of section 92 CA of the Act is made during the course of the proceeding for assessment or re-assessment, the period available for completion of assessment or re-assessment, as the case may be, under the said sub-sections (1), (1-A), (2), (3) and (3-A) of the Act shall be extended by twelve months.

Moreover, Explanation-1 below section 153 of the Act also provides for the periods which have to be excluded while computing the twelve months period mentioned in section 153 (3) of the Act. For example - it provides for exclusion of the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited or inventory valued under sub-section (2-A) of section 142 of the Act or in a case where an application made before the Income-tax Settlement Commission is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which an application was made before the Settlement Commission and ending with the date on which the order is received by the Principal Commissioner or Commissioner or where the period commencing from the date on which an application made before the Authority for Advance Rulings or before the Board for Advance Rulings under sub-section of section 2450 of the Act and ending with the date on which the Advance Ruling pronounced by it is received by the Commissioner or where reference for exchange for information is made by an authority competent under an agreement referred to in section 90 or section 90-A of the Act or where a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner etc, shall be excluded. There is no mention anywhere about section 144C of the Act.

If we accept the submissions of Shri Suresh Kumar that when there is a remand as in this case, the AO is unfettered by limitation, it would run counter to the avowed object of provisions that were considered while framing the provisions of section 144C of the Act. Having set time limits every step of the way, it does not stand to reason that proceedings on remand to the AO may be done at leisure sans the imposition of any time limit at all.

Having considered the language of sections 144C and 153, we cannot accept that the provisions of section 153 are excluded to the operation of section 144C.

Mr. Mistri, therefore, is correct in his submissions that the time limit prescribed under section 153 of the Act would prevail over and above the assessment time limit prescribed under section 144C of the Act. This is because 23 Saxon Global India Private Limited the Assessing Officer may follow the procedure prescribed under section 144C of the Act, if he deems fit necessary but then the entire procedure has to be commenced and concluded within the twelve months period provided under section 153 (3) of the Act. This is because, the procedure under section 141C(1) of the Act also has to be followed by the Assessing Officer only if he proposes to make any variation which is prejudicial to the interest of the eligible assessee. If the Assessing Officer did not wish to make any variation which is prejudicial to the interest of the eligible assessee, he need not go through the procedure prescribed under section 144C of the Act.

In our view, the assessment has to be concluded within twelve months as provided in section 153(3) of the Act when there has been remand to the AO by the ITAT under section 254 of the Act. Within this twelve months prescribed, the AO has to ensure that the entire procedure prescribed under section 144C is completed and pass a final assessment order. For this the AO has to be prompt in passing an order contemplated under section 144C(1) of the Act and not wait to be reminded like in this case and still take almost two years to start the process. Sub-section (13) of section 144C provides that an assessment officer shall, upon receipt of the directions, issued under sub-section (5), in conformity with the directions complete, notwithstanding anything to the contrary contained in section 153, the assessment without providing any further opportunity of being head to the assessee, within one month from the end of the month in which such direction is received. What is contemplated under section 144C (13) is the passing of the final assessment order. Twelve months as provided under section 153(3) would start from the end of the financial year in which the Principal Commissioner received the order under section 254 from the ITAT. The assessing officer should have taken steps to pass the final order under sub-section (13) of section 144C within 12 months period.

The exclusion of applicability of section 153, in so far as non-obstante clause in sub-section (13) of section 144C is concerned, it is for limited purpose to ensure that debers larger time available, an order hased on the directions of the DRP has to be passed within 30 days from the end of the receipt of such directions The section and sub-section have to be read as a whole with connected provisions to decipher the meaning and intentions.

We would also observe that a similar non-obstante clause is also used in section 144C(4) of the Act with the same limited purpose to imply, even though there might be a larger time limit under section 153, once the matter is remanded to AD by the ITAT under section 254, the process to pass final order under section 144C has to be taken immediately 32. The object is to conclude the proceedings as expeditiously as possible. There is a limit prescribed under the statute for the AO and therefore, it is his duty to pass an order in time. After 30th September 2021, the AO will have no authority to pass any final assessment order in this Case.

We cannot accept the submissions of Shri Suresh Kumar that passing of draft assessment order before 30th September 2021 would suffice. We find support for this view in Roca Bathroom (SB) (supra) and Roca Bathroom (DB) (supra).

In the circumstances, since no final assessment order can be passed in the present case as the same is time barred, the Return of Income as filed by Petitioner be accepted. This would however, not preclude the Revenue from taking any other steps in accordance with law.”

We further note that, the Co-ordinate Bench of the Tribunal, Hyderabad has also considered identical issue in the case of Aveva Solutions India LLP, Hyderabad Vs. ITO, Ward-8(1), Hyderabad in dated 19.11.2025 where under identical set of facts, the Tribunal by following the decision of Hon'ble Madras High Court and also the decision in the case of Hon'ble Bombay High Court cited above has held as under :

Since the issue is pending adjudication before the Hon'ble Supreme Court in the case of ACIT-(International Taxation] vs., Shelf Drilling Ron Tappmeyer Ltd., [2025] 177 taxmann.com 262 (SC) and the first attempt to resolve the dispute by the Hon'ble Supreme Court is not successful due to divergent views of the Division Bench of the Hon'ble Supreme Court and, therefore, the matter is required to be resolved by the Larger Bench of the Hon'ble Supreme Court. Since the matter is yet to be resolved by the Hon'ble Supreme Court, therefore, we allow the parties to get this appeal revived if the decision of the Hon'ble Supreme Court on this issue necessitates modification of this order.

The preliminary objection raised by the petitioner is sustained and all these writ petitions stands allowed on this very jurisdictional issue. Since the impugned notices and orders are getting quashed on the point of Jurisdiction, we are not inclined to proceed further and decide the other issues raised by the petitioner which stands reserved to be raised and contended in an appropriate proceedings.

Since the Hon'ble Supreme Court had, in the case of Ashish Agarwal, supra, as a one-time measure exercising the powers under Article 142 of the Constitution of India, permitted the Revenue to proceed under the substituted provisions, and this Court allowing the petitions only on the procedural flaw, the right conferred on the Revenue would remain reserved to proceed further if they so want from the stage of the order of the Supreme Court in the case of Ashish Agarwal, supra.”

The sum and substance of ratio laid down by the Hon'ble Madras High Court in the case of CIT Vs. Roca Bathroom Products Private Limited (supra) and Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (supra), which was later followed by the Co- 27 Saxon Global India Private Limited ordinate Bench of the Tribunal in the case of Aveva Solutions India LLP, Hyderabad Vs. ITO (supra), are that the upper time limit provided under Section 153(1) and Section 153(4) of the Act is applicable for the final assessment order passed by the A.O. under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act, and in case the final assessment order passed by the A.O. under Section 143(3) r.w.s. 144C(13) r.w.s. 144B of the Act is beyond the upper time limit provided under Section 153(1) and Section 153(4) of the Act, then the said order is beyond the limitation provided under the Act and liable to be quashed. In the present case, there is no dispute with regard to the fact that the normal time limit available for passing the assessment order, as per the provisions of Section 153(1) of the Act, for the Assessment Year 2021-22 is 9 months from the end of the relevant assessment year, which would expire on 31.12.2022. Further, as per the provisions of Section 153(4) of the Act, where a reference under Section 92CA of the Act was made to the Transfer Pricing Officer (TPO), the time limit stands extended by another 12 months, and in the present case, if we apply the provisions of Section 153(4), then the upper time limit for completion of assessment proceedings would expire 28 Saxon Global India Private Limited on 31.12.2023. The final assessment order in the present case has been passed by the A.O. only on 28.10.2024, which is clearly beyond the statutory time limit, and therefore liable to be quashed as being barred by limitation.

In the present case, the final assessment order passed by the A.O. under Section 143(3) r.w.s. 144C(13) r.w.s. 144B dated 28.10.2024 is clearly beyond the limitation prescribed under Section 153(4) of the Income-tax Act, 1961, and thus, liable to be quashed, as held by the Hon'ble Madras High Court and Hon'ble Bombay High Court in the cases of CIT Vs. Roca Bathroom Products Private Limited (supra) and Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (supra) respectively. Therefore, by respectfully following the decisions of the Hon'ble Madras High Court and the Hon'ble Bombay High Court in the above cases, we hold that the final assessment order passed by the A.O. under Section 143(3) r.w.s. 144C(13) r.w.s. 144B dated 28.10.2024 is barred by limitation and accordingly quashed.

We further noted that, although the decisions of the Hon'ble Madras High Court in the case of CIT Vs. Roca Bathroom Products 29 Saxon Global India Private Limited Private Limited (supra) and the Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (supra) are in favour of the assessee, and we dispose of the appeal filed by the assessee by following the above two decisions and quashed the assessment order, but the fact remains that the revenue has challenged the decision of the Hon'ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (supra) by filing an SLP before the Hon'ble Supreme Court, and the Hon'ble Supreme Court has disposed of the appeal. Further, the Hon'ble Supreme Court has delivered a split verdict by two Hon'ble Judges on this issue, i.e., one in favour of the revenue and one in favour of the assessee. Therefore, in our considered view, the matter is still pending for adjudication before the Hon'ble Supreme Court in the case of Shelf Drilling Ron Tappmeyer Limited Vs. ACIT, International Taxation (supra) and is to be resolved by a Larger Bench of the Hon'ble Supreme Court on this issue. Therefore, considering the present legal position, we allow the parties to get this appeal revived for adjudication of the other issues involved in the appeal on merits, if the decision of the Hon'ble Supreme Court 30 Saxon Global India Private Limited on this issue necessitates modification of this order. Accordingly, we dispose of this appeal on this legal issue and keep open the other issues raised by the assessee on merits, in case the Hon'ble Supreme Court decides the issue otherwise.

In the result, the appeal filed by the assessee is allowed in terms of our observations given hereinabove.