REPAL RENEWABLES PRIVATE LIMITED,HYDERABAD vs. DCIT CIRCLE -3(1), HYDERABAD

3 ITA.Nos.116 & 481/Hyd./2022 Payment of Interest on NCDs

4. On the facts and circumstances of the case and in law, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in rejecting the Appellant's benchmarking analysis which demonstrated that payment of Interest on NCDs was at arm's length and conducting a fresh benchmarking exercise.

5. Without prejudice to the above, on the facts and circumstances of the case and in law, the ld. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in selecting comparable instances for determining arm's length price for the payment of Interest on NCDs, which were in-fact not comparable to the Appellant. Once the incorrect comparable instances are rejected from the fresh benchmarking exercise conducted by the Id. TPO, the Appellant's transaction is at arm's length. Computation of book profits

6. On the facts and circumstances of the case and in law, the ld. AO erred in computing the amount of book profits and the consequent taxes as per Section 115JB of the Act. The AO ought to have appreciated that "book profits cannot be enhanced by the quantum of additions under Chapter X.

Interest under section 2348 and 234D

7. On the facts and circumstances of the case and in law, the ld. AO erred in computing the interest under Section 234B and Section 234D of the Act while calculating the Appellant's payable demand.

Initiation of penalty under Section 270A

4 ITA.Nos.116 & 481/Hyd./2022 8. On the facts and circumstances of the case and in law, the ld. AO erred in initiating penalty proceedings under Section 270A of the Act.

The above grounds are independent and without prejudice to one another. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law.”

3. The assessee has also raised an additional ground by filing an application under Rule 11 of ITAT Rules, 1963. The additional ground raised by the assessee reads as under:

“On the facts and circumstances of the case and in law, the final assessment order dated 15th February 2022 is passed beyond the limitation period prescribed by section 153 of the Income-tax Act, 1961 ('the Act') and accordingly the final assessment order dated 15th February 2022 is bad in law and ought to be quashed in- limine.

The Respondent craves leave to add, amend, delete, rectify, substitute and modify any of the aforesaid grounds of appeal or add a new ground or grounds of appeal at any time before or at the time of hearing the appeal.”

5 ITA.Nos.116 & 481/Hyd./2022 ITA.No.481/Hyd./2022 – A.Y. 2018-2019 :

4. The assessee has raised the following grounds :

1. “On the facts and circumstances of the case and in law, the assessment proceedings in the Appellant's case for AY 2018-19 are barred by limitation and accordingly the final assessment order dated 27 July 2022 ought to be quashed in-limine.

2. On the facts and circumstances of the case and in law, the final assessment order dated 27 July 2022 ought to be quashed in- limine as the same is without jurisdiction because it has been passed without following the mandatory directions of the Hon'ble Dispute Resolution Panel ('DRP').

Payment of interest towards purchase on supplier credit

3. On the facts and circumstances of the case and in law, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in re-characterizing the transaction of 'Payment of interest towards purchase on supplier credit as an external commercial borrowing and thereby calculating at its arm's length price. The authorities ought to have appreciated that the transaction undertaken by the Appellant is a trade payable and accordingly at arm's length price.

4. Without prejudice, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in computing the amount of transfer pricing adjustment.

Payment of Interest on NCDs

5. On the facts and circumstances of the case and in law, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in rejecting the Appellant's benchmarking analysis which 6 ITA.Nos.116 & 481/Hyd./2022 demonstrated that payment of Interest on NCDs was at arm's length and conducting a fresh benchmarking exercise.

6. Without prejudice to the above, on the facts and circumstances of the case and in law, the Id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in selecting comparable instances for determining arm's length price for the payment of Interest on NCDs, which were in-fact not comparable to the Appellant. Once the incorrect comparable instances are rejected from the fresh benchmarking exercise conducted by the Id. TΡΟ, the Appellant's transaction is at arm's length.

7. Without prejudice, the id. AO and the Ld. TPO, under the directions of the Hon'ble DRP, erred in computing the amount of transfer pricing adjustment.

The above grounds are independent and without prejudice to one another. The Appellant craves leave to add, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of appeal, so as to enable the Hon'ble Income-tax Appellate Tribunal to decide this appeal according to law.

5. The assessee has also raised an additional ground by filing an application under Rule 11 of ITAT Rules, 1963. The additional ground raised by the assessee reads as under: Additional Ground No.1 : The Assessment Order dated 27th July 2022 passed under section 143(3) read with section 144C(13) of the Income-tax Act, 1961 for AY 2018-19 is void and bad in law as it has been passed beyond the time limit prescribed under section. 153 of the Act.

7 ITA.Nos.116 & 481/Hyd./2022 The Appellant craves leave to add, alter, vary, omit, substitute or amend time before or at, the time of hearing of the appeal, so as to enable the Hon'ble Tribunal to decide this appeal according to law.”

8 ITA.Nos.116 & 481/Hyd./2022 Accordingly, by following the Judgment of Hon’ble Supreme Court in the case of National Thermal Power Co. Ltd., vs., CIT [1998] 229 ITR 383 (SC) we admit the additional ground raised by the assessee for adjudication.

8. The learned Authorised Representative of the Assessee has submitted that the assessment order passed by the Assessing Officer for the assessment year 2017-2018 on 15.02.2022 is beyond the limitation and, therefore, the same is invalid and liable to be quashed on this ground alone. He has pointed-out that time limit for passing the final assessment order was available up-to 31.12.2019. However, since there was a reference made u/sec.92CA of the Act, therefore, a further period of 12 months was available to the Assessing Officer to pass the assessment order i.e., up-to 31.12.2020. Even by taking the benefit of time extension under Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) [in short “TOLA”] Act, 2020, the limitation was further extended up-to 30.09.2021, however, the impugned order was passed on 15.02.2022. Therefore, in view of judgment of Hon’ble Madras High Court in the case

9 ITA.Nos.116 & 481/Hyd./2022 of CIT vs., vs., Roca Bathroom Products (P.) Ltd., [2022] 445 ITR 537 (Madras) as well as the Judgment of Hon’ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd., vs., ACIT, International Taxation [2023] 457 ITR 161 (Bombay). The assessment order passed by Assessing Officer is invalid and liable to be quashed. Thus, the Learned Counsel for the Assessee has submitted that the overall limitation for passing the assessment order cannot be exceeded as provided u/sec.153(1) read with sub-sec.(4) of said Section and the limitation as provided u/sec.144C(13) is only a restriction on the Assessing Officer to pass the final order within one month from the receipt of the Directions of the DRP and not enlarging the limitation which is provided u/sec.153 of the Act. The Hon’ble Madras High Court has held that provisions u/sec.144C and 153C are not mutually exclusive as both contains the provisions relating to sec.92CA and are inter- dependent and overlapping. Similar view has been taken by the Hon’ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd., vs., ACIT, International Taxation (supra) and held that the limitation prescribed u/sec.153 of the Act

10 ITA.Nos.116 & 481/Hyd./2022 would prevail over and above the assessment time limit prescribed u/sec.144C of the Act.

9. On the other hand, learned DR has submitted that the provisions of sec.144C begins with a non-obstante clause and, therefore, sec.144C is a Code in itself so far as the assessments in case of an “eligible assessee” and, therefore, the non-obstante clause in sec.144C(13) excludes the provisions of sec.153 of the Act. Learned DR has submitted that sec.153 of the Act exists in the Income Tax Act for a consequently longer period of time, whereas sec.144C of the Act is relatively a new provision introduced in 2009 and, therefore, the effect of non-obstante clause in sec.144C makes it clear that the provisions of sec.144C would prevail over the provisions of sec.153 of the Act. The learned DR has further submitted that the Income Tax Act provides two different methods of assessment one for the “eligible assessee” as defined u/sec.144C(15)(b) of the Act and the “other method” is applicable for the assessees’ who falls under the normal category. In case of ordinary or normal category of assessee , the assessment order must be 11 ITA.Nos.116 & 481/Hyd./2022 completed within the limitation as provided u/sec.153(1) of the Act, whereas, if the matter is referred to the TPO u/sec.92CA of the Act, this period of limitation is further extended by a period of 12 months as per sub-sec.(4) of sec.153. The learned DR has further submitted that as per the special provisions u/sec.144C, the assessee is having an option to accept the Draft Assessment Order and variations in the draft assessment or to object the same by filing objections before the DRP or to the Assessing Officer for going to challenge the order of the Assessing Officer under regular appeal before the learned CIT(A). Therefore, once the assessee decided to go for the objections before the DRP, the limitation for completing the assessment is applicable as provided u/sec.144C(13) of the Act. Thus, the learned DR has submitted that once the Final Assessment Order is passed within the period of 30 days from the receipt of the DRP directions, then, it is well within the period of limitation provided u/sec.144C(13) of the Act. The learned DR has further submitted that this issue is pending adjudication before the Hon’ble Supreme Court. Earlier the Division Bench

12 ITA.Nos.116 & 481/Hyd./2022 of the Hon’ble Supreme Court has given divergent decisions and, therefore, now this controversy has to be resolved by a Larger Bench of Hon’ble Supreme Court. Thus, the learned DR has submitted that till the dispute is resolved by the Larger Bench of the Supreme Court, this issue may be kept open. She has further submitted that the limitation was also extended by the Hon’ble Supreme Court in case of suo motu Cognizance for Extension of Limitation reported in Re 441 ITR 722 (SC) and, therefore, as per the Judgment of Hon’ble Supreme Court the limitation was extended up-to the end of 2022 and further period of 90 days was already granted by the Hon’ble Supreme Court. The learned DR has thus, submitted that in view of Judgment of Hon’ble Supreme Court, the assessment order passed for the assessment year 2017-2018 is within the period of limitation.

13 ITA.Nos.116 & 481/Hyd./2022 period for completing the assessment gets extended up-to 31.12.2020. Further, due to the Covid-2019 pandemic the Government has notified the TOLA whereby the time period was extended up-to 30.09.2021 vide Notification dated 25.06.2021. Therefore, by considering the extension of time period by Notification of TOLA, the Assessing Officer was to complete the assessment by 30.09.2021, but, in the case in hand, the Assessing Officer has passed the impugned order on 15.02.2022 which is beyond the time limitation provided u/sec.153 as well as extension by Notification of TOLA. The learned Department Representative for the Revenue has also relied upon Judgment of Hon’ble Supreme Court in suo motu Cognizance for Extension of Limitation (supra), for extending the limitation. However, in our considered view that the limitation extended by the Hon’ble Supreme Court is not applicable for passing the orders by the Tax Authorities beyond the limitation provided under the Act. The learned Authorised Representative of the Assessee has filed copy of the Circulars dated 157/13/2021 dated 20.07.2021 issued by the Central Board of Indirect Taxes and Customs [in short

14 ITA.Nos.116 & 481/Hyd./2022 “CBITC”] whereby the CBITC has clarified this point that the extension of limitation was only with reference to the judicial and quasi-judicial proceedings in the nature of appeals/suits /petitions etc., and has not extended to every action or proceedings under the CGST Act, 2017. For ready reference, we reproduce the relevant part of the Circular dated 20.07.2021 vide Paras-3 to 5 as under :

“3. Accordingly, legal opinion was solicited regarding applicability of the order of the Hon'ble Supreme Court to the limitations of time lines under GST Law. The matter has been examined on the basis of the legal opinion received in the matter. The following is observed as per the legal opinion:-

(i) The extension granted by Hon'ble Supreme Court order applies only to quasi-judicial and judicial matters relating to petitions/ applications/suits/appeals/all other proceedings. All other proceedings should be understood in the nature of the earlier used expressions but can only with reference to judicial and quasi- judicial proceedings. Hon’ble Supreme Court has stepped into to grant extensions only with reference to judicial and quasi-judicial proceedings in the nature of appeals/suits/petitions etc. and has not extended it to every action or proceeding under the CGST Act.

(ii) For the purpose of counting the period(s) of limitation for filing of appeals before any appellate authority under the GST Law, the limitation stands extended till further orders as ordered by the Hon'ble Supreme Court in Suo Motu Writ Petition (Civil) 3 of 2020

15 ITA.Nos.116 & 481/Hyd./2022 vide order dated 27th April 2021. Thus, as on date, the Orders of the Hon'ble Supreme Court apply to appeals, reviews, revisions etc., and not to original adjudication.

(iii) Various Orders and extensions passed by the Hon'ble Supreme Court would apply only to acts and actions which are in nature of judicial, including quasi-judicial exercise of power and discretion. Even under this category, Hon'ble Supreme Court Order, applies only to a lis which needs to be pursued within a time frame fixed by the respective statutes.

(iv) Wherever proceedings are pending, judicial or quasi-judicial which requires to be heard and disposed off, cannot come to a standstill by virtue of these extension orders. Those cases need to be adjudicated or disposed off either physically or through the virtual mode based on the prevailing policies and practices besides instructions if any.

(v) The following actions such as scrutiny of returns, issuance of summons, search, enquiry or investigations and even consequential arrest in accordance with GST law would not be covered by the judgment of the Hon'ble Supreme Court.

(vi) As regards issuance of show cause notice, granting time for replies and passing orders, the present Orders of the Hon'ble Supreme Court may not cover them even though they are quasi- judicial proceedings as the same has only been made applicable to matters relating to petitions/applications/suits, etc.

16 ITA.Nos.116 & 481/Hyd./2022 (a) Proceedings that need to be initiated or compliances that need to be done by the taxpayers :- These actions would continue to be governed only by the statutory mechanism and time limit provided/ extensions granted under the statute itself. Various Orders of the Hon'ble Supreme Court would not apply to the said proceedings/compliances on part of the taxpayers Quasi-Judicial proceedings by tax authorities:- The tax authorities can continue to hear and dispose off proceedings where they are performing the functions as quasi- judicial authority. This may interalia include disposal of application for refund, application for revocation of cancellation of registration, adjudication proceedings of demand notices, etc.

Similarly, appeals which are filed and are pending, can continue to be heard and disposed off and the same will be governed by those extensions of time granted by the statutes or notifications, if any.

(c) Appeals by taxpayers/ tax authorities against anv quasi- judicial order:- Wherever any appeal is required to filed before Joint Additional Commissioner (Appeals), Commissioner (Appeals), Appellate Authority for Advance Ruling. Tribunal and various courts against any quasi-judicial order or where a proceeding for revision or rectification of any order is required to be undertaken, the time line for the same would stand extended as per the Hon'ble Supreme Court's order.

17 ITA.Nos.116 & 481/Hyd./2022 Appellate Authority for Advance Ruling, Tribunal and various courts against any quasi-judicial order or where proceeding for revision or rectification of any order is required to be undertaken, and is not applicable to any other proceedings under GST Laws.”

“7. We have considered the rival submissions as well as relevant material on record. In the case in hand, the assessee has challenged the validity of the assessment order passed u/sec.143(3) r.w.s.144C(13) of the Act dated 18.10.2024 being barred by limitation as provided u/sec.153 of the Act. At the outset, it is noted that the limitation for passing the assessment orders is provided u/sec.153 of the Act and the relevant provisions are in sub-sec.(1) and sub-sec.(4) of sec.153 reads as under :

"153. Time limit for completion of assessment, reassessment and re-computation.—

18 ITA.Nos.116 & 481/Hyd./2022 (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable. Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: Provided further that in respect of an order of assessment relating to the assessment year commencing on – (i) the 1st day of April, 2019, the provisions of this sub- section shall have effect, as if for the words "twenty- one months", the words "twelve months" had been substituted. (ii) the 1st day of April, 2020, the provisions of this sub- section shall have effect, as if for the words "twenty- one months", the words "eighteen months" had been substituted. Provided also that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "nine months" had been substituted: Provided also that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2022,

19 ITA.Nos.116 & 481/Hyd./2022 the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted: (1A) xxxxx xxxxx (1B) xxxxx xxxxx (2) xxxxx xxxxx (3) xxxxx xxxxx (3A) xxxxx xxxxx (4) Notwithstanding anything contained in sub-sections (1), (1A), (2) (3) and (3A), where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections (1), (1A), (2), (3) and (3A) shall be extended by twelve months.

(5) Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer [or the Transfer Pricing Officer, as the case may be], wholly or partly, otherwise than by making a fresh assessment or reassessment [or fresh order under section 92CA, as the case may be], such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be.

20 ITA.Nos.116 & 481/Hyd./2022 Provided that where it is not possible for the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer [or the Transfer Pricing Officer, as the case may be], if satisfied, may allow an additional period of six months to give effect to the order.

Provided further that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 shall be made within the time specified in sub- section (3).”

21 ITA.Nos.116 & 481/Hyd./2022 Officer was required to complete the assessment by 31.12.2023. The Assessing Officer has passed the Final Assessment Order on 18.10.2024 in pursuance to the Directions dated 24.09.2024 of the DRP. This controversy of the limitation applicable u/sec.153 or u/sec.144C(13) was considered by the Hon’ble Madras High Court in the case of CIT vs., Roca Bathroom Products (P.) Ltd., (supra) and held in Paras-18 to 28 as under:

22 ITA.Nos.116 & 481/Hyd./2022 23 ITA.Nos.116 & 481/Hyd./2022 24 ITA.Nos.116 & 481/Hyd./2022 25 ITA.Nos.116 & 481/Hyd./2022 26 ITA.Nos.116 & 481/Hyd./2022 27 ITA.Nos.116 & 481/Hyd./2022

10. Similar view has been taken by the Hon’ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd., vs., ACIT, International Taxation (supra) in Paras-23 to 34 as under :

28 ITA.Nos.116 & 481/Hyd./2022 29 ITA.Nos.116 & 481/Hyd./2022 30 ITA.Nos.116 & 481/Hyd./2022

11. Therefore, following the Judgments of Hon’ble Madras High Court as well as Hon’ble Bombay High Court cited (surpa), we hold that the assessment order passed by the Assessing Officer on 18.10.2024 is barred by limitation and consequently, the same is liable to be quashed. We order accordingly.

13. The Hon’ble jurisdictional High Court in the case of Kotha Kantaiah vs., Income Tax Officer in WP.No.344 of 2025 vide order dated 24.04.2025 while dealing with the issue of validity of the notice issued u/sec.148 issued by the Jurisdictional Assessing Officer [in short “JAO”] instead of Faceless Assessing Officer [in short “FAO”] as per the Faceless Assessment Scheme has quashed the notice issued u/sec.148 by the JAO and consequently, re-assessment order, but, granted the liberty to the parties to get the petition revived as per the outcome of the Judgment of the Hon’ble Supreme Court on the identical issue. The relevant part of the Judgment of Hon’ble Jurisdictional High Court of Telangana in the case of Kotha Kantaiah vs., Income Tax Officer (supra) in Paras-15 to 18 of the said judgement is as under :

31 ITA.Nos.116 & 481/Hyd./2022 32 ITA.Nos.116 & 481/Hyd./2022 33 ITA.Nos.116 & 481/Hyd./2022

14. Accordingly, we dispose of this appeal on this legal issue and keep open the other issues raised by the assessee on the merits if the Hon’ble Supreme Court decides this issue otherwise.”

34 ITA.Nos.116 & 481/Hyd./2022 12. Accordingly, to maintain the rule of consistency, we follow the earlier decisions of this Tribunal in the case of Aveva Solutions India LLP, Hyderabad vs., ITO, Ward-8(1), Hyderabad (supra) and hold that assessment order dated 15.02.2022 passed by the Assessing Officer is barred by limitation and consequently, the same is liable to be quashed. We Order accordingly.

35 ITA.Nos.116 & 481/Hyd./2022 ITA.No.481/Hyd./2022 – A.Y. 2018-2019 :

36 ITA.Nos.116 & 481/Hyd./2022 15. We dispose of this appeal on the legal issue and keep open the other issues raised by the assessee on merits if the identical legal issue is decided by the Hon’ble Supreme Court necessitates the modification of this order.

Order pronounced in the open Court on 26.11.2025.