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Facts
The assessee filed its return of income for AY 2011-12. A draft assessment order was passed proposing adjustments. The assessee filed objections before the DRP, which upheld the adjustments. The final assessment order was passed. The assessee appealed to the Tribunal, which restored the matter to the AO/TPO. A revised draft assessment order was passed, and the DRP dismissed the assessee's objections. The AO passed a final assessment order. The assessee again appealed to the Tribunal.
Held
The Tribunal held that the final assessment order dated 31.03.2024 was passed beyond the limitation period prescribed under Section 144C(13) of the Income Tax Act, 1961. Citing various High Court judgments, the Tribunal concluded that the timeline for passing the assessment order after receiving DRP directions is mandatory. Therefore, the assessment order was considered time-barred, void, and invalid.
Key Issues
Whether the final assessment order passed by the Assessing Officer was barred by limitation as per Section 144C(13) of the Income Tax Act, 1961.
Sections Cited
144C, 143(3), 254, 92CA(3), 271(1)(c), 234B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “H” BENCH: NEW DELHI
Before: SHRI YOGESH KUMAR U.S & SHRI MANISH AGARWAL
O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the Assessee against the final assessment order dated 31.03.2024 passed u/s 144C r.w.s. 143(3) r.w.s. 254 of the Income Tax Act, 1961 (‘the Act”) arising out of the directions issued by the ld. Dispute Resolution Panel - 1, New Delhi ("ld. DRP") dated 18.09.2023 for Assessment Year 2011-12.
Brief facts of the case are that assessee filed its return of income for on 30.11.2011 declaring total income of Rs. 1,27,46,780/-. The case was selected for scrutiny through CASS. Thereafter draft assessment order dated 20.02.2015 was passed proposing adjustment of Rs. 1,93,37,357/- as per order of TPO and further addition of Rs. 82,92,871/- on account of unexplained expenses was proposed.
Ariba India Pvt.Ltd. vs. ACIT Against the draft order, assessee filed objections before the ld. DRP. The ld. DRP vide its order dated 30.11.2015 upheld the adjustments and additions proposed in draft assessment order. Accordingly, final assessment order u/s 144C(3) of the Act was passed on 29.01.2016 determining the total income of the assessee at Rs. 4,03,77,010/- after making addition of Rs. 1,93,37,357/- on account of transfer pricing and addition of Rs. 82,92,871/- on account of unexplained expenses. Aggrieved by the said order, assessee filed appeal before the Tribunal who vide its order in dated 18.06.2020 restored the matter to the file of TPO on the issue of Transfer Pricing issue and the issue of unexplained investment was restored to the file of AO. Accordingly, the TPO vide its order u/s 92CA(3) of the Act dated 31.07.2021 proposed adjustment of Rs. 1,62,32,530/-. Thereafter the AO passed draft assessment order on 28.12.2022 proposing to made the additions towards the adjustments proposed by TPO. Against the said order assessee filed objections before ld. DRP who gave directions in terms of its order dt. 18.09.2023 wherein all the objections raised by the assessee were dismissed. Subsequently, the AO passed the Final assessment order on 31.03.2024 u/s 144C r.w.s. 143(3)/254 of the Act at a total income at Rs. 3,72,72,181/- by making addition of Rs. 1,62,32,530/- TP adjustments and further addition of Rs. 82,92,871/- was made towards unexplained expenses.
Against the said order, the assessee is again preferred appeal before the Tribunal by taking the following grounds of appeal:- 1. “That on the facts and circumstances of the case and in law, the order u/s 143(3) r.w.s144C(13) passed by the AO is bad in law and void ab initio since it has been passed beyond the limitation prescribed under section 144C(13).
2. That on the facts and circumstances of the case and in law, the AO has erred in assessing the total income of the Appellant at IN 3,72,72,181 by making an Ariba India Pvt.Ltd. vs. ACIT addition amounting to INR 2,45,25,401 as against the returned income amounting to INR 1,27,46,780. Transfer Pricing adjustment amounting to INR 1.62,30.459 in respect of the international transaction pertaining to fees for receipt of technical services for provision of spend management solutions services: 3. That on the facts and circumstances of the case and in law, the AO/ DRP/ TPO have erred in making Transfer Pricing ("TP") adjustment amounting to INR 1,62,30,459 in respect of the international transaction pertaining to fees for receipt of technical services for provision of spend management solutions services alleging that the same is not at arm's length. 3.1. That on facts and circumstances of the case and in law, the AO / DRP / TPO have erred in not following the express directions of the ITAT issued in the 1st round of proceedings. 3.2 That on the facts and circumstances of the case and in law, the TPO has erred in not discharging the statutory onus of establishing that the conditions specified in clauses (a) to (d) of section 92C(3) of the Act are satisfied in Appellant's case, before disregarding the arm's length price determined by the Appellant. The AO/ DRP have further erred in upholding the action of the TPO. 3.3. That on the facts and circumstances of the case and in law, the Ld. AO/ DRP/ TPO have erred in not appreciating the functional profile and characterization of the Appellant for the trading segment (i.e. Spend Management Solutions segment) and misinterpreted the Appellant to be an engineering consultancy service provider instead of software/ hardware distributor. 3.4. That on the facts and circumstances of the case and in law, the TPO has erred in rejecting and AO/ DRP have further erred in upholding the rejection of economic analysis undertaken by the Appellant based on incorrect appreciation of the functional, asset and risk profile of the Appellant and without appreciating the submissions and evidence furnished by the Appellant. 3.5. That on the facts and circumstances of the case and in law, the TPO has erred in not appreciating the filters applied by the Appellant for benchmarking the international transaction and consequently, erred in modifying the filters and applying additional quantitative filters not applicable to the functional profile of the Appellant. The AO/ DRP have further erred in upholding the action of the TPO. 3.6. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO have erred in selecting functionally incomparable companies and not appreciating the functions, assets and risks in order to determine the arm's length margin of the international transaction.
Ariba India Pvt.Ltd. vs. ACIT 3.7. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO have erred in rejecting certain companies which were comparable to the Appellant basis the functions, assets and risks profile. 3.8. That on the facts and circumstances of the case and in law, the AO/ DRP/ TPO have erred in not computing the correct margin of the comparable companies chosen to benchmark the international transaction. 3.9. Without prejudice to the above grounds, the AO/DRP/ TPO has erred by not limiting the transfer pricing addition to the value of international transactions entered into by the Appellant with its AEs and has grossly erred by making an addition on the total operating cost base. 3.10. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO erred in disregarding the multiple year data selected by the Appellant in the TP Documentation and in selecting the current year (i.e. financial year 2010-11) data for comparability despite the fact that at the time of comparison done by the Appellant, the complete data for financial year 2010-11 was not available within the public domain. 3.11. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO erred by not appreciating the fact that the Appellant is a company incorporated under the provisions of the Companies Act, 1956 and enjoying the tax holiday benefits conferred under the tax holiday benefits as per the Software Technology Park of India (herein after referred to as "STPI") Scheme Thus, there is no motive on the part of the Appellant to shift the profits to any other jurisdiction. Hence the case of the Appellant falls squarely within the ambit of aforementioned principle. 3.12. That on the facts and circumstances of the case and in law, the AO/ DRP/ TPO have erred in taking a contradictory view, as in the case of Ariba Inc. (Appellant's AE) the AO has alleged that the payment towards fees for services was not adequate and a higher fee of 45% was warranted which has eventually been accepted in Ariba Inc's case at 12.5% after the Hon'ble Commissioner of Income Tax (Appeals) ['CIT(A)"] Order which has also been upheld by Hon'ble ITAT. 3.13. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO erred by not accepting the consistent approach as adopted by the Hon'ble ITAT in Appellant's own case for FY 2009-10 (AY 2010-11) as there was no change in the functional profile and nature of transactions during the year under assessment vis-à-vis earlier year. Transfer Pricing adjustment amounting to INR 2,071 in relation to international transaction pertaining to interest on accounts receivable:
Ariba India Pvt.Ltd. vs. ACIT 4. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO erred in making a notional addition of INR 2,071 on account of alleged interest on perceived delay in collection of receivables from the AEs without taking due cognizance of the business model and submissions made by the Appellant. 4.1. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO has grossly erred in overlooking the fact that before making an adjustment neither a comparable transaction entered into has been identified nor the enterprise which has been entered into such a transaction has been identified as mandated and necessitated as per Rule 10B(2) of the Rules. 4.2. That on the facts and in the circumstances of the case and in law, the AO/ DRP/ TPO erred in fact and in law by making a separate notional addition of alleged interest on accounts receivables despite the fact that the same has already been counted by way of working capital adjustment on the comparables. Corporate Tax 5. That on the facts and in the circumstances of the case and in law, the AO / DRP erred in facts and in law in disallowing IN 82,92,871 appearing as credit card payments in the AIR 5.1. That on the facts and in the circumstances of the case and in law, the AO and the DRP erred in not appreciating that the credit cards are issued by the bank to the employees of the appellant. These are not owned by the appellant and the statements thereof are issued by the bank directly to the employees. Accordingly, the assessee is unable to produce any details in respect of such credit card payments appearing in the AIR since not privy to those statements. 5.2. That on the facts and in the circumstances of the case and in law, the AO / DRP have not disputed the expenses claimed by the appellant in the return. The expenses in the AIR are in addition to the claim made in the income tax return. If the AO and DRP claim that the expenses are of the assessee, then these should be reduced from the taxable income and not added back. Only what has been claimed as an expenditure can be disallowed. 5.3. That on the facts and in the circumstances of the case and in law, the AO has erred in stating that the expenditure is unexplained without appreciating that this is not an expenditure of the appellant. The appellant has paid more than IN 10 Crore salaries to their employees and if the employees have gone ahead and spent money on their credit cards which is much less than the salaries paid, then the expenditure cannot be called as unexplained.
Ariba India Pvt.Ltd. vs. ACIT 6. That on the facts and in the circumstances of the case and in law, the AO has erred in facts and in law in charging and computing interest under section 234B of the Income Tax Act, 1961.
That on the facts and circumstances of the case and in law, the AO has erred in initiating penalty proceedings under section 271(1)(c) of the Act. Each of the above grounds are independent and without prejudice to the other grounds of appeal preferred by the Appellant. The Appellant prays for leave to add, alter, vary, omit, substitute, or amend the above grounds of appeal, at any time before, or at, the time of hearing of the appeal, in the interest of the natural justice.”
Ground of appeal No.1 is general in nature and requires no adjudication.
With respect to Ground of appeal No.2, ld. AR for the assessee submits that in the instant case, ld. DRP has passed the order on 18.09.2023 and the final assessment order was passed on 31.03.2024 which is time barred. Ld. AR submits that as per section 144C(13) of the Act the AO should passed the final assessment order within a period of one month from the end of the month in which order of Ld. DRP is received, however, in the instant case, the final assessment order is passed on 31.3.2024 which is barred by limitation and, thus, deserves to be held bad in law. He prayed accordingly.
7. On the other hand, the Ld. CIT DR supports the order of the lower authorities and requests for the confirmation of the same on this issue.
We have heard the parties and perused the material available on record. For the sake of ready reference, the Provisions of section 144C are reproduced as under:
Ariba India Pvt.Ltd. vs. ACIT “144C. Reference to dispute resolution panel. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing officer shall, notwithstanding anything contained in section 153, pass the assessment order under sub-section (3) within one month from the end of the month in which,- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub- section (5),- (a) make such further enquiry, as it thinks fit; or (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub- section (2) by the eligible assessee. (15) For the purposes of this section,- (a) "Dispute Resolution Panel" means a collegium comprising of three Commissioners of income-tax constituted by the Board for this purpose; (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92-CA; and (ii) any foreign company.’ 9. A reference is also made to the provisions of section 144B relating to the faceless assessment pertaining to the assessment completed in case of eligible assessee u/s 144C of the Act, which are as under:
Ariba India Pvt.Ltd. vs. ACIT “144B.Faceless Assessment. (1) Notwithstanding anything to the contrary contained in any other provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:— (i) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit through an automated allocation system; (ii) the National Faceless Assessment Centre shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section; (iii) a notice shall be served on the assessee, through the National Faceless Assessment Centre, under sub-section (2) of section 143 or under sub- section (1) of section 142 and the assessee may file his response to such notice within the date specified therein, to the National Faceless Assessment Centre which shall forward the same to the assessment unit; (iv) ….(xx) (xxi) in case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of such assessee, as mentioned in sub-section (1) under section 144C, the National Faceless Assessment Centre shall serve the draft order referred to in clause (xx) on the assessee; (xxii)…(xxiii) (xxiv) where a draft order is served on the assessee as referred to in clause (xxi), such assessee shall,— (a) file his acceptance of the variations proposed in such draft order to the National Faceless Assessment Centre; or (b) file his objections, if any, to such variations, with— (I) the Dispute Resolution Panel, and (II) the National Faceless Assessment Centre, within the period specified in sub-section (2) of section 144C; (xxv) …(xxvi) (xxvii) where the eligible assessee files objections with the Dispute Resolution Panel, under sub-clause (b) of clause (xxiv), the National Faceless Assessment Centre shall send such intimation along with a copy of objections filed to the assessment unit; (xxviii) the National Faceless Assessment Centre shall, in a case referred to in clause (xxvii), upon receipt of the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, forward such directions to the assessment unit; (xxix) the assessment unit shall, in conformity with the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, complete the assessment within the time allowed in sub-section (13) of section 144C and initiate penalty proceedings, if any, and send a copy of the assessment order to the National Faceless Assessment Centre; Ariba India Pvt.Ltd. vs. ACIT (xxx) the National Faceless Assessment Centre shall, upon receipt of the assessment order referred to in clause (xxvi) or clause (xxix), as the case may be, serve a copy of such order and notice for initiating penalty proceedings, if any, on the assessee, along with the demand notice, specifying the sum payable by, or the amount of refund due to, the assessee on the basis of such assessment; (xxxi) …(xxxii) (2) … 10. From the perusal of sub-section (13) of section 144C it is clear that the final assessment order has to be passed by the Assessing officer within a period of one month from the end of the month in which the directions from the DRP are received. Further as per clause (xxviii) and (xxix) of sub-section 1 to section 144B provides that the Faceless Assessment centre after receiving the directions of the DRP, sent them to the Assessment unit who shall pass the final assessment order in accordance with section 144C(13). Thus, in any case whether the assessment is completed by Jurisdictional Assessing officer or by Faceless Assessing Officer, final order should be passed within the time provided u/s 144C(13) of the Act.
11. The final assessment order so passed by the Jurisdictional Assessing Officer on 31.03.2024 is barred by limitations as the timeline of one month for completion of final assessment order starts from 18.09.2023 when ld. DRP passed its order disposing the objections raised by assessee and on the very same day, DIN was intimated to both the parties vide intimation letter No. ITBA/DRP/S/91/2023- 24/1056205448(1). Undisputedly, the final assessment order was passed on 31.03.2024 thus, is barred by limitations and is void and invalid order.
The Hon’ble Jurisdictional High Court in the case of PCIT Vs. M/s Fibrehome India Pvt. Ltd. in of 2024 vide order dt. 5.2.2024 has held as under:-
Ariba India Pvt.Ltd. vs. ACIT “3. We note that an identical question has been answered by us in W.P.(C) 15381 of 2022 titled as "Louis Dreyfus Company India Private Limited vs. Deputy Commissioner of Income Tax Circle 13(1), Delhi & Ors." in favour of the assessee / petitioner. While dealing with this question, we had observed as follows:- "14. The determination which the AO makes in the first instance is recognized to be a draft of the proposed order of assessment by virtue of section 144C(1) of the Act. If the assessee be aggrieved by the proposed order of assessment, it is entitled to file objections before the DRP in accordance with Section 144C(2) of the Act. The power of the AO to complete the assessment on the basis of the draft order stands interdicted in case objections have come to be preferred within the 30 day period as contemplated in Section 144C(2) of the Act. It is the DRP which thereafter proceeds to decide the objections and frame directions to enable the AO to complete the assessment in accordance with Section 144C(5) of the Act.
In terms of sub-section (13) of Section 144C of the Act, the AO is mandated to complete the assessment "in conformity with the directions" as framed by the DRP. That very provision commands the AO to complete the assessment within one month from the end of the month in which such a direction is received.
This is evident from Section 144C of the Act which is extracted herein below:- ……..
As is manifest from a reading of sub-section (13) of Section 144C of the Act, the AO is not accorded any discretion in the framing of an order of assessment once directions have come to be framed by the DRP. In fact, the provision requires the AO to frame an order of assessment in conformity with those directions and without providing any further opportunity of hearing to the assessee. This principle of law has been affirmed by the Bombay High Court in the aforenoted paragraphs of Vodafone Idea and in Shell India Markets Private Limited v. Additional Commissioner of Income Tax Officer, National Faceless Assessment Centre & Ors. The relevant paragraph of the decision in Shell India are extracted hereinbelow: "10. Sub-section (13) of Section 144C, therefore, is very clear inasmuch as the Assessing Officer shall, upon receipt of the directions issued under sub-section (5), in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received, Sub-section (13) also provides that the Assessing Officer can complete the assessment without providing any further opportunity of being Ariba India Pvt.Ltd. vs. ACIT heard to the assessee. This means that the moment the Assessing Officer receives the directions under sub-section (5), he has to straightaway complete the assessment and he does not even have to hear the assessee. The Assessing Officer shall simply comply with the directions received from the DRP within one month from the end of the month in which such direction is received."
18. In this backdrop, we note that both the judgments of the Bombay High Court in Shell India and Vodafone Idea construe the time lines as provided in Section 144C to be mandatory in character. In our considered opinion, this interpretation is in accord with the intent behind insertion of that provision and the bare text and spirit of that section. Thus, we accord our approval to the interpretation as set out in the aforenoted decisions of the Bombay High Court.
Further, the procedure of assessment as provided under Section 144C does not envisage or contemplate the interdiction or involvement of the TPO once a directive has been framed by the DRP. The role of the TPO comes to an end once an order as contemplated under Section 92 CA(4) of the Act has come to be framed and remitted to the AO. There was thus no occasion for the TPO having resumed proceedings post the passing of the direction by the DRP on 20 June 2022.
Undisputedly, the directive of the DRP came to be uploaded on the ITBA portal on 24 June 2022. It is additionally stated to have been dispatched through Speed Post to the third respondent (TPO) and the fourth respondent (Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi) on 27 June 2022. It is thereafter that the TPO appears to have passed the order dated 25 July 2022. XXX XXX XXX 22. It is thus manifest that as per the provisions of E-as, 2019, all orders, notices and decisions have to be necessarily uploaded on the ITBA portal and as part of the larger faceless assessment regime which now holds the field. The uploading of the directive of the DRP on the ITBA portal would thus constitute valid and sufficient service and the period of limitation as prescribed in Section 144C(13) of the Act would be liable to be computed bearing that crucial date in mind. Once the aforesaid position becomes clear, it is evident that the order of assessment, if at all could have been framed lastly by 31 July 2022. There has thus been an abject failure on the part of the first respondent to comply with the mandatory timelines as incorporated in the aforenoted provisions. Accordingly, the writ petition is liable to be allowed and the impugned order of assessment and Ariba India Pvt.Ltd. vs. ACIT the consequential penalty proceedings are thus liable to be set aside on this short score alone." 4. We, consequently, find no merit in the instant appeal and the same shall stand dismissed.”
In the case of Vodafone Idea Limited V. CPC, Benglauru, Writ Petition No.15398 of 2023 (Bombay High Court) vide order dated 8.11.2023 has held as under: “20. Section 144C of the Act is a self contained provision which carves out a separate class of assessees, i.e.. 'eligible assessee Section 144C of the Act was inserted in the Finance Act of 2009 and came into effect from 1 October 2009. In the notes on clauses to the Finance Bill. 2009 (Budget 2009-2010), the reason for insertion of Section 144C is given as under: "The subjects of transfer pricing audit and the taxation of foreign company are at nascent stage in India. Often the Assessing Officers and Transfer Pricing Officers tend to take a conservative view. The correction of such view take very long time with the existing appellate structure. With a view to provide speedy disposal, it is proposed to amend the Income- tax Act so as to create an alternative dispute resolution mechanism within the income-tax department and accordingly, section 144C has been proposed to be inserted so as to provide inter alia the Dispute Resolution Panel as an alternative dispute resolution mechanism." 21. Thus, if the provisions of Section 144C as mandated by the Statute are not strictly adhered the entire object of providing for an alternate redressal mechanism in the form of DRP stand defeated. That is not the intention of the legislature when the provision was introduced in the Act. Section 144C(10) of the Act provide that the directions of DRP are binding on the AO. By failing to pass any order in terms of the provision, the AO cannot be permitted to defeat the entire exercise and render the same futile. When a Statute prescribes the power to do a certain thing in a certain way, then the thing must be done in that way and other methods of performance are forbidden. Once the statute has prescribed a limitation period for passing the final order, it is expected that the internal procedure of the department should mould itself to give meaning to and act in aid of the provision. Any procedural defect (there is none in this case) in the internal mechanism of the working of E-assessment Scheme, cannot operate against the interest of assessee. Hence, the FAO cannot be believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part of department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity, but is an illegality and vitiates the entire proceeding.
In a decision in the matter of Turner International India Private Limited v. Deputy Commissioner of Income Tax, Circle-25(2), New Delhi, the Delhi High Court has held that the question "whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of Section 144C of the Act?", is no longer res integra and any order passed contrary to Section 144C of the Act cannot be sustained.
In a decision cited by Mr. Mistri in the matter of Shell India Markets (P) Ltd. (supra), this Court has also held as follows: "10. Sub-section (13) of Section 144C, therefore, is very clear inasmuch as the Assessing Officer shall, upon receipt of the directions issued under Sub- section (5), in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received. Sub- section (13) also provides that the Assessing Officer can complete the assessment without providing any further opportunity of being heard to the assessee. This means that the moment the Assessing Officer receives the directions under Sub-section (5), he has to straightaway complete the assessment and he does not even have to hear the assessee. The Assessing Officer shall simply comply with the directions received from the DRP within one month from the end of the month in which such directions is received."
In view of the aforesaid discussion, we have no hesitation in holding that the assessment order dated 31" August 2023 passed by FAO two years after the DRP directions, is time barred and cannot be sustained. Consequently, the ROI as filed has to be accepted. Petitioner is entitled to receive the refund together with interest, in accordance with law. The procedure to be completed within 30 days of this order being unloaded. This would, however, not preclude revenue, should the need arise, from reopening the assessment by following due process and in accordance with law.
Rule is thus made absolute in terms of prayer clause (A) which reads as under: "A. that this Hon'ble Court be pleased to issue a Writ of Mandamus or any other writ in the nature of Mandamus, order or direction under Article 226 of the Constitution of India calling for the records of the case so as to examine the failure of Respondent Nos. 1 and 2 to give refund of tax paid by the Petitioner for the assessment year 2016-2017 which is in excess of legitimate tax due on the returned income of the Petitioner and directing Respondent Nos. 1 and 2 to forthwith grant the refund for the assessment year 2016-2017 along with the applicable rate of interest."
Before we part, we strongly recommend that a detailed enquiry be initiated on the failure on the part of the Faceless Assessing Officer concerned to act in accordance with the provisions of the Act and the lack of diligence on the part of officials concerned and the system itself insofar as it relates to the present assessment. Strict Ariba India Pvt.Ltd. vs. ACIT action should be taken against persons responsible for the laxity and lethargy displayed which has caused a huge loss to the exchequer and in turn to the citizens of this country. A copy of this order be circulated to the CBDT and the Principal Secretary, Ministry of Finance, GOI.
Mr. Singh seeks stay of the judgment. Stay refused.”
Further the decision of Hon’ble Madras High Court in the case of M/s Taeyang Metal India Private Limited vs. DCIT in Writ Petition No.12159 of 2023 and W.M.P. No.11989 of 2023 vide order dated 23.02.2024 has held as under: “6. The interpretation of sub-section 13 of Section 144C takes center stage in the adjudication of this dispute. The said sub-section is set out below: "(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received." From the above provision, it is evident that the specified time limit is one month from the end of the month in which directions are received. It is also clear that the time limit should be computed from the date of receipt of directions issued under sub- section (5) thereof. Sub-section (5) of Section 144C deals with the issuance of directions by the DRP. The admitted position is that the DRP issued directions on 16.06.2022 and this fact is borne out by examining the proceedings of the DRP, which is contained at page Nos. 122 to 130 of the typed set of papers. The said proceedings also record that the copy of the directions of the DRP is being forwarded to the assessee, the assessing officer and the TPO. The assessing officer referred to therein is the National Faceless Assessment Centre, Delhi. The petitioner has placed on record a communication from the Secretary and ACIT to the DRP. The said communication states that the assessing officer in the captioned case is the National Faceless Assessment Centre, Delhi and that a scanned copy of the proceedings was uploaded to the National Faceless Assessment Centre on 17.06.2022. 7. From the above discussion, the conclusion that emerges is that the directions of the DRP were forwarded to the assessing officer, i.e. National Faceless Assessment Centre, Delhi by uploading the same on 17.06.2022. Although learned senior standing counsel contends that the jurisdictional assessing officer received the directions only on 17.03.2023, for purposes of sub-section (13) of Section 144C, the date of receipt should be reckoned as B COREY date of receipt by the National Faceless Assessment Centre on 17.06.2022. The internal arrangement by which the assessment proceedings relating to the petitioner were purportedly transferred so as Ariba India Pvt.Ltd. vs. ACIT to ensure that the proceedings are not barred by limitation is not material for this purpose. Indeed, as contended by learned counsel for the petitioner, the communication dated 12.04.2022 from the PCCIT of the National Faceless Assessment Centre seeking approval for transfer so as to complete assessment within the period of limitation underscores the fact that the income tax authorities were mindful of the fact that assessment would be barred by limitation unless such assessment is proceeded with and completed expeditiously.
8. All that remains is to examine whether the assessment proceedings would be barred by limitation if computed from the end of June 2022. If so computed, the period of one month expired on 31.07.2022, whereas the assessment order came to be issued on 25.03.2023. Hence, the assessment order was issued beyond the time limit specified in sub-section (13) of Section 144C. By taking into account not only statutory prescription but also the interpretation thereof by the Division Bench of this Court in Roca and that of the Division Bench of the Delhi High Court in Louis Dreyfus, 1 conclude that the assessment order cannot be sustained.
In view of the conclusion that the assessment proceedings are barred by limitation, it is unnecessary to examine as to whether the assessing officer was duly authorized to exercise jurisdiction either under the WhatsApp message issued on 13.04.2022 or upon the physical file being signed on 21.04.2022.”
15. The Co-ordinate bench of ITAT, Chennai Bench ‘D” in the case of M/s Cognizant Technology Solutions India Private Limited (as successor-in-interest of M/s KBACE Technologies Private Limited) vs. ACIT in IT(TP)A 61/CHNY/2023 vide order dated 29/05/2024 has held has under:
“10. We have heard rival submissions in the light of facts of the case, evidence placed on record and judicial citations relied upon. Ground of appeal no.1 is general in nature and hence bereft of any meritorious adjudication. Coming to grounds of appeal Nos. 2 to 6 whereby the assesse has challenged procedural irregularities in giving effect proceedings and thus arguing that the AO dated 18.05.2023 is barred by limitations, we find considerable force in the arguments put forth by the assesse. Facts on records indicate that the DRP Bangalore had given its directions on 01.12.2022. Within the meanings of section 144C(13) was incumbent on the AO to have passed his order on or before 31.01.2023. The DR could not controvert the said timeline by placing any evidence suggesting different service dates upon the AO. The Law prescribed u/s. 144C(13) unequivocally postulates that pursuant to the receipt of directions in a calendar month, the AO is mandated to pass his final order before the end of following calendar month. Statutory stipulations prescribed in 144C(13) do not make any difference as to whether a set aside assessments would be given different timelines. The argument of CIT(DR) have accordingly been found to be not in consonance with statutory regulations governing the matter.
The case law relied upon by the assesse of 18/05/2023 Adobe system supra supports its case. Accordingly, the order u/s 143(3) r.w.s 1440 F.W.S 920A r.w.s 254 of the Income Tax Act dated 18.05.2023 is held to be barred by limitation and hence quashed. The grounds of appeal numbers 2-6 thus stands allowed.”
16. In the light of the above discussion and by respectfully following the aforesaid catena of judgements including of hon’ble jurisdictional high court and various benches of Tribunal, we are of the considered view that the final order passed by the Jurisdictional assessing officer is barred by limitations and thus is invalid order. Accordingly, the same is hereby quashed. As a consequence, Ground appeal Nos. 2 of the assessee is allowed.
17. Since, we have already decided and allowed the assessee’s legal ground of appeal No. 2 taken on limitation issue, thus the other grounds of appeal taken are not adjudicated.
In the result, appeal of the assessee is allowed.
Order is pronounced in the Open Court 27.01. 2026