DCIT 2(3)(1), MUMBAI vs. HDFC BANK LIMITED, MUMBAI

These are two sets of appeals and cross objections pertaining to Assessment Years 2014-15 and 2015-16. Since the appeals/cross

By way of the present appeal the Revenue has challenged the order, dated 27/03/2023, passed by the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the ‘CIT(A)’] whereby the Ld. CIT(A) had allowed the appeal preferred by the Assessee against the Assessment Order, dated 15/02/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]. In the aforesaid appeal, the Assessee has filed cross objections.

The Revenue has raised following grounds of appeal:-

The Cross Objections raised by the Assessee read as under: C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

2. The Ld. Assessing Officer erred in disallowing broken period interest paid on securities classified under the category of ‘Held to maturity’ (HTM) on the alleged ground that the same is in the nature of capital expenditure without considering the fact that the securities purchased forms part of Bank’s stock-in- trade.

3. The Ld. Assessing Officer erred in making disallowance of provision in respect of reward points.”

On the facts and in circumstances of the case and in law, the Ld. Assessing Officer be directed to allow the ESOP expenses C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

The Cross Objector prays before Your Honour that the claim of ESOP expenses be allowed.

The relevant facts in brief are that the Assessee filed return of income for the Assessment Year 2014-15 on 30/11/2024. The case of the Assessee was selected for scrutiny. The Assessing Officer was of the view that the Assessee had undertaken Specified Domestic Transactions with its Associated Enterprises and therefore, a reference was made to the Transfer Pricing Officer on 29/12/2016. The Assessee filed writ petition before the Hon’ble Bombay High Court seeking quashing of the order making reference to Transfer Pricing Officer. Vide order dated 26/06/2017, passed in Writ Petition 462 of 2017, the Hon’ble Bombay High Court stayed the assessment proceedings since the Transfer Pricing Officer was directed not to pass final order. Thereafter, vide final order dated 20/12/2018 passed in the aforesaid writ petition [reported in (2019) 410 ITR 247], the Hon’ble Bombay High Court quashed the reference to the TPO. The Assessing Officer, thereafter, completed the assessment and passed Assessment Order on 15/02/2019. 4. The Assessee preferred appeal before the CIT(A) against the above Assessment Order contending, inter alia, that the Assessment Order was bad in law having been passed after the expiry of prescribed period specified in Section 153(1) of the Act. However, the CIT(A) accepted the aforesaid contention and allowed the appeal vide order, dated 27/03/2023. 5. Being aggrieved, the Revenue has preferred the present appeal challenging the order passed by the CIT(A) on the grounds reproduced in paragraph 2.1 above, while the Assessee has raised cross objection contending that the assessment order is barred by C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

We would first take up the issue of validity of assessment order.

It is the contention of the Revenue that the CIT(A) failed to appreciate the facts and fell into error by holding that the assessment order was barred by limitation by relying upon a judgment of the Hon’ble Supreme Court which was not applicable to the facts of the present case. The Learned Departmental Representative appearing before us submitted that the moment reference was made to the TPO, the period of limitation for passing the order of assessment for the Assessment Year 2014-15 as specified in Section 153(1) of the Act stood extended by 12 months in terms of Section 153(4) of the Act. It is admitted position that in the present case the assessment proceedings were stayed since the Hon’ble Bombay High Court had, vide order dated 26/06/2016, directed that TPO shall not pass final order and as a result the Assessing Officer was also precluded from passing the assessment order. Explanation 1 (ii) to Section 153 of the Act provides that for the purpose of computing the period of limitation the period during which the assessment proceeding were stayed by an order or injunction of any court shall be excluded. On exclusion of the period of stay the time left with the Assessing Officer for passing the Assessment Order was less than 60 days and therefore, in view of the provisions contained in proviso to Explanation 1 to Section 153 of the Act, the Assessing Officer had 60 days to pass the assessment order. Thus, in case the period of stay is excluded, the assessment order passed is within the period prescribed in Section 153(1) read with Section 153(4) and Proviso to Explanation 1 to Section 153 of the Act. It was also submitted C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

In response, the Learned Authorised Representative took us through the orders passed by the Hon’ble Bombay High Court in the writ petition preferred by the Assessee and submitted that the period of limitation for passing order of assessment under Section 143 of the Act for the Assessment Year 2014-15 as specified in Section 153(1) of the Act expired on 31/12/2017. Since the reference to the TPO was quashed by the Hon’ble Bombay High Court, the extended period of limitation available in case of a reference made to TPO in terms of Section 153(4) of the Act was not available to the Assessing Officer. Therefore, the Assessment Order passed on 15/02/2019 is barred by limitation. The CIT(A) had appreciated the facts correctly while holding that the Assessment Order is barred by limitation.

We have given thoughtful consideration to the rival submissions and perused the material on record. There is no dispute as to facts. The dates/events relevant for adjudication of the issue are as under: SNo. Date Event 1 29/12/2016 Reference to TPO under Section 92CA of the Act 2 31/12/2016 Time limit for passing order as per Section 153(1) of the Act 3 23/02/2017 Writ Petition filed by the Assessee seeking quashing of reference to TPO 4 26/06/2017 Interim stay granted by the Hon’ble C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

The issue that arises for consideration is whether in the facts and circumstances of the present case the extended period of limitation available to an assessing officer on a reference being made to TPO under Section 92CA of the Act as specified in Section 153(4) of the Act would be available to the Assessing Officer even in a case where the aforesaid reference to TPO is quashed by the Hon’ble Bombay High Court.

In the present case the assessee had challenged the very juri iction of the TPO to enter into reference by preferring writ petition before the Hon’ble Bombay High Court seeking, inter alia, quashing of the reference made under Section 92CA of the Act. A challenge to juri iction has to distinguished from a case of challenge to incorrect exercise of juri iction. Once the prayer of the Assessee is accepted that the reference made to TPO under Section 92CA of the Act is quashed by the Hon’ble Bombay High Court, the reference made under Section 92CA of the Act becomes a nullity in the eyes of law taking away the juri iction of the TPO C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

Once the Assessment Order is nullity in eyes of law, the cross objections raised by the Assessee pertaining to merits of addition/disallowances become infructuous.

During the course of hearing, it was submitted by the Learned Authorised Representative for the Assessee that a cross objection was to be treated as an independent appeal and therefore, the fresh claim raised by the Assessee for the first time before the Tribunal ought to be considered. We do not find any merit in the aforesaid submission for the reasons that once the assessment order is struck down as being barred by limitation, there arises no occasion for the appellate authority to examine the C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

In view of the above (a) all the grounds raised by the Revenue are dismissed, (b) Cross Objection 1 (1.1 to 1.2) raised by the C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

We would now take up appeal and cross-objection for the Assessment Year 2015-16. 11. By way of the this appeal the Revenue has challenged the order, dated 27/03/2023, passed by the National Faceless Appeal Centre (NFAC), Delhi, [hereinafter referred to as the ‘CIT(A)’] whereby the Ld. CIT(A) had allowed the appeal preferred by the Assessee against the Assessment Order, dated 15/02/2019, passed under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’]. In the aforesaid appeal, the Assessee has filed cross objections.

Both the sides agreed that the facts and circumstances prevailing for the Assessment Year 2015-16 were identical to Assessment Year 2014-15. For the Assessment Year 2015-16, the reference made to the TPO under Section 92CA of the Act was quashed vide order, dated 20/12/2018, passed by the Hon’ble Bombay High Court in Writ Petition No. 670 of 2018. The period of limitation for passing order of assessment specified in Section 153(1) of the Act expired in 31/12/2017 whereas the Assessment Order was passed on 15/02/2019. In appeal preferred by the assessee, the CIT(A) held that the assessment order was barred by limitation. Hence the present appeal by the Revenue and Cross-Objection by the Assessee raising grounds/objections identical to those raised for the Assessment Year 2014-15. Therefore, adopting the reasoning given while adjudicating appeal/cross-objection for the C.O. No. 26 & 27/Mum/2024 Assessment Year: 2014-15 & 2015-16

In result, appeals preferred by the Revenue for the Assessment Years 2014-15 and 2015-16 are dismissed; and the Cross Objections filed by the Assessee for the Assessment Years 2014- 15 and 2015-16 are partly allowed.