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Facts
The assessee filed an appeal against an order confirming additions made by the AO. The primary issue revolved around the validity of a reference made to the TPO and the subsequent assessment order, which the assessee contended were time-barred.
Held
The Tribunal held that the reference to the TPO and the subsequent assessment order were made beyond the permissible time limits. Relying on a High Court judgment, the Tribunal found the proceedings to be invalid and barred by limitation.
Key Issues
Whether the reference to the TPO and the assessment order were passed within the statutory time limits prescribed under the Income Tax Act, 1961.
Sections Cited
139(5), 143(3), 144B, 250, 43A, 40A(7), 41, 92CA(3), 153, 251, 153(1), 153(4), 92CA(1)
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Income Tax Appellate Tribunal, DELHI BENCH: ‘B’ NEW DELHI
Before: SHRI S RIFAUR RAHMAN & SHRI VIMAL KUMAR
PER VIMAL KUMAR, JUDICIAL MEMBER:
The appeal filed by the assessee is against order dated 14.03.2024 of Ld. Commissioner of Income Tax (Appeals)/National Faceless Assessment Centre (NFAC), Delhi (hereinafter referred to as the “Ld. CIT(A)” under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) arising out of order dated 28.03.2022 under Section 143(3) r.w.s. 144B of the Act for assessment Year 2019-20.
2. Brief facts of case are that assessee filed original income tax return on 30.11.2019 declaring total income of Rs.202,42,24,480/- and later on revised return under Section 139(5) of the Act, declaring income of Rs.1,99,74,55,920/- on 29.09.2020. The case was selected for complete scrutiny under CASS on following issues: i ) Increase in TDS in Revised Return ii) Claim of Any Other Amount Allowable as Deduction in Schedule BP iii) Reduction of Income in Revised Return & Claim of Refund iv) International Related Party Transactions in Respect of Intangible Property. v) Refund Claim vi) ICDS Compliance and Adjustment vii) Disallowance u/s 40A(7) (Gratuity provision) viii) Foreign Outward Remittance ix) Taxability of business liability written off u/s 41 or any other section 2.1 Notice under Section 143(2) dated 31.03.2021 of the Act was served. Specific queries were made vide notice issued under Section 142(1) of the Act dated 10.11.2021, 03.12.2021, 13.12.2021, 11.02.2022, 18.02.2022 and 28.02.2022. Assessee filed replies on 04.01.2022 and 04.03.2022. With respect to International Related Parties Transactions in respect of intangible property, the matter was referred to Ld. TPO on 28.01.2022. Ld. TPO’s order under Section 93CA(3) of the Act was received with no adverse inference drawn regarding transactions entered into by assessee with associated enterprises. No changes in draft assessment order were made. Ld. AO vide order dated 28.03.2022 made additions of Rs.4,93,63,939/-, Rs.2,67,68,555/-, Rs.3,84,625/-, Rs.4,02,45,734/- and Rs.3,66,744/-.
Being aggrieved, appellant/assessee preferred present appeal with following grounds of appeal: “Ground 1: On the facts and in the circumstances of the case & in law, the action of Ld. Commissioner of Income-tax (Appeals) [CIT(A)] confirming the additions/disallowances made by the Ld. AO vide the order passed under section 250 of the Income Tax Act, 1961 (the Act) is bad in law. Ground 2: On the facts and circumstances of the case & in law, the Ld. CIT(A) erred in confirming the addition of Rs. 3,84,625 on account of gain on foreign exchange fluctuation relating to capital assets, which was duly reduced from the cost of assets in accordance with the provisions of section 43A of the Act. Ground 2.1: On the facts and circumstances of the case & in law, the CIT(A) erred in not appreciating that the gain on foreign exchange fluctuation relates to capital assets and accordingly, is capital and not revenue in nature. Ground 3: On the facts and circumstances of the case & in law, the CIT(A) erred in not allowing the expense incurred in relation to foreign exchange fluctuation loss amounting to INR 4,02,45,734 without appreciating the fact that the same was revenue in nature and was incurred and paid in relation to the business of the Appellant. Ground 4: On the facts and circumstances of the case & in law, the CIT(A) exceeded its jurisdiction vested upon him under section 251 of the Act by setting aside the matter to AO with respect to disallowance under section 40A(7) of the Act and addition of sum under section 41 of the Act without adjudicating the merits of the case. That the above grounds are independent and without prejudice to each other.
That the appellant craves to add, alter, amend or withdraw all or any grounds herein or add any further grounds as may be considered necessary either before or during the hearing of the grounds in this appeal.”
At the time of hearing, appellant/assessee pressed additional ground of appeal
nos. 5 & 6 as under: "5. On the facts and circumstances of the case & in law, the Ld. AO grossly erred in making a reference under section 92CA(3) of the Income- tax Act, 1961 ('the Act') on 28. January 2022 when the relevant assessment proceedings already stood time barred as per section 153 of the Act and thus, the said reference so made and all consequential proceedings thereafter are invalid, bad in law and a nullity being barred by limitation.
On the facts and circumstances of the case & in law, the assessment order dated 28 March 2022 passed under section 143(3) read with section 144B of the Act by the Ld. AO is bad in law and barred by limitation in view of the provisions of Section 153 of the Act.”
6. Learned authorized Representative for the appellant/assessee submitted that Ld. CIT(A) failed to appreciate that pertinently, the assessment for the impugned assessment year i.e. AY 2019-20 ought to have been completed before the end the twelve months from the end of the assessment year in which the income was first assessable i.e., by 31 March 2021 as per the provisions of section 153(1) of the Act as reproduced hereinabove. Further, the said time limitation was further extended to 30 September 2021 by time-to-time notifications provided on account of COVID-19 circumstances. The relevant sequence of events is summarized hereunder for the sake of ready reference:
S. No. Particulars Date 1 Assessment year in which income was first AY 2019-20 assessable (i.e. the impugned AY). 2 Time Limit to pass assessment order as per proviso 31 March 2021 to section 153(1) of the Act. 3 Time Limit extended by Taxation and Other Laws 30 September (Relaxation and Amendment of Certain Provisions) Act, 2020 read with Notification No. 74/2021 dated 2021 25 June 2021 ("TOLA Act"). 4 Date of reference made under section 92CA(1) of 28 January 2022 the Act to Ld. TPO (refer para 1, internal pg. 1 of Ld. TPO's order dt. 29 January 2022 enclosed as Exhibit-1). 5 Date of passing assessment order (refer pg. 54 of 28 March 2022 appeal set).
6.1 As is evident from the above tabulated chart, a reference to the Ld. TPO was made on 28 January 2022 when the assessment proceedings for the instant year under consideration already stood barred by limitation under section 153(1) of the Act (ie., 30 September 2021) and thus, the said reference so made and the ensuing proceedings are barred by limitation and a nullity in the eyes of law. 6.2 It is essential to note that the TP reference under section 92CA(1) of the Act can only be made during the course of assessment proceeding within the period of limitation as mandated under section 153(1) of the Act and not afterwards. Whereas, in the instant case, the Ld. AO has referred the matter to the Ld. TPO much after the expiry of aforesaid timelines i.e., 30 September 2021.
6.3 Therefore, the said reference having been made beyond the permissible time limit is invalid, bad in law and void-ab-initio. As a consequence, the assessment order passed under section 143(3) read with section 144B of the Act on 28 March 2022 is invalid, barred by limitation and liable to be quashed. 6.4 Reliance is placed on the judgement of Hon'ble Madras High Court in the case of Virtusa Consulting Services (P.) Ltd. v. Dispute Resolution Panel, [2022] 139 taxmann.com 361 (Madras) dated 9 June 2022 wherein it was concluded based on the facts of the case that in the aforesaid case, it was concluded by the Hon'ble Madras High Court that where assessee-company had filed its return for AY 2006-07 on 30 November 2006 and reference to TPO under section 92CA of the Act was made on 17 December 2009 i.e., beyond permissible period of 21 months from end of relevant assessment year as prescribed under section 153(1), such reference being barred by limitation was liable to be set aside. The relevant extract is reproduced hereunder: Quote “22. From the above judgments, it is clear that a legal plea can be raised at any stage and there cannot be any waiver of a statutory right. In the present case, though the appellant/petitioner has participated in the proceedings before TPO and the assessing officer, it is their specific stand that they have raised the issue before the DRP and also that, when they submitted their objections and documents to the TPO, the date of reference was not known to them. This stand is not factually objected by the department. Further, there is no acquiescence, waiver or estoppel in taxing laws. The law on this point is well settled. The Levy and collection of tax must be within the four corners of law in compliance with the substantial and procedural mandates of connected legislations. Therefore, we again disagree with the findings of the learned Judge.
If the reference is bad, then as a sequitur, all further proceedings, in furtherance of the same are also bad. In the present case, because of a reference after the permissible period, the time line has been missed by the department at every stage. Therefore, the appellant is entitled to succeed in the appeal.”
Learned authorized Representative for the Revenue submitted that Ld. AO in response to notice, additional ground of appeal
nos. 5 & 6 in letter dated 13.09.2025 stated as under: “5. On the facts and circumstances of the case & in law, the Ld. Ao grossly erred in making a reference under section 920A(3) of the Income-tax Act, 1961 (the Aot') on 28. January 2022 when the relevant assessment proceedings already stood time barred as per section 153 of the Act and thus, the said reference so made and all consequential proceedings thereafter are invalid, bad in law and a nullity being barred by limitation. AO comments The above ground raised by the assessee is misconceived and factually incorrect. As per the ITBA case history notings, the reference to the TPO u/s 92CA(1) was duly made on 24.05.2021 and approved on 30.06.2021, which is well within the statutory time limit prescribed under section 163 of the Act. on the facts and circumstances of the case & in law, the assessment order dated
28. March 2022 passed under section 143(3) read with section 144B of the Act by the Ld. AO is bad in law and barred by limitation in view of the provisions of Section 153 of the Act.; AO comments This contention of the assessee is also devoid of merit. Once a valid reference to the TPO was made on 24.06.2021, the statutory period Yor completion of assessment stood extended to 31.03.2022 by operation of section 153(4) of the Act. The assessment order has in 28.03.2022, which is squarely within the extended limitation period. The assessee's plea that the assessment is barred by limitation is therefore factually and legally untenable.
From examination of records in light of aforesaid rival contentions, it is crystal clear that for assessment Year 2019-20, the assessment ought to have been completed before 30.09.2021. Ld. TPO passed order in reference to letter dated 28.01.2022. Therefore, the assessment order under Section 143(3) r.w.s. 144B dated 28.03.2022 being barred by limitation is invalid. Reference to ratio of judgment in Virtusa Consulting Services (P) Ltd. vs. Dispute Resolution Panel [2022] 139 taxmann.com 361 (Madras) (supra) is important. Accordingly, the additional ground of appeal
nos. 5 & 6 are allowed. Ground of appeal nos. 1 to 4, being not pressed are left open.