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Facts
The Revenue appealed against the order of CIT(A) that held the assessment order for AY 2019-20 as barred by limitation. The assessee contended that the assessment order was passed beyond the prescribed time limits, considering extensions due to transfer pricing proceedings and various CBDT notifications.
Held
The Tribunal held that the reference made by the Assessing Officer to the TPO was time-barred and invalid, and thus, it constituted no reference in the eyes of law. The assessment order dated 30.09.2022 was therefore clearly barred by limitation.
Key Issues
Whether the assessment order for AY 2019-20 is barred by limitation due to a time-barred reference to the Transfer Pricing Officer.
Sections Cited
143(3), 144C(3), 144B, 153, 92CA, 153(4), 153(1)
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
O R D E R
PER MAHAVIR SINGH, VICE PRESIDENT:
This appeal by the Revenue is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre in Order No.ITBA/NFAC/S/250/2023-24/1061817436(1) dated 01.03.2024. The assessment was framed by the Assessing Officer, Assessment Unit, Income Tax Department for the assessment year 2019-20 u/s. 143(3) r.w.s. 144C(3) r.w.s.144B of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 30.09.2022.
2. The first issue in this appeal of Revenue is as regards to the order of CIT(A) in holding that the impugned assessment order is barred by limitation without considering the facts of actual limitation date. For this, Revenue has raised the following Ground No.2:- “(2) The Ld.CIT(A) has erred in arriving the conclusion that the impugned assessment order is barred by time limitation without considering the facts that the actual limitation date (31.03.2021) for completion of assessment u/s 153 of the IT Act, 1961 extended to 30.09.2021 by virtue of series of CBDT’s notifications (S.O.966(E) dated 27.02.2021, S.O.1703(E) dated 27.04.2021 & S.No.2580(E) dated 25.06.2021) and further extended to 31.09.2022 by a period of 12 months as per provisions of Section 92CA(1) & 153(4) of the IT Act, 1961.”
Brief facts are that the assessee is a public limited company engaged interalia, in the business of manufacturing and trading of cement. The assessee company filed its return of income for the relevant assessment year 2019-20 on 30.09.2020. The assessment was framed by the Assessment Unit of Income Tax Department u/s.143(3) r.w.s. 144C(3) r.w.s. 144B of the Act vide order dated 30.09.2022 for the relevant assessment year 2019-20. The assessee before CIT(A) contended that the assessment order passed by the Assessment Unit / AO is barred by limitation. The assessee before CIT(A) contended that the assessee during the course of assessment proceedings submitted before the AO that the time limit for completion of assessment proceedings was 31.03.2022, which was already expired. The assessee submitted that CBDT Notification No.10 of 2021 dated 27.02.2021 states that the time limit for completion of assessment expires on 31.03.2021 due to extensions provided in earlier notifications and as such, time limit would be extended to 30.04.2021. This time limit of 30.04.2021 was further extended to 30.06.2021 vide CBDT Notification No.38 of 2021 dated 27.04.2021 and further extended to 30.09.2021 vide CBDT Notification No.74 of 2021 dated 25.06.2021. It was contended before AO that the time limit for completion of assessment proceedings u/s.153(4) of the Act for the relevant assessment year 2019-20, which was 31.03.2022 was never extended either by taxation and other laws (Relaxation and Amendment of certain provisions) Act, 2020 (hereinafter ‘TOLA Act’) or vide CBDT notifications. The assessee before AO contended that in term of second proviso to section 153(1) of the Act, the assessment proceedings is required to be completed by 31.03.2021, which gets extended to 31.03.2022 in view of section 153(4) of the Act in the cases where the matter is referred to transfer pricing adjustment. It was contended that the proceedings for the relevant assessment year was referred for transfer pricing proceedings u/s.92CA of the Act and order by Transfer Pricing Officer u/s.92CA(3) of the Act was passed on 28.01.2022. Hence, the last date for completion of assessment proceedings have become time barred on 31.03.2022 i.e., before the date of completion of assessment proceedings, which was completed on 30.09.2022. The AO held that due to completion of assessment proceedings for assessment year 2019-20 as extended by CBDT Notification was 30.09.2021, as the assessee’s case have been referred to transfer pricing proceedings u/s.92CA of the Act, a further period of 12 months has been added to calculate the time period.
3.1 The CIT(A) after going through the above facts and submissions held the assessment as barred by limitation by noting in para 4.4 as under:- 4.4 I have considered the assessment order and submission of the appellant, the assessment order under section 143(3) for AY 2019-20 is deemed time-barred as the last date for completing assessment proceedings i.e. 31-03-2022, had expired, and no valid extension beyond this date was provided either through CBDT notifications or the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. Additionally, the Transfer Pricing Office's order was passed within the requisite 60 days prior to the due date, confirming that no further extension was granted. I am in agreement with the understanding of the appellant that the CBDT notifications cited by the Assessing Officer (AO) do not apply in this case, as it did not extend the time limit beyond 31-03-2022. CBDT notification no. 10 of 2021 dated 27.02.2021 states that the time limit for completion of assessment which expires on 31.03.2021 due to extensions provided in earlier notifications, such time limit would be extended to 30.04.2021. This time limit of 30.04.2021 has been extended to 30.06.2021 vide CBDT notification no. 38 of 2021 dated 27.04.2021 and further extended to 30.09.2021 vide CBDT notification no. 74 of 2021 dated 25.06.2021 Any assumption of any extension for the next assessment year (i.e 2022) on the basis of above notifications, would not be valid. As a result, the assessment order in the present case to be treated as barred by time limit.
Aggrieved, Revenue is in appeal before the Tribunal.
We have heard rival contentions and gone through facts and circumstances of the case. We noted from the arguments of ld.AR for the assessee that in view of the second proviso to section 153(1) of the Act, the due date for completion of assessment u/s.143(3) was 31.03.2021, since the reference u/s.92CA(1) of the Act was made to TPO on 13.09.2021, vide section 153(4) of the Act the due date gets extended upto 31.03.2022. The ld.AR also drew our attention to the relevant provisions of section 153(1), 153(4) and second proviso to section 153(1) of the Act. He narrated that the reference u/s.92CA(1) of the Act was made to TPO on 13.09.2021 and accordingly, in view of the provisions of section 153(4) of the Act, the due date for passing assessment order u/s.143(3) of the Act gets extended to 31.03.2022, as the TPO passed the order u/s.92CA(3) of the Act on 28.01.2022. The ld.AR for the assessee stated that there is no extension of any time limit for passing or framing assessment u/s.143(3) in term of section 153(4) of the Act. For this, he referred to the decision of Mumbai Bench of this Tribunal in the case of JP Morgan Chase Bank N.A. vs. CIT in order dated 31.01.2024, wherein exactly on Tribunal decided the issue after narrating the facts from paras 8 to 11 as under:- 8. The second plank of argument challenging validity of impugned order is that the Assessing Officer had made a reference to the TPO, but the reference was returned by the TPO stating it to be time barred. The CIT in the impugned order has observed that there was no reference by the Assessing Officer. Hence, jurisdiction u/s. 263 of the Act has been exercised on wrong appreciation of facts. Before we proceed further it would be relevant to refer to some of the dates:
Date Events 01/03/2021 Letter from A.O to CIT(IT),Mumbai-3 requesting for approval for referring the case to the TPO. 09/03/2021 Approval received from the CIT for referring the case to TPO 20/09/2021 A.O makes reference to the TPO via ITBA Portal. 24/09/2021 TPO returned the reference to A.O stating it to be invalid/time barred, hence, cannot be acted upon.
Indeed, reference was made by the Assessing Officer to TPO, and the said reference was returned on the ground that it was not valid. The provisions of section 92CA(1) of the Act mandates that the Assessing Officer has to make a reference to the TPO with the previous approval of the PCIT/CIT for computation of the arm's length price in relation to the international transaction. The CBDT Instruction No.3 of 2016 sets out guidelines for implementation of the TP provisions, hence, a reference has to be made by the Assessing Officer to the TPO in accordance with provisions of section 92CA read with CBDT Instruction No.3/2016. The provisions of Section 92CA(3A) specifies the time line for passing of the order by TPO u/s. 92CA(3) of the Act. The TPO has to pass the order u/s. 92CA(3) at any time before 60 days prior to the date of expiry of limitation for completion of the assessment. Any reference made by the Assessing Officer to TPO in deviation in terms of approvals, time line, etc. that has the effect of jeopardizing the assessment would make the reference invalid. Such invalid reference is in fact no reference.
In the instant case, the TPO returned reference by placing reliance on Office Memo dated 28/06/2021. The said Office Memo is with regard to limitation period for transfer pricing proceedings particularly for "2. In this regard, I have been directed to inform that the comments of TPL Division in the matter as under: "The section 3 of Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 thereinafter referred to as the TOLA") only provides that the action, which in this case is passing of assessment order, which falls under the window given in the said section may be completed by the date given in the said section. The said section does so without amending section 153 of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). (2) For AY 2018-19, the assessment proceedings were originally required to be completed till 30th September 2020 us per the provisions of section 153 of the Act which gets extended to 30th September 2021 under sub section (4) of section 153 of the Act in Transfer Pricing (hereinafter referred to "TP" cases. Thus the TP order in such cases is required to be passed 60 days before 30th Sept 2021, that is, 31st July 2021. Since 31st July 2021 does not fall under the window of section 3 of TOLA, no extension Is granted by TOLA in such cases. The lime limit of final assessment order in cases is defined by the provisions, of the section 153 of the Act only and is, therefore, 30th September, 2021.
(3| With regard to difficulties faced by the TP Officers in completing TP proceedings and passing TP orders by 31st July 2021. It is pertinent to reiterate that TOLA does not give the authority to extend the TP time barring date of 31.07,2021 for AY, 2018-19. The said time barring date can be extended only by means of an ordinance or a legislative amendment which is beyond the purview of the Board." [Emphasized by us] A perusal of the aforesaid Office Memo makes it clear that there is no extension of time for passing the TP order u/s. 92CA(3) of the Act by TOLA.
A close examination of sequence of events tabulated above would show that the Assessing Officer had received the approval from the office of CIT on 09/03/2021 i.e. well before the last date for passing of the TP order i.e. 31/07/2021. The Assessing Officer went in slumber and held on to himself the approval from CIT for more than six months. In proceedings under the Act, time is the essence. Thereafter, on 20/09/2021 made reference to TPO, by that time the period to pass the order by the TPO u/s. 92CA(3) of the Act had already elapsed. As is evident from Office Memo the last date for passing the order for TPO was 31/07/2021. The reference made by Assessing Officer to the TPO was clearly time barred and invalid. Such reference is no reference in the eye of law.
The Assessing Officer completed the assessment giving a go bye to the mandatory provisions of section 92CA and CBDT Instruction No.3 of 2016. Such an assessment order definitely falls within the meaning of erroneous and prejudicial to the interest of Revenue as envisaged u/s. 263 of the Act. The ld. Counsel for the assessee has pointed that in ITBA portal the last date for completion of assessment was mentioned as 30/09/2022, therefore, the Assessing Officer has reason to believe that he has still time to make reference. We find no force in the submission of the ld. Counsel for the assessee. The limitation for completion of assessment is to be determined strictly in accordance with the provisions of the Act and not dates mentioned in ITBA portal. The Department had issued Office Memo dated 28/06/2021 (supra) clarifying the doubts over issue of limitation for Transfer Pricing proceedings for Assessment Year 2018-19. It is a settled legal position that Board Circulars, Notifications and OMs are binding on the Assessing Officer. We find no infirmity in the action of CIT in invoking revisional jurisdiction u/s. 262 of the Act in passing the impugned order.
The ld.CIT-DR except explaining the facts could not controvert the above proposition of law. We noted that the issue is very simple and there is no extension of time limit by CBDT or by Act in term of section 153(4)of the Act for completion of assessment u/s.143(3) of the Act. Admittedly, the reference to TPO was made u/s.92CA(1) of the Act on 13.09.2021 and who passed the order u/s.92CA(3) of the Act on 28.01.2022. Since the reference u/s.92CA(1) of the Act was made to TPO, consequent to section 153(4) of the Act, the due date 31.03.2022 but in the present case, the assessment u/s.143(3) r.w.s. 144C(3) r.w.s. 144B of the Act was passed vide order dated 30.09.2022, which is clearly barred by limitation. Hence, we find no infirmity in the order of CIT(A) holding the assessment order as barred by limitation and we confirm the findings of the CIT(A). Hence, this jurisdictional issue of limitation is decided against the Revenue.
Coming to the merits of the case i.e., issue of disallowance u/s.14A of the Act and disallowance of claim of weighted deduction u/s.35(2AB) of the Act by the AO, deleted by the CIT(A), since we have adjudicated and decided the jurisdictional issue in favour of assessee, we refrain from adjudicating these issues on merits and hence, these has become academic.
In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 20th September, 2024 at Chennai.