Period of limitation u/s 153 is applicable in remand matters

By POONAM GANDHI Income Tax Judiciary June 29, 2022

TaxGuru Citation: 2022 taxguru.in 2869
Case Name: CIT Vs Roca Bathroom Products Private Limited (Madras High Court)
Appeal Number: Only available for paid members
Courts: All High Courts, Madras High Court

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CIT Vs Roca Bathroom Products Private Limited (Madras High Court)

Held that the period of limitation prescribed under Section 153 (2A) or 153 (3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or TPO or the DRP, the duty is on the assessing officer to pass orders.

Facts-

The respondent, M/s. Roca Bathroom Products Private Limited, is a private limited company and a subsidiary of Roca Sanitario S.A., Spain. For A.Y. 2009-2010, they filed their return declaring an income of Rs.21,44,96,661/-. Similarly, for AY 2010-2011, they filed their returndeclaring an income of Rs.50,75,32,362/-. The returns of income were taken up for scrutiny and were referred to TPO u/s. 92CA.

The TPO passed an order in respect of AY 2009-2010, making a downward adjustment of Rs.4,66,00,000/- on import of goods. Following the same, the AO passed a draft assessment order dated 30.03.2013, in conformity with the adjustment proposed by the TPO and also made addition for (i)disallowance under Rule 14A (ii) disallowance on connectivity expenses and (iii) disallowance on unabsorbed depreciation of amalgamating company, to which, the respondent submitted their objections before the first appellant / DRP and the Assessing Officer. However, the DRP rejected the same and confirmed the additions made in the draft assessment order and issued directions under section 144C. Based on the same, the second appellant passed the final assessment order on 16.01.2014 and raised a demand u/s 156 of Rs.1,46,07,560/-.

For AY 2010-2011, the TPO passed an order under Section 92CA, making adjustment of Rs.19,38,25,457/- in respect of 3 issues viz., (i) downward adjustment on import of goods (ii) downward adjustment of advertisement, marketing and promotion expenses and (iii) downward adjustment on interest paid on Compulsorily Convertible Debentures. Accordingly, the AO passed a draft assessment order on 24.03.2014 in conformity with the adjustment proposed by the TPO and also made addition for (i) disallowance under Rule 14A and (ii) disallowance on connectivity expenses. Aggrieved by the same, the respondent filed their objections before the first appellant / DRP, but the objections were rejected by the DRP and directions were issued under section 144C. Based on the same, the second appellant passed the final assessment order on 17.02.2015 and raised a demand u/s. 156 of Rs.10,93,31,070/-.

The Tribunal allowed the appeals by setting aside the orders of the assessing officer and remanding the matter to the assessing officer to refer the same to the DRP for fresh examination, after giving sufficient opportunity to the assessee.

Pursuant to Tribunal order, the respondent didn’t received any notice. Hence, respondent sent a letter to second appellant that the remand proceedings have become time barred u/s 153 and requested for refund of tax already paid for AY 2009-2010 and 2010-2011 along with interest.

Conclusion-

The non-obstante clause would not exclude the operation of Section 153 as a whole. It only implies that irrespective of availability of larger time to conclude the proceedings, final orders are to be passed within one month in line with the scheme of the Act.

FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT

The Revenue is the appellant(s) in all the appeals. WA.Nos.1517, 1519, 1609 and 1610 of 2021 have been filed against a common order dated 23.12.2020 passed by the learned Judge in the respective WP Nos.1068, 1070, 922 and 919 of 2020, whereas WA.No.1854 of 2021 arises from the order dated 16.02.2021 made in WP No.6202 of 2019.

2. The issues raised in all these writ appeals are identical and interrelated to each other as the order in one batch has been relied and followed in the other case. The learned counsel on either side have putforth common arguments in all the appeals. Therefore, all the writ appeals were taken up for hearing together and disposed of by this common judgment.

3. The respondent in these writ appeals namely WA Nos. 1517, 1519, 1609 & 1610 of 2021 / M/s. Roca Bathroom Products Private Limited is a private limited company incorporated during August 1983 and a subsidiary of Roca Sanitario S.A., Spain. They are engaged in the business of manufacturing and marketing of bathroom products, such as, sanitary ware, tap fittings and other allied products. For the assessment year 2009-2010, they filed their return on 26.09.2009, declaring an income of Rs.21,44,96,661/-. Similarly, for the assessment year 2010-2011, they filed their return on 30.09.2010 declaring an income of Rs.50,75,32,362/-. The returns of income were taken up for scrutiny and were referred to Transfer Pricing Officer (in short, “TPO”) under Section 92CA of The Income Tax Act, 1961 (in short, “the Act”).

4. The TPO passed an order dated 23.01.2013 in respect of assessment year 2009-2010, making a downward adjustment of Rs.4,66,00,000/- on import of goods. Following the same, the Assessing Officer passed a draft assessment order dated 30.03.2013, in conformity with the adjustment proposed by the TPO and also made addition for (i)disallowance under Rule 14A (ii) disallowance on connectivity expenses and (iii) disallowance on unabsorbed depreciation of amalgamating company, to which, the respondent submitted their objections before the first appellant / DRP and the Assessing Officer. However, the DRP rejected the same and confirmed the additions made in the draft assessment order and issued directions under section 144C. Based on the same, the second appellant passed the final assessment order on 16.01.2014 and raised a demand under section 156 of Rs.1,46,07,560/-.

5. For the assessment year 2010-2011, the TPO passed an order under Section 92CA of the Act on 29.01.2014, making adjustment of Rs.19,38,25,457/- in respect of 3 issues viz., (i) downward adjustment on import of goods (ii) downward adjustment of advertisement, marketing and promotion expenses and (iii) downward adjustment on interest paid on Compulsorily Convertible Debentures. Accordingly, the Assessing Officer passed a draft assessment order on 24.03.2014 in conformity with the adjustment proposed by the TPO and also made addition for (i) disallowance under Rule 14A and (ii) disallowance on connectivity expenses. Aggrieved by the same, the respondent filed their objections before the first appellant / DRP, but the objections were rejected by the DRP and directions were issued under section 144C. Based on the same, the second appellant passed the final assessment order on 17.02.2015 and raised a demand under section 156 of Rs.10,93,31,070/-.

6. Assailing the assessment orders relating to the assessment years 2009-2010 and 2010-2011, the respondent approached the Income Tax Appellate Tribunal by filing appeals. By a common order dated 18.12.2015, the Tribunal allowed the appeals by setting aside the orders of the assessing officer and remanding the matter to the assessing officer to refer the same to the DRP for fresh examination, after giving sufficient opportunity to the assessee. In respect of the assessment year 2010-2011, the respondent/assessee filed Miscellaneous Petition No. 71/Mds/2016 stating that certain grounds raised by them have not been adjudicated. By order dated 10.08.2016, the Tribunal allowed the Miscellaneous Petition and reopened the appeal in respect of grounds 4 to 7 for fresh adjudication. Pursuant to the same, the Tribunal by order dated 23.09.2016, allowed the appeal and directed the assessing officer to reexamine the issue afresh, after providing reasonable opportunity to the assessee.

7. According to the respondent, they did not receive any notice, pursuant to the orders of the Tribunal and therefore, they sent a letter dated 21.08.2019 to the second appellant stating that the remand proceedings have become time barred under Section 153 of the Act and hence, requested for refund of the tax already paid by them for the assessment years 2009-2010 and 2010-2011 along with interest. Thereafter, they received separate notices dated 06.01.2020 from the Dispute Resolution Panel (in short, “the DRP”) calling upon them to appear for enquiry on 10.01.2020. Stating that as per the orders of the Tribunal, the assessing officer ought to have passed the draft assessment orders afresh, within the time limit prescribed under section 153 of the Act, but he failed to do so and hence, the notices dated 06.01.2020 issued by the first appellant are barred by limitation, the respondent filed Writ Petitions to quash the notices dated 06.01.2020 and consequently, direct the second appellant to refund the tax amount along with interest under section 244A of the Act and also restraining the appellants from proceeding further in relation to the assessment years 2009-10 and 2010-11.

8. According to the respondent in WA.No.1854 of 2021 viz., M/s. Freight Systems (India) Private Limited, they are an assessee on the file of the Deputy Commissioner of Income Tax. For the assessment year 2006-07, they filed return of income on 29.11.2006 and subsequently, filed revised return of income on 19.10.2007. The return of income was taken up for scrutiny and was referred to Transfer Pricing Officer under Section 92CA of the Act. The TPO passed an order on 31.10.2009 and based on the same, the assessing officer passed a draft assessment order on 31.12.2009, to which, the respondent/assessee filed their objections before the DRP/ first appellant and on 17.09.2010, the DRP disposed of the objections. Subsequently, the assessing officer passed the final assessment order on 29.10.2010, which was put to challenge before the Income Tax Appellate Tribunal. The Tribunal, by an order dated 24.01.2013, remanded the matter back to the DRP by concluding that the freight forward segment had been omitted to be considered by the DRP. On remand, the DRP heard the respondent initially on 10.03.2014 and on several dates. When the matter was pending on the file of DRP, Chennai, it was ordered to be transferred to DRP, Bangalore, a newly constituted division. After such transfer, no order has been passed and therefore, the respondent sent a representation to the Chief Commissioner of Income Tax (International Taxation) Bangalore for annulment of the entire proceedings and for refund of the amount collected from them by placing reliance on Section 153 of the Act. Thereafter, the respondent filed writ petition No. 6202 of 2019 to quash the final assessment order dated 29.10.2020 passed under Section 143 (3) read with Section 144-C (13) of the Act and consequently direct the appellants to grant refund of Rs.4,72,88,068/- along with interest.

9. Opposing the relief (s) sought for in the writ petitions, a counter affidavit was filed by the appellants contending that the writ petition was filed on misconception that the proceedings initiated by the department are barred by limitation in respect of the assessment year 2009-2010. It is well settled that the challenge made to show cause notice is not maintainable inasmuch as it is only a proposal to initiate action and it has not finally determined the rights and liabilities of the parties to the writ. The respondent/assessee ought to have submitted their objections to the show cause notice and it is for the appellants to decide as to whether the proceedings are barred by limitation or not. Therefore, it was submitted that the writ petitions have been filed hastily and the reliefs sought for need not be granted. It was also submitted that the Assessing Officer was directed by the DRP to re-examine the issues and therefore, the provisions of Section 153 of the Act would not be applicable to the present case, inasmuch as the DRP is not an authority within the purview of Section 153 of the Act. Further, the Dispute Resolution Panel (DRP) is not an assessing officer against whom the time limit does not apply. As per Section 2 (7A) of the Act, the DRP is not an assessing officer and Section 144C (15) of the Act clarifies that the DRP is a collegium comprising of three Principal Commissioners or Commissioner constituted by the Board for resolution of the disputes.

10. The learned Judge, on examining the rival submissions, held that after the order of remand passed by the Tribunal, the Assessing Officer has not taken up the assessment proceedings within a reasonable time and therefore, the entire proceedings are vitiated by reason of delay. Accordingly, by order dated 23.12.2020, the learned Judge allowed WP Nos. 919, 922, 1068 and 1070 of 2020 filed by the respondent/M/s. Roca Bathroom Products Private Limited with the following observations:-

“11. There is no doubt in my mind that the orders of the Tribunal have not been given effect to in a proper manner by the Assessing Authority. The Tribunal, in the order for AY 2009-10, has set aside the order of assessment directing the DRP to re-examine the issue afresh on the basis of available documentation and after affording an opportunity to the assessee. The direction is to the DRP though the DRP was not a party to the proceedings and only the Joint Commissioner of Income Tax, was arrayed as appellant/respondent in the appeals. The order of the Tribunal has also not been marked to the DRP, as copies are marked routinely only to the appellant/respondent/CIT(A)/CIT/DR/GF. This is perhaps the reason for the inaction of the DRP even though the direction of the Tribunal is specifically addressed to it.

12. As far as AY 2010-11 is concerned, the Tribunal set aside the order of assessment and remanded the matter to the file of the Assessing Officer, who, though being a party to the proceedings did nothing to give effect to the same. In my view, the proper course of action would have been for the Assessing Authority to have given effect to the order of the Tribunal by way of a consequential order and thereafter taken proceedings up in accordance with the procedure prescribed in Section 144C. However, it was only after receipt of the petitioner’s communication seeking a refund that the Department has woken up, with the DRP issuing notices to the petitioner for both years, though for AY 2010~11, the matter was remanded to the file of the Assessing Officer.

….

15. No doubt, Section 144C is a self contained code of assessment and time limits are inbuilt each stage of the procedure contemplated. Section 144C envisions a special assessment, one which includes the determination of Arms Length Price (ALP) of international transactions engaged in by the assessee. The DRP was constituted bearing in mind the necessity for an expert body to look into intricate matters concerning valuation and transfer pricing and it is for this reason that specific timelines have been drawn within the framework of Section 144C to ensure prompt and expeditious finalisation of this special assessment.

16. The purpose is to fast-track a specific type of assessment. This does not however lead to the conclusion that overall time limits have been eschewed in the process. In fact, the argument to the effect that proceedings before the DRP are unfettered by limitation would run counter to the avowed object of setting up of the DRP a high powered and specialised body set up for dealing with matters of transfer pricing. Having set time limits every step of the way, it does not stand to reason that proceedings on remand to the DRP may be done at leisure sans the imposition of any time limit at all.

17. Sub-section (13) to Section 144C, in my view, imposes a restriction on the Assessing Officer and denies him the benefit of the more expansive time limit available under Section 153 to pass a final order of assessment as he has to do so within one month from the end of the month when the directions of the DRP are received by him, even without hearing the assessee concerned.

18. Barring this, I find nothing in the language of Section 144C or 153 to lead me to the conclusion that the latter is operated from the operation of the former. The specific exclusion of Section 153 from Section 144C(13) can be read only in the context of that specific sub~section and once again, reiterates the urgency that sets the tone for the interpretation of Section 144C itself.

19. The Bombay High Court, in PCIT V. Lion Bridge Technologies Pvt. Ltd. (260 Taxmann 273) was dealing with a challenge to a final order of assessment. It was held that such a final assessment could be made only if the draft assessment had been forwarded by the Assessing Officer to the assessee within the time limit prescribed under Section 153(2A) of the Act.

20. In Lion Bridge (supra) the Income Tax Appellate Tribunal had set aside the order of assessment and remanded the matter to the file of the Assessing Officer directing him to pass orders de novo. In appeals filed by the revenue under Section 260A, the substantial question raised was “Whether on the facts and in the circumstance of the case and in law, the Tribunal is correct in entertaining the objection that the assessment order is without jurisdiction null and void and unenforceable?“ While dismissing the appeals, the Division Bench proceeds on the basis that the draft assessment order ought to have been passed within the time frame stipulated under Section 153(2A) of the Act, also supporting the conclusion arrived at by me.

21. In Nokia India Private Ltd. V. DCIT (298 CTR 334) a Division Bench of the Delhi High Court held that where the matter had been remanded to be re~done, it would hardly make a difference as to whether the remand had been to the TPO or the DRP, thus indicating that the provisions of Section 144C were also governed by the limitation of time set out in Section 153 of the Act.

22. The issue before the Delhi High Court concerned the effect of Section 153(2A) in a matter where the Tribunal had remanded the assessment in respect of five out of seven issues to the Assessing Officer. Upon receipt of the order of the Tribunal, the Assessing Officer referred the transfer pricing issues to the TPO. The assessee took a stand that the TPO would be bound by the limitation prescribed under Section 153(2A) and requested the TPO to take the provision into consideration in the proceedings before him. The time limits under Section 153(2A) were however violated by the Department leading to Writ Petitions being filed by Nokia. In that context, the Court, while accepting the stand of the assessee that the time limits specified in Section 153(2A) would apply, states as follows:

“25. In the present case, of the seven issues, the assessment in respect of five was set aside and the issues remanded for a fresh determination. Whether the remand was to the TPO or the DRP would not make a difference as long as what results from the remand is a fresh assessment of the issue. Clearly, therefore, the time limit for completing that exercise was governed by Section 153 (2A) of the Act.”

23. It is brought to my notice that the above order has not been accepted by the revenue and has been challenged before the Supreme Court. Delay in filing the SLP has been condoned and leave granted Civil Appeal in C.A.No.6755 of 2018 is pending though without any order of

24. Nothing has been stated in the course of the arguments in this matter, to persuade me to take a different view from what I have already taken. Additionally, the Bombay High Court, in Vodafone India Services (P) Ltd., Vs. Union of India (361 ITR 531), paragraph 47, states that the process before the DRP is a continuation of assessment proceedings as only thereafter would a final appealable assessment order be passed.”

11. Similarly, while allowing WP No. 6202 of 2019 on 16.02.2021, the learned Judge observed as follows:

“7. Nothing has been stated in the course of the arguments in this matter, to persuade me to take a different view from what I have already taken. Additionally, the Bombay High Court, in Vodafone India Services (P) Ltd., Vs. Union of India (361 ITR 531), paragraph 47, states that the process before the DRP is a continuation of assessment proceedings as only thereafter would a final appealable assessment order be passed.

8. An alternative argument putforth is that even if one were to take the view that the provisions of Section 153 would not apply to the scheme of assessments under Section 144C, Courts have consistently held that a reasonable limitation should be read into provisions dealing with the finalisation of assessments and, by no stretch of the imagination, can seven years be construed to be a reasonable period. I agree, though there is really no necessity for me to consider the alternate argument, in the light of my having accepted the primary argument.

9. This Writ Petition is allowed. The impugned final assessment order dated 29.10.2010 is quashed. There is a direction to R1 to refund the amounts remitted by the petitioner in connection with the demand raised under the impugned order, along with applicable interest in terms of Section 244A of the Act, within a period of four (4) weeks from today.”

12.(i) Mrs. Hema Muralikrishnan, learned senior panel counsel appearing for the appellants would submit that the DRP is entirely governed by the provisions contained under Section 144-C of the Act. As per Section 144C, the Assessing Officer shall forward a draft order of assessment to the eligible assessee, if he proposes to make any variation in the income or loss returned, which is prejudicial to the interest of such assessee. On receipt of such draft order, the assessee shall file his acceptance or objections and thereafter the Assessing Officer shall complete the assessment on the basis of such draft order, if no objections are filed and based on the directions issued by DRP, if objections are filed. The Assessing Officer, notwithstanding anything contained in Section 153 or Section 153B, shall pass assessment order under Section 144C(3) within a month from the end of the month in which the period for filing objections under sub-section (2) of Section 144C expires. Therefore, it is contended that Section 144-C has to be considered independently as far as DRP is concerned. Adding further, the learned counsel submitted that section 153 is a genus and section 144C is a specie which is independent. Firstly, the marginal note to Section 144-C states that “Reference to dispute resolution panel”and secondly, sub-section 12 specifies the time limit which the DRP shall give suggestions. Though under sub-section (5), the DRP can issue directions only upon receipt of objections, the time limit mentioned under subsection (12) begins from the month in which the draft order is forwarded to the assessee by the Assessing Officer and not the month in which the assessee chooses to file objections. The significance of marginal note and beginning of time limit is that the DRP’s action begins only upon reference, which means an action initiated by the Assessing Officer. Such reference is made when the Assessing Officer forwards the draft assessment order to the assessee.

(ii) It is further submitted by the learned senior panel counsel appearing for the appellants that when transfer pricing issues are involved and the matter is referred to TPO as per Section 92CA, the TPO shall pass an order after hearing the assessee, either confirming or modifying the arm’s length price between the associated enterprises. On receipt of such order, as per Section 144C of the Act, the Assessing Officer has to pass a draft assessment order after incorporating the adjustments suggested in the order of the TPO and also pass orders with respect to other issues. Thereafter the assessee has two options (i) he can file objections before the DRP against the draft assessment order or accept the assessment proceedings and (ii) if the assessee conveys his acceptance of the variations to the Assessing Officer, then the Assessing Officer can proceed to pass a final order, against which, a remedy of appeal is available before the Commissioner of Income Tax. However, in case, the assessee objects to the draft assessment order before the DRP, then the DRP shall, after hearing the assessee, issue directions to the Assessing Officer to complete the assessment, based on which the Assessing Officer has to complete the assessment proceedings. Such an order can be passed by the Assessing Officer, notwithstanding anything to the contrary contained in Section 153 of the Act. Section 153 of the Act stipulates time limit for completion of assessment or re-assessment and re-computation by an assessing officer in different circumstances i.e., time limit for completion of original assessment, completion of assessment on the basis of the order passed by the Commissioner under Section 263 or 264 of the Act or in compliance with the order of the Appellate Authorities or Tribunal or the Court. Section 153 of the Act is silent with respect to the period of limitation, within which time, the assessment has to be made by the assessing officer on the basis of the directions of the DRP. The time limit is specifically excluded because the proceedings before the DRP as well as the proceedings initiated on the basis of the directions issued by DRP are separate and distinct. In this context, reliance was placed on Section 144C (13) of the Act, which reads as follows:-

“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.”

(iii) By pointing out Section 144 C (13) of the Act, it is submitted by the learned senior standing counsel for the appellants that the limitation prescribed under Section 153 of the Act applies only to a draft assessment order and not final assessment order passed under Section 144C and that is the reason why the draft assessment orders are passed within a period of 33 months from the expiry of the relevant assessment year. Wherever assessment proceedings were dependent on extraneous data or extraneous proceedings like grant of interim stay of operation of initiation of the assessment proceedings or where accounts are to be audited, reference will be made to Valuation Officer. In this context, Explanation to Section 153 has extended the period of limitation by providing for exclusion of period. However, Section 153 is specifically silent with respect to limitation in respect of cases pending before DRP and this clearly shows that legislature has consciously refrained from providing for limitation under Section 153 of the Act. Thus, the learned Judge erred in concluding that Section 144C (13) imposes a restriction on the Assessing Officer to pass the final order within the time limit available under Section 153 of the Act. According to the learned Senior Panel counsel, the period of 21 months indicated in Section 153 (1) of the Act from the end of the assessment year is for the purpose of completion of assessment, whereas, Section 153 (4) stipulates that where reference under Section 92CA(1) of the Act has been made, the period for completion of assessment or re-assessment shall be extended by 33 months. This period of 33 months relates to draft assessment order and not final order. While so, the observations made by the learned Judge that the Assessing Officer ought to have given effect to the order of the Tribunal by way of passing order within the time limit prescribed under Section 144C of the Act, are contrary to the statute.

(iv) The learned senior panel counsel also submitted that the Tribunal set aside the order of the DRP, as a consequence of which, the Assessing Officer cannot take up the Arm’s length price adjustment. In such event, there would be absolutely no Arms Price adjustment proceedings and consequently, the assessee would not be aggrieved by the order.

(v) The learned senior panel counsel for the appellants also submitted that the decision of Bombay High Court in Principal Commissioner of Income Tax vs. Lion Bridge Technologies Private Limited [2019 (260) Taxman 273] has no application to the facts of the present case. In that case, the Bombay High Court did not consider the effect of Section 144C (13) which specifically uses the words “notwithstanding anything to the contrary contained in Sec.153 or Sec.153B” but the Court had an occasion to consider whether the Assessing Officer could, by issuance of a Corrigendum, convert a final assessment order into that of a draft assessment order. Similarly, the decision of the Delhi High Court in Nokia India Private Limited v. DCI [2018 (407) ITR 20] is not applicable to the case on hand, where the Court has not considered the effect of Section 144C (13). Therefore, the reliance placed by the learned Judge on the aforesaid two decisions is improper. In any event, when Section 153 of the Act does not apply to DRP and the Assessing Officer has no control over DRP, it has to be construed that there is no time limit prescribed in the Act for the DRP to complete the proceedings. Therefore, Section 153 of the Act cannot be interpreted as if it imposes limitation to the Assessing Officer to pass orders upon remand of the matter by the Tribunal by obtaining order from DRP within the time prescribed under Section 153 of the Act. The order passed by the learned Judge, in effect, would mean prescribing a limitation of one month prior to the date on which the period specified in Section 153(2A) expires for completion of proceedings by the DRP, when such limitation has not been prescribed by the legislature. The learned Senior Panel Counsel therefore prayed for allowing the writ appeals by setting aside the order passed by the learned Judge.

13. (i) Mr.R.V.Eshwar, learned Senior counsel appearing for the respondent in W.A. No. 1854 of 2021, at the outset, would contend that challenging the order of assessment passed by the Assessing Officer, for the assessment year 2006-2007, the respondent filed an appeal before the Tribunal. By order dated 24.01.2013, the Tribunal allowed the appeal, thereby setting aside the order of the Assessing Officer and remanding the matter to the DRP to decide the issue of TP adjustment to the tune of Rs.8,06,50,795/- in the Freight Forwarding Segment on the file of DRP inasmuch as the Tribunal noticed that DRP has not at all adjudicated this issue. The order of remand was passed with the consent of the counsel for the assessee as well as the Revenue. The order dated 24.01.2013 was received by the respondent on 08.02.2013. On 19.02.2014, DRP, Chennai issued a notice to the respondent and initiated the remand proceedings. Subsequently, on 11.03.2014, 21.04.2014, 09.12.2014 and 12.12.2014, the matter was heard by DRP, when the assessee concluded their contentions by filing written submissions. At this stage, by a notification dated 31.12.2014, the jurisdiction of the assessment proceedings stood transferred to the file of DRP, Bengaluru. Thereafter, no order was passed in the remand proceedings. Even assuming that the DRP received the order dated 24.01.2013 passed by the Tribunal in the appeal preferred by the respondent on 19.02.2014, on which date, a notice was issued to the respondent for remand proceedings, the 12 months period stipulated under Section 153 (2A) of the Act expired on 31.03.2015. However, before 31.03.2015, no order has been passed by the DRP inspite of the fact that the matter was heard and written submissions were filed by the respondent. Therefore, any order or proceedings that may be initiated after 31.03.2015 is barred by limitation. In other words, the 12 months period from the end of financial year 2013-2014 expired on 31.03.2015 within which date, a final order in the remand proceedings ought to have been passed.

(ii) The learned Senior counsel for the respondent invited the attention of this court to the decision of the Delhi High Court in Nokia India Private Limited v. DCIT [(2018) 407 ITR 20] and submitted that the provisions contained under Section 152 (3A) of the Act are applicable even to a remand proceedings passed by the Tribunal, directing the DRP to adjudicate the issues afresh. In this case, pursuant to the order passed by the Tribunal, remand proceedings were initiated by the DRP, Chennai and subsequently, by notification dated 31.12.2014, the jurisdiction vested with DRP, Bengaluru. However, it cannot be said that DRP, Chennai which initiated the remand proceedings, has no jurisdiction to adjudicate the issue or in the alternative, should have passed orders even earlier. While so, the appellants ought to have passed an order on or before 31.03.2015 and any order passed subsequent thereto is hit by Section 153 (2A) of the Act.

(iii) The learned Senior counsel also submitted that even assuming that Section 153(2A) does not provide any limitation, it is a settled law that in case where no limitation is prescribed for discharge of certain acts or duties, the authority expected to discharge such duty, has to conclude the proceedings within a reasonable time and the person against whom such proceedings are initiated, will also have a legitimate expectation to get the proceedings concluded at the earliest point of time. In the present case, there was inordinate delay in passing the final order in the remand proceedings which has caused acute prejudice to the respondent. Taking note of the same, the learned Judge rightly held that non-obstante clause in Section 144C (13) is to exclude the application of Section 153 only in the context of passing final assessment order. It was further held that this is not a general exclusion of Section 153 of the Act at every stage of the proceedings and the non-obstante clause just ensures that the limitation prescribed for passing of final order as provided in Section 153, does not apply at the beginning and the final order is to be passed after the directions are issued to the DRP by the Tribunal.

(iv) The learned senior counsel further submitted that the DRP has sat over the remand proceedings for more than six years and therefore, it is precluded from passing any further order against the assessee in the remand proceedings. The learned Senior counsel placed reliance on the decision in GE T&D India Limited v. Deputy Commissioner of Income Tax [(2019) 105 Taxmann.com 286 (Madras) = (2019) 414 ITR 727 (Madras)] wherein this Court has annulled the assessment proceedings by pointing out that there is an extraordinary delay of 8 years in concluding the assessment proceedings. The ratio laid down by this Court in the said case squarely applies to the facts of the present case as well.

(v) The learned Senior counsel also placed reliance on the decision of the Delhi High Court in Commissioner of Income Tax v. Goyal MG Gases Private Limited (Order dated 23.02.2011 in ITA No.335/2011) wherein in similar circumstances, it was held that the delay of 3 years and 8 months in passing a final order is more than reasonable period and therefore, the order passed thereof is hit by the limitation prescribed under the Act. As against the said order dated 23.02.2011, an appeal in SLP (c) No. 26766 of 2011 was filed by the Department and the same was dismissed by the Hon’ble Supreme Court on 19.09.2021. The learned senior counsel also relied upon the Judgment in Vedanta Ltd v. DCIT [(2020) 114 taxman.com 686] to buttress the contention that the very object of DRP mechanism is to expedite the assessment proceedings involving transfer pricing and foreign companies. By placing reliance on the aforesaid decision and other decisions, which emphasize the strict adherence to the period of limitation for assessment or revision of assessment, it is submitted by the learned Senior counsel that there is enormous delay in passing a final order pursuant to the order of remand passed by the Tribunal on 24.01.2013. The learned Judge, on appreciation of the said aspects has rightly allowed the writ petition filed by the respondent and it calls for no interference by this court.

14. (i) Mr. Kamal Sawhney, learned senior counsel appearing for the respondent in WA Nos. 1517, 1519, 1609 & 1610 of 2021 would contend that the appellants are not legally justified in not passing a final order in the remand proceedings within a reasonable time. According to him, the order passed by the TPO is binding on the Assessing Officer in terms of Section 92CA (4) of the Act. On receipt of an order passed by TPO, the Assessing Officer has to complete the assessment by passing a draft assessment order in terms of Section 144C(1) of the Act. The expression used in Section 144C(1) ‘at the first instance’ would only mean that the Assessing Officer, before passing the final order of assessment, has to pass a draft assessment order at the first instance. The draft assessment order has to be passed within the time limit prescribed under Section 153 of the Act. In case where objections are filed for such draft assessment, then, for issuing the final assessment order alone, the provisions under Section 153 will not apply. In case of an order of remand passed by the Tribunal, Sections 153(2A) or 153 (3) of the Act are applicable. In case where the Final Order of Assessment is set aside by the Tribunal pursuant to the order passed by DRP, the provisions of Sections 153(2A) & 153 (3) of the Act will apply. In the present case, the appeal filed by the respondent as against the order of assessment for the assessment year 20102011, was allowed by the Tribunal directing the Assessment Officer to refer the matter to the DRP, which in turn has to re-examine the issue afresh on the basis of available documents. According to the learned senior counsel, the proceedings before the DRP under Section 144C are in continuation of the assessment proceedings and therefore Section 153 of the Act will apply. In this context, reference was made to the decision of the Bombay High Court in the case of Vodafone India Services Private Limited v. Union of India [361 ITR 531] wherein it was held that the proceeding before the DRP is not an appeal proceeding, but a correcting mechanism in the nature of a second look at the proposed assessment order by high functionaries of the revenue keeping in mind the interest of the assessee. It was further held that such proceeding before the DRP is a continuation of the assessment proceedings before a final order of assessment, which is appealable, is passed by the Assessing Officer as per Section 144C (6) of the Act.

(ii) The learned Senior counsel further proceeded to contend that the DRP is a specialised body tasked with the matters of transfer pricing. The order of remand passed by the Tribunal to DRP is to ensure that a quickest remedial measures would be arrived at by the expert body, but not to conduct its proceedings in a leisurely manner without any set of limitation. In the present case, for more than five years from the date of order of remand passed by the Tribunal, no order has been passed by the appellants, while so, the notice dated 06.01.2020 issued for continuing the remand proceedings is illegal and it is barred by limitation under Section 153(2A) of the Act.

(iii) The learned Senior counsel also placed reliance on the decision of the Delhi High Court in Nokia India (P) Ltd case (supra) and contended that whether the remand was made to the TPO or the DRP would not make a difference as long as what results from the remand is a fresh assessment of the issue and therefore, the time limit for completing the exercise of assessment is governed by Section 153 (2A) of the Act. According to the learned Senior counsel, the legislature was cautious and well aware of the limitations, which are applicable for completing the assessment under Section 153 and even completing an assessment pursuant to an order of remand. The legislature has provided specific timelines under Section 144C within which the DRP has to act and complete the proceedings. However, in the present case, the Assessing Officer has not issued any draft assessment order pursuant to the directions of the Tribunal and hence, the proceedings are time barred as it was not initiated within a reasonable period. At the same time, it cannot be said that no limitation would apply to DRP and the assessment or re-assessment proceedings can be initiated at any time by the DRP is opposed to the provisions of section 153 and section 144C of the Act, which required the assessment to be completed within a time prescribed. The learned Senior counsel ultimately submitted that having regard to the facts and circumstances of the case coupled with the legal provisions involved, the learned Judge has rightly allowed the writ petitions filed by the respondent by pointing out the extraordinary delay in concluding the assessment proceedings, which do not require any interference at the hands of this court.

15. We have heard the counsel on either side and perused the materials placed on record.

16. Let us now look at the important timeline of the cases on hand which are not disputed by any of the parties and are primordial for deciding the issues involved herein.

Freight Systems India Private Ltd

Filing of original Return

29.11.2006

Revised Return

19.10.2007

Order of TPO

31.10.2009

Draft Assessment Order

31.12.2009

Order of DRP

17.09.2010

Final Assessment Order