Mondelez India Foods Private Limited Vs ACIT (ITAT Mumbai)
ITAT Mumbai held that any order passed by the TPO beyond a period of limitation as prescribed under the provisions of section 92CA(3A) of the Income Tax Act is bad in law.
Facts-
Assessee has submitted that as per section 92CA(3A) of the Act, where reference is made to the TPO, the TPO is required to pass order under section 92CA(3) of the Act at any time before sixty days prior to the date on which the period of limitation referred to in section 153 for making the assessment order expires. Provisions of section 153 of the Act as applicable to the assessment year 2010-11 states that, where reference is made to TPO under section 92CA(1) of the Act, the limitation for passing assessment order shall be three years from the end of assessment year in which the income was first assessable.
In the present case, the due date for completion of assessment in accordance with third proviso to section 153(1) of the Act was 31/03/2014. The time limit for passing the order under section 92CA(3A) of the Act is before sixty days prior to the date on which limitation for passing assessment order expires. In calculating 60 days – the day on which limitation to pass assessment order expires i.e. 31/03/2014 has to be excluded. Calculating 60 days backwards – 30 days of March, 28 days of February and 2 days of January. Thus, the last date for passing the order under section 92CA(3) of the Act was 29/01/2014. The TPO passed the order under section 92CA(3) of the Act on 30/01/2014. Thus, the order passed under section 92CA(3) of the Act is time barred by one day.
Conclusion-
Hon’ble High Court in the case of Pfizer Healthcare India (P) Ltd has held that any order passed by the TPO beyond a period of limitation as prescribed under the provisions of section 92CA(3A) read with proviso to section 153 of the Act, lacks jurisdiction.
The appeal by the Revenue has become infructuous as the order passed under section 92CA(3)of the Act is held bad in law. Once bedrock for passing the assessment order is eroded the entire proceedings, arising therefrom are vitiated. Consequently, appeal of the Revenue is dismissed.
FULL TEXT OF THE ORDER OF ITAT MUMBAI
The appeal by assessee in ITA No.1492/Mum/2015 is directed against the assessment order dated 29/01/2015 passed under section 143(3) r.w.s. 144C(13) of the Income Tax Act, 1961 [ in short ‘the Act’] for the assessment year 2010-11.
2. The assessee in appeal has raised several grounds/ additional grounds of appeal assailing additions/adjustments on merits as well as challenging the validity of assessment order.
3. Shri J.D. Mistry, Sr. Advocate appearing on behalf of the assessee submitted that at this stage he would be pressing only additional grounds of appeal No.48 and 49 challenging validity of order passed by Transfer Pricing Officer (TPO) dated 30/01/2014 and the assessment order dated 29/01/2015. The Ld.Counsel for the assessee submitted that both these orders are time barred.
4. The ld.Counsel for the assessee submitted that since additional grounds of appeal No.48 & 49 are legal grounds and goes to the root of validity of assessment, therefore, these additional grounds of appeal should be admitted for adjudication on merits. The facts required for adjudication of the additional grounds are already on record. No fresh evidence is required for adjudication of these legal grounds. He further asserted that legal/ jurisdictional issues can be raised at appellate stage even if such issues were not raised before lower authorities.
5. Ms. Vatsalaa Jha representing the Department vehemently opposed admission of additional grounds of appeal. The ld.Departmental
Representative submits that this appeal was filed by the assessee in 2015. The assessee has filed additional grounds of appeal challenging validity of assessment order and the order passed by TPO in 2022 i.e. after inordinate delay of over seven years. Hence, the additional grounds of appeal should not be admitted at this belated stage.
6. The assessee has filed additional grounds of appeal Sl. No.48 and 49, vide application dated 12/07/2022. The said additional grounds are reproduced herein below:
“48. Without prejudice to the Appellant’s grounds of appeal, the order under section 92CA of the Act is time-barred as it was not passed within the time stipulated under section 92CA(3A) read with section 153 of the Act.
49. Without prejudice to the Appellant’s grounds of appeal, the assessment order dated 29 January 2015 is time-barred as assessment order under section 143{3) of the Act was required to be passed by 31 March 2014.”
A perusal of the grounds and the application for admission of said additional grounds clearly indicates that these are legal grounds assailing the validity of the assessment order and the order of TPO. The Hon’ble Supreme Court of India in the case of National Thermal Power Company vs. CIT, 229 ITR 383 has held that the Tribunal has jurisdiction to examine a question of law which arises from the facts on record and have a bearing on the tax liability of the assessee. In the instant case, the additional grounds of appeal raised by the assessee challenges the validity of assessment order and the order of TPO on the ground of limitation. No further documentary evidence is required to be adduced for adjudicating these grounds. The said additional grounds of appeal are admitted and are taken up for adjudication.
7. The ld.Counsel for the assessee submits that at this stage he will be confining his submissions only with respect to the additional grounds of appeal No.48 & 49, without prejudice to the original grounds / other additional grounds of appeal. If ground No.48 & 49 are allowed, the original grounds/ other additional grounds would become academic and, hence, adjudication of original grounds/other additional grounds may not be required.
7.1 The ld.Counsel for the assessee submits that the order passed by TPO dated 30/01/2014 is time barred by one day. Narrating the sequence of dates he pointed that the TPO passed the order under section 92CA(3) of the Act on 30/01/2014. The period of limitation for passing the assessment order expires on 31/03/2014. The draft assessment order was passed on 28/03/2014. The DRP issued directions on 19/12/2014 and the final assessment order was passed on 29/01/2015.
7.2 The ld.Counsel for the assessee submits that as per provisions of section 92CA(3A) of the Act, where reference is made to the TPO, the TPO is required to pass order under section 92CA(3) of the Act at any time before sixty days prior to the date on which the period of limitation referred to in section 153 for making the assessment order expires. The ld.Counsel for the assessee further refers to the provisions of section 153 of the Act as they were applicable to the assessment year 2010-11. The ld.Counsel for the assessee pointed that where reference is made to TPO under section 92CA(1) of the Act, the limitation for passing assessment order shall be three years from the end of assessment year in which the income was first assessable. In the present case, the due date for completion of assessment in accordance with third proviso to section 153(1) of the Act was 31/03/2014. The time limit for passing the order under section 92CA(3A) of the Act is before sixty days prior to the date on which limitation for passing assessment order expires. In calculating 60 days – the day on which limitation to pass assessment order expires i.e. 31/03/2014 has to be excluded. Calculating 60 days backwards – 30 days of March, 28 days of February and 2 days of January. Thus, the last date for passing the order under section 92CA(3) of the Act was 29/01/2014. The TPO passed the order under section 92CA(3) of the Act on 30/01/2014. Thus, the order passed under section 92CA(3) of the Act is time barred by one day. The ld.Counsel for the assessee in support of his submissions placed reliance on the following decisions:
(i) Pfizer Healthcare India (P) Ltd. vs. JCIT,433 ITR 028 (Mad)
(ii) DCIT vs. Saint Gobain India (P) Ltd., 137 taxmann.com 215 (Mad)
7.3 The ld.Counsel for the assessee submits that the Single Judge of the Hon’ble Madras High Court in the case of bunch of appeals, lead case being Pfizer Healthcare India (P) Ltd. (supra) had decided exactly the similar issue. The Hon’ble Madras High Court observed that limitation has been prescribed for each stage/process in an assessment right from filing of return of income, reference to the TPO, passing of the order by TPO, filing of objections before DRP and thereafter passing of final assessment order. The Hon’ble High Court in para- 30 of the judgment has explained as to how the period of sixty days as mentioned in section 92CA(3A) is to be calculated . The Hon’ble High Court has further held that any order passed by the TPO beyond a period of limitation as prescribed under the provisions of section 92CA(3A) read with proviso to section 153 of the Act, lacks jurisdiction.
7.4 The order of the Single Judge was challenged by the Department in writ appeal before the Division Bench of Hon’ble Madras High Court. The Division Bench in the case titled DCIT vs. Saint Gobain India (P) Ltd.,(supra) confirmed the findings of Single Judge Bench. Thereafter, Bangalore Bench of the Tribunal in the case of Unisys India Pvt. Ltd. vs. DCIT in ITA No.2096/Bang/2017 following the law laid down by Hon’ble Madras High Court held the order passed by TPO, time barred in similar set of facts.
7.5 The ld.Counsel for the assessee further submits that the provisions of section 144C of the Act are applicable only to the “eligible assessee” as defined in sub-section (15), clause(b) to section 144C of the Act. The ld.Counsel for the assessee again draws support from the decision of Hon’ble Madras High Court in the case of Saint Gobain India (P) Ltd.,(supra) to buttress his arguments, that the assessee in the present case is not “eligible assessee”as there is no valid order under section 92CA(3) of the Act in the case of assessee. Therefore, the assessment framed on the basis of non-est order of TPO is unsustainable. The ld.Counsel for the assessee further asserted that the assessment order dated 21/05/2015 is time barred as the limitation of pasing the assessment order got over on 31/03/2014.
8. Per contra, Ms. Vatsala Jha representing the Department vehemently submitted that the order passed by TPO u/s.92CA(3)of the Act is a valid order passed within the period of limitation. The ld. Departmental Representative submits that CBDT vide Circular No.3/2008 dated 12/03/2008 in the Explanatory Notes on the provisions of the Finance Act, 2007 has explained that with a view that TPO gets sufficient time to make the audit of Transfer Pricing and also to provide the Assessing Officer sufficient time to make assessment in the case involving international transactions, the time limit specified in section 153 of the Act has been extended by 12 months, where reference is made to the TPO. Further, it has also been provided that the TPO shall determine the ALP at least two months before the expiry of statutory time limit for making the assessment. In appeal under consideration, due date for completion of assessment under third proviso of section 153(1) of the Act was 31/03/2014 and the time limit for passing an order u/s. 92CA(3A) of the Act is two months prior to the date of limitation. The TPO passed the order on 30/01/2014 which is two months prior to 31/03/2014, therefore, the order passed by TPO is within the period of limitation. The ld. Departmental Representative further referred to the Central Action Plant for Financial Year 2014-15 and 2015-16, wherein the period prescribed to frame transfer pricing audit is 31/01/2015 and 31/01/2016, respectively, and the limitation for order u/s.143(3) r.w.s. 153 of the Act is 31/03/2015 and 31/03/2016, respectively. The same principle would apply to A.Y. 2010-11. The ld. Departmental Representative submits that in line with the Boards Central Action Plan the TPO has passed the order within the period of limitation. The ld. Departmental Representative placed reliance on the decision of Delhi Bench of Tribunal in the case of M/s. Louis Dreyfus Commodities India Ltd. vs. DCIT in ITA No.2381/Del/2014 for Assessment Year 2009-10 decided on 11/03/2021.
9. Shri Mistry, Sr. Advocate rebutting the submissions made on behalf of the Revenue asserted that Hon’ble Madras High Court in the case of Pfizer Healthcare India (P) Ltd. vs. JCIT (supra) has considered Central Action Plan issued by CBDT. The ld. Counsel for the assessee further asserts that in the case of Louis Dreyfus Commodities India Ltd.(supra) the Bench has not considered the provisions of section 144C of the Act, hence, the aforesaid decision is distinguishable.
10. We have heard the submissions made by rival sides on the limited issue of validity of order passed by TPO u/s. 92CA(3) of the Act and the subsequent proceedings arising there from. The ld.Counsel for the assessee has restricted his submissions to the legal grounds raised in additional grounds of appeal No.48 & 49.
11. The assessee has questioned the validity of order passed u/s.92CA(3) of the Act alleging the same to be barred by limitation. Before proceeding further to adjudicate this issue it would be imperative to have a glance on the relevant dates.
