Adobe Systems India P. Ltd. Vs DCIT (ITAT Delhi)
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Delhi Bench has quashed a substantial tax assessment order against Adobe Systems India P. Ltd., deeming it invalid due to being time-barred. The decision, handed down on June 16, 2022 (though the final assessment order challenged was dated April 6, 2022, for the assessment year 2020-21), centered on the Assessing Officer’s (AO) failure to adhere to the statutory time limit for issuing the final assessment order after receiving directions from the Dispute Resolution Panel (DRP).
The case originated from an assessment order under Section 143(3) read with Section 144C(13) and Section 144B of the Income-tax Act, 1961. Adobe Systems India P. Ltd. had been assessed with an additional income of INR 19,14,69,591, comprising an adjustment related to international transactions concerning interest on outstanding receivables and a disallowance of other deductions claimed by the company. The company, engaged in software development and marketing/support services for its US and Ireland-based associated enterprises, had undergone a Transfer Pricing Officer (TPO) assessment, followed by objections filed with the DRP.
The core of Adobe’s appeal was Ground No. 1, asserting that the final assessment order dated April 6, 2022, was beyond the maximum time limit prescribed under Section 144C(13) of the Income-tax Act. According to Section 144C(13), the AO is mandated to complete the assessment within one month from the end of the month in which the DRP’s directions are received. Adobe’s counsel presented evidence, including dispatch information and postal tracking reports, to demonstrate that the DRP’s decision, dated January 10, 2022, was dispatched to the AO on January 24, 2022, and delivered on January 27, 2022. Therefore, the AO was required to pass the final assessment order by February 28, 2022. The order, issued on April 6, 2022, significantly exceeded this deadline.
