Case Law Details

Case Name : Yokogawa India Ltd. Vs ACIT (ITAT Bnagalore)
Appeal Number : ITA(TP)A No. 1715 & 692/Bang/2016
Date of Judgement/Order : 08/03/2021
Related Assessment Year : 2011-12 & 2012-13

Yokogawa India Ltd. Vs ACIT (ITAT Bnagalore)

Admittedly the impugned assessment order passed by the Ld.AO under section 143 (3) read with section 144C is in violation mandatory provisions under section 144C(10) and (13) of the Act by not passing the order in pursuance of and in conformity with the directions of DRP issued under section 144C(5) of the Act. We therefore respectfully following the aforestated view, setaside the impugned final assessment order dated 28/01/2016 passed for assessment year 2011-12 and we remand the issues to the Ld.AO/TPO to pass appropriate order in accordance with law having regard to the directions of the DRP. Assessee is directed to file all necessary details in support of its claim. Needless to say that proper opportunity of being heard must be granted to assessee.

FULL TEXT OF THE ITAT JUDGEMENT

Present appeals have been filed by the assessee against the final assessment order passed by Ld. DCIT Circle-1 dated 28/01/2016 for assessment year 2011-12 and final assessment order passed by Ld. ACIT circle-1 dated is 31/08/2016 for assessment year 2012-13 on following grounds of appeal:

ITA No. 697/B/2016(assessment year 2011-12)

“Based on the facts and circumstances of the case and in law, Yokogawa India Limited (“Yokogawa India” or the “Company” or the “Appellant”) respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 (“Act”) against the order passed on 28.01 .2016 under Section 143 (3) read with Section 144 C of the Income Tax Act, 1961, by Deputy Commissioner of Income-tax, Large Taxpayers Unit, Circle – 1, Bangalore (“AO”) (hereinafter referred to as the Impugned Order) in pursuance of the directions issued by Dispute Resolution Panel (“DRIP”), Bangalore under Section 144 C (5), dated 24 November 2015 on the following grounds:

That on the facts and circumstances of the case and in law:

1. The order of the learned AO is based on incorrect interpretation of law and therefore is bad in law.

2. The learned AO has erred in assessing the total income at Rs. 46,19,68,010/- as against returned income of Rs.37,76,59,670/- computed by the Appellant and has thus erred in computing the total tax payable (including surcharge and cess) by the Appellant as Rs. 3,68,85,910/-.

3. The Learned AO has erred, in levying interest under section 234B of the Act amounting to Rs.1,34,16,328/-.

Grounds relating to transfer pricing matters:

4. The Hon’ble DRP has erred in law and in facts, by providing a consolidated direction for 2nd 3rd 4th and 5th grounds of objections filed by the assessee, directing the Transfer Pricing Officer (“TPO”) to determine the Arm’s Length Price (“ALP”) by following the Hon’ble Bangalore Tribunal’s decision in assessee’s own case for AY 2007-08, without taking cognizance of the fact that the 3d and 4 1h grounds of objections are factual grounds pertaining only to the AY 2011-12 and are not covered by the aforesaid ITAT decision.

5. The earned AO/TPO have erred in law and in facts, by not following the Hon’ble DRP direction of determining the ALP of payment towards Management fees (“ME”) and Global Sales and Marketing Activities Fees (“GSMAF”) based on the Hon’ble Bangalore TAT’s decision in the assessee’s own case for AY 2007-08, on the reasoning that a time limit of one month is not sufficient for passing the order giving effect (OGE”) to the DRP directions and thereby concluding that the directions are impossible to implement and bad in law.

6. The learned TPO has erred in law and in facts by providing contradictory statements in the TP order in relation to substantiation of actual receipt of services towards MF and the receipt of benefits thereof.

7. The learned AO/TPO have erred in law and in facts, by deviating from his own conclusion in relation to ME for AY 2011-12 vis-à-vis AY 2010-11, wherein he had concluded that the assessee has proved and substantiated the receipt of service for which ME is paid and the benefits received thereof based on documentary evidences submitted and considered the payments towards ME as being at ALP.

8. The learned AO/TPO have erred, in facts, by concluding that the services for which GSMAE is paid is not different and distinct from some of the services towards which MF is paid and hence duplicative in nature.

9. The learned AO/TPO have erred in law and in facts, by concluding that the Appellant has not been able to prove substantially that the intra-group services have actually been rendered to it, and that the Appellant has not derived any economic benefit from the intra-group services received from the Associated Enterprise (“AE”), and thereby holding that the ALP of the intra-group service charges is ‘Nil’.

10. The learned AO/TPO have erred, in law and in facts, by rejecting the Transactional Net Margin Method (“TNMM”) adopted by the Appellant for determining the ALP of the international transactions pertaining to payment of ME and GSMAF and by considering Comparable Uncontrolled Price (“CUP”) method without justifying how the same was the most appropriate method.

11. The learned AO/TPO have erred in law and in facts by considering CUP method without undertaking comparability analysis for identifying comparable transactions and determining the ALP of ME and GSMAF as Nil.

12. The learned AO/TPO have erred in law and in facts by not taking cognizance of the ruling of the jurisdictional Income Tax Appellate Tribunal in Appellant’s own case for AY 2007-08 and AY 2009-10 which was brought to their notice wherein the Hon’ble Tribunal has clearly held that the AO/TPO cannot question the necessity of the expenditure or the benefits derived, cannot consider the ALP at ‘Nil’ and is required to determine the ALP by applying the methods recognized under the Act.

13. The learned AO/TPO have erred, in law and in facts, by making an addition of Rs. 7,91,35,133 to the total income of the Appellant on account of adjustment in the ALP for the international transaction of payment towards ME and GSMAE by the AE.

14. The learned AO/ TPO have erred in law, by not providing an opportunity of being heard to the assessee in relation to the comparables margin as determined by him in the TP order for the manufacturing segment, which has been concluded as being at arm’s length by him post giving effect to the TP adjustment in relation to ME and GSMAE.

Grounds relating to other matters:

15. The Learned AO has erred in law by not abiding by the Hon’ble DRP’s direction while assessing the Assessment Order without appreciating the fact that Section 1440(10) of the Act mandates every direction issued by the Hon’ble DRP is binding on the AO and hence, required to pass final assessment order giving effect to the directions.

16. The Learned AO has erred in law and in facts by not appreciating the fact that the Company has not incurred any interest expense during the year and there shall not be any disallowance under rule 8D(2)(ii). The Learned AO has erred in not accepting the claim of the Appellant that only Rs.1,73,201/- has been incurred for earning the exempt income and hence the disallowance under Section 14A should be restricted to Rs.1,73,201/-;

17. The Learned AO has erred in law and in facts by disallowing expenses of Rs.50,00,000 on the basis that such expenditure is not laid out for the purpose of business under section 37 of the Act without appreciating that: – the Hon’ble DRP has directed to disallow expenses under Rule 8D(2)(ii) and – it has not upheld disallowance under section 37(1) of the Act as made in the draft assessment order;

18. The Learned AO has erred by not granting the foreign tax credit partially, to the extent of Rs.1,46,209/- although company had submitted the foreign tax credit Certificates with respect to the complete amount claimed in its return of income;

19. The Learned AO has erred in levying additional tax on dividend under section 1150 at Rs.3,37,968/- by computing such tax with surcharge at 7.5% without considering the fact that the applicable surcharge rate was 5% on the date when dividend was distributed;

20. The Learned AO has erred, in law, and in facts, in initiating penalty proceedings under Section 274 read with Section 271(1)(c) of the Act, without appreciating the fact that the Appellant has not concealed or furnished any inaccurate particulars of income.”

ITA No. 1715/B/2016(assessment year 2012-13)

“Based on the facts and circumstances of the case and in law, Yokogawa India Limited (“Yokogawa India” or the “Company” or the “Appellant”) respectfully craves leave to prefer an appeal under section 253 of the Income-tax Act, 1961 (“Act”) against the order passed on August 31, 2016 (” impugned order”) under Section 143 (3) read with Section 144 C of the Income Tax Act, 1961, by Assistant Commissioner of Income-tax, Large Taxpayers Unit, Circle – 1, Bengaluru (“AO”) (hereinafter referred to as the Impugned Order) in pursuance of the directions issued by Dispute Resolution Panel (“DRP”), Bengaluru under Section 144 C (5), dated August 24, 2016 on the following grounds:

1. The learned AO has erred in law, by passing the final assessment order after the expiry of the period specified under the Act and accordingly is bad in law.

Grounds relating to transfer pricing matters:

2. Impugned order erroneously rejects the Transfer Pricing (“TP”) documentation maintained by the assessee and upholds undertaking a new search beyond the due date prescribed for maintaining the TP documentation.

3. Impugned order erroneously proceeds on presumptions, choosing companies totally incomparable to Appellant, ignoring principle of consistency to make huge unjustified adjustment under provisions of Chapter X.

4. Impugned order erroneously concludes without any basis that the payment towards Global Sales and Marketing Activity Fees (“GSMAF”) made is in the nature of Advertising, Marketing and Promotional (“AMP”) expenses of the Associated Enterprise (‘AE”) of the assessee.

5. Impugned order wrongly concludes on the nature and characterization of GSMAF contrary to evidence and proceeds on unsubstantiated presumptions to uphold Adjustment to Arm’s Length Price (“ALP”).

6. Impugned order unlawfully disallows expenditure towards GSMAF purportedly by application of Comparable Uncontrolled Price (“CUP”) method claiming same to be sub- method of Transactional Net Margin Method (‘TNNM”).

7. Impugned order inappropriately determines the ALP of payment of GSMAF by using the bright line test which is not a method recognized under the Act.

8. Impugned order erroneously makes contrary conclusions on the nature and characterization of GSMAF.

9. Impugned order erroneously proceeds on incorrect presumption that the services provided by the AE under internal coordination which is a sub-category service of GSMAF is duplicative in nature and has already been charged under Management Fees (“MF”).

10. Impugned order erroneously determines the arm’s length nature of the international transactions of payment in relation to MF by not applying any of the methods specified under the Act r.w. the Income tax Rules, 1962 (“Rules”), but by merely applying the “benefit test” and making adjustment on an AO-hoc/ estimate basis.

Grounds relating to other matters:

11. The learned AO has erred in considering the total income at INR 46,85,79,104 as against INR 46,85,90,100 declared by the Assessee as per the revised Return of Income (“ROl”).

12. The learned AO has erred in granting partial credit towards Self-assessment amounting to INR 1,62,71,240 without considering the subsequent payment of INR 12,87,522 made on 29 March 2014.

13. The learned AO has erred in not granting the credit of tax collected at source amounting to INR 18,230 and foreign tax credit amounting to INR 1,67,41,111, as claimed in its revised ROI.

14. The learned AO has erred, in law, and in facts, in computing interest of INR 3,96,93,174 under Section 234B of the Act.

15. The learned AO has erred, in initiating penalty proceedings under section 271(1)(c) of the Act.

The Appellant submits that each of the above grounds is independent and without prejudice to one another.

The Appellant craves leave to AO, alter, amend, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal, so as to enable the Hon’ble Tribunal to decide on the appeal in accordance with the law.”

Assessment year 2011-12:

Brief facts of the case are as under:

2. Assessee is in the business of manufacture, training and distribution of process control instruments. It filed its return of income for year under consideration on 29/11/2011 declaring total income of Rs.37,76,59,670/-. The assessment was taken up for scrutiny, and notices under section 143(2) of the Act was issued to assessee. As international transaction entered into between assessee and AE exceeded Rs.15 crores, the case was referred to transfer pricing officer to determine arm’s length price.

3. On receipt of the reference under section 92CA of the Act, the Ld.TPO called on assessee to file economic details of international transactions. After going through various details filed by the assessee the Ld.TPO proposed an adjustment of Rs.7,91,35,133/- vide order dated 30/01/2015 passed under section 92CA of the Act.

4. Upon receipt of the Transfer Pricing order, the Ld.AO passed draft assessment order by making addition under section 14A amounting toRs.1,73,201/- and a sum of Rs. 50 Lacs was disallowed as expenses, not laid out for purposes of business u/s 37(1) of the Act.

5. Against the draft assessment order, the assessee preferred objections before the DRP. The DRP vide order dated 17/11/2015 directed the Ld.TPO to determine arm’s length price is of the international transactions by following the decision of coordinate bench of this Tribunal in assessee’s own case for assessment year 2007-08 in ITA No.1329/B/2011. As regards corporate tax issues, the DRP directed the Ld.AO to disallow expenses under sub Rule 8D(2)(ii) and deleted the disallowance made under section 37(1) of the Act.

6. Upon receipt of the DRP directions, the Ld.AO failed to follow the directions in computing the transfer pricing adjustment, as well as the corporate tax additions. Instead of passing the final assessment as required by law, the Ld.AO passed impugned order dated 28/01/2016 identical to the draft assessment order passed on 23/02/2015.

7. Aggrieved by the final assessment order passed, the assessee is in appeal before us now.

8. In Ground No.5 assessee raises the issue regarding validity of final assessment order dated 28/01/2016 passed u/s 143(3) r.w.s 144C of the Act. It is submitted that, the final assessment order should have been passed by Ld.AO following the due process of law, and therefore is bad in law and should be quashed. The Ld.AR thus submitted that, the final assessment order is not in conformity with the directions of DRP and should be cancelled. He placed reliance on following decisions in support of his contentions:

“i) M/s. Flextronics Technologies (India) Pvt. Ltd. in IT(TP)A No.832/Bang/201 7.

ii) M/s. Software Paradigms Infotech Pvt. Ltd. in IT(TP)A No. 150/Bang/2014.

iii) M/s. Lenovo India Pvt. Ltd. in IT(TP)A No.580 & 581/Bang/2015

iv) M/s. Espn Star Sports Mauritius S N C E T Companies in W P. (C) 2384/2015 &CM No.4277/2015 (Delhi High Court).

v) M/s. July Systems & Technologies Pvt. Ltd. in IT(TP)A No.368/Bang/2016.”

9. On the contrary, the Ld.CIT DR placed reliance on orders passed by authorities below.

10. We have perused submissions advanced by both sides in light of records placed before us. We note that this is a legal issue that goes to the route cause of the case. We, therefore, adjudicated this ground first. We note that coordinate bench of this Tribunal dated 21/12/2020 in case of M/s Xchanging solutions Ltd. vs DCIT in ITA (TP) A No. 2664/Bang/2017 on and identical situation observed and held as under :

“5. We have heard both the parties and perused the material on record. Similar issue came up for consideration in the case of Flextronics Technologies (India) Pvt. Ltd. Vs. ACIT in IT(TP)A No.832/Bang/2017 dt.31.12.2018 has held in paras 9 to 12 as under:

9. We have considered the rival submissions. We find that on identical facts, this Tribunal in the case of Software Paradigms Infotech (P.) Ltd. (supra) has quashed the final order of assessment observing as follows:-

“3.3.1 We have heard the rival contention of both parties in the matter and perused and carefully considered the material on record. The undisputed facts on record, as brought out by the discussions above, is that the AO, as per law, was required to pass the final order of assessment dated 17/1/2014 for asst. year 2009-10 u/s 143(3) r.w.s 144C of the Act in conformity with the directions issued by the DRP u/s 144C(5) of the Act, which are binding on him as per section 144C(10) thereof and within the time prescribed u/s 144C(13) of the Act. We find that instead of passing the final order of assessment as required by law, the AO passed the impugned final order of assessment dated 17/1/2014 u/s 143(3) r.w.s 92CA of the Act; which, as contended by the id AR, is identical to the draft order of assessment passed on 14/3/2013 by only incorporating this TPOs proposals and , thereby evidently giving the DRPs mandatory directions issued u/s 144C(5) of the Act a complete go-by. In our view, it is factually established that the AO in the final order of assessment dated 17/1/2014 has not given effect to or carried out the binding directions of the DRP as required u/s 144C(10) within the time specified u/s 144C(13) of the Act; which is a clear violation of the binding provisions of sec. 144C(10) and (13) of the Act. Therefore, in our considered opinion, the conduct of the AO/TPO in passing the impugned final order of assessment dated 17/1/2014 is a clear case of defiance and disregard to the binding directions of the higher authorities, i.e, the DRP in the case on hand. In fact, in the impugned order dated 17/1/2014 there is not even a single reference to the DRPs directions issued us! 144C(5) of the Act vide order dated 30/12/2013.

3.3.2 In the factual and legal matrix of the case on hand, as discussed above, we are of the considered view that the impugned final order of assessment for asst. year 2008-09 passed u/s 143(3) r.w.s 92CA of the Act by the AO, in violation of the express mandatory provisions of sec. 144C(10) and (13) of the Act by not passing the impugned order in pursuance of and in conformity with the binding directions of the DRP issued u/s 144C(5) of the Act, within the time specified for this purpose, has rendered the said impugned final order of assessment unsustainable in law. We, therefore, quash the impugned final order of assessment for asst. year 2009-10 passed by the AO u/s 143(3) r.w.s 92CA of the Act dated 17/1/2014 in the case on hand. W hold and direct accordingly. Consequently, ground No. 17 of assessee’s appeal is allowed.”

10. Respectfully following the aforesaid view of the Tribunal, we quash the impugned order of assessment. Since the impugned order of assessment is quashed on the ground that the same is not in conformity with the provisions of section 144C of the Act and further on the ground that the time for passing the final order of assessment is barred by time, we are of the View that the other issues raised by the assessee in its grounds of appeal and the grounds raised by the revenue in its appeal does not require any consideration. As far as the decision cited by the learned DR in the case of H & M Hennes & Mauritz India (P) Ltd. (supra) is concerned, we find that in the said decision, the counsel for the Assessee has in para 3.8 of the said order prayed for setting aside the final order of assessment of AO to pass orders in accordance with the directions of the DRIP. Thus, it is a case of concession by the Assessee and not on the basis of arguments advanced by the parties. The law is well settled that a decision on concession of the counsel cannot be regarded as a precedent. Therefore, the decision cited by the learned DR does not support the case of the revenue.

11. In view of the conclusion that the assessment order is null and void, the other grounds of appeal raised by the assessee on merits of the Addition made do not require any Adjudication.

12. In the result, the appeal of the assessee is allowed.”

In the present case also, as pointed out by the AR, the DRP included Evoke Technologies Limited in the list of comparables and similarly the DRP excluded ICRA Techno Analytics Limited from the list of comparables. The ALP Adjustment made by the TPO has been changed on account of these two directions of DRP, however, the Assessing Officer retained the original Transfer Pricing adjustment at Rs.8,67,23,600 in the final assessment order as made in the draft assessment order. Being so, we are not in a position to uphold the order of the Assessing Officer on this count. As provided in the Section 144C(13) of the Act, the final order of the Assessing Officer should be in conformity with the directions given by the DRP. In the present case, while working out the ALP adjustment, he has not followed the direction of the DRP, consequently, the assessment order is bad in law as held by co­ordinate Bench in the case cited above. Accordingly, the assessment framed in this case is quashed and set aside. However we make it clear that, this order would not, in any way, stop the revenue from taking such steps as are available to it in law and the assessee also from contesting the action of the revenue in accordance with the law, if it so desires.

6. Since we have decided the primary ground on applicability of Section 144C(13) of the Act, at this stage we are refrained from adjudicating other grounds on issues raised by the assessee.”

11. Admittedly the impugned assessment order passed by the Ld.AO under section 143 (3) read with section 144C is in violation mandatory provisions under section 144C(10) and (13) of the Act by not passing the order in pursuance of and in conformity with the directions of DRP issued under section 144C(5) of the Act. We therefore respectfully following the aforestated view, setaside the impugned final assessment order dated 28/01/2016 passed for assessment year 2011-12 and we remand the issues to the Ld.AO/TPO to pass appropriate order in accordance with law having regard to the directions of the DRP. Assessee is directed to file all necessary details in support of its claim. Needless to say that proper opportunity of being heard must be granted to assessee. As we have wished decided the preliminary issue raised in Ground No.5, the other grounds raised are kept open.

Accordingly appeal filed by assessee for assessment year 2011-12 stands allowed for statistical purposes.

Assessment year 2012-13:

12. Present appeal arises out of the final assessment order dated 31/08/2016 passed by Ld. ACIT under section 143 (3) read with section 144C of the Act. At the outset, the Ld.AR submitted that, assessing officer has not completed the assessment within the period of limitation.

Brief facts of the case are as under:

13. During assessment proceedings the Ld.AO noted that assessee had international transaction exceeding Rs.15 crores, and the case was referred to the Transfer Pricing officer to determined arm’s length price. Subsequently, an order under section 92CA was passed on 29/01/2016, proposing Adjustment of Rs.15,82,32,432/- towards purchase of traded goods, management support fee and excess AMP.

14. The Ld.AO upon receipt of the Transfer Pricing order, passed draft assessment order on 10/03/2016 under section 143 (3) read with 144C of the Act, making addition of Rs.62,69,39,430/- to the total income of assessee. It has been submitted that, against the draft assessment order, assessee filed objections before DRP with a delay of 2 days on 13/04/2016. The DRP took a view that provisions of the income tax Act do not empower the DRP to condone the delay in filing objections by assessee and since assessee filed its objection beyond the specified time period of 30 days, application was not accepted. The DRP accordingly rejected the objections filed by assessee. The DRP passed order on 24/08/2016.

15. The Ld.AO, subsequently passed the impugned order on 31/08/2016.

16. It has submitted by the Ld.AR that, the impugned order passed by the Ld.AO is beyond the period of limitation, as the Ld.AO should have completed the assessment based on the draft assessment order dated 10/03/2016. He placed reliance on the decision of Hon’ble Pune Tribunal dated 26/02/2020 in case of TDK Electronics AG vs ACIT in ITA No. 1810/PON/2019 in support of his contention

17. On the contrary the Ld.CIT.DR placed reliance on orders passed by authorities below.

18. We have perused submissions advanced by both sides in the light of records placed before us.

19. In Ground No.2 assessee raises the issue regarding validity of final assessment order dated 31/08/2016 passed u/s 143(3) r.w.s 144C of the Act. The Ld.AR submitted that the impugned order is passed beyond the due date prescribed u/s 144C of the Act. The relevant dates to be considered in the present facts are as under:

  • date of draft assessment order : 10/03/2016
  • date on which draft assessment
  • order was received by assessee  : 12/03/2016
  • date on which objections were filed
  • before DRP  : 13/04/2016
  • date on which DRP passed directions : 24/08/2016
  • date on which the final assessment order
  • was passed under section 144C(13) : 31/08/2016 20.

20. Admittedly the draft assessment order dated 10/3/2016 was received by assessee on 12/03/2016 as per the speed post tracking record of the postal department and the period of 30 days for filing Form 35 A in terms of section 144C (2) expired on 11/04/2016. Assessee in the present facts filed objections before DRP on 13/04/2016, thereby causing 2 days delay. The view taken by DRP that it has no power to condone the delay is inasmuch as such power is absent under section 144C of Income Tax (DRP) Rules 2009 cannot be found fault with. Hon’ble Pune Tribunal in case of TDK Electronics AG vs ACIT (supra) has dealt in detail with the various provisions, Act, wherein, the legislature has conferred the power of condoning delay to various authorities under the Act.

Hon’ble Pune Tribunal in case of TDK Electronics AG vs ACIT (supra) on identical issue has held as under:

“15. The scheme of the relevant provisions in this regard is that when the AO makes a reference to the TPO, the latter passes an order u/s. 92CA(3) of the Act. On receipt of the order from the TPO, the AO passes a draft order u/s. 144C(i). If dissatisfied with the draft order, the assessee has an option to either approach the DRP route by filing objections before the DRP or choose the appellate recourse by filing an appeal before the CIT(A). If an assessee opts to be governed by the procedure enshrined for the DRP reference, then the DRP is supposed to issue directions within nine months from the end of the month in which the draft order is forwarded to the eligible assessee as per sub-section (12) of section 144C. Sub-section (13) provides that upon a receipt of the direction in sub-section (5), the AO shall complete assessment within one month from the end of the month in which such a direction is received. At this juncture, it is significant to have a glance at the mandate of sub-section (3) of section 144C, which runs as under :-

‘The Assessing Officer shall complete the assessment on the basis of the draft order, if—

(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or

(b) no objections are received within the period specified in sub-section (2). ‘

16. The crux of section 144C(3) in so far as clause (a) is concerned is that if an assessee accepts the variation as per the draft order, then there is no need to sail through the DRP or the appellate route. In that scenario, the AO, in terms of section 144C(4)(a), will be required to complete the assessment on the basis of the draft order within a period of one month from the end of the month in which the acceptance is received. Clause (b) of section 144C(3) deals with a situation of completing the assessment on the basis of the draft order in a case in which no objections are received within the period specified in sub-section (2). In the latter situation, clause (b) of section 144C(4) provides that the AO will pass the assessment order within one month from the end of the month in which the period of filing the objections under sub-section (2), expires. It means that if an assessee does not file objections against the draft order before the DRP within a period of thirty days as per sub-section (2), the AU, without waiting for anything else, will have to complete the assessment within one month from the end of the month in which the period of filing of objections under sub-section (2) expires. The DRP dismissed the objections of the assessee in limine by opining that the assessee could not have filed objections outside the time limit provided under sub-section (2) of section 144C. The net effect of the order of the DRP is that the objections filed by the assessee were time barred and hence no cognizance could have been taken of them. Once the objections filed by the assessee are time barred, the natural corollary is that no valid objections were filed by the assessee. One cannot contemplate a situation that the objections are invalid for the DRP so as not to issue any direction u/s 144C(5) and valid for the AO so as to pass order u/s 144C(13) of the Act. If the objections are invalid as time barred having not been filed within the time prescribed under sub-section (2) of section 1444C, the AO will have to act in terms of Section 144C(3)(b) and complete the assessment within the time prescribed u/s 144C(4)(b) of the Act, namely, within one month from the end of the month in which the period of filing of objections under sub-section (2) expires.

17. Adverting to the facts of the instant case, it is found that, the period of 30 days for filing objections within sub-section (2) of section 144C expired on 23.01.2019. Going by the mandate of subsection (3) of section 144C(3)/144C(4), the AO was supposed to complete the assessment on the basis of the draft order by February, 2019. As against this, the AO actually completed the assessment u/s. 144C(13) on 24.10.2019. Such a completion of assessment not only under the wrong provision but also beyond the limitation period is ultra vires and hence cannot stand. We declare the assessment order to be time barred and ex consequenti null and void, with the effect that the returned income will automatically get accepted as finally assessed income.

18. In the result, the appeal is allowed.”

21. As there is no difference in facts as observed in para 18-19 herein above of present case before us, we hold that impugned order passed dated 31/08/2016 u/s 144C(13) is beyond the limitation period and is ultra virus.

22. As we have allowed present appeal on the legal issue raised, other issues raised by assessee becomes academic at this juncture, and therefore are not adjudicated.

Respectfully following the above view, we hold the returned income as the assessee income.

23. In the result, appeal filed by assessee stands allowed in terms of Ground No.2.

Order pronounced in the open court on 11th March, 2021

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