Quashing of Assessment order on non-compliance of sec 144C and barred by the period of Limitation

Novateur Electrical and Digital Systems Pvt. Ltd Vs ACIT (ITAT Mumbai)

Conclusion: Order passed by TPO in the name of assessee as “Novateur Electrical and Digital Systems Pvt. Ltd. [formerly Legrand (India) Ltd./Indo Asian Electric Pvt. Ltd.]” quoting PAN in the header table was of Legrand was not valid by non-compliance/adherence to the mandated procedure under section 144C vitiated the assessment in itself and was barred by limitation.

Held: Assessee-company was engaged in the manufacturing and sale of electrical products such as miniature circuit breakers and wiring accessories. Assessee had filed its return of income for the assessment year 2011-12, declaring a loss. Later on, it revised its return, claiming depreciation on goodwill arising from the acquisition of the switchgear division of Indo Asian Fusegear Ltd. through a slump sale. It was to be noted that Legrand India Pvt. Ltd., another entity, was amalgamated with Novateur effective from April 1, 2011. Both Novateur and Legrand had filed separate returns for the assessment year 2011-12, and separate scrutiny assessments were initiated for each. During the assessment proceedings, Transfer Pricing Officer (TPO) passed an order adjusting the arm’s length price (ALP) of international transactions undertaken by Legrand. However, the TPO’s order mentioned Novateur’s name along with Legrand’s PAN, creating confusion. AO issued a draft assessment order incorporating the TPO’s adjustments and passed the final assessment order. Assessee challenged the validity of this order, arguing that it was passed beyond the limitation period prescribed under Section 153. The company contended that since no transfer pricing adjustments were made in its case, the final assessment order should have been passed. It was held that on record that two separate assessment proceedings were initiated by two different Income-tax authorities for two separate legal entities, i.e., Novateur (assessee) and Legrand. Though, Legrand did not exist at the time of culmination of the assessment proceeding so initiated, yet the same had to be brought to logical end by passing separate orders by taking into record the fact of amalgamation of Legrand into Novateur. It was a case where the statutory procedure mandated in section 144C had been attempted to be by passed by merely mentioning the name of the assessee as the amalgamated entity with its former name and the name of amalgamating company. Non-compliance/adherence to the mandated procedure vitiates the assessment in itself. Thus, it was a case where there was no variation in the income by virtue of order of TPO, more particularly, no separate TP order for the transactions specific to Novateur, the condition prescribed for assessee to be an eligible assessee were not met and therefore procedure for issuance of draft order calling for objections and taking further steps did not apply. The impugned order passed u/s.143(3) r.w.s. 144C was barred by limitation as it ought to have been passed on or before 31.03.2015.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

This appeal filed by the assessee is against the order of Ld. CIT(A)-57, Mumbai, vide order no. CIT(A)-57/Arr.50/2018-19, dated 14.03.2019 passed against the assessment order by the Assistant Commissioner of Income Tax – 10(3)(1), Mumbai, u/s. 143(3) r.w.s. 144C(3) of the Income-tax Act (hereinafter referred to as the “Act”), dated 12.05.2015 for Assessment Year 2011-12.

2. Grounds taken by the assessee are reproduced as under:

Ground 1- Validity of final assessment order

1. The appellant submits that the order dated 12 May 2015 purported to be passed under section 143(3) read with section 144C(3) of the Income-tax Act, 1961 (‘Act’) is bad in law in as much as it has been passed beyond the period of limitation provided for under section 153 of the Act

On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in the following respects

2. in upholding the validity of the final assessment order dated 12 May 2015 passed under section 143(3) read with section 144C(3) of the Act beyond the period of limitation viz. 31 March 2015 even after accepting the fact that there was no variation to the income that arose as a consequence of an order purportedly passed by the Transfer Pricing Officer in the case of the appellant.

3. in holding that the transfer pricing order dated 12 January 2015 was a combined order passed by the Transfer Pricing Officer for two separate legal entities having their own respective PAN (appellant- AACCE4671N and Legrand India Private Limited (‘Legrand’) – AAACM50090).

4. in holding that the provisions of Explanation 1(i) to section 153 of the Act are applicable in the instant case

5. in applying Explanation 1(i) to section 153 of the Act without appreciating the fact that the case of the appellant is neither a case of reopening nor a case of rehearing as the appellant never made any demand for rehearing.

6. in not appreciating that the transfer pricing order mentioned only one PAN viz. AAACM5009Q being the one pertaining to Legrand.

Ground 2-Depreciation on Goodwill

On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in the following respects:

7. in upholding the disallowance of depreciation on goodwill amounting to Rs.81,30,26,569.

8. in not allowing depreciation on goodwill despite accepting the valuation report of the appellant and holding that goodwill is an intangible asset covered under section 32 of the Act and is entitled for depreciation.

9. in proceeding on a factually incorrect basis that the switchgear division of Indo Asian Fusegear Limited was amalgamated with the appellant without appreciating the fact that the appellant had acquired the said division through a slump sale from Indo Asian Fusegear Limited and therefore the entire foundation of the order passed by the learned CIT(A) denying the claim of depreciation on goodwill is vitiated.

10. in invoking the 6″ proviso to section 32 and explanation 7 to section 43(1) which are applicable to a scheme of amalgamation and in not appreciating that the assets were acquired through a slump sale and not under a scheme of amalgamation.

11. in relying on various decisions to disallow depreciation on goodwill without appreciating that the facts in the said decisions were different from the facts in the appellant’s case.

3. Assessee filed its additional legal grounds of appeals vide application dated 17.09.2023. However, in the order sheet for hearing on 24.04.2024, it is recorded that assessee has withdrawn the additional grounds so raised and is not pressed. Considering this, the additional grounds so raised by the assessee are dismissed as not pressed. In the course of hearing, ld. Counsel has emphasised on ground No.1 challenging the validity of final assessment order. Accordingly, we take up ground No.1 for adjudication to first decided the legal issue so raised.

4. Brief facts of the case are that assessee is a company engaged in business of manufacturing and sale of miniature circuit breakers, residual current circuit breakers and wiring accessories and trading of distribution boards and circuit breakers. It was incorporated on 11.08.2010 in the name of Era Electricals Pvt Ltd. (EEPL). It acquired the business of switch gear division of Indo Asian Fusegear Ltd. (IAFL) who was an unrelated third-party seller, through a slump sale on 22.07.2010 for which the effective date of business transfer was 09.09.2010. Name of the assessee after the said acquisition was changed to Indo Asian Electric Pvt. ltd. (IAEPL) on 14.04.2011. Later, assessee again changed its name on 21.03.2012 to Novateur Electrical and Digital Systems Pvt. Ltd. (hereinafter referred to as ‘Novateur’ or the ‘assessee’). Assessee filed its return of income for Assessment Year 2011-12, i.e., the year under consideration, on 30.11.2011 under its first changed name i.e., IAEPL. Return so filed was accompanied with Form 3CEB for transfer pricing regulation compliance and Form 3CD for tax audit. Assessee declared a total loss of Rs.48,87,02,205/- in this original return of income filed u/s.139(1) of the Act. Subsequently, a revised return of income was filed u/s.139(5) on 03.09.2012 reporting a total loss at Rs.130,17,88,775/- wherein depreciation of Rs.81.30 Crores on goodwill amounting to Rs.325.21 Crores arising on account of business transfer agreement of switch gear division from IAFL, dated 22.07.2010 by way of slump sale was claimed by the assessee.

4.1. Legrand India Pvt. Ltd. (Legrand) an Indian company having PAN- AAACM5009Q was amalgamated with the assessee vide order dated 06.07.2012, passed by the Hon’ble High Court of Bombay. The appointed date of amalgamation given by the Hon’ble Court was from 01.04.2011, i.e., from Financial Year 2011-12 relevant to Assessment Year 2012-13. At this juncture, it is important to note the PAN of assessee which is AAACCE4671N. Also, it is important to note that the year under consideration before us is Assessment Year 2011-12. Legrand had filed its original return of income for Assessment Year 2011-12 u/s.139(1) on 29.11.2011, alongwith Form 3CEB for its transfer pricing regulation compliance and Form 3CD for its tax audit requirements.

4.2. For Assessment Year 2011-12, both assessee and Legrand had individually filed their respective returns of income along with other relevant and necessary compliance. Separate scrutiny assessment proceedings were undertaken by the Income-tax authorities for each of them. Jurisdiction in the case of assessee during the relevant time lay with Income Tax Officer-6(2)(4), Mumbai from whose office, notice u/s.143(2), dated 01.08.2012 was issued in the name of Novateur Electrical and Digital Systems Pvt. Ltd. Jurisdiction in the case of Legrand during the relevant time lay with ACIT-6(3), Mumbai, who issued notice u/s.143(2) on 02.08.2012 in the name of Legrand itself. Thus, two separate scrutiny assessment proceedings were initiated. Both the companies had international transactions and therefore both had filed their respective Form 3CEB in compliance with the transfer pricing regulations. In case of both, respective ld. Assessing Officers made a reference to the ld. Transfer Pricing Officer (TPO).

4.3. In the case of Legrand, pursuant to transfer pricing proceedings, addition of Rs.6,65,357/- in respect of export sales made to its Associated Enterprises (AEs) was made by the ld. TPO in order passed u/s.92CA(3), dated 12.01.2015. The said order was passed by Addl. CIT (TPO)-3(1), Mumbai. It is important to note that in the said order against the name of the assessee, ld. TPO mentioned the name of assessee as “Novateur Electrical and Digital Systems Pvt. Ltd. [formerly Legrand (India) Ltd./Indo Asian Electric Pvt. Ltd.]”. The PAN quoted in the header table is “AAACM5009Q”. which is of Legrand. Assessing Officer mentioned in the same header table is “DCIT-6(3), Mumbai”. In the first para of this order, it is stated that a reference u/s.92CA(1) in case of Novateur Electrical and Digital Systems Pvt. Ltd. i.e., the assessee was received from DCIT-6(3), Mumbai on 30.09.2013 who had made reference for determination of arm’s length price (ALP) for all the transactions reported in Form 3CEB filed by the assessee.

4.4 It is to be noted that there was cadre re-structuring of the jurisdiction owing to which jurisdiction in the case of Novateur Electrical and Digital Systems Ltd. i.e., assessee in the present case was changed to ACIT-10(3)(1), Mumbai. Similar change was made in the jurisdiction of Legrand to DCIT-10(2)(1), Mumbai. Owing to such change in jurisdiction on account of cadre restructuring, subsequent proceedings were undertaken under the changed jurisdiction.

4.5. Pursuant to this order of ld. TPO passed in respect of reference made by the ld. Assessing Officer of Legrand, a draft assessment order was issued u/s. 143(3) r.w.s. 144C(1), dated 16.03.2015 by DCIT-10(2)(1), Mumbai in the name of Legrand (India) Pvt. Ltd., again under the PAN “AAACM5009Q” by the ld. Assessing Officer having jurisdiction over Legrand. In the said draft assessment order, ld. Assessing Officer included the transfer pricing adjustments for the purpose of making addition of Rs.6,65,357/- on account of adjustment made in ALP in respect of international transactions with AEs. Subsequent to the draft assessment order, final assessment order was passed u/s.143(3) r.w.s. 144C(3), dated 20.04.2015 by DCIT-10(2)(1), Mumbai in the name of Legrand (India) Pvt. Ltd. with its PAN as stated above. In the final assessment order, addition towards adjustments made in ALP in respect of international transaction with AEs of Rs.6,65,357/- was retained as made in the draft assessment order.

4.6. In the case of Novateur Electrical and Digital Systems Pvt. Ltd., i.e., the assessee, though the reference was made by the ld. Assessing Officer to the ld. TPO for determination of ALP of international transactions with its AEs, yet there is no separate transfer pricing (TP) order passed pursuant to such reference. There is nothing on record for any adjustment proposed/made with respect to transactions undertaken by IAEL in Assessment Year 2011-12.

4.7. It is worth noting a fact that the transfer pricing order passed with the PAN of Legrand, dated 12.01.2015 mentions name of the present assessee with the suffix ‘formerly Legrand (India) Ltd./Indo Asian Electric Pvt. Ltd.’ This TP order relating to the adjustment made in respect of international transaction of Legrand has been referred by the ld. Assessing Officer of Novateur Electrical and Digital Systems Pvt. Ltd. for the purpose of passing a draft assessment order in the name of Novateur Electrical and Digital Systems Pvt. Ltd., dated 30.03.2015. While passing this draft assessment order, the name mentioned is “Novatuer Electrical and Digital Systems Pvt. Ltd. (formerly known as Indo Asian Electric Pvt. Ltd.)” with PAN of Novateur, i.e., AACCE4672N. In this draft order in para 6.2, ld. Assessing Officer has mentioned about the TP order, dated 12.01.2015 passed by the Addl. CIT (TP)-3(1), Mumbai which has suggested an adjustment of Rs.6,65,357/- to the ALP of assessee’s international transactions relating to exports of finished goods. Pursuant to this draft assessment order, final assessment order has been passed by making the addition towards to the said TP adjustment by ACIT-10(3)(1), Mumbai in the name of Novateur Electrical and Digital Systems Pvt. Ltd. (formerly known as Indo Asian Electric Pvt. Ltd.) with the PAN of Novateur. In this final order, the same verbiage of para 6.2 has been retained.

5. In the backdrop of above stated detailed factual matrix, the issue to be addressed by the Bench raised by the assessee in ground No.1 is on ascertaining the validity of final assessment order dated 12.05.2015 passed u/s.143(3) r.w.s. 144C(3) since it has been passed without a valid TP order as the TP order dated 12.01.2015 is a combined order by the ld. TPO for two separate legal entities having their respective PAN and that there was no variation in the income that arose as a consequence of an order purportedly passed by the ld. TPO in the case of Novateur, i.e. the assessee. The only TP adjustment of Rs.6,65,357/- is in respect of international transactions with its AEs undertaken prior to amalgamation of Legrand with the assessee. Thus, in absence of a valid TP order in respect of international transactions undertaken by the assessee with its AEs, no draft assessment order ought to have been passed by the ld. Assessing Officer, thereby affecting the limitation available to pass the impugned assessment order which according to the assessee ought to have been passed by 31.03.2015 as against the same having passed on 12.05.2015, making the impugned order barred by limitation and hence bad in law, liable to be quashed ab initio.

6. We have heard both the parties in detail who have placed their written submissions on record covering Various arguments/propositions made to justify their grounds. We have also perused the material including paper book compilations and synopsis placed on record. We have also given thoughtful considerations to the judicial precedents referred in the course of hearing and noted in the written submissions.

7. Before we delve into the aforesaid issue, let us appraise ourselves to section 144C of the Act. According to the said section, Assessing Officer is required to pass a draft assessment order in cases of eligible assessee as defined as u/s.144C(15). Relevant extract of section 144C(15) is as under:

“(15) For the purposes of this section, –

(a) “Dispute Resolution Panel” means a collegium comprising of three Principal Commissioners or Commissioners of Income-tax constituted by the Board for this purpose;

(b) “eligible assessee” means,-

(i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub­section (3) of section 92CA; and

(iii) any non-resident not being a company, or any foreign company.”

7.1. Thus, from the above, it is noted that a draft order is required to be passed only in the following cases:

a) Where variation is required to be made pursuant to the order passed by ld. TPO u/s.92CA.

b) Where the assessee is a foreign company.

8. In the present context, case before us is in respect of TP adjustment made for international transactions with AEs, undertaken by a separate entity, i.e., Legrand which got amalgamated into the assessee who also had its own set of international transactions with its AEs, both Legrand and assessee being unrelated parties in the year under consideration. It is undisputed that TP reference was made in both the cases by respective jurisdictional Assessing Officers to the respective ld. TPOs. Owing to approval of amalgamation scheme by the Hon’ble High Court of Bombay in the subsequent year, i.e., Assessment Year 2012-13, effective from 01.04.2011, during the pendency of the impugned proceedings, ld. TPO passed a combined order for the two separate legal entities, by mentioning name of the assessee as Novateur Electrical and Digital Systems Pvt. Ltd. [formerly Legrand (India) Ltd./Indo Asian Electric Pvt. Ltd.] in the PAN of Legrand i.e., AAACM5009Q. By the said order, ld. TPO attempted to cover up the situation which arose because of amalgamation of Legrand into Novateur though the transfer pricing adjustment was made only in respect of international transactions with AEs undertaken by Legrand alone, amounting to Rs.6,65,357/- for export of finished goods. There are no TP adjustments in respect of international transactions with AEs undertaken by Novateur for which WWW.TAXSCAN.IN – Simplifying Tax Laws – 2025 TAXSCAN (ITAT) 528 a separate Form 3CEB is on record, meaning thereby that the transactions reported there in have been accepted as such being at ALP.

8.1. Further, there is no separate TP order u/s 92CA(3) pursuant to reference made by the ld. Assessing Officer having jurisdiction over Novateur. For this separate reference made by ld. Assessing Officer of Novateur, the combined order by the ld. TPO of Legrand has been taken into consideration for passing the draft assessment order and then the final assessment order. It is important to note that both in the draft and the final assessment order, the addition made by the ld. Assessing Officer on account of TP adjustment is in respect of international transactions with AEs undertaken by Legrand. Assessee had taken up this matter before the ld. CIT(A) who had held that no variation was made to the total income of the assessee pursuant to order passed u/s.92CA as the adjustment made in the TP order pertained to the transactions entered into by Legrand. Thus, he deleted the addition of Rs.6,65,357/- made towards ALP adjustment against which the Department is not in appeal.

8.2. We note that since there exists no TP variation, first in the case of assessee itself where no adjustment was per se made and secondly in the case of Legrand where the adjustment was made but deleted by CIT(A) and Department not coming up for an appeal before the Tribunal, the criteria of holding the assessee as eligible assessee specified u/s.144C(15) is not fulfilled. Once there is no variation arising as a consequence of the order of TPO, the draft assessment order could not have been passed. The statutory time limit provided u/s.153 of the Act in this respect is tabulated as under for ease of reference.

10. In the given set of facts, ld. Assessing Officer has passed the impugned final assessment order on 12.05.2015 which ought to have been passed on or before 31.03.2015 as the present case is a case with no TP adjustment, whether it is Novateur or Legrand (since in the case of Legrand, the adjustment even though made by the ld. TPO had been deleted by ld. CIT(A) and Department is not in appeal for the same).

11. Ld. CIT DR has emphasised on the contention that provision of explanation 1(i) to Section 153 of the Act applies in the present case as it is a case of re-hearing due to cadre restructuring and thus, has submitted the justification for extended time limit. In this regard, we wish to reproduce relevant extract of Explanation 1 to section 153 of the Act which is as under:

“Explanation 1-For the purposes of this section, in computing the period of limitation-

(1) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be re-heard under the proviso to section 129; or

(ii) the period during which the assessment proceeding is stayed by an order or injunction of any court; or

(iii)….

shall be excluded:

Further, provisions of section 129 of the Act is reproduced as under

“Section 129: Change of incumbent of an office:

129. Whenever in respect of any proceeding under this Act an Income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor:

Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard “

[emphasis supplied by us by bold]

11.1 From the aforesaid provisions, we note that explanation 1 to section 153 of the Act applies in a case where an opportunity to rehear is demanded by the assessee pursuant to succession of one Income-tax authority by another u/s.129 of the Act. In this respect, it was submitted before us by the ld. Counsel of the assessee that no proceedings have undertaken previously before issuance of notice by the incumbent Assessing Officer and that assessee had not requested for any re-hearing before the incumbent Assessing Officer. Essential fact on this line of proposition is that, it is a case of change of jurisdiction and not a change of incumbent. Case of the assessee has been transferred from one jurisdiction to another jurisdiction which would be covered by provisions of section 127 and not section 129. It is noted that section 129 speaks of change in incumbent of an office without any change of jurisdiction. Provisions of section 127 and 129 are summarised below:

11.2. Accordingly, the contentions made by ld. CIT DR on applicability on explanation 1(i) to section 153 of the Act to make out a case as a case of re-hearing due to cadre restructuring is not tenable. To hold so, we find force from the decision of Hon’ble High Court of Delhi in the case of Shibani Dutta Vs. CIT(A) (2012) 26 taxmann.com 105 (Del), which has extensively dealt with the provisions of sections 127 and 129 for their applicability. The relevant extract from the said decision are as under:

“10. The Revenue however contends, (which was accepted by the Tribunal) that Explanation 1(iii) to Section 158BE is applicable and in computing the period of limitation for the purpose of the Section “the time taken in reopening the whole or any part of the proceeding or giving an opportunity to the assessee to be reheard under the proviso to Section 129” shall be excluded. In our opinion the contention of the Revenue is misconceived. The period of limitation gets extended under clause (iii) of Explanation 1 only by the time taken to reopen the whole or any part of the proceeding or giving an opportunity to the assessee (to be reheard) under the proviso to Section 129. If we turn to Section 129 of the Act we find that it provides for the procedure to be followed when there is a “change of incumbent of an office”. The Section is as under: –

“Change of incumbent of an office.

129. Whenever in respect of any proceeding under this Act an income-tax authority ceases to exercise jurisdiction and is succeeded by another who has and exercises jurisdiction, the income-tax authority so succeeding may continue the proceeding from the stage at which the proceeding was left by his predecessor:

Provided that the assessee concerned may demand that before the proceeding is so continued the previous proceeding or any part thereof be reopened or that before any order of assessment is passed against him, he be reheard.”

11. We do not see how this provision helps the Revenue. It is applicable when in the same jurisdiction, there is a change of incumbent and one Assessing Officer is succeeded by another. In such a case, the main Section provides that the successor – officer is entitled to continue the proceeding from the stage at which it was left by his predecessor subject to the caveat, expressed in the proviso, that if the assessee demands that before the proceeding is continued the previous proceedings or any part thereof shall be reopened or that before any assessment order is passed against him, he shall be reheard, such a demand has to be accepted. If as a result of accepting the assessee’s demand under the proviso to Section 129 some time is taken and the assessment proceedings cannot be completed within the normal period of limitation, then the period of limitation gets extended by such time taken for giving the assessee an opportunity to reopen the earlier proceedings or for rehearing. Section 129 is applicable to normal assessments made under Section 143(3) of the Act as well as the block assessments made under Section 158BC of the Act. The question however is whether there was a change in the incumbent of the office in the assessee’s case so as to attract Section 129. We are afraid that Section 129 is not attracted to the assessee’s case. The case of the assessee is one of a transfer under Section 127 from one jurisdiction to another jurisdiction. By order passed under Section 127 of the Act on 15.05.2002, the jurisdiction to assess the assessee was transferred from the ITO, Ward 2(7), Bangalore to Central Circle-25, New Delhi. Apparently because of search several cases had to be centralised and that is the reason for passing the order under section 127 and this has been referred to in Para 3 of the order of the CIT (Appeals). After the assessee’s case was transferred to Delhi the Assessing Officer at Delhi issued notice under Section 158BC on 11.06.2002 calling for the block return of income. Section 129 speaks of change of an incumbent of an office without any change of the jurisdiction. Explanation-1 (iii) to Section 158BE speaks only of the proviso to Section 129. There were no earlier proceedings against the assessee pursuant to the search in Bangalore which got transferred to Delhi. The notice under Section 158BC was itself issued only by the Assessing Officer at Delhi and it is by this notice that the proceedings were commenced. If the proceedings had been commenced by the Assessing Officer at Bangalore and during the pendency of the proceedings the case had been transferred to Delhi it would possibly be argued that the proviso to Section 129 would extend the time limit. We, however, express no opinion about the same because that is not the factual position in the present case. In the present case the assessment proceedings were commenced only by the Assessing Officer at Delhi by notice issued on 11.06.2002. Thereafter there was no change in the incumbent of the office so as to attract the provisions of Section 129. In such a situation there is no scope for importing the proviso to Section 129 to extend the period of limitation. Even factually there is nothing on record to show that the assessee made any request or demand before the Assessing Officer in Delhi that the previous proceedings, if any, should be reopened or that before any order of assessment is passed against her. she should be reheard. Therefore, both factually and legally there is no scope for invoking Explanation-1(ii) to Section 158BE of the Act to extend the period of limitation. The assessment under section 158BC ought to have, therefore, been completed on or before 30.06.2002 as per Section 158BE (1) (b) of the Act. Since it was completed only on 30.07.2002, it is barred by limitation.”

12. It is also a fact on record that pursuant to a reference made by the Jurisdictional Assessing Officer (JAO) of Novateur made to ld. TPO in respect of international transactions with AEs undertaken by Novateur as reported in its Form 3CEB, there is no separate identifiable TP order passed by the ld. TPO having jurisdiction for the same with regard to the reference so made. The TP order, dated 12.01.2015 passed in the case of Legrand had merged into the final assessment order, dated 20.04.2015 passed in the case of Legrand itself for Assessment Year 2011-12. Moreover, ld. CIT(A) in the case of Legrand has quashed the final assessment order on the ground that the same has been passed in the name of non-existent entity. Thus, when the aforesaid TP order which got merged into the final assessment order of Legrand, which has been quashed, it has no legality on its standalone basis and cannot be referred into the proceedings of Novateur for the purpose of passing draft assessment order and thereafter the final assessment order. Accordingly, the extended time limit of 12 months cannot be made available for passing the final assessment order in the case of Novateur, i.e., the assessee. We, thus find that the final assessment order ought to have been passed on or before 31.03.2015, which in fact has been passed on 12.05.2015 and is thus beyond the period of limitation, liable to be quashed.

12.1. Ld. CIT DR has contested to make out a case that since it is a case of amalgamation of Legrand into Novateur, ultimately the onus is on Novateur only and therefore has no bearing even if a combined order has been passed by the ld. TPO. In this respect, it is to be noted that the scheme of amalgamation is effective from 01.04.2011 by the order of Hon’ble High Court of Bombay passed on 06.07.2012, hence the effective year for amalgamation is Assessment Year 2012-13 and not the year under consideration which is Assessment Year 2011-12. It is on record that two separate assessment proceedings were initiated by two different Income-tax authorities for two separate legal entities, i.e., Novateur (assessee) and Legrand. Though, Legrand did not exist at the time of culmination of the assessment proceeding so initiated, yet the same had to be brought to logical end by passing separate orders by taking into record the fact of amalgamation of Legrand into Novateur. It is a case where the statutory procedure mandated in section 144C has been attempted to be bypassed by merely mentioning the name of the assessee as the amalgamated entity with its former name and the name of amalgamating company. Section 144C provides for a detailed procedure to be followed in cases where any variation in income or loss returned which is prejudicial to the interest of an assessee on account of reference made in section 92CA. Non-compliance/adherence to the mandated procedure vitiates the assessment in itself. Thus, holistically taken, it is a case where there is no variation in the income by virtue of order of the ld. TPO, more particularly, no separate TP order for the transactions specific to Novateur, the condition prescribed for assessee to be an eligible assessee are not met and therefore procedure for issuance of draft order calling for objections and taking further steps do not apply.

13. Considering the above detailed factual matrix and elaborate discussion on the same along with the applicable provisions of the law and judicial precedents, we hold that the impugned order passed u/s.143(3) r.w.s. 144C, dated 12.05.2015 is barred by limitation as it ought to have been passed on or before 31.03.2015. Thus, assessee succeeds on ground No.1 contesting on the validity of final assessment order. Since the impugned assessment order has been quashed as barred by limitation in terms of the discussion above, ground No.2 on the merits of the case is rendered academic and therefore not adjudicated upon.

14. In the result, appeal of the assessee is allowed.

Order is pronounced in the open court on 31 December, 2024