The Honourable Dr. Justice Anita Sumanth v. The Deputy Commissioner Of Income Tax, Corporate Circle -Ii (1), Room

DATED: 16.02.2021 CORAM THE HONOURABLE DR. JUSTICE ANITA SUMANTH Writ Petition No.6202 of 2019andWMP. No.7049 of 2019 M/s.Freight Systems (India ) Private Limited,Represented by its National Head - Finace & Accounts,Mr.P.Vijaya Kumar,New No.257, Old No.125/2,AngappaNaicken Street, Chennai - 600 001. …PetitionerVs 1.The Deputy Commissioner of Income Tax, Corporate Circle -II (1), Room No.511, 5[th] Florr, Main Building, Aayakar Bhawan, 121, Uttamar Gandhi Salai, Nungambakkam, Chennai - 600 034. Corporate Circle -II (1), Room No.511, 5[th] Florr, Main Building, Aayakar Bhawan, 121, Uttamar Gandhi Salai, Nungambakkam, Chennai - 600 034. 2.The Secretary, Dispute Rolution Panel - Panel - II, 4th Floor, KendriyaSadan, Koramangala, Bengaluru - 560 034. … Respondents PRAYER: Writ Petition filed under Article 226 of theConstitution of India praying for the issuance of Writ ofCertiorarified Mandamus, to call for the Final Assessment Orderdated 29.10.2010 passed by the 1[st] Respondent herein underSection 143 (3) read with Section 144-C (13) of the Income TaxAct for the AY 2006-07 and quash the same as the consequentialproceedings in furtherance of the aforementioned Order dated29.10.2010,pendng before the 2[nd] respondent herein, is barred bylimitation in terms of Section1 153(2A) of the Act andconsequentially direct the 1[st] respondent herein to grant arefund of Rs.4,72,88,068/- due to the Petitioner herein alongwith interest for delayed refund for a period from the saidassessment year to the date of grant of refund. https://hcservices.ecourts.gov.in/hcservices/ For Petitioner : Mr.Kamal Sawhney, Senior Counsel for Mr.S.Muthuvenkatraman For Respondents: Ms.Hema Muralikrishnan, Senior Standing Counsel ORDER The petitioner, an assessee on the file of the DeputyCommissioner of Income Tax/R1, challenges a final assessmentorder dated 29.10.2010 passed in terms of Section 143 (3) r/w144C (13) of the Income Tax Act, 1961 (in short ‘Act’) forAssessment Year (A.Y.) 2006-07 in consequence of an orderpassed by the Dispute Resolution Panel (DRP) dated 29.10.2010,as barred by limitation in terms of Section 153 (2A) of the Act.A direction is also sought to R1 to refund the tax paid/adjustedin settlement of demand raised under the impugned assessmentorder along with interest. 2. The sequence of dates and events is that, a return ofincome was filed on 29.11.2006 revised on 19.10.2007, that wasselected for scrutiny. A Transfer Pricing Order (TPO) was passedon 31.10.2009 and a draft assessment made by the AssessingOfficer on 31.12.2009. As against the draft assessment order,objections were filed before the DRP that were disposed on17.09.2010. The aforesaid proceedings had transpired in Mumbaiand on 26.02.2010, the assessment of the petitioner stoodtransferred from Mumbai to R1 in Chennai. In compliance with thedirections of the DRP dated 17.09.2010, a final assessment orderwas passed by R1 on 29.10.2010 that was challenged in appealbefore the Income Tax Appellate Tribunal (Tribunal). During thependency of the appeal, the entire demand arising from orderdated 29.10.2010 was collected by way of adjustment of refundsfor other assessment years. 3. The Tribunal remanded the matter to the DRP by orderdated 24.01.2013 on the agreement of both the parties before itthat the issue relating to the Freight Forward Segment had beenomitted to be considered by the DRP. On remand, the DRP heardthe matter on 10.03.2014. The aforesaid proceedings took placebefore the authorities at Chennai. Pending orders from the DRP,Chennai, the DRP, Bangalore /R2 was constituted and the file ofthe petitioner stood transferred to R2. Post transfer, no orderswere passed by the DRP and hence the petitioner argues, relyingon the provisions of Section 153 (2A) as it stood prior toamendment vide Finance Act, 2016, with effect from 01.06.2016,that an order of fresh assessment ought to have been passedbefore the expiry of one year from the end of the financial year when the order of the Tribunal was received by the ChiefCommissioner or Commissioner of Income Tax. Thus, since theorder of the Tribunal had been passed on 24.01.2013, and noorder of final assessment was passed within the period asstipulated under 153(2A), the proceedings are barred by time. 4. Assuming that the order of the Tribunal dated 24.01.2013was received prior to the completion of that financial year i.e.on or before 31.03.2013, proceedings became barred on31.03.2015. If received after 01.04.2013, proceedings would havebeen barred by 31.03.2016. Since no order was passed prior to31.03.2016, the petitioner addressed the Chief Commissioner ofIncome Tax (International Taxation, Bangalore) for annulment ofthe proceedings and refund of the amount collected. This wasfollowed by further reminders, in between which proceedings wereinitiated by R2 for assessment, in which the petitioner hadparticipated. 5. I have heard Mr.Kamal Sawhney, learned Senior Counselappearing for Mr.Muthuvenkatraman, learned counsel for thepetitioner and Ms.Hema Muralikrishnan, learned Senior StandingCounsel for the respondents. 6. The main defence putforth by the Revenue is that thereis no limitation for finalization of proceedings pending beforethe DRP and that the provisions of Section 153 do not apply tosuch matters. I have had occasion to deal with the similarissue in the matter of Roca Bathroom Products Private LimitedVs. The Dispute Resolution Panel -2 and others in W.P. Nos.919,922, 1068 & 1070 of 2020 and vide order dated 23.12.2020, haveopined as follows: '13. Under the scheme of assessment in Section144C(1), the Assessing Officer, notwithstandinganything to the contrary contained in the Act, is toforward a draft of the proposed order of assessmentto the assessee in question, if he is of the viewthat a variation is called for in the income or lossreturned by that assessee which would be prejudicialto its interests. The assessee in response, undersub-section (2), has 30 days to either file itsacceptance of the proposed variation or objectionsto the variations with the DRP and the AssessingOfficer. The Assessing Officer is to thereafter,under sub-section (3), complete the assessment onthe basis of the draft order if the assessee hasintimated its acceptance of the order or has notfiled objections to the same within the timestipulated. In terms of sub-section (4), theAssessing Authority is to pass an order ofassessment within one month from the end of the month in which the acceptance of the assessee isreceived or the period for filing of objectionsexpires. month in which the acceptance of the assessee isreceived or the period for filing of objectionsexpires. 14. Sub-section (5) to (12) set out theprocedure for receipt, adjudication and disposal ofobjections by the DRP. Sub-section (5) states thatthe DRP shall issue such directions as it may thinkfit to guide the Assessing Officer is completing theassessment. In issuing the guidelines, as per sub-Section (6) the DRP shall take into account thedraft order, objections, evidences, reports ofauthorities and records as per sub-section (6).Sub-section (7) empowers the DRP to make furtherenquiry, if thought necessary and sub-section (8)confines the power of confirmation, rejection orenhancement of the variations proposed in the draftorder. Sub-sections (9) and (10) state that theopinion of the majority of the members shall prevailand that the directions of the DRP bind theAssessing Officer. Sub-section (11) provides for anopportunity of hearing to the assessee prior toissuance of the directions. Sub-section (12) setsout a limitation of nine (9) months from the end ofthe month in which the draft order is forwarded tothe assessee for disposal of the objectionsreceived. In passing a final assessment order, sub-section (13) specifically excludes the provisions ofSection 153 stating that the Assessing Officer shallpass a final order of assessment even withouthearing the assessee, in conformity with thedirections issued by the DRP, within one month fromthe end of the month when such directions werereceived by him. However, in my view, the exclusionof Section 153/153B is specific to, and kicks inonly at the stage of passing of final assessmentorder after directions are received from the DRP,and not at any other stage of the proceedings underSection 144C. Sub-sections (14) and (15) are notrelevant for the purpose of these Writ Petitions. 15. No doubt, Section 144C is a self containedcode of assessment and time limits are inbuilt eachstage of the procedure contemplated. Section 144Cenvisions a special assessment, one which includesthe determination of Arms Length Price (ALP) ofinternational transactions engaged in by theassessee. The DRP was constituted bearing in mindthe necessity for an expert body to look intointricate matters concerning valuation and transfer pricing and it is for this reason that specifictimelines have been drawn within the framework ofSection 144C to ensure prompt and expeditiousfinalisation of this special assessment. 16. The purpose is to fast-track a specifictype of assessment. This does not however lead tothe conclusion that overall time limits have beeneschewed in the process. In fact, the argument tothe effect that proceedings before the DRP areunfettered by limitation would run counter to theavowed object of setting up of the DRP a highpowered and specialised body set up for dealing withmatters of transfer pricing. Having set time limitsevery step of the way, it does not stand to reasonthat proceedings on remand to the DRP may be done atleisure sans the imposition of any time limit atall. 17. Sub-section (13) to Section 144C, in myview, imposes a restriction on the Assessing Officerand denies him the benefit of the more expansivetime limit available under Section 153 to pass afinal order of assessment as he has to do so withinone month from the end of the month when thedirections of the DRP are received by him, evenwithout hearing the assessee concerned. 18. Barring this, I find nothing in thelanguage of Section 144C or 153 to lead me to theconclusion that the latter is operated from theoperation of the former. The specific exclusion ofSection 153 from Section 144C(13) can be read onlyin the context of that specific sub-section and onceagain, reiterates the urgency that sets the tone forthe interpretation of Section 144C itself. 17. Sub-section (13) to Section 144C, in myview, imposes a restriction on the Assessing Officerand denies him the benefit of the more expansivetime limit available under Section 153 to pass afinal order of assessment as he has to do so withinone month from the end of the month when thedirections of the DRP are received by him, evenwithout hearing the assessee concerned. 18. Barring this, I find nothing in thelanguage of Section 144C or 153 to lead me to theconclusion that the latter is operated from theoperation of the former. The specific exclusion ofSection 153 from Section 144C(13) can be read onlyin the context of that specific sub-section and onceagain, reiterates the urgency that sets the tone forthe interpretation of Section 144C itself. 19. The Bombay High Court, in PCIT V. LionBridge Technologies Pvt. Ltd. (260 Taxmann 273) wasdealing with a challenge to a final order ofassessment. It was held that such a final assessmentcould be made only if the draft assessment had beenforwarded by the Assessing Officer to the assesseewithin the time limit prescribed under Section 153(2A) of the Act. 20. In Lion Bridge (supra) the Income TaxAppellate Tribunal had set aside the order ofassessment and remanded the matter to the file ofthe Assessing Officer directing him to pass ordersde novo. In appeals filed by the revenue under Section 260A, the substantial question raised was"Whether on the facts and in the circumstance of thecase and in law, the Tribunal is correct inentertaining the objection that the assessment orderis without jurisdiction null and void andunenforceable?" While dismissing the appeals, theDivision Bench proceeds on the basis that the draftassessment order ought to have been passed withinthe time frame stipulated under Section 153(2A) ofthe Act, also supporting the conclusion arrived atby me. 21. In Nokia India Private Ltd. V. DCIT (298 CTR334) a Division Bench of the Delhi High Court heldthat where the matter had been remanded to be re-done, it would hardly make a difference as towhether the remand had been to the TPO or the DRP,thus indicating that the provisions of Section 144Cwere also governed by the limitation of time set outin Section 153 of the Act. 22. The issue before the Delhi High Courtconcerned the effect of Section 153(2A) in a matterwhere the Tribunal had remanded the assessment inrespect of five out of seven issues to the AssessingOfficer. Upon receipt of the order of the Tribunal,the Assessing Officer referred the transfer pricingissues to the TPO. The assessee took a stand thatthe TPO would be bound by the limitation prescribedunder Section 153(2A) and requested the TPO to takethe provision into consideration in the proceedingsbefore him. The time limits under Section 153(2A)were however violated by the Department leading toWrit Petitions being filed by Nokia. In thatcontext, the Court, while accepting the stand of theassessee that the time limits specified in Section153(2A) would apply, states as follows: 25. In the present case, of the sevenissues, the assessment in respect of fivewas set aside and the issues remanded fora fresh determination. Whether the remandwas to the TPO or the DRP would not make adifference as long as what results fromthe remand is a fresh assessment of theissue. Clearly, therefore, the time limitfor completing that exercise was governedbySection 153(2A) of the Act. 23. It is brought to my notice that the aboveorder has not been accepted by the revenue and hasbeen challenged before the Supreme Court. Delay in filing the SLP has been condoned and leave grantedCivil Appeal in C.A.No.6755 of 2018 is pendingthough without any order of stay.' 25. In the present case, of the sevenissues, the assessment in respect of fivewas set aside and the issues remanded fora fresh determination. Whether the remandwas to the TPO or the DRP would not make adifference as long as what results fromthe remand is a fresh assessment of theissue. Clearly, therefore, the time limitfor completing that exercise was governedbySection 153(2A) of the Act. 23. It is brought to my notice that the aboveorder has not been accepted by the revenue and hasbeen challenged before the Supreme Court. Delay in filing the SLP has been condoned and leave grantedCivil Appeal in C.A.No.6755 of 2018 is pendingthough without any order of stay.' 7. Nothing has been stated in the course of the arguments inthis matter, to persuade me to take a different view from what Ihave already taken. Additionally, the Bombay High Court, inVodafone India Services (P) Ltd., Vs. Union of India (361 ITR531), paragraph 47, states that the process before the DRP is acontinuation of assessment proceedings as only thereafter woulda final appealable assessment order be passed. 8. An alternative argument putforth is that even if one wereto take the view that the provisions of Section 153 would notapply to the scheme of assessments under Section 144C, Courtshave consistently held that a reasonable limitation should beread into provisions dealing with the finalisation ofassessments and, by no stretch of the imagination, can sevenyears be construed to be a reasonable period. I agree, thoughthere is really no necessity for me to consider the alternateargument, in the light of my having accepted the primaryargument. 9. This Writ Petition is allowed. The impugned finalassessment order dated 29.10.2010 is quashed. There is adirection to R1 to refund the amounts remitted by the petitionerin connection with the demand raised under the impugned order,along with applicable interest in terms of Section 244A of theAct, within a period of four (4) weeks from today. Sd/- Assistant Registrar(CS VIII) //True Copy// rkp To Sub Assistant Registrar 1.The Deputy Commissioner of Income Tax, Corporate Circle -II (1), Room No.511, 5[th] Florr, Main Building, Aayakar Bhawan, 121, Uttamar Gandhi Salai, Nungambakkam, Chennai - 600 034. Corporate Circle -II (1), Room No.511, 5[th] Florr, Main Building, Aayakar Bhawan, 121, Uttamar Gandhi Salai, Nungambakkam, Chennai - 600 034. 2.The Secretary, Dispute Rolution Panel - Panel - II, 4th Floor, KendriyaSadan, Koramangala, Bengaluru - 560 034. +1cc to Ms. Hema Muralikrishnan, Advocate Sr.8970 Writ Petition No.6202 of 2019andWMP. No.7049 of 2019 sky [co]srg 26/03/2021