Vildirect: IncomeTax-caselaws-2014-VIL-906-ITAT-CHN

2014-VIL-906-ITAT-CHN

Income Tax Appellate Tribunal COCHIN

IT(TP)A No.244/Coch/2014

Date: 12.12.2014

M/s . ENVESTNET ASSET MANAGEMENT (INDIA) PRIVATE LIMITED

THE ASST. COMMISSIONER OF INCOME-TAX

For the Appellant : Shri Nageswar Rao & Ajith
For the Respondent : Shri M. Anilkumar, CIT-DR

BENCH

Shri N.R.S.Ganesan, JM & Shri Chandra Poojari, AM,JJ.

JUDGMENT

Per N. R. S. Ganesan, JM

Being aggrieved by the transfer pricing adjustment made by the Assessing Officer in conformity with the direction of the Dispute Resolution Panel, Bangalore (DRP) by an order dated 28.03.2014, the assessee filed the present appeal before the Tribunal.

2. Shri Nageswar Rao, the learned Counsel for the assessee submitted that the order passed by the Assessing Officer consequent to the direction of the DRP is barred by limitation. Referring to the provisions of section 144C(13), the learned Counsel submitted that on receiving the direction of the DRP, the Assessing Officer is expected to pass the order in conformity with the direction of the DRP within one month from the end of the month in which such direction is received. In this case, the direction of the DRP is dated 29.11.2013. However, the assessment order was passed on 28.03.2014. The learned Counsel submitted that the assessee received copy of the direction of the DRP on 05.12.2013. Therefore, the order passed by the Assessing Officer cannot stand in the eyes of law. On a query from the bench, the learned Counsel for the assessee submitted that the assessee filed return of income for assessment year 2009-2010 on 26.09.2009. The Assessing Officer referred the transfer pricing adjustment to the Transfer Pricing Officer (TPO). The TPO determined the transfer pricing adjustment by an order dated 24.01.2013 increasing the income of the assessee by Rs. 2,31,71,849. The learned Counsel has also advanced argument on the merit of the adjustment made by the DRP.

3. On the contrary, Shri Anilkumar, the learned Departmental Representative, submitted that section 144C provides for passing of the assessment order from one month from the end of the month in which such direction is received. Referring to letter of the Assessing Officer dated 09.07.2014, the learned DR submitted that the order of the DRP was sent to Asst.Commissioner of Income-tax, Circle 1(1), Kochi and the same was redirected to the office of the Assessing Officer at Trivandrum. The date of receipt of order of DRP in the office of the Assessing Officer is not recorded. Therefore, according to the learned DR, it has to be deemed that the order of DRP was received by the Assessing Officer in February 2014. Hence, the assessment order passed on 28.03.2014 is well within the time provided in section 144C of the Act.

4. We have considered the rival submissions on either side and perused the relevant material on record. The power to pass assessment order other than block assessment in the case of search flows from section 143(3) of the Income-tax Act. Section 153 of the Income-tax Act provides for limitation for passing the assessment order. In fact, 3rd proviso to section 153(1) provides for three years from the end of the assessment year in which its income was first assessable for passing the assessment order, wherever the matter was referred to TPO. We also find that section 92CA(3A) enables the TPO to pass an order before 60 days prior to the time limit provided for passing the assessment order in 153 or 153B, as the case may be. Therefore, wherever the issue of adjustment of transfer pricing arises for consideration, the TPO is expected to pass his order before 60 days prior to the period of limitation referred in 153 or 153B, as the case may be.

4.1 We further find from section 144C of the Act, that when the Assessing Officer drafted a proposed assessment order and the assessee accepted the variation made by the Assessing Officer in the draft order, then the Assessing Officer has to pass the assessment order within one month from the end of the month in which the acceptance of the assessee is received by the Assessing Officer. This period of limitation provided in section 144C(4) of the Act. Whenever the assessee objects to the proposed assessment order drafted by the Assessing Officer, the DRP should issue directions as provided in section 144C(5) of the Act. Sub-section (12) of section 144C prohibits the DRP from issuing any direction after 9 months from the end of the month in which the draft assessment order is forwarded to the eligible assessee. Sub-section (13) of section 144C mandates the Assessing Officer to pass assessment order within one month from the end of the month in which such direction from the DRP was received. Therefore, it is obvious that section 153 provides for limitation of 3 years prior to the end of the assessment year in which the income was first assessable. Section 144C(5) provides for limitation of one month in the end of the month from which the acceptance of the assessee was received by the Assessing Officer. However, section 144C(13) provides for period of one month in the end of the month from which the direction of DRP was received by the Assessing Officer. Since different period of limitations are provided in different provisions as stated above, wherever the transfer pricing adjustment are involved the question arises for consideration is which provisions of the Income-tax Act would be applicable when the DRP directed the Assessing Officer to make transfer pricing adjustment. It is well settled principles of rule of interpretation that whenever conflicting provisions are provided in the enactment all the provisions of the Act shall be read harmoniously so as to give effect to all the provisions of the Act. If for any reasons any of the provisions could not be reconciled, the latter provision will prevail over the former. By keeping this Rule of interpretation as approved by the Privy Council and the Apex Court in mind, let us now examine, whether the impugned order of assessment is barred by limitation or not?

4.2 Section 153(1) provides for 3 years for passing the assessment order from the end of the assessment year in which the income was first assessable. In this case, admittedly, the income is assessable for assessment year 2009-2010. Thus, three years period expired on 31.03.2013. However the assessment order was admittedly passed on 28.3.2014. Therefore, it is beyond the period prescribed u/s 153.

4.3 Section 144C(13) reads as follows:-

“(13) Upon receipt of the directions issued under subsection (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received.”

4.4 In view of section 144C(13), notwithstanding anything contained in section 153, the Assessing Officer has to pass order within one month from the end of the month in which the direction of the DRP is received. Therefore, even though the period of limitation provided in 3rd proviso to section 153(1) expired on 31.3.2013. Section 144C(13) gives extension of further period of one month from the date of receipt of direction from the DRP. In view of the above, the date of receipt of direction of DRP by the Assessing Officer becomes crucial. Before us the Assessing Officer claims that the direction of DRP was initially sent to the ACIT, Circle 1(1), Kochi and the same was redirected. From the assessment order it appears that the assessment order was passed by the ACIT, Circle 1(1), Trivandrum. From the letter of the Assessing Officer dated 09.07.2014, it appears that the direction of DRP was mis-sent to ACIT, Kochi. No material is available on record to suggest that the direction of the DRP was sent to ACIT, Circle 1(1), Kochi, other than the letter of the Assessing Officer. Moreover, it is also not known when actually the ACIT, Circle 1(1), Kochi, received the direction of the DRP, and when it was redirected. The letter of the Assessing Officer dated 09.07.2014 is reproduced hereunder:-

“No.ACIT/Cir.1(1)/TVM/AABCN5494K/2009-10 Dt.09.07.2014

The Junior Authorised Representative

Office of the Commissioner of Income Tax (DR)

Income Tax appellate Tribunal, Kochi.

Sir,

Sub : Forwarding of Miscellaneous records in the case of M/s.Envestnet Asset Management (India) Pvt. Ltd. Trivandrum – A.Y. 2009-10 – reg. Ref. F.No.CIT(DR)/ENVESTNET/2014-15 dated 27.6.2014.

Kind attention is invited to the above.

2. The order of DRP was missent to the ACIT, Circle 1(1), Kochi and the same was redirected to this office. The date of receipt in this office is not recorded. From the circumstances it is inferred that the same was received in this office in February, 2014.

3. The miscellaneous records in the above case for A.Y.2009-10 are enclosed.

Yours faithfully,

Sd/-

(Laina Balan, IRS)

Assistant Commissioner of Income-tax

Circle 1(1), Trivandrum.

Encl : MR for A.Y. 2009-10.

Copy submitted to: 1. The Commissioner of Income-tax, Trivandrum

2. The Joint Commissioner of Income-tax Range-1, Trivandrum.”

4.5 From this letter of the Assessing Officer, it is clear that the Assessing Officer do not want to disclose the actual date of receipt of the direction of the DRP. The Office of the ACIT, Circle 1(1), Trivandrum, who passed the assessment order is maintaining register for inward tapals as per the procedure prescribed by Government of India. The DRP is situated at Bangalore, therefore, the copy of the DRP direction ought to have been received only through post. Whenever a letter or other communication is received by post, it is the practice of the Government department to make entry in the register for inward tapal as per the procedure / instructions of Government of India. It is not known how the Assessing Officer could claim that the date of receipt of the direction of DRP is not recorded in his office. It is for the Officers of the Income-tax Department to set right their house in order by maintaining proper records for inward and outward tapals. The Assessing Officer cannot take advantage of his negligence in not maintaining the register for inward tapal. Moreover, when the Income-tax Act provides for one month period for passing the assessment order after receipt of the direction of the DRP, it is a mandatory requirement for the Assessing Officer to record the date of actual receipt of the direction from DRP. By claiming that the date of receipt of direction from the DRP was not recorded in his office, the Assessing Officer cannot escape from the clutches of law. Therefore, there is no question of any deemed receipt of direction of DRP by the Assessing Officer in February 2014 especially when the order of the DRP is dated 29.11.2013 and the assessee received the same on 05.12.2013. In view of this, we are of the considered opinion that when the direction of the DRP is dated 29.11.2013, it ought to have been received within two months period from the date of order. Therefore, at the best, we may say that the Assessing Officer might have received the direction of the DRP within a period of two months from the date of direction of DRP. In other words, the direction of the DRP dated 29.11.2013 might have been received by the Assessing Officer by the end of January 2014. Therefore, the Assessing Officer is expected to pass the assessment order by the end of February 2014. Therefore, the assessment order passed by the Assessing Officer on 28.3.2014 is beyond the extended period of limitation provided in section 144C(13) of the Act. Hence, the impugned order of assessment dated 28.03.2014 cannot stand in the eyes of law. Accordingly, the impugned assessment order passed by the Assessing Officer on 28.03.2014 is quashed.

5. In the result, the assessee’s appeal is allowed.

Order pronounced on this 12th day of December, 2014.

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