Period Of Limitation Under S.153 Of Income Tax Act Applies To Remand Proceedings : Madras HC

The Madras High Court recently observed that the period of limitation under the Sections 153 (2A) or 153 (3) was applicable even for remad proceedings before the Assessing Officer, Transfer Pricing Officer or the Dispute Resolution Panel. The entire proceedings had to be conducted within a period of 9 months as contemplated under Section 144C (12) of the Income Tax Act. The bench of Justice R Mahadevan and Justice Sathya Narayana Prasad further observed that in matters of transfer pricing, when the matter was remanded to the DRP, the Assessing Officer had to pass a denova draft and complete the entire proceedings within 12 months as otherwise the very purpose of extension would become meaningless.The court also observed that the outer time limit of 33 months provided under Section 153 would apply to the final order and nit the draft order. therefore, the entire proceedings had eto be completed within the prescribed time. The non-obstante clause would not exclude the operation of Section 153 as a whole but only implies that the irrespective of availability of larger time, the final order had to be passed within one month.The court also held that in cases where a period of limitation was not prescribed, the orders had to be passed within a reasonable time and not beyond 3 years. BackgroundThe Revenue is the appellant(s) in the appeals. The respondent in these writ appeals M/s. Roca Bathroom Products Private Limited is a private limited company incorporated during August 1983 and a subsidiary of Roca Sanitario S.A., Spain and are engaged in the business of manufacturing and marketing bathroom products. For the assessment year 2009-2010, they filed their return declaring an income of Rs.21,44,96,661/-. Similarly, for the assessment year 2010-2011, they filed their return declaring an income of Rs.50,75,32,362/-. The returns of income were taken up for scrutiny and were referred to Transfer Pricing Officer (in short, "TPO") under Section 92CA of The Income Tax Act, 1961.The TPO passed orders which were confirmed by the Assessing Officer in his draft assessment order. Though objections were raised with the Dispute Resolution Panel (DRP), the same was rejected and directions were issued under section 144C. Based on the same, the second appellant passed the final assessment order and raised a demand under section 156.Assailing the assessment orders relating to the assessment years 2009-2010 and 2010-2011, the respondent approached the Income Tax Appellate Tribunal by filing appeals. By a common order dated 18.12.2015, the Tribunal allowed the appeals by setting aside the orders of the assessing officer and remanding the matter to the assessing officer to refer the same to the DRP for fresh examination, after giving sufficient opportunity to the assesseeAccording to the respondent, they did not receive any notice, pursuant to the orders of the Tribunal and therefore, they sent a letter dated 21.08.2019 to the second appellant stating that the remand proceedings have become time-barred under Section 153 of the Act and hence, requested for refund of the tax already paid by them for the assessment years 2009-2010 and 2010-2011 along with interest. Thereafter, they received separate notices dated 06.01.2020 from the DRP calling upon them to appear for enquiry on 10.01.2020. The respondents stated that as per the orders of the Tribunal, the assessing officer ought to have passed the draft assessment orders afresh, within the time limit prescribed under section 153 of the Act, but he failed to do so, and hence, the notices dated 06.01.2020 were issued by the first appellant are barred by limitation.They filed Writ Petitions to quash the notices dated 06.01.2020 and consequently, direct the second appellant to refund the tax amount along with interest under section 244A of the Act and also restraining the appellants from proceeding further in relation to the assessment years 2009-10 and 2010-11.Opposing the reliefs, the appellants contended that the writ petition was filed under a misconception that the proceedings initiated by the department are barred by limitation in respect of the assessment year 2009-2010. It is well settled that the challenge made to show cause notice is not maintainable inasmuch as it is only a proposal to initiate action and it has not finally determined the rights and liabilities of the parties to the writ. The respondent/assessee ought to have submitted their objections to the show cause notice and it is for the appellants to decide as to whether the proceedings are barred by limitation or not. Therefore, it was submitted that the writ petitions have been filed hastily and the reliefs sought for need not be granted. It was also submitted that the Assessing Officer was directed by the DRP to re-examine the issues and therefore, the provisions of Section 153 of the Act would not be applicable to the present case, inasmuch as the DRP is not an authority within the purview of Section 153 of the Act. ...

Period Of Limitation Under S.153 Of Income Tax Act Applies To Remand Proceedings : Madras HC

Upasana Sajeev

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