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.
The 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 respondents also highlighted that the DRP is a specialised body tasked with the matters of transfer pricing. The order of DRP was to ensure that a quickest remedial measures would be arrived at by the expert body, but not to conduct its proceedings in a leisurely manner without any set of limitation.
The court agreed with the submission of the respondents and observed that the the DRP proceedings is a continuation of assessment proceedings. Therefore, once the objections are filed under section 144C (12) a period of 9 months is prescribed, within which, directions are to be issued by the DRP, failing which any directions are to be treated as otiose.
The court further observed that the exclusion of applicability of Section 153 or Section 153 B is for a limited purpose to ensure that dehors larger time is available and an order based on the directions of the DRP has to be passed within 30 days from the end of the month of receipt of such directions.The timeline provided under the statute has to be strictly followed.
The court was of the opinion that even applying the principle of reasonable time, drawing a clue from Article 113 of the Limitation Act, the residual entry, it would be reasonable to conclude that action is to be concluded within 3 years.
Case Title: The Commissioner of Income Tax and Anr v. M/s. Roca Bathroom Products Private Limited
Case No: W.A No. 1517 of 2021
Citation: 2022 LiveLaw (Mad) 252
Counsel for the Appellant: Mrs. Hema Muralikrishnan Senior Panel Counsel and Mr. Prabhu Mukunth Arunkumar
Counsel for the Respondent: Mr.R.V. Eshwar, Senior Counsel for Mr. R. Sandeep Bagmar, Mr. Kamal Sawhney, Senior Counsel for Mr. Arun Karthick Mohan