Income Tax Appellate Tribunal - Delhi
Asian Honda Motor Co. Ltd.,, New Delhi vs Assessee on 18 July, 2016
Page 1 of 19
INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "I-2": NEW DELHI
BEFORE SMT DIVA SINGH, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
ITA No.6143/Del/2015
(Assessment Year: 2009-10)
M/s. Asian Honda Motor Co. DCIT,
Ltd., Intl Taxation,
C/o. PDS Legal Vs. New Delhi
Atmaram Mansion, Office
No.7, First Floor, K.G. Marg,
New Delhi
PAN:AAICA2531P
(Appellant) (Respondent)
Assessee by : Sh. Deepak Chopra, Adv
Sh. Amit Shrivastava, Adv
Ms. Manasvini Bajpai, Adv
Revenue by: Sh. Sanjay Kumar, Sr. DR
Date of Hearing 19/05/2016
Date of pronouncement 18/07/2016
ORDER
PER PRASHANT MAHARISHI, A. M.
1. This is appeal filed by the assessee against the order u/s 143(3) of the Income Tax Act [ hereinafter referred to as‟ the Act‟] of the ld DCIT International Taxation, circle- Noida [hereinafter referred to as „AO‟ or „Assessing officer‟] dated 21.10.2015 framed pursuant to direction of the Learned Dispute Resolution panel -2 [ hereinafter referred to as „DRP‟] New Delhi u/s 144C (5) of the act for the Assessment Year 2009-10.
2. Appellant is a company incorporated in Thailand and engaged in trading of raw materials, consumable and spare parts. It is also Page 2 of 19 an associated enterprise of Honda Motor, Japan and has also an associated enterprise in India by name of Honda Seil Cars India Pvt. Ltd. During the course of survey u/s 133A on Honda Seil Cars India Ltd on 24.06.2010 certain documents were found wherefrom the revenue has formed a belief that appellant has a permanent establishment in India. It has also entered into international transactions with its associated enterprises. The return of income was filed by the assessee/ appellant on 20.8.2010 showing income of Rs. 20698486/-. Based on the above information the matter was referred u/s 92CA (3) to Transfer Pricing Officer [hereinafter referred to as‟ The TPO‟] for determination of Arm‟s length price [hereinafter referred to as „ALP‟] of international transaction on 28.12.2011. Meanwhile assessee approached Authority for Advance Ruling {hereinafter referred to as „AAR‟] on 29.06.2011 and vide ruling dated 15.05.2012 the application of the assessee was rejected. A further reference on 11.12.2013 was made for seeking information in terms of Article- of Indo Thailand Double Taxation Avoidance Agreement [In short „DTAA‟] reply for which was received on 07.11.2014 and due to above the time limit for passing draft assessment order u/s 144C read with Section 143(3) was extended up to 26.01.2015 with the consent of the assessee vide letter dated 14.01.2015. ld TPO passed his order on 31.12.2014 proposing an adjustment u/s 92CA of Rs. 83414899/- on account of interest income and Rs. 187755226/- on account of export of raw material, spare parts and expenses recovered. The ld Assessing Officer incorporated the adjustment proposed by the TPO and framed draft assessment order on M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 3 of 19 16.01.2015 determining proposed taxable income of Rs. 291868610/-. Against the draft order, the appellant filed objection before the DRP Panel-2 and directions were passed on 10.09.2015 u/s 144C (5) of the Act. Pursuant to those directions, the ld Assessing Officer passed the final assessment u/s 143(3) rws 144C (5) of the Act on 21.10.2015 making an adjustment u/s 92CA of Rs. 83414899/- and determining taxable income of appellant at Rs. 104113380/-. Aggrieved by the order the assessee has preferred this appeal before the tribunal.
3. The assessee has raised the following grounds of appeal:-
"Ground 1: That on the facts and in law, the Learned Deputy Commissioner of Income-tax, Noida (hereinafter referred to as "AO") erred in assessing the income of the Appellant for the relevant assessment year at Rs. 104,113,380/- as against the returned income of Rs. 20,698,486/-.
Ground 2: That on the facts and in law, the AO/ Hon'ble Dispute Resolution Panel (hereinafter referred to as "DRP") erred in not giving due cognizance to the fact that the order passed by the TPO is time barred under the provisions of section 153 read with section 92CA(3A) of the Act and hence, liable to be quashed.
Ground 3: That on the facts and in law, the TPO erred in concluding that there existed a Permanent establishment of the Appellant in India which was not the mandate accorded to him under section 92CA. Ground 4: That on the facts and in law, the TPO acted contrary to the jurisdiction vested in him by concluding that the profit arises from the offshore supplies are taxable in India owing to existence of Permanent establishment in India.
Ground 5: That on the facts and in law, the TPO/DRP failed in not appreciating that the adjustment made on account of interest was hit by jurisdiction bar contained in section 92(3) and Circular 14 of 2001, as it resulted in M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 4 of 19 decreasing the overall incidence of tax in India in context of Indian payer/associated enterprises. Ground 6: That on the facts and in law, the TPO/DRP miserably failed to appreciate that the transaction relating to sale of raw material to associated enterprises in India along with the applicable interest on delayed payment had been found to meet the ALP test by applying the combined transaction approach in the assessment proceeding of Indian associated enterprises and as such no adjustment could be made in the hands of the Appellant company.
Ground 7: That on the facts and in law, the TPO/DRP fail to appreciate that it was not within their jurisdiction to question the commercial expediency of the transaction where the Appellant had selected to apply SIBOR on the transaction under consideration and it was not for the TPO to impose that LIBOR not being the commercial between the parties.
Ground 8: Without prejudice, that on facts and in law, the TPO/ DRP erred in not considering that the risk/reward matrix, commercial rational and the business expediency existed in case of charging interest on business credit extended to the AE in the normal course of business is completely different from the case where the loan is extended by bank in typical financing transaction.
The TPO/DRP failed to appreciate that in the Appellant's case the purpose is not to earn interest income form such extended credit. Thereby erred in considering the PLI (Profit level Indicator) used by Banks in their normal course of lending/ borrowing business as comparable uncontrolled price (CUP) for determining the Arm's Length price.
Ground 9: That on facts and in law, the AO/ TPO/DRP has grossly erred in law and facts in initiating the penalty under section 271BA, 271 AA and 271G of the Act and alleging that the Appellant has not complied with the provision of aforesaid sections. It is imperative to mention that the Appellant had duly submitted all the information, to the extent available and had filed all the necessary information on record and in any case has M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 5 of 19 made full and complete disclosure as required under the Income Tax Act, 1961.
Ground 10: Without prejudice: that on facts and in law, the TPO/ DRP erred in not applying the Proviso to section 92C of the Act and has failed to allow the Appellant the benefit of downward variation of 5 percent in determining the ALP."
4. Ground No. 1 of the appeal is general in nature and no specific arguments were advanced by the parties before us, therefore same is dismissed.
5. Ground No. 2 of the appeal is a legal ground contesting that order passed by the ld. TPO is time barred and liable to be quashed. Before us the ld AR contends that the order passed by the ld TPO is time barred under the provisions of section 153 rws 92CA(3) of the Act and hence it is liable to be quashed. He referred to the provisions of section 153(1) and submitted that reference u/s 92CA (3) of the act was received by the ld. TPO on 28.12.2011 and therefore date of limitation for passing of the order by ld. TPO was 27.11.2014 which was passed on 31.12.2014, therefore, the order passed by the ld TPO is barred by the limitation. He further excluded the time period pertaining to the application before AAR and information sought as per DTAA and consequently excluded 668 days for the same. Therefore according to him the order of Transfer Pricing Officer is barred by limitation and therefore the assessment made pursuant to that does not survive. He submitted that On the similar facts for AY 2010-11 in ITA No. 1132/Del/2015 wherein, identical issue has been decided in case of Honda Trading Corporation Japan. He specifically relied on para no. 6.1 to 8 under caption heading „B‟ at page no 35 to 46 of that order. He M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 6 of 19 also submitted a chart showing sequence of events to demonstrate his point of view.
6. The ld DR submitted that the order passed by the TPO is not barred by the limitation and even otherwise he relied upon the order of Hon‟ble Supreme Court in case of Deepak Agro Foods Vs. State of Rajasthan dated 11.07.2008 and submitted that such illegality is capable of being cured and it is merely a case of irregularity in assessment proceedings by the ld AO and TPO who were not bereft of the authority to assess the appellant and therefore the Tribunal is duty bound to cure this defect. However he did not dispute the dates and facts mentioned in the chart submitted by the ld AR.
7. We have carefully considered the rival contentions. Firstly we look at the various provisions which are cited before us.
8. According to the provisions of section 92CA (3A) of the act "[(3A) Where a reference was made under sub-section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires"
M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 7 of 19 Admittedly the reference to ld TPO was made after 1-6-2007 Therefore the provisions of this section are applicable to the facts of the case. Accordingly ld. TPO may make order under this section at any time before 60 days prior to the date of expiry of limitation as per section 153 (1) of the act as applicable in the present case.
9. According to section 153 (1) of the act the time limit for passing an order u/s 143 (3) was as under :-
Time limit for completion of assessments and reassessments.
153. 39[(1) No order of assessment40 shall be made under section 143 or section 144 at any time after the expiry of--
(a) two years from the end of the assessment year in which the income was first assessable ; or
(b) one year from the end of the financial year in which a return or a revised return relating to the assessment year commencing on the 1st day of April, 1988, or any earlier assessment year, is filed under sub-section (4) or sub-section (5) of section 139, whichever is later :] 41[Provided that in case the assessment year in which the income was first assessable is the assessment year commencing 41a[on or after the 1st day of April, 2004 but before the 1st day of April, 2010], the provisions of clause (a) shall have effect as if for the words "two years", the words "twenty-one months" had been substituted :] 42[Provided further that in case the assessment year in which the income was first assessable is the assessment year commencing 42a[on or after the 1st day of April, 2005 but before the 1st day of April, 2009] and during the course of the proceeding for the assessment of total income, a reference under sub-section (1) of section 92CA--
M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 8 of 19
(i) was made before the 1st day of June, 2007 but an order under sub-section (3) of that section has not been made before such date; or
(ii) is made on or after the 1st day of June, 2007, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words "two years", the words "thirty-three months" had been substituted:] 42b[Provided also that in case the assessment year in which the income was first assessable is the assessment year commencing on the 1st day of April, 2009 or any subsequent assessment year and during the course of the proceeding for the assessment of total income, a reference under sub-section (1) of section 92CA--
(i) is made before the 1st day of July, 2012, but an order under sub-section (3) of that section has not been made before such date; or
(ii) is made on or after the 1st day of July, 2012, the provisions of clause (a) shall, notwithstanding anything contained in the first proviso, have effect as if for the words "two years", the words "three years" had been substituted.] [Extracted from taxmann.com as amended by the Finance Act 2012] Therefore accordingly the order u/s 143(3) for AY 2009-10 should have been passed by 31.3.2013 and further extended by the time taken for various reasons as per explanation (1) to section153 of the act.
10. Based on the facts narrated above we hereby tabulate the relevant dates pertaining to the proceedings before the various authorities for the impugned AY.
Sl. Particulars Date Remarks
No.
1 Date of filing return of 20.08.2010
M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 9 of 19 income 2 Application u/s 245Q(1) 29.06.2011 before AAR 3 Date of reference 28.12.2011 received by TPO for determining ALP 4 Date of rejection of the 15.05.2012 As the original application of the application was applicant by AAR made on 29.06.2011 and was disposed off on 15.05.2012 total no of 322 days are required to be excluded as per clause No. VI of explanation 1 to section 153 of the Act.
5 The date on which 11.12.2013 request to competent authority of Japan for exchange of information 6 Date on which the ld 20.11.2014 According to the TPO received the clause (viii) of information vide letter Explanation 1 to dated 07.11.2014 section 153 the period excluded from the date of reference made ending with date on which the information last received or a period of one year whichever is less.
Here the reference was first sent on 11.12.2013 as per Sl No. 3 and ended on 20.11.2014 resulting into exclusion of 344 M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 10 of 19 days.
7 Date by which the order 28.01.2015 The date before
should have been passed which the order
as per the explanation 1 should have been
of section 153 passed according to
section 153 was
31.03.2013. The
date of 31.03.2013
is required to be
extended by a period
322 days as per Sl
No. 4 and 344 days
as per Sl No. 6 of the
chart which extends
the date for passing
of the order by 668
days which makes
the time limit of
passing of the order
of 31.03.2013
extended to
28.01.2015. [though
in the chart date
mentioned by ld AR
is 26.01.2015 but
according to us it is
28.01.2015]
8 The date by which the 29.11.2014 The TPO should
TPO should have passed have passed an
the order being 60 days order before 60 days
prior to the date on from the date of
which the period of extended time limit
limitation referred to u/s as per Sl. No. 7
153 from passing which is 26.01.2015
assessment order i.e. on or before
expires i.e. 60 days prior 29.11.2014. [though to date mentioned at Sl. in the chart date No. 7 mentioned by ld AR is 27.11.2014 but according to us it is M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 11 of 19 29.11.2014] 9 Date of passing of the 31.12.2014 Barred by limitation order by the ld TPO by 31 days
11. In any case the difference in the dates mentioned by the ld AR and computed by us does not make any bearing on the computation of time limit for deciding whether the order passed by the Ld TPO is barred by limitation or not.
12. Now we come to the judicial precedent referred before us by the ld AR . Identical issue has been decided by the coordinate bench in ITA No. 1132/Del/2015 for AY 2010-11 in Honda Trading Corporation Vs. DCIT dated 15.09.2015 wherein, it has been held that the time limit specified u/s 92CA(3A) is mandatory and not directory and therefore the TPO is bound by the time limit for passing of the order u/s 92CA (3) of the act. Accordingly, in that case time limit as per section 153(1) of the Act was up to 7.06.2014 and TPO passed his order on 31.05.2014 instead of on or before 08.04.2014, hence order passed by the TPO in that case was held to be time barred. The coordinate bench has further held that in such circumstances the final assessment order would be same but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transaction by the TPO emanating from his time barred order is unsustainable and therefore the coordinate bench directed for deletion of addition of Rs. 2.15 crores on account of transfer pricing adjustment made in the final assessment order. The coordinate bench in its order has held as under:-
" B. Time limit for passing of order by the TPO M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 12 of 19 6.1. The ld. AR also challenged the passing of the order by the TPO. It was submitted that the TPO passed order on 31.5.2014, which was time barred and, hence, the same should be annulled leading to the quashing of the final assessment order. In the opposition, the ld. DR supported the Revenue‟s stand.
6.2. We have heard the rival submissions and perused the relevant material on record. It has been noticed above that the provisions of section 92CA requiring the passing of the order by the TPO determining the ALP of the international transactions, came into being by the Finance Act, 2002. As per sub-section (3) of section 92C, the TPO is required to pass the order determining the ALP of the international transactions. No time limit was initially given for the passing of order by the TPO. It is only by the Finance Act, 2007, that sub-section (3A) was inserted providing time limit for the passing an order by the TPO. No amendment has been carried out in this provision thereafter. Sub-section (3A) of section 92CA containing the relevant time limit for the passing of the order by the TPO, reads as under : -
`(3A) Where a reference was made under sub- section (1) before the 1st day of June, 2007 but the order under sub-section (3) has not been made by the Transfer Pricing Officer before the said date, or a reference under sub-section (1) is made on or after the 1st day of June, 2007, an order under sub-section (3) may be made at any time before sixty days prior to the date on which the period of limitation referred to in section 153, or as the case may be, in section 153B for making the order of assessment or reassessment or recomputation or fresh assessment, as the case may be, expires.‟. 6.3. It transpires from a reading of the above provision that where a reference is made to the TPO after 1.6.2007, an order under sub-section (3) may be made at any time before 60 days prior to the date on which the period of limitation referred to in section 153, or, as the case may be, in section 153B, for making the order of assessment or re-assessment, etc., expires.
M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 13 of 19 6.4. The ld. DR vehemently contended that the use of the word `may‟ in this provision for the passing of the order by the TPO within a period of 60 days of the limitation set out in section 153 indicates that the adherence to this time limit is not mandatory. He contended that even if the order is passed after the period of 60 days from the period of limitation as given u/s 153, still it would be treated as having been passed within time. This argument was countered by the ld. AR.
6.5. There is no doubt that the legislature has used the word `may‟ in sub-section (3A) of section 92CA. There is further no doubt that the ambit of the word `may‟ is different from the word `shall‟. Whereas, ordinarily the use of the word `shall‟ signifies mandatory compliance, the word „may‟ signifies directory compliance. But at times, the word `may‟ can also be read as `shall‟ and vice versa. In fact, all depends upon the context and the background of the provision in which such a word is used.
6.6. Section 127 deals with the power to transfer cases.
Sub-section (1) of this provision provides that : `The Director General or Chief Commissioner or Commissioner may, after giving the assessee a reasonable opportunity of being heard in the matter, wherever it is possible to do so, and after recording his reasons for doing so, transfer any case from one or more Assessing Officers subordinate to him (whether with or without concurrent jurisdiction) to any other Assessing Officer or Assessing Officers (whether with or without concurrent jurisdiction) also subordinate to him‟. Dispute arose in Sahara Hospitality Ltd. vs. CIT (2013) 352 ITR 38 (Bom) as to whether or not giving the assessee a reasonable opportunity of being heard before the transfer of case by the Chief Commissioner, in the backdrop of the use of the word `may‟ in the provision, be considered as mandatory. The Hon‟ble Bombay High Court has held that the word `may‟ in section 127 should be read as `shall‟ and hence the granting opportunity to the assessee is mandatory.
M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 14 of 19 6.7. Section 16 of the Wealth-tax Act, 1957 deals with the assessment of wealth. Section 16A having marginal note of `Reference to Valuation Officer‟ provides through sub-section (1) that : `For the purpose of making an assessment (including an assessment in respect of any assessment year commencing before the date of coming into force of this section) under this Act, where under the provisions of section 7 read with the rules made under this Act or, as the case may be, the rules in Schedule III, the market value of any asset is to be taken into account in such assessment, the Assessing Officer may refer the valuation of any asset to a Valuation Officer- (a) in a case where the value of the asset as returned is in accordance with the estimate made by a registered valuer if the Assessing Officer is of opinion that the value so returned is less than its fair market value; (b) in any other case, if the Assessing Officer is of opinion- (i) that the fair market value or the asset exceeds the value of the asset as returned by more than such percentage of the value of the asset as returned or by more than such amount as may be prescribed in this behalf; or (ii) that having regard to the nature of the asset and other relevant circumstances, it is necessary so to do‟. In Raj Paul Oswal vs. CWT (1988) 171 ITR 489 (P&H), there arose a quarrel as to the meaning of the word `may‟ used in section 16A in the context of making reference to the Valuation Officer. Settling the controversy, the Hon‟ble High Court held that the word `may' used in section 16A(1)(b), should be read as `shall'. It held that if the legislative intent had been to accord total discretion to the WTO to make a reference to the Valuation Officer or not in cases which were covered by cls. (a) & (b) of sub-s. (1) of s. 16A of the WT Act, then there was no necessity of providing the guidelines in cl. (a) or in sub-cls. (i) and (ii) of cl. (b) of sub-s. (1) of s. 16A. It was, therefore, held that the legislature by prescribing the contingencies, in which, by implication, it would not be necessary to make a reference, also again by necessary implication be taken to have intended that the reference to Valuation Officer was must if the given contingencies did not exist. In this M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 15 of 19 regard, the Hon‟ble High Court observed that : `There is no doubt about the fact that the use of expression "may" and "shall" to some extent serves an indicia to the intention of the legislature and helps in deciding as to whether the given requirement is directory or mandatory in character, but the use of expression "may" or "shall" is never considered decisive in that regard‟. It was thus held that the moment the estimated value exceeded the returned value of the asset by more than what is envisaged by r. 3B, then the WTO had no option, but to make a reference and he is not to wait for a request from the assessee to make a reference. Similar view has been expressed by the Hon‟ble Delhi High Court in Sharbati Devi Jhalani vs. CWT & Ors. (1986) 159 ITR 549 (Del). It is vivid from the above discussion that the use of word `may‟ or `shall‟ in a provision is not conclusive of its mandatory or directory nature. One needs to go through the text of the provision and the context in which such a word has been used. 6.8. Reverting to section 92CA, we find that the Finance Act, 2007 inserted sub-section (3A) carrying the time limit of sixty days for passing of the order by the TPO before the expiry of time limit for completion of assessment by the AO u/s 153. Despite the use of the word `may‟, the time limit for passing the order by the TPO is mandatory, as in the otherwise situation of the TPO having been allowed more time by implication, say of three months or more, could at that time have frustrated the provisions of section 153 for the passing of the assessment order by the AO. Thus we have no hesitation in holding that the use of the word `may‟ in sub-section (3A) of section 92CA is to be construed as `shall‟, thereby making this time limit as mandatory and not directory. As such, it is held that the TPO is bound by the given time limit for passing of his order. 6.9. Having held that the word `may‟ in section 92CA(3A) should be read as `shall‟, we once again note that prior to the insertion of section 144C by the Finance Act, 2009, the time limit for completion of assessment was contained in section 153 and accordingly the time limit for the passing of the order by the TPO was also set out M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 16 of 19 accordingly in section 92CA w.r.t. the time limit for the completion of assessment as per section 153. However, with the insertion of section 144C, the time limit for the completion of assessment, or in other words, for passing of the final assessment order, stood shifted to sub- sections (4) or (13) of section 144C and got detached from section 153. Along with this, passing of draft order also became mandatory, for which we have held above that the same is required to be passed within a reasonable time and it has got no relation with the time limit given in section 153. When the position is such that the draft order has to be passed independent of the time limit given in section 153, there appears some logic in not continuing with the time limit for the passing of the order by the TPO tagged with the time limit given in section 153. It has led to incoherence in the provisions. This position can be set right only with a suitable legislative amendment.
6.10. Having held that the time limit given in sub-section (3A) of section 92CA is mandatory for the passing of the order by the TPO, let us find out the time available with the TPO for the passing of his order. It has been noticed above that the time limit as per section 153(1) read with the third proviso and clause (viii) of the Explanation to the section, comes at 7th June, 2014. Period of 60 days prior to such time limit coming as per section 153, available with the TPO for passing his order, comes to an end on 8th April, 2014. As against this, the order was actually passed by the TPO on 31st May, 2014. Thus, the order passed by the TPO is patently time barred.
C. Consequences of valid draft order and TPO's time barred order
7. The ld. AR argued that since the draft order as well as the order of the TPO were time barred, the final assessment order passed by the AO was liable to be set aside. We have held above that the draft order was passed within time and only the order of the TPO is time-barred. When an order is passed without jurisdiction or beyond the permissible time, it is M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 17 of 19 considered as null and void. The effect of passing a null and void order is that it is considered as non est, meaning thereby, that it entails all the consequences of not having been passed at all and is ignored for all practical purposes. The Hon‟ble Madras High Court in Vijay Television (P.) Ltd. vs. DRP (2014) 369 ITR 113 (Mad) considered a case in which the assessment order was directly passed without routing through draft order or DRP. The Hon‟ble Court held it to be a noncurable defect and resultantly the assessment was quashed. It was held that when there is an omission on the part of the AO to follow the mandatory procedure prescribed under the Act, such an omission cannot be termed as a mere procedural irregularity and it cannot be cured. Extantly, we are confronted with a situation in which the draft order has been passed in time but the lapse has come in the passing of the order by the TPO. The consequence of the above scenario is that the passing of a valid and properly timed draft order cannot lead to the setting aside of the final assessment order. However the passing of the time barred order by the TPO, which is again a mandatory procedure prescribed under the Act, would be a non-curable defect, having the consequence as if it was not passed. In such circumstances, though the final assessment order would be saved but the addition on account of transfer pricing adjustment arising from the determination of the ALP of the international transactions by the TPO as emanating from his time barred order, would be unsustainable. We hold accordingly and direct the deletion of addition on account of transfer pricing adjustment made in the final assessment order.
8. In view of our decision on the above legal ground, there remains no need to deal with the contentions raised before us on the merits of the addition on account of transfer pricing adjustment."
13. In view of above decision of the coordinate bench the order of ld TPO in impugned appeal which should have been passed on or before 29.11.2014 but passed on 31.12.2014 is barred by M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 18 of 19 limitation in view of the provisions of section 92CA (3A) of the Income Tax Act and therefore is liable to be quashed.
14. The ld DR has argued that even otherwise if the order is passed beyond the limitation of time when the authority is not found bereft of authority to assess the appellant it is merely an illegality and should have been cured. The judicial precedent of decision of Hon‟ble Supreme Court in case of Deepak Agro Foods Vs. State of Rajasthan (supra) was cited. We have carefully perused the decision of the Hon‟ble Supreme Court, however, in that case the order was allegedly passed on 07.06.2002 was anti dated and as in fact it was passed on 29.06.2002. In the present case the facts are not that the order of the ld TPO is passed before 29.11.2014 but dated 31.12.2014. Furthermore, here the order of the Transfer Pricing Officer is not irregular, wrong or illegal but is null and void. It is not a case of exercise of jurisdiction by the ld TPO in a wrongful manner. Further also it is not the case of any irregularity in the procedure. In view of this the reliance placed by the revenue on the decision of Hon‟ble Supreme Court is misplaced.
15. In view of above and following judicial precedent cited before us by the ld AR being decision of the coordinate bench we hold that the order of the ld TPO passed on 31.12.2014 is barred by limitation and liable to be quashed. Therefore, consequently, the addition on account of transfer pricing adjustment amounting to Rs. 83414899/- does not survive. In view of this ground No. 2 of the appeal of the assessee is allowed.
16. In view of our decision on the above ground we do not find it necessary to deal with the contention raised before us on the M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10 Page 19 of 19 merits of the addition on account of transfer pricing adjustment as they become infructuous. In view of this ground No. 3 to 10 of the appeal are dismissed as infructuous. Order pronounced in the open court on 18/07/2016.
-Sd/- -Sd/-
(DIVA SINGH) (PRASHANT MAHARISHI)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated: 18/07/2016
A K Keot
Copy forwarded to
1. Applicant
2. Respondent
3. CIT
4. CIT (A)
5. DR:ITAT
ASSISTANT REGISTRAR
ITAT, New Delhi
M/s. Asian Honda Motor Co. Ltd. Vs. DCIT, ITA No.6143/Del/2015 AY: 2009-10