The Madras High Court has ruled that, the period of limitation under the Sections 153 (2A) or 153 (3) was applicable even for remand 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 division bench of Justice R Mahadevan and Justice Sathya Narayana Prasad observed that in matters of transfer pricing, when the matter was remanded to the DRP, the Assessing Officer had to pass a draft and complete the entire proceedings within 12 months as otherwise the very purpose of extension would become meaningless. The respondent, M/s. Roca Bathroom Products Private Limited is a private limited company 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 (TPO) under Section 92CA of the Income Tax Act. 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.
Relating to the assessment years 2009-2010 and 2010-2011, the respondent approached the Income Tax Appellate Tribunal. The Tribunal allowed the appeal by setting aside the orders of the assessing officer and remanding the matter to the assessing officer to refer it to DRP for fresh examination, after giving sufficient opportunity to the assessee. The respondents stated that as per the orders of the Tribunal, the assessing officer ought to have passed the draft assessment orders afresh, within time limit prescribed under section 153 of the Act, but he failed to do so, and hence notices were issued by the first appellant are barred by limitation. They filed Writ Petitions to quash the notices 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.
The Court held that “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 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.”
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