The Chennai bench of the Income Tax Appellate Tribunal ( ITAT ) recently held that the final assessment order passed after expiry of one month from the end of the month in which the DRP directions were received by the Revenue is barred by limitation. It was found that the order was passed wholly without jurisdiction and therefore, null in the eyes of law.
Conference call Services India Pvt. Ltd, the Assessee is a company engaged in the business of providing audio, video, web conference to its customers. During the AY 2013-14, the Assessee had entered into international transactions with its Associated Enterprise ( AE ) and accordingly, a reference was made to the TPO to determine the ALP. The TPO made a downward adjustment in respect of the international transactions.
Subsequently, AO passed the draft assessment order making addition in respect of adjustment made by TPO to the value of international transactions. The Assessee filed objections before the DRP which were rejected. The DRP’s directions were received by the AO on Sept 18, 2017 and Revenue issued notice dated Sept 21, 2017 requiring Assessee to furnish details in respect of a particular claim which was remanded by the DRP to the file of AO to verify the same. The AO then passed the final assessment order on Nov 21, 2017 under section143(3) r.w.s. 144C(1) r.w.s 92CA of the Income Tax Act, 1961.
Section 144C(13) of the Income tax Act mandates the completion of the assessment within one month from the end of the month in which DRP directions are received. Rule 11 of the Dispute Resolution Panel Rules requires communication of directions to the assessee and the Assessing Officer.
The Bench rejected the Revenue’s contention that DRP had given directions to verify a particular claim and as the directions were binding on the Revenue, it issued notice to the Assessee to furnish details regarding the said claim and as the Assessee did not respond to the said notice, one more notice was issued in Nov 2017.
The two member Bench comprising Aby T. Varkey (Judicial Member) and Jagadish (Accountant Member) observed that “as per Section 144C(13), Revenue had to complete the final assessment without providing any further opportunity of being heard to the Assessee within one month from the end of the month in which such directions are received and hence, the last date to pass final assessment order, in the present case, is Oct 31, 2017”.
The Bench therefore held that the final assessment order having been passed on Nov 21, 2017 is barred by limitation. The ITAT tallowed Assessee’s appeal and concluded that the assessment order passed beyond the time limit specified under section144C(13) was barred by limitation.
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