ITAT quashes Final Assessment order as it was passed beyond the period of Limitation [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) quashed the final assessment order as it was passed beyond the period of limitation.

In this case, the assessee had appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year 2011-12.

In this case, the assessee, Novateur Electrical and Digital Systems Pvt. Ltd., formerly known as Indo Asian Electric Pvt. Ltd., is engaged in the manufacturing and sale of electrical products such as miniature circuit breakers and wiring accessories. The company had filed its return of income for the assessment year 2011-12, declaring a loss. Later on, it revised its return, claiming depreciation on goodwill arising from the acquisition of the switchgear division of Indo Asian Fusegear Ltd. through a slump sale.

It is to be noted that Legrand India Pvt. Ltd., another entity, was amalgamated with Novateur effective from April 1, 2011. Both Novateur and Legrand had filed separate returns for the assessment year 2011-12, and separate scrutiny assessments were initiated for each.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

 During the assessment proceedings, the Transfer Pricing Officer (TPO) passed an order on 12-1-2015, adjusting the arm's length price (ALP) of international transactions undertaken by Legrand. However, the TPO's order mentioned Novateur's name along with Legrand's PAN, creating confusion.

The Assessing Officer (AO) issued a draft assessment order on 30-3-2015, incorporating the TPO's adjustments, and passed the final assessment order on 12-5-2015.

The assessee challenged the validity of this order, arguing that it was passed beyond the limitation period prescribed under Section 153 of the Income Tax Act, 1961. The company contended that since no transfer pricing adjustments were made in its case, the final assessment order should have been passed by 31-3-2015.

The ITAT held that the final assessment order was barred by limitation. The tribunal noted that the TPO's order pertained only to Legrand's transactions and not to the assessee’s.  Since there was no variation in the assessee's income due to the TPO's order, the conditions for issuing a draft assessment order under Section 144C of the Income Tax Act were not met.

The bench observed that the final assessment order should have been passed within the statutory time limit of 31-3-2015.

Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here

The ITAT quashed the final assessment order as barred by limitation, rendering the second ground of appeal regarding the depreciation on goodwill academic and not requiring adjudication.

The ITAT, comprising Pavan Kumar Gadale (Judicial Member) and Girish Agrawal (Accountant Member), allowed the assessee’s appeal.

To Read the full text of the Order CLICK HERE

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