Limitation Period and Validity of Final Assessment Order in Transfer Pricing Case

Case Law Citation: [2024] 158 taxmann.com 238 (Delhi - Trib.) - Mavenir UK Holdings v. Assistant Commissioner of Income tax, Circle INT Tax 2(2)(1), IT

Facts of the Case:

1. Mavenir UK Holdings (the assessee) appealed against the final assessment order passed by the Assessing Officer (AO) under Section 147 r.w.s. 144 of the Income Tax Act, 1961.

2. The assessee raised various grounds challenging the validity and legality of the final assessment order.

Issues Involved:

1. Whether the final assessment order, passed on 27.12.2022, was barred by limitation due to the assessee filing objections before the Dispute Resolution Panel (DRP) after the due date.

2. Various other issues raised by the assessee challenging the validity of the draft assessment order, notice under Section 148, and alleging errors in the assessment process.

Ruling and Conclusion:

1. The draft assessment order was passed on 04.03.2022, and the assessee filed objections before the DRP on 06.04.2022, which was after the due date for filing objections.

2. According to Section 144C(4) of the Income Tax Act, the AO should have completed the assessment within one month from the end of the month in which either the acceptance of variations is received or the period for filing objections expires.

3. The final assessment order was passed on 27.12.2022, well beyond the due date of 31.05.2022. As a result, the order was held to be barred by limitation and treated as void.

4. The assessee's grounds challenging the validity of the draft assessment order, notice under Section 148, and various alleged errors in the assessment process were not addressed, as the primary issue of limitation led to the order being deemed void.

5. The assessee's appeal was allowed.

Detailed Analysis:

The case revolves around the timeline of the assessment process and adherence to the statutory provisions. The AO passed the draft assessment order on 04.03.2022. Subsequently, the assessee filed objections before the DRP on 06.04.2022, which was after the due date for such objections.

Section 144C(4) prescribes a time limit for the AO to pass the final assessment order. It mandates that the order should be passed within one month from the end of the month in which either the acceptance of variations is received or the period for filing objections expires. In this case, since the objections were filed after the due date, the AO should have proceeded to finalize the assessment order without waiting for the objections.

However, the final assessment order was passed on 27.12.2022, which was beyond the due date of 31.05.2022. The Tribunal held that this delay rendered the order barred by limitation and, consequently, treated it as void.

The ruling primarily focuses on the strict adherence to procedural timelines specified in the Income Tax Act. The consequences of not complying with these timelines can result in the invalidation of the final assessment order.

The various other grounds raised by the assessee, such as challenging the validity of the draft assessment order, the notice under Section 148, and alleging errors in the assessment process, were not explicitly addressed in the ruling. The Tribunal's decision to treat the order as void due to a limitation issue made further detailed analysis of these grounds unnecessary for the disposition of the case.

In summary, the case underscores the importance of complying with statutory timelines in the assessment process and highlights the severe consequences, including the voiding of the final assessment order, when such timelines are not met.