In High Court of Judicature at Madras Dated : 06.8.2019 Coram : Honourable Mr.Justice T.S.SIVAGNANAM and Honourable Mrs.Justice V.BHAVANI SUBBAROYAN Tax Case Appeal No.547 of 2019 M/s.L&T Thales Technology Services Private Limited (formerly known as Thales Software India Private Ltd.), Chennai-32. ...Appellant Vs Commissioner of Income Tax, Corporate Circle-3, Chennai-34. ...Respondent APPEAL under Section 260A of Income Tax Act, 1961 against order dated 23.11.2016 made in ITA.No.1663/Mds/2015 on file of Income Tax Appellate Tribunal, Madras 'D' Bench for assessment year 2008-09. For Appellant: Mr.N.V.Balaji For Respondent: Mr.S.Rajesh, JSC Judgment was delivered by T.S.Sivagnanam,J We have elaborately heard Mr.N.V.Balaji, learned counsel for appellant assessee. Mr.S.Rajesh, learned Junior Standing accepts notice for respondent - Revenue. 1/10 TCA.No.547 of 2019 2. This appeal, filed by assessee under Section 260A of Income Tax Act, 1961 (for short, Act), is directed against order dated 23.11.2016 made in ITA.No.1663/Mds/2015 on file of Income Tax Appellate Tribunal, Madras 'D' Bench for assessment year 2008-09. 3. assessee has filed this appeal by raising following substantial questions of law : i. Whether, on facts and circumstances of case and law, Tribunal was right in concluding that assessment order passed by Assessing Officer was not barred by limitation ? ii. Whether, on facts and circumstances of case and law, Tribunal was right in not quashing assessment order passed by Assessing Officer in violation of provisions of Section 144C(13) of Act? And iii. Whether, on facts and circumstances of case and law, Tribunal was right in concluding that non compliance with directions of Appellate Authority was curable defect? 4. short issue, which falls for consideration, is as to whether assessment done by Assessing Officer pursuant to directions issued by Disputes Resolution Panel (DRP) as implemented by Transfer 2/10 http://www.judis.nic.in TCA.No.547 of 2019 Pricing Officer (TRP) dated 10.2.2015 is time barred. 5. assessee filed their return of income for assessment year under consideration claiming loss of Rs.3,06,16,652/-. Along with return of income, international transactions of assessee were duly reported in accountant's report in form No.3CEB filed in terms of provisions of Indian Transfer Pricing Regulations adopting Transactional Net Margin Method (TNMM). Assessing Officer referred case to TPO under Section 92CA of Act for determination of arm's length nature of assessee's international transactions. TPO rejected transfer pricing documents placed by assessee and made upward adjustment of Rs.6,72,00,000/-. 6. draft assessment order was passed under Section 143(3) read with Section 144C(1) of Act in conformity with adjustment made by TPO. assessee filed their objections before DRP. However, DRP issued directions on 09.8.2012 rejecting arguments of assessee and upholding findings of TPO as implemented by Assessing Officer. Assessing Officer passed final assessment order under Section 143(3) read with Section 144C(13) of Act vide order dated 31.10.2012. 7. As against final assessment order dated 31.10.2012, assessee 3/10 http://www.judis.nic.in TCA.No.547 of 2019 preferred appeal before Tribunal, which, by order dated 22.5.2013, set aside order of DRP and restored matter back to file of DRP to pass speaking order stating all objections of assessee and disposing them of by giving cogent reasons for adjudication of objections of assessee. It was further stated in order dated 22.5.2013 that DRP, before adjudicating issues, should afford reasonable and proper opportunity of hearing to assessee. There was also direction that after receiving order of DRP, Assessing Officer would again pass order under Section 144C(13) of Act. 8. Thus, matter went back to DRP for fresh consideration. DRP, by order dated 12.3.2014, modified its earlier order by stating that TPO would compute margins of comparables based on annual reports of respective comparable company, that M/s.KALS Information Systems Limited was excluded from comparable set and that M/s.VJIL Consulting Limited was included in comparable set. order passed by DRP dated 12.3.2014 was marked to assessee, Assessing Officer and Transfer Pricing Officer concerned. Thereafter, giving effect to order was passed on 10.2.2015 and final assessment order was passed on 26.2.2015 by Assessing officer. 9. As against final assessment order dated 26.2.2015, assessee 4/10 http://www.judis.nic.in TCA.No.547 of 2019 filed appeal before Tribunal on ground that it was time barred, as it was passed beyond time limit mentioned in Section 144C(13) of Act. However, Tribunal, by order dated 23.11.2016, rejected contention advanced by assessee that final assessment order dated 26.2.2015 was time barred and this is how assessee is before us by way of this appeal. 10. Mr.N.V.Balaji, learned counsel for assessee would vehemently contend that Assessing Officer was in receipt of directions issued by DRP on 21.3.2014, same date, on which, TPO received directions and due date for passing final assessment order as per Section 144C(13) of Act was 30.4.2014 whereas final assessment order was passed on 26.2.2015, which is clearly beyond time limit prescribed under Sub-Section (13) of Section 144C of Act. 11. After referring to Sub-Sections (8), (9), (11) and (12) of Section 144C of Act, it is submitted by learned counsel for assessee that if view taken by Tribunal is adopted, then unilaterally limitation prescribed under Statute would be extended and if TPO does not pass orders within reasonable time, then statutory time limit prescribed under Sub-Section (13) of Section 144C of Act loses its significance. In first round of litigation, TPO understood legal position in proper manner 5/10 http://www.judis.nic.in TCA.No.547 of 2019 and passed orders giving effect to directions issued by DRP and final assessment order was passed by Assessing Officer within time limit under Sub-Section (13) of Section 144C of Act. However, in second round, both TPO as well as Assessing Officer slept over matter and they cannot now extend time limit thereby acting prejudicial to interest of assessee. 12. Though, at first blush, arguments of Mr.N.V.Balaji, learned counsel for assessee appear to be convincing, on closer reading, we find arguments to be not acceptable. We support our conclusion with following reasons : First, we should take not of factual position. In first round, directions were issued by DRP under Section 144C(5) of Act on 09.8.2012. Thereafter, assessee went before TPO and made their submissions vide letter dated 13.9.2012 wherein they specifically requested to record their submissions and give effect to directions of DRP. TPO passed order dated 19.10.2012 giving effect to directions of DRP and this was communicated to Assessing Officer. Those directions were in terms of Sub-Section (5) of Section 144C of Act. Upon receipt of directions, Assessing Officer implemented same by passing final assessment order dated 31.10.2012. 6/10 http://www.judis.nic.in TCA.No.547 of 2019 13. Challenging final assessment order dated 31.10.2012, assessee preferred appeal before Tribunal. Tribunal, after taking into consideration submissions made by assessee and after hearing Revenue, came to conclusion that DRP did not deal with objections raised by assessee in proper manner and that no reasons were assigned in support of its conclusion and therefore, remanded matter to DRP for considering objections raised by assessee and for passing speaking order. DRP, on remand, took up contentions raised by assessee before it and passed order dated 12.3.2014 under Section 144C(5) read with Section 144C(8) of Act. 14. Interestingly, DRP did not compute as to what was arm's length price and whether there was upward adjustment or otherwise. DRP directed TPO to compute margins of comparables based on annual reports of respective comparable company and issued two other directions as well. assessee fully understood that directions were to TPO and not to Assessing Officer since, obviously, computation could not be done by Assessing Officer. 15. In earlier round, TPO implemented DRP's directions, which, in turn, were given effect to by Assessing Officer. Thus, assessee, having understood factual and legal position in proper 7/10 http://www.judis.nic.in TCA.No.547 of 2019 manner, on their own volition, submitted before TPO representation dated 10.4.2014 requesting to take on record their submissions and give effect to directions of DRP. Further, assessee undertook to provide any clarifications required. 16. TPO took into consideration modified order passed by DRP and submissions of assessee, passed giving effect to order dated 10.2.2015 and communicated same to Assessing Officer, who, in turn, passed final assessment order dated 26.2.2015. In light of above factual position, we are of clear view that Tribunal was right in holding that there is no jurisdictional error to invalidate proceedings in toto and communication of copy of directions of DRP dated 12.3.2014 to Assessing Officer, stated to have been received by Assessing Officer on 21.3.2014, is not direction within scope of Sub-Section (5) of Section 144C of Act. directions issued by DRP were to TPO, who was, in turn, required to do computation after considering objections of assessee and it is thereafter they mature into directions under Sub-Section (5) of Section 144C of Act, which were required to be implemented in terms of Sub-Section (5) of Section 144C of Act. 17. On facts, we are of clear view that Tribunal was right in 8/10 http://www.judis.nic.in TCA.No.547 of 2019 rejecting plea raised by assessee before it. Furthermore, case of assessee has to be tested for its correctness in light of earlier proceedings and more particularly order of Tribunal, which remanded matter for fresh consideration. Thus, assessee has not made out any ground to interfere with order of Tribunal. 18. Accordingly, above tax case appeal is dismissed. substantial questions of law are answered against assessee. No costs. 19. After we dictated judgment, Mr.N.V.Balaji, learned counsel for assessee submits that directions issued by Tribunal in impugned order may be directed to be implemented by DRP within time frame. 20. Considering fact that this is second round of litigation and fact that assessment is of year 2008-09, we direct DRP to give early hearing to assessee in terms of directions issued by Tribunal and conclude proceedings preferably within period of three months from date of receipt of copy of this judgment. 06.8.2019 9/10 http://www.judis.nic.in TCA.No.547 of 2019 T.S.SIVAGNANAM,J AND V.BHAVANI SUBBAROYAN,J RS Internet: Yes To 1.The Income Tax Appellate Tribunal, Chennai 'D' Bench. 2.The Commissioner of Income Tax, Corporate Circle 3, Chennai-34. TCA.No.547 of 2019 06.8.2019 10/10 L & T Thales Technology Services Private Limited (formerly known as Thales Software India Private Ltd.) v. Commissioner of Income-tax, Corporate Circle-3, Chennai