Section 144C inserted in the statute by the Finance (No. 2) Act, 2009 with retrospective effect from 1st April, 2009 is prospective in nature and would not apply to A.Y. 2009-10 or earlier assessment years

4. Truetzschler India Pvt. Ltd. vs. DCIT (Mumbai) Members: Vikas Awasthy (J.M.) and Manoj Kumar Aggarwal (A.M.) ITA No. 1949/Mum/2015 A.Y.: 2009-10 Date of order: 30^th September, 2020 Counsel for Assessee / Revenue: Nitesh Joshi / A. Mohan

Section 144C inserted in the statute by the Finance (No. 2) Act, 2009 with retrospective effect from 1st April, 2009 is prospective in nature and would not apply to A.Y. 2009-10 or earlier assessment years

FACTS

In the present appeal preferred against the order of the CIT(A), the assessee raised an additional ground challenging the validity of the assessment order dated 13^th May, 2013 passed u/s 143(3) r/w/s 144C(13). In the additional ground, the assessee contended that the assessment order ought to be quashed as it has been passed after the expiry of the time limit prescribed u/s 153.

The Tribunal noted that the Transfer Pricing Officer (TPO) passed the order u/s 92CA(3) on 9^th January, 2013. The A.O. passed the draft assessment order on 27^th March, 2013. Thereafter, the A.O. was required to pass the final assessment order within the limitation period provided u/s 153(1), i.e., by 31^st March, 2013, whereas, actually the final assessment order was passed on 13^th May, 2013, i.e., after the expiry of the limitation period.

On behalf of the assessee, and relying on the decision of the Madras High Court in the case of Vedanta Limited vs. ACIT in Writ Petition No. 1729 of 2011 decided on 22^nd October, 2019, it was contended that the time limit for passing the assessment order in the impugned assessment year does not get extended by application of section 144C mandating reference to the dispute resolution panel as the provisions of the said section do not apply to the impugned assessment year. On the other hand, the Departmental Representative placed reliance on CBDT Circular No. 5 of 2010 dated 3^rd June, 2010 to counter the argument made on behalf of the assessee.

HELD

The additional ground being purely legal in nature and requiring no fresh evidence was admitted by the Tribunal.

The Tribunal noted that the Madras High Court has held that where there is a change in the form of assessment itself, such change is not a mere deviation in procedure but a substantive shift in the manner of framing an assessment. A substantive right has enured to the parties by virtue of the introduction of section 144C. Bearing in mind the settled position that the law applicable on the first day of the assessment year be reckoned as the applicable law for assessment for that year, leads one to the inescapable conclusion that the provisions of section 144C can be held to be applicable only prospectively, that is, from A.Y. 2011-12. The High Court also made it clear that the Circular issued in 2013 to bring the assessment year 2009-10 in the fold of the newly-inserted provisions of section 144C would have no application.

The Tribunal held that

i)    the provisions of section 144C would not apply in the impugned assessment year, and hence the time period for passing the assessment order would not get enlarged;

ii)   the A.O. was under obligation to pass the assessment order within the time specified under the third proviso to section 153(1), i.e., on or before 31^st March, 2013;

iii)  since the order has been passed beyond the period of limitation, the same is null and void. The assessee succeeds on the legal ground raised as additional ground of appeal;

iv)  the assessment order is quashed and the appeal of the assessee is allowed.