Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

so that every word has a place and everything is in its place. It is by looking at the definition as a whole in the setting of the entire Act and by reference to what preceded the enactment and the reasons for it that the court construed the expression ‘prize chit’ in Srinivasa [Srinivasa Enterprises v. Union of India, (1980) 4 SCC 507] and we find no reason to depart from the court’s construction.” (underlining by me)

The above approach is useful while interpreting a non-obstante clause in a statute. 10.9 This Court has in a number of cases relied on the following words of Rowlatt, J. in Cape Brandy Syndicate vs. Inland Revenue Commissioner [(1921) 1 KB 64] : “In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One can only look fairly at the language used.” 10.10 In Central India Spg., Wvg. & Mfg. Co. Ltd. vs. Municipal Committee, 1957 SCC OnLine SC 18, it was observed that in construing the words of the statute if there are two possible interpretations then effect is to be given to the one that favours the citizen and not the one that imposes a burden on him. In CIT vs. Shahzada Nand & Sons, (1966) 60 ITR 392, this Court reiterated the applicability of the aforesaid principle in context of fiscal statute. In CIT vs. Jargaon Electric Supply Co. Ltd., (1960) 40 ITR 184, this Court speaking through Hidayatullah, J. repelled the contention of the Revenue that it would be unjust to allow escapement of tax in the facts therein by observing that there is no question of unjustness involved if the income tax law is deficient due to the legislature failure’s to express itself clearly. Bearing in mind the above principles of interpretation of statutes, I shall proceed to analyse the relevant provisions of the Act having a bearing on the controversy.

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Analysis of the Provisions:

11. Section 143 of the Act deals with assessment, while Section 144 thereof speaks of Best Judgment Assessment. Section 143 of the Act speaks of an assessment made when a return has been filed under Section 139 or in response to a notice under sub-section (1) of Section 142 and the return is processed leading to an assessment order being passed by the Assessing Officer. However when any person fails to make the return required under sub-section (1) of Section 139 and has not made a return or a revised return of that section or fails to comply with all the terms of a notice issued under Section 142 or having made a return fails to comply with all the terms of a notice issued under sub-section (2) of Section 143, then the Assessing Officer, after taking into account all relevant material which the Assessing Officer has gathered, shall, after giving the assessee an opportunity of being heard, make an assessment of the total income or loss to the best of his judgment and determine the sum payable by the assessee on the basis of such assessment. It is not necessary to go into the other aspects of Section 143 or Section 144 of the Act. 11.1 The other relevant provisions which could be referred to are Section 144A which deals with power of Joint Commissioner to issue directions in certain cases; Section 144B which speaks of faceless assessment and Section 144C discusses a reference to a DRP with which we are concerned in the present cases. 11.2 The time limit for completion of an assessment, re-assessment and re-computation is delineated in Section 153 of the Act. The said Section has been substituted by the Finance Act, 2016 w.e.f. 01.06.2016. Sub-section (1) of Section 153 refers to an assessment being made under Section 143 or Section 144, while sub-section (1A) has a non-obstante clause to sub-section (1) of Section 153, so also sub-section (1B) has a non-obstante clause with reference to sub-section (1) of Section 153. Sub-section (2) of Section 153 deals with an assessment, re-assessment or re-computation made under Section 147 wherein the limitation period has been prescribed. This is in the case of income escaping assessment which is dealt with under Section 147 of the Act.

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

11.3 Sub-section (1) to Section 153 prescribes the limitation period for making of an order of assessment under Section 143 or Section 144 which is twenty-one months. However, various provisos to the said sub-section prescribe reduced limitation periods having regard to the commencement of the respective assessment years. In certain cases, the period of limitation is reduced from twenty-one months to eighteen months while in other cases to twelve months and as also nine months. Having regard to the facts of the present two cases, the period of limitation under first proviso to sub-section (1) of Section 153 is 18 months as the applicable assessment year is 2018-2019. Sub-section (3) of Section 153 is relevant for the purposes of this case. It states that notwithstanding anything contained in sub-sections (1), (1A), and 2, an order of fresh assessment or fresh order under Section 92CA, as the case may be, in pursuance of an order under Section 250 or Section 254 (relevant to the present cases) or Section 263 or Section 264, setting aside or cancelling an assessment or an order under Section 92CA, as the case may be, shall be made at any time before the expiry of nine months from the end of the financial year in which the order under Section 250 or Section 254 is received by the Principal Chief Commissioner or Chief Commissioner, or Principal Commissioner or Commissioner, as the case may be, or, as the case may be, the order under Section 263 or Section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be. 11.4 However, the proviso to sub-section (3) of Section 153 states that where the order under Section 250 or 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under Section 263 or Section 264 is passed by the Principal Commissioner or Commissioner on or after the 1st day of April, 2019, the provisions of this sub-section should have been, as if for the words “nine months”, the words “twelve months” have been substituted.

p. 1672

11.5 Sub-section (3A) of Section 153 also begins with a non- obstante clause with reference to sub-sections (1), (1A), (2) and (3). Sub-section (4) states that notwithstanding anything contained in sub-sections (1), (1A), (2), (3) and (3A), where a reference under sub-section (1) of Section 92C A is made during the course of the proceedings for the assessment or re- assessment, the period available for completion of assessment or re-assessment, as the case may be, under the said sub- sections (1), (1A), (2), (3) and (3A) shall be extended by twelve months. This sub-section was added by an amendment with effect from 01.04.2023. However, the same is not applicable to the facts of the case. Section 92CA deals with a reference to the Transfer Pricing Officer. Sub-section (3A) of Section 92CA, inter alia, refers to Section 153 of the Act, which deals with the period of limitation for the purpose of Section 92CA. 11.6 Explanation (1) to Section 153 deals with certain situations in reference to which certain periods shall be excluded while computing the period of limitation prescribed under the said Section. For instance, under clause (2) to Explanation (1), the period during which the assessment proceeding is stayed by an order of injunction of any court has to be excluded while calculating the period of limitation under Section 153. 11.7 For the purposes of this case, Section 254 and sub-section (3) of Section 153 including the proviso thereto are relevant. This is because where an assessment order has been set aside and the matter has been remanded under Section 254 by the Tribunal (as in the present case), then, in terms of the proviso to sub-section (3) of Section 153, a fresh assessment order shall have to be made at any time before the expiry of twelve months from the end of the financial year in which the order under Section 254 is received by the Principal Chief Commissioner or Chief Commissioner etc. as the case may be. 11.8 Thus, on a reading of the proviso to sub-section (3) of Section 153, along with the main provision, it becomes clear that the period of twelve months has to be calculated from the end of the financial year in which the order is received by the Principal Chief Commissioner or Chief Commissioner etc., as the case may be. Therefore, what is of significance is the

p. 1673

Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

date of the commencement of the limitation period of twelve months which commences from the end of the financial year in which the order passed under Section 254 by the Tribunal, setting aside or cancelling an assessment is received by the Principal Chief Commissioner or Chief Commissioner etc. For example, if the order is passed by the Tribunal on 01.02.2021 and it is received by the concerned commissioner on 01.03.2021, then the limitation period of twelve months would be from the end of the financial year in which the order under Section 254 was received, i.e., twelve months from 31.03.2021, which would be 31.03.2022, within which the fresh assessment order would have to be made. This would effectively mean thirteen months in total from the date of receipt of the order. 11.9 However, in a case where Section 144C applies, i.e., where a reference to the DRP applies, then in such a case the time frame has been given for the conclusion of the proceedings initiated under the said provision which is totally only eleven months from the date of passing the draft order. The procedure contemplated under Section 144C applies to only two categories of assesses, who are called as eligible assessees under clause (b) of sub-section 15 to Section 144C. The first category of eligible assessee is any person in whose case the variation referred to in sub-section (1) of Section 144C arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of Section 92CA and the second category is in the case of any non-resident not being a company or any foreign company. The proviso thereto states that such eligible assessee shall not include persons referred to in sub-section (1) of Section 158BA or other persons referred to in Section 158BD. Therefore, in the case of only the aforesaid two categories of eligible assesses, the procedure contemplated under Section 144C applies. 11.10 When Section 92CA applies to any eligible assessee, then sub-section (4) of Section 153 states that the period available for completion of an assessment or re-assessment, as the case may be, under sub-sections (1), (1A), (2), (3) and (3A) of Section 153 shall be extended by twelve months. This sub-section is applicable with effect from 01.04.2023 and not

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for the period prior thereto. Further, in the case of any other eligible assessee, who is a non-resident, there is no such extension of the period of limitation. 11.11 The question then is, how the limitation period prescribed under Section 153(3) of the Act can be reconciled with the procedure as well as the period contemplated under Section 144C of the Act in a case where Section 254 of the Act applies.

Scheme of Section 144C:

12. Before answering the above question, it is necessary to dilate on the scheme of Section 144C of the Act. Sub-section (1) of Section 144C contains a non-obstante clause. It states that the Assessing Officer shall, notwithstanding anything to the contrary contained in the Act, in the first instance, forward a draft of the proposed order of assessment (draft order) to the eligible assessee, if he proposes to make, on or after 01.10.2009 any variation which is prejudicial to the interest of such assessee. It must be noted that this non-obstante clause is notwithstanding anything to the contrary contained in the Act and not with reference to only Section 153 which deals with only the limitation period for making an assessment or re-assessment. As already extracted above, sub-section (1) of Section 144C prescribes that the Assessing Officer shall forward a “draft” of the proposed “order of assessment”. The careful drafting by the legislature must be given heed to. The provision for forwarding of a draft of the proposed order of assessment speaks plainly that this sub-section is only concerned with a “draft order” and cannot be a final order of assessment. Therefore, any provisions that would relate to an order of assessment have no bearing on any interpretation to be given to such a draft order. 12.1 On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order—(a) file his acceptance of the variation to the Assessing Officer; or (b) file his objections, if any, to such variation with—(i) the DRP and (ii) the Assessing Officer, [vide Section 144C(2)]. Therefore, the eligible assessee has thirty days’ time from the date of receipt of the draft order to either file his acceptance or his objections. If no objections are received within the aforesaid period of thirty days or the assessee intimates to

p. 1675

Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

the Assessing Officer the acceptance of the variation, then in terms of sub-section (3) of Section 144C, the Assessing Officer shall complete the assessment on the basis of the draft order within the prescribed period of limitation as per sub-section (4) of Section 144C. 12.2 Sub-section (4) is significant inasmuch as it contemplates a limitation period within which the Assessing Officer has to pass an assessment order in terms of sub-section (3) of Section 144C. This sub-section again contains a non-obstante clause. This non-obstante clause is however notwithstanding anything contained in Section 153 or Section 153B. The Assessing Officer shall, notwithstanding the aforesaid provisions, pass the assessment order under sub-section (3) within one month from the end of the month in which—(a) the acceptance is received, or (b) the period of filing objections under sub- section (2) expires. Thus, the stipulation of period of one month in sub-section (4) is for the Assessing Officer to complete the assessment order having regard to either clauses (a) or (b) of sub-section (2) of Section 144C, as the case may be, although under the proviso to sub-section (3) of Section 153 the period of limitation prescribed to make a fresh assessment order is twelve months. 12.3 What would be the next step when objections are received under sub-section (2) of Section 144C? In a case where objections are received under sub-section (2), the DRP shall issue directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. The directions to be issued by the DRP under sub-section (5) of Section 144C shall be having regard to certain material which are enumerated in sub-section (6) of Section 144C. The procedure to be followed by the DRP is contemplated under sub-section (7) of Section 144C and the nature of the order to be passed by the DRP is as per sub-section (8) of Section 144C. The Explanation to sub-section (8) of Section 144C is for the purpose of removal of doubts. 12.4 The following paragraph from the Manual of Office Procedure, 2019 of the Income Tax Department throws useful light on the nature of a draft order forwarded by the Assessing Officer to

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the Assessee under Section 144C(1) and the proceedings before the DRP inasmuch as it clarifies that the DRP: “5.7 It needs to be emphasized that the proceeding before the DRP is not an appeal proceeding but a correcting mechanism through which the proposed assessment order is reviewed by a Panel of higher Income-tax Authorities. It is a continuation of the Assessment proceedings till such time a final order of assessment which is appealable is passed by the Assessing Officer. This also finds support from Section 144C(6) which enables the DRP to collect evidence or cause any enquiry to be made before giving directions to the Assessing Officer under Section 144C(5). The DRP procedure can only be initiated by an assessee objecting to the draft assessment order. This would enable correction in the proposed order (draft assessment order) before a final assessment order is passed.” 12.5 Sub-section (10) of Section 144C states that every direction issued by the DRP shall be binding on the Assessing Officer. Sub-section (11) of Section 144C contemplates that an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the Revenue before passing any such direction. 12.6 Sub-section (12) of Section 144C is significant inasmuch as it states that no direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. Therefore the DRP is rendered functus officio on completion of the period of nine months as stipulated. Thus, this period of limitation is to be strictly complied with by the DRP. 12.7 As already noted, a draft order is forwarded to the eligible assessee under sub-section (1) of Section 144C and thirty days’ time is granted to pass a final order, if no objections are received or if there is an acceptance of the variation of the draft order by the assessee in a month’s time. Thus, in the above circumstances the period of limitation is thirty days from

p. 1677

Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

date of forwarding the draft orders to an eligible assessee. This is as opposed to sub-section (3) of Section 153 and the proviso thereto where the period of limitation is twelve months to make a final order. Hence, the non-obstante clause under sub-section (4) of Section 144C of the Act. However, if there are objections, which have to be made within thirty days from the date of receipt of the draft order, then within nine months from the end of the month in which the draft order is forwarded to the eligible assessee, the DRP has to issue directions. If directions are issued by the DRP to the Assessing Officer within a period of nine months, on receipt of the said directions issued under sub-section (5) of Section 144C, the Assessing Officer shall in conformity with the said directions, complete the 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. However, there is again a non-obstante clause in sub-section (13) of Section 144C i.e., the completion of the assessment order shall be notwithstanding anything contrary contained in Section 153 or Section 153B. 12.8 What emerges on a conjoint reading of the aforesaid provisions is that the Assessing Officer has only thirty days’ time to pass a final assessment order, irrespective of whether the draft assessment order is accepted or in the face of objections raised by the eligible assessee, the DRP issues directions to the Assessing Officer. The submission of learned senior counsel for the respondents is that in the instant case, the Assessing Officer passed the assessment order within a period of twenty days from the date of receipt of the directions from the DRP but nevertheless breached the limitation period prescribed under sub-section (3) of Section 153 of the Act and hence, the High Court granted relief to the assessee. 12.9 Thus, it is noted that there are three non-obstante clauses in Section 144C. Sub-section (1) is notwithstanding anything to the contrary contained in the Act, while sub-section (4) and (13) are notwithstanding anything contained in Section 153 or 153B of the Act. The object and purpose of having the non-obstante clause in the aforesaid manner has to be ascertained inasmuch as the interpretation to sub-section (3)

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of Section 153 in light of Section 144C has to be made in the present cases in order to answer the rival contentions advanced at the Bar. 12.10 As already noted, Section 144C applies to an eligible assessee. The respondents in these cases are eligible assessees and there is no dispute about the said fact. When an order is passed under Section 254 by the Tribunal setting aside or cancelling an assessment, then a re-assessment has to be made within twelve months as stipulated in the proviso to sub-section (3) of Section 153 which delineates the time frame for completion of assessment or a re-assessment etc. As already noted, the period of twelve months commences from the end of the financial year in which the order under Section 254 is received by the Principal Chief Commissioner or Chief Commissioner etc. On receipt of such an order from the Tribunal, when a re-assessment has to be made and Section 144C is applicable, then a fresh draft assessment order has to be forwarded to the assessee as per sub-section (1) of Section 144C of the Act. 12.11 There is no time limit stipulated under sub-section (1) of Section 144C for forwarding a draft order to the eligible assessee after receipt of the order from the Tribunal under Section 254 of the Act. The question that would arise is, whether, the Assessing Officer can forward the draft order at any point of time or take his own sweet time to do so, since sub-section (1) of Section 144C contains a non-obstante clause which is notwithstanding anything contained under the Act or, on the contrary, the Assessing Officer is bound to follow a timeline for forwarding a draft order to the eligible assessee. 12.12 No doubt, sub-section (3) of Section 153 which prescribes the limitation period does not make any distinction between an eligible assessee and any other assessee. The limitation period of twelve months prescribed under Section 254 applies to all categories of assessees without any distinction being made between any particular category of assessee as per the proviso thereto. Then, within what time the Assessing Officer has to forward a draft order to the eligible assessee while acting under sub-section (1) of Section 144C pursuant to an

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

order under Section 254 of the Act. Although sub-section (1) of Section 144C states “notwithstanding anything to the contrary contained in this Act” does the said expression refer to Section 153 which prescribes the limitation period for completion of assessment or re-assessment or, whether the non-obstante clause has been used in sub-section (1) of Section 144C in order to emphasize on a distinct and different procedure contemplated under the Act in the case of only eligible assessees as opposed to other categories of assessees. In my view, the non-obstante clause in sub-section (1) of Section 144C implies that it overrides all sections of the Act contrary to the procedure contemplated under Section 144C of the Act inasmuch as it contemplates a special procedure insofar as eligible assessees are concerned. This means that insofar as the eligible assessees are concerned, their assessment is subject to a distinct procedure under Section 144C, wherein a draft assessment order has to be made in the first instance. This is opposed to the case of other assessees, wherein such a procedure of making a draft order is not envisaged and only a final assessment order is passed by the Assessing Officer. Therefore, the requirement of a non-obstante clause vis-à-vis eligible assessees has been met by the Parliament under Section 144C of the Act as a legislative device. This is because the procedure and process of assessment/re-assessment in the case of eligible assesses is different from that of other categories of assessees inasmuch as a draft order has to be made and communicated to an eligible assessee under sub-section (1) of Section 144C of the Act in the first instance, which is not so in the case of other category of assessees. That is the precise object for insertion of a non-obstante clause under sub-section (1) of Section 144C of the Act. 12.13 To reiterate, the non-obstante clause in sub-section (1) of Section 144C of the Act has been invoked by the Parliament in order to make a distinction between eligible assessees and other category of assessees in the matter of assessment/ re-assessment where a draft assessment order has to be made by the Assessing Officer in the first instance leading to DRP directions being issued to the Assessing Officer in case

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there is a reference to the DRP, which is not so in the case of other assessees. The discussion in this regard has been made above and hence would not call for a repetition. Thus, the non-obstante clause in sub-section (1) of Section 144C is not related to the overall limitation period prescribed under Section 153 of the Act but with the aspect of there being a distinct procedure which has been envisaged in the case of only eligible assessees. 12.14 On the other hand, if the non-obstante clause under sub- section (1) of Section 144C is to be construed only in the context of the limitation period under Section 153 inasmuch as the procedure contemplated under Section 144C would be a time frame to be considered over and above what is contemplated under Section 153(3), it would lead to an absurd result. That is why, the non-obstante clause in sub-section (1) of Section 144C cannot be held to be with reference to Section 153(3) at all. This is because a non-obstante clause is with regard to anything contrary contained in the Act vis-à-vis sub- section (1) of Section 144C and Section 153 is not contrary to Section 144C. The scope and ambit of the two provisions are distinct inasmuch as Section 153 deals with limitation period with respect to completion of assessments and re- assessments while Section 144C deals with a procedure to be complied with for making an assessment order only in the case of eligible assessees. There is no contradiction between Section 144C and Section 153 of the Act. Therefore, sub- section (1) of Section 144C has to be read as prescribing a unique procedure insofar as eligible assessees are concerned inasmuch as notwithstanding anything contrary contained in the Act vis-à-vis various categories of assessees, Section 144C is applicable only in the case of eligible assessees and not to any other category of assessee. 12.15 This intention of the Parliament to make a distinction between eligible assessees and other category of assessees under Section 144C(1) has to be borne in mind. This aspect would become clearer when the two other non-obstante clauses in sub-section (4) and sub-section (13) of Section 144C are compared with sub-section (1) thereof. In the aforesaid two sub-sections, the non-obstante clause is with specific reference

p. 1681

Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

to Section 153 or Section 153B only and in relation to any other Section of the Act. This is because under sub-section (4) of Section 144C, the period within which the assessment order is to be made is stipulated i.e. within thirty days from the date of receipt of the draft order by the assessees in terms of sub- section (1) of Section 144C when there is an acceptance of the draft order made by the Assessing Officer or no objections are filed. This is notwithstanding anything contained in Section 153 or Section 153B. This period stipulated is as opposed to twelve months being available to an Assessing Officer to make an assessment order under sub-section (3) of Section 153 of the Act. 12.16 Similarly, under sub-section (13) of Section 144C the assessment has to be completed within one month from the end of the month in which the direction is received from the DRP under sub-section (5) of Section 144C. This is notwithstanding anything contained to the contrary in Section 153 or Section 153B. 12.17 Therefore, on a comparison of the expressions of the non- obstante clause in sub-section (1) of Section 144C with sub-section (4) and sub-section (13) thereof, it is clear that the Parliament has applied the legislative device of the non-obstante clause in different ways to bring out distinct legislative intents. Therefore, sub-section (1) of Section 144C is not relatable to Section 153 i.e., the limitation period at all. It deals with a totally distinct procedure to be adopted in the case of an eligible assessees as compared to other category of assessees in terms of the procedure contemplated under the said Section by initially making a draft assessment order, whereas sub-section (4) and sub-section (13) of Section 144C directly refer to and have a bearing on Sections 153 or 153B, which deal with limitation period. This is because narrower limitation periods are prescribed to do certain things as contemplated under the said sub-sections. The object and purpose of prescribing narrower limitation periods (one month) in sub-section (4) of Section 144C and one month in sub-section (13) of Section 144C is to ensure that the proviso to sub-section (3) of Section 153 is ultimately complied with as it prescribes the overall limitation period of twelve months

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for completion of an assessment or re-assessment, inter alia, when Section 254 of the Act applies. 12.18 If Section 144C applies to an eligible assessee, then the maximum period that is contemplated for passing the final assessment order is eleven months from the date of receipt of the draft order by the eligible assesses; the shortest period would be two months, when the draft order is accepted by the eligible assessee, for passing the final order. Also, nine months is the maximum period for the DRP to issue directions to the Assessing Officer in case objections are received to a draft assessment order from an eligible assessee. 12.19 In cases where Section 144C applies, the maximum period stipulated for completion of a final assessment order under the said provision being eleven months would still be within the limitation period of twelve months prescribed under the proviso to Section 153(3) of the Act. This would mean that a draft assessment order has to be forwarded by the Assessing Officer to the eligible assessees within one month from the end of the financial year in which the order under Section 254 of the Act is received by the Principal Chief Commissioner, Chief Commissioner etc., as the case may be. Then, one month’s time is the shortest period of time to prepare the draft assessment order under Section 144C of the Act by the concerned Assessing Officer. 12.20 Therefore, there has to be a system put in place, if not already in place, under which the order of the Tribunal passed under Section 254 of the Act is communicated to the concerned Assessing Officer of a particular eligible assessee. As soon as the papers are received by the Principal Chief Commissioner or Chief Commissioner etc., pursuant to an order passed under Section 254 of the Act, the same has to be forwarded and ultimately the final assessment order has to be made within twelve months from the end of the financial year in which the order under Section 254 was received by the Principal Chief Commissioner or Chief Commissioner etc., as the case may be. In which event, this would imply that a copy of the same would also have to be simultaneously sent to the Assessing Officer concerned and the minimum period that the Assessing

p. 1683

Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

Officer would have for making the draft order would be thirty days, depending on when the order is received by the Principal Chief Commissioner or Chief Commissioner, etc., as the case may be. 12.21 In this context, it is relevant to note the non-obstante clause in sub-section (4) of Section 153 of the Act which applies when a reference under sub-section (1) of Section 92CA is made during the course of the proceeding for the assessment or re-assessment, then the period available for completion of assessment or re-assessment, as the case may be, under sub- section (3) of Section 153 shall be extended by twelve months. This provision applies with effect from 01.04.2023. However, such a provision is wholly conspicuous by its absence in the case of an eligible assessee who falls under the category of any non-resident not being a company, or a foreign company. Therefore, what follows is that in the case of any non-resident not being a company, or a foreign company, there is no extension of the period of limitation beyond twelve months as stipulated under the proviso to sub-section (3) of Section 153. 12.22 To reiterate, whether or not the Assessing Officer has adequate or negligible time to deliver on the statutory obligations under Section 144C, or otherwise, cannot have a bearing on our interpretation of the Act. It is a well settled principle that the legislature is assumed to have the wisdom and knowledge behind promulgating any provision. As it is concluded that the procedure under Section 144C is subsumed within the time limits prescribed under Section 153, it is not for this Court to sit on whether the applicable period of time is adequate or not. A statute cannot be held to be unworkable, or an interpretation said to give rise to absurdity, only because of some asymmetry in time available to the Assessing Officer for passing a draft order in case of an eligible assessee under Section 144C as compared to final assessment order in case of an ordinary assessee. 12.23 In the same context, where the statute gives a beneficial option to an assessee, the exercise of such an option cannot be a ground to justify leaving the assessee worse off. Merely because an eligible assessee chooses to exercise their

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option to file objections before the DRP, that is no ground for extension of the limitation period. At the cost of repetition, to consider any of the aforementioned factors would tantamount to inserting practicable considerations and questions of equity in interpreting fiscal statutes. 12.24 Furthermore, it was contended on behalf of the Revenue that accepting the arguments of the respondent-assessee would defeat the working of the Act as the non-obstante clause in Section 144C(1) would then be limited to the procedure of passing a draft assessment order instead of final assessment order under Section 143(3) without subsuming the associated timelines under Section 153. There is no difficulty in rejecting this submission because Section 144C(1) is not concerned with the passing of a final assessment order in the first place. That the draft order passed under Section 144C(1) not be bound by Section 153 is no hindrance to giving effect to the working of the Act, and in particular Section 144C. I do not see any difficulty in a scenario where Assessing Officers assessing a small set of eligible assessees would have to work backwards and accommodate for the entire timelines prescribed under Section 144C. Arguendo, that the Parliament could not have conceived such a procedure to be followed by Assessing Officers, it is not for a court to import provisions in the statute to supply any assumed deficiency, especially when the statute is otherwise workable. In the present case, the Act is certainly workable if the proceedings under Section 144C are subsumed within the limitation prescribed under Section 153(1) or (3), or as the case may be. 12.25 It was also argued that if the scheme of Section 144C is interpreted such that the Assessing Officer has to work backwards, then the failure of an Assessing Officer to stick by the timeline would lead to absurdity and render the Act unworkable. In my view, the failure of an Assessing Officer to abide by the statutory timelines cannot be the basis for assuming any absurdity in the statute. A provision in a taxing statute which is ostensibly beneficial to the assessee must be interpreted as it is and not by hypothetical scenarios.

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

Relevant Case Law:

13. The judgments cited at the Bar on the provisions under consideration could be discussed at this stage. 13.1 The judgment of the Madras High Court in Roca Bathroom Products has been a subject matter of discussion and has been referred to extensively during the course of hearing. That was also a case which assailed a notice related to the assessment year 2010-11 as being bereft of jurisdiction and barred by limitation, by way of a writ petition filed before the High Court. Another writ petition was filed by the assessee therein seeking a writ of prohibition restraining the respondent therein from continuing with proceedings for assessment for the very same assessment year. The third and fourth writ petitions were filed seeking quashing of the communication dated 06.01.2020 with respect to the assessment year 2009- 10 and a direction for refund of the tax paid by the petitioner therein along with interest in accordance with Section 244A of the Act. In the fourth writ petition, a writ of prohibition was also sought to restrain the respondents therein from continuing or proceeding further in relation to the assessment year 2009-10. 13.2 It would be useful to refer to the facts of the said case. The petitioner therein filed return of income that was selected for scrutiny and referred to the Transfer Pricing Officer (TPO) and a transfer pricing order was passed on 23.01.2013 and a draft order was passed on 30.03.2013 making various adjustments to the income returned as well as incorporating the adjustments proposed in the transfer pricing order. The petitioner therein filed objections to the draft assessment which was confirmed in terms of Section 144C of the Act. Thereafter, a final assessment order was passed on 16.01.2014. Being aggrieved by this, the petitioner therein filed an appeal. The Appellate Tribunal vide its order dated 18.12.2015 remanded the matter to respondent No.1 therein for fresh examination. The contention of the petitioner therein was that as per the provisions of Section 153(2A) [unamended] / 153(3) [post amendment], an order of fresh assessment in pursuance of an order under Section 254 setting aside or cancelling the

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assessment had to be made at any time before the expiry of one year/nine months respectively from the end of the financial year in which the order was issued under Section 254 was received by the Principal Chief Commissioner/Commissioner. That the notice was issued pursuant to the remand dated 06.01.2020 which was barred by limitation inasmuch as for the assessment order year 2009-10, the limitation period under Section 153(2A) had expired on 31.03.2017 and for the assessment year 2010-11 the period had expired on 31.12.2017. 13.3 While discussing the procedure contemplated under Section 144C of the Act, the Madras High Court held that sub- section (13) of Section 144C imposes a restriction on the Assessing Officer and denies him the benefit of the more extensive time limit available under Section 153 to pass the final order of assessment as he has to do so within one month from the end of the month when the directions of the DRP are received by him and there is also no requirement for hearing the assessee at that stage. That Section 144C(13) contains a non-obstante clause which is to emphasize the urgency contemplated as compared to Section 153. 13.4 Reliance was placed on the judgment of the Bombay High Court in the case of Pr. CIT vs. Lionbridge Technologies Pvt. Ltd. (2019) 260 Taxman 273 (Bom.), wherein it was held that the final assessment could be made only if the draft assessment had been forwarded by the Assessing Officer to the assessee within the time limit prescribed under Section 153(2A) of the Act. Nokia India P. Ltd. vs. DCIT, (2018) 407 ITR 20 (Delhi) (HC) (“Nokia India P. Ltd.”)was also referred to wherein it was observed that where the matter has been remanded to be redone, it would hardly make a difference as to, whether, the remand has been to the Transfer Pricing Officer or the DRP, thus indicating that the provisions of Section 144C were also covered by the limitation of time set out in Section 153(3) of the Act. Although Civil Appeal was admitted before this Court against the judgment of the Delhi High Court in Nokia India P. Ltd., there had been no stay of the said judgment and the Civil Appeal was finally disposed of due to low tax effect.

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

13.5 The Madras High Court ultimately held in Roca Bathroom Products that since the impugned notice issued by the DRP was after a period of four years from the date of the order of the Tribunal, it was barred by limitation under Section 153(2A) of the Act. Consequently, the writ petitions were allowed. The Revenue filed writ appeals before the Division Bench of the Madras High Court against the aforesaid order. The Division Bench of the Madras High Court speaking through Mahadevan, J. while holding that the facts of the case were not in dispute, by a detailed Judgment dismissed the appeals filed by the Revenue. It would be useful to extract paragraph 27 of the said judgment. “27. For the reasons set out herein before, we conclude as under : (a) The provisions of sections 144C and 153 are not mutually exclusive, but are rather mutually inclusive. The period of limitation prescribed under section 153(2A) or 153(3) is applicable, when the matters are remanded back irrespective of whether it is to the Assessing Officer or Transfer Pricing Officer or the Dispute Resolution Panel, the duty is on the Assessing Officer to pass orders. (b) Even in the case of remand, the Transfer Pricing Officer or the Dispute Resolution Panel have to follow the time limits as provided under the Act. The entire proceedings including the hearing and directions have to be issued by the Dispute Resolution Panel within nine months as contemplated under section 144C(12) of the Income-tax Act. (c) Irrespective of whether the Dispute Resolution Panel concludes the proceedings and issues directions or not, within nine months, the Assessing Officer is to pass orders within the stipulated time. xxx

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(f) The non obstante clause would not exclude the operation of section 153 as a whole. It only implies that irrespective of availability of larger time to conclude the proceedings, final orders are to be passed within one month in line with the scheme of the Act. (g) When no period of limitation is prescribed, orders are to be passed within a reasonable time, which in any case cannot be beyond three years. However, when the statute prescribes a particular period within which orders are to be passed, then such period, irrespective of whether it is short or long, shall be applicable.”

Meaning of Assessment Order:

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

is the assessment. Liability does not depend on assessment. That, ex hypothesi, has been already fixed. But assessment particularises the exact sum which a person liable has to pay. Lastly comes the methods of recovery if the person taxed does not voluntarily pay.” 14.2 In Kalyankumar Ray, this Court speaking through Ranganathan, J. observed as under: “‘Assessment’ is one integrated process involving not only the assessment of the total income but also the determination of the tax. The latter is as crucial for the assessee as the former. Section 144, which also describes the same process, makes no distinction as suggested. It will not be therefore correct to read the provision as leaving undefined the process of determination of the net sum payable by the assessee. In our opinion, therefore, learned counsel for the petitioner is right in his submission that the ITO has to determine, by an order in writing, not only the total income but also the net sum which will be payable by the assessee for the assessment year in question and that the demand notice under Section 156 has to be issued in consequence of such an order.” 14.3 Thus, the expression “the assessing officer shall, in conformity with the directions, complete notwithstanding anything to the contrary contained in Section 153 or 153(B), the assessment… within one month from the end of the month in which such direction is received” in sub-section (13) of section 144C has to be harmoniously read with sub-section (3) of Section 153 wherein it is stated that “an order of fresh assessment” has to be made within twelve months from the end of the financial year in which the order under Section 254 is received by the Principal Chief Commissioner or Chief Commissioner etc,… as the case may be. When the aforesaid provisions are harmoniously read, it would inevitably mean that the procedure contemplated under Section 144C applicable to an eligible assessee has to be concluded within a period of

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twelve months as stipulated in proviso to sub-section (3) of Section 153 as interpreted by me above.

15. Having considered the language of Sections 144C and 153, the High Court refused to accept that the provisions of Section 153 are excluded to the operation of Section 144C. Even when the Assessing Officer has to follow the procedure prescribed under Section 144C of the Act, the same has to be commenced and concluded in terms of sub-section (3) of Section 153 of the Act. The said provision is applicable to an eligible assessee inasmuch as when the procedure under Section 144(C)(1) has to be followed. Consequently, the rest of the provisions of Section 144C would become applicable. This is only when the Assessing Officer intends to make any variation which is prejudicial to the interest of the eligible assessee. Then a draft order has to be made in the first instance. In my view, even in such a case, the assessment has to be concluded within twelve months as stipulated in Section 153(3) of the Act where there has been remand by the Tribunal to the Assessing Officer under Section 254 of the Act. Therefore, within the period of twelve months prescribed under Section 153(3), the Assessing Officer has to ensure that the entire procedure under Section 144C is completed (as and when it is applicable) and pass a final assessment o rder. 15.1 The Assessing Officer has to be prompt, attentive and conscious of passing an order envisaged under Section 144C(1) of the Act and not be reminded about doing so. Therefore, even when Section 144C applies to a case, the twelve month period stipulated under Section 153(3) has to be applied. Thus, the procedure under Section 144C has to be concluded within the time frame envisaged under Section 153(3) or Section 153(1) as the case may be. If the above interpretation is made, then, there would be a harmonious interpretation of Sections 144C and 153. Therefore, the non-obstante clauses in sub-sections of Section 144C have been accordingly interpreted. 15.2 The object is to conclude the proceedings and make an assessment as expeditiously as possible. If orders are not made within the time stipulated under Section 153(3), then there would be no final assessment order and the return of income as filed by the assessee would have to be accepted.

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

Summary of Conclusions: 15.3 The summary of the aforesaid discussion can be made as under: (i) Section 143 of the Act states that when a return has been filed under Section 139 or in response to a notice of sub- section (1) of Section 142, and the same is processed, it would lead to an assessment order being passed by the Assessing Officer. Section 144 deals with ‘best judgment assessment’. Sections 143 speaks of final assessment order being made in the case of all category of assessees except eligible assessees. (ii) On the other hand, Section 144C discusses a reference to a DRP in case when a draft order is made by an Assessing Officer which is not accepted by an eligible assessee. Thus, in so far as only an eligible assessee, as defined under sub-section 15 of Section 144C of the Act is concerned, notwithstanding anything to the contrary contained in the Act, if the Assessing Officer proposes to make, on or after 01.10.2009 any variation in the return which is prejudicial to the interest of such an assessee only a draft order has to be made and not a final assessment order. Therefore, the non-obstante clause in sub-section (1) of Section 144C has to be juxtaposed with reference to Section 143 of the Act and all other Sections which deal with making of an assessment order. This is because both Section 143 of the Act as well as Section 144C of the Act deal with the passing of assessment orders depending on the category to which the assessee belongs, as already stated: if the assessee is an eligible assessee, sub-section (1) of Section 144C would apply, if a variation is to be made, and in all other cases sub-section (3) of Section 143 of the Act would apply. (iii) On the other hand, the non-obstante clauses in sub- sections (4) and (13) of Section 144C are only with reference to Section 153 of the Act. The time lines provided under the aforesaid sub-sections 144C and the time line provided under Section 153 of the Act deal

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with respective limitation periods and therefore, the Parliament has used the expression “notwithstanding anything contained in Section 153”. Sub-sections (4) and (13) of Section 144C when juxtaposed with Section 153 of the Act make it evident that they both deal with only the period of limitation in making an assessment order and not the manner of passing an assessment order. (iv) An assessment order or an order of assessment encompasses the entire process of assessment commencing from the stage of filing of a return till the making of an assessment of the total income and also the determination of the taxes which is contemplated under Section 153 of the Act in so far as the limitation period for the said procedure is concerned. That is not exactly the exercise that is carried out under sub-section (1) of Section 144C as the said assessment order is not a final assessment order but only a draft assessment order. This is unlike assessment orders made under sub-section (3) of Section 143 or sub-section (13) of Section 144C of the Act which are final assessment orders. (v) Therefore, the expressions “assessment” used in Section 143 of the Act and “make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment”, and the expression “the assessment” in sub-section (13) of Section 144C as well as the expression “assessment order” in sub-section (4) of Section 144C have to be given an identical meaning under Section 153 of the Act, i.e., final assessment order although, the assessment orders are made in a distinct manner and under a different procedure as they apply to different categories of assessees as noted above. In view of my aforesaid interpretation of Section 144C vis-à-vis Section 153 of the Act, I arrive at the same conclusion as in W.P. 3059-3060/2021 by the Bombay High Court. In these cases, the question pertains not to fresh assessment orders passed on remand but original

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Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc.

assessment orders. On 30.11.2018, the petitioners therein filed their Return of Income declaring total loss for AY 2018-19. According to the time limit in respect of A.Y. 2018-19 under first proviso to Section 153(1) of the Act, any original order of assessment was required to be passed within the period of eighteen months from the end of the assessment year in which the income became assessable. Therefore, the period of eighteen months would have ordinarily expired on 30.09.2020. However, as already noted, due to the operation of the TOLA and the Notifications issued thereunder the due date was extended to 30.09.2021. Finally, draft assessment orders under Section 144C were passed only on 28.09.2021. As we have already held that the period under Section 144C of the Act is to be subsumed within the time prescribed under Section 153(1) of the Act, we find that the High Court was correct in taking the view that since the draft order under Section 144C was passed only on 28.09.2021, the proceedings had become time-barred as no final assessment order in compliance with the provisions of Section 144C could be passed due to the impending expiry of the limitation period on 30.09.2021. 15.4 I therefore find that the High Court was right in allowing the writ petitions filed by the respondents-assessees by holding that no final assessment orders can be passed in these cases as the same would be time barred and hence the return of income filed by the respondents-assessees have to be accepted. I reiterate the same and also state that this would not preclude the Revenue from taking any other step in accordance with law. Consequently, I do not find any merit in these appeals filed by the Revenue as the impugned order is correct. 15.5 In SLP(C) No.25798/2024, what is assailed by the Revenue is an interim order passed in WP(L) No.30944/2023. By the said order, the High Court has continued the interim order dated 28.06.2024. The main writ petition is pending before the High Court. I do not propose to interfere with the said interim order and hence, this Special Leave Petition stands dismissed.

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Order of the Court

Having regard to the divergent opinions expressed by us, we direct the Registry to place these matters before Hon’ble the Chief Justice of India for constituting an appropriate Bench to consider the issues which arise in these matters afresh.

Result of the case: M atters to be placed before Hon’ble Chief Justice of India for constituting appropriate Bench@.

@ Ed. Note: In view of divergent opinions of Hon’ble Mrs. Justice B.V. Nagarathna and Hon’ble Mr. Justice Satish Chandra Sharma, who pronounced separate judgments, the matters were directed to be placed before Hon’ble Chief Justice of India for constituting an appropriate Bench.