Adherence to statutory limitation is a matter of jurisdiction.  For Assessment Year (‘AY’) 2019-20, the question of limitation for completion of assessment gave rise to certain interpretational issues, owing to the simultaneous operation of the provisions of two Central enactments^[1] during the Covid – 19 pandemic. The peculiar question is whether reference to a transfer pricing officer (‘TPO’) under Section 92CA(1) of the Income Tax Act, 1961 (‘IT Act’), made beyond March 31, 2021, had the effect of extending limitation to complete assessment to September 30, 2022, instead of the prescribed statutory deadline, as provided for under the IT Act.

At the outset, as per Section 153(1) of the IT Act, assessment ought to be made at any time before the expiry of 12 months from the end of the AY in which income was first assessable. Owing to the use of the phrase “income was first assessable”, the beginning of the period of limitation stood set at March 31, 2020.  Further, limitation for completion of assessment was 12 months from March 31, 2020, till March 31, 2021.  However, in the meanwhile, Taxation and Other Laws (Relaxation & Amendment of Certain Provisions) Act, 2020 (‘TOLA’) was brought in force to extend the limitation for completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action, if such limitation was expiring between a period ranging from March 20, 2020 to December 31, 2020 (‘Specified Period’), till March 31, 2021 (‘End-Date’). Thereafter, the Specified Period was modified by virtue of Notification No. 93/ 2020 dated December 31, 2020, issued by the Central Board of Direct Taxes (‘CBDT’). Pursuant thereto, if limitation for completion of any proceeding or passing of any order or issuance of any notice, intimation, notification, sanction or approval or such other action expired between a period ranging from March 20, 2020 to March 30, 2021, the same got extended till March 31, 2021.  Thereafter, Notification No. 10/ 2021 dated February 27, 2021 was issued by the CBDT, which modified the Specified Period and the End-Date for completion of assessment or reassessment or action under Section 153 of the IT Act.  In view thereof, if limitation for completion of assessment or reassessment or action under Section 153 of the IT Act expired between a period ranging from March 20, 2020 to March 30, 2021, the same got extended till September 30, 2021. It is pertinent to point out that it is only limitation for passing an order of assessment or reassessment, which got extended beyond March 31, 2021 to September 30, 2021 and not all actions, including reference under Section 92CA(1) of the IT Act.

It is in this context the question arises as to whether a reference under Section 92CA(1) of the IT Act, made post March 31, 2021 would be legally sustainable or not.  In the event of unsustainability of such reference, limitation would stand to be governed by Section 153(1) of the Act alone.  Consequently, order of assessment for AY 2019-20 ought to be passed by March 31, 2021, which period got extended to September 30, 2021, by TOLA and the Notifications mentioned above.^[2]

Even otherwise, a position may be taken that even if it is assumed that reference under Section 92CA(1) of the IT Act could have been made beyond March 31, 2021, the consequential extension of 12 months for completing the assessment would have to start from April 01, 2020 and not from September 30, 2021, owing to use of the phrase “income was first assessable” in Section 153(1) of the IT Act.  If such position is accepted, then, even if the Revenue Authorities are permitted to make reference under Section 92CA(1) of the IT Act beyond March 31, 2021, the extended period of limitation, would expire on March 31, 2022, in terms of Section 153(4) of the IT Act.  Since the said date of March 31, 2022, does not fall within the Specified Period under TOLA and Notifications thereunder, it may be averred that the same is not capable of being breached.

Needless to add, this conundrum is open to judicial scrutiny.

[1] Income-tax Act, 1961 and Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.

[2] On this very issue, Karnataka High Court has been pleased to grant a stay on the operation of the impugned final assessment order in Google India Private Limited v. National Faceless Assessment Centre (Order dated September 20, 2023 in W.P. No. 19348/ 2023), wherein Google India Private Limited was represented by AZB & Partners.