High Court Order Condoning Jurisdictional Revenue Delay and Affirming Abatement of TPO Order Upheld

Issue

Facts

• Inter-State Jurisdictional Transfer: Following a search under Section 132 for Assessment Year 2008-09, jurisdiction over the assessee’s case was transferred from Bengaluru to Kolkata.
• Delay in Appeal: The Revenue filed an appeal under Section 260A before the High Court with a delay of 341 days, citing physical record reconciliation, inter-state file transfers, and multi-tier administrative approvals.
• Assessee’s Objection: The assessee opposed the condonation, arguing that administrative red tape does not constitute sufficient cause and that the Revenue is bound by limitation rules.
• Abatement of TPO Proceedings: Consequent to the search, assessment proceedings abated under Section 153A, rendering the previously concluded TPO order non-est/void for the purpose of the search assessment.
• Deletion of TP Adjustments: The ITAT deleted the transfer pricing adjustments because the Assessing Officer failed to make a fresh reference to the TPO during the search assessment.
• High Court Ruling: The High Court condoned the 341-day delay on the grounds of bona fide operational complexities from inter-state transfer and affirmed the ITAT’s deletion of TP adjustments.
• Revenue’s SLP: The Revenue filed a Special Leave Petition (SLP) before the Supreme Court challenging the High Court’s decision.

Decision

• Held that there was no good ground to interfere with the impugned order passed by the High Court.
• The Special Leave Petition (SLP) filed by the Revenue was dismissed.
• Decided in favor of the Revenue on condonation of delay, and in favor of the assessee on the merits of the transfer pricing abatement.

Key Takeaways

• Bona Fide Administrative Delay Condonable: Inordinate delay caused by complex inter-state jurisdictional transfers and record reconciliation during search proceedings can be condoned under Section 5 of the Limitation Act if sufficient cause is demonstrated.
• Effect of Search Abatement under Section 153A: When pending assessment proceedings abate due to a search under Section 132, previous TPO orders or determinations become void for the search-based assessment unless a fresh reference is made to the TPO.
• Mandate for Fresh TPO Reference: The Assessing Officer cannot rely on pre-search TPO orders to make transfer pricing adjustments in an abated assessment without making a new reference under Section 92CA.