Validity of income tax reassessment notice found time-barred; reassessment notice quashed and appeal allowed for assessee

Interplay between provisions governing reassessment and limitation was considered; the reassessment notice issued on 18.10.2024 was held to be beyond the statutory limitation and therefore liable to be quashed, resulting in allowance of the appeal. The tribunal applied prior decisions to maintain consistency and set aside the notice as time-barred under the limitation framework, while noting that a pending higher court decision on the same issue may permit parties to seek revival of the appeal if that decision requires modification of this outcome.

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Issues: (i) Whether the final assessment order dated 18.10.2024 passed under sections 143(3) read with 144C(13) read with 144B of the Income-tax Act, 1961 for AY 2021-22 is barred by limitation as provided under section 153 of the Income-tax Act, 1961 (including extension under section 153(4) on reference under section 92CA(1)).

Analysis: The statutory limitation for completion of assessment for AY 2021-22 is governed by section 153 read with applicable provisos, which reduced the normal outer limit to nine months from the end of the assessment year for the year in question. Sub-section (4) of section 153 extends the period by twelve months where a reference under section 92CA(1) to the Transfer Pricing Officer is made, thereby fixing the outer limit applicable in such cases. Section 144C contains procedural timelines for DRP directions and finalisation of assessment, including sub-section (13) which prescribes a period for passing the final order after receipt of DRP directions; however, the non-obstante clause in section 144C(13) operates for a limited purpose and does not operate to entirely exclude the applicability of the overall outer time limits prescribed by section 153. Established principles of harmonious construction require reading the provisions together so as to give effect to both; where no separate or longer time is expressly provided by section 144C to displace section 153, the outer time limit in section 153 (including extension under section 153(4) for references to TPO) remains applicable. Applying these principles to the facts, the Assessing Officer passed the final assessment order on 18.10.2024, which is beyond the extended limitation date of 31.12.2023 calculated under section 153(4) for the reference to the TPO, and therefore the order is time-barred.

Conclusion: The assessment order dated 18.10.2024 is barred by limitation under section 153 (including extension under section 153(4)) and is quashed; the appeal is allowed in favour of the assessee on this legal issue.

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