Final income-tax assessment after DRP directions-whether time-barred u/s153 despite s.144C; order quashed as late

The dominant issue was whether the final assessment order was time-barred under s. 153(1) r/w s. 153(4) of the Income-tax Act despite the DRP mechanism in s. 144C. Relying on HC authority holding that ss. 144C and 153 are mutually inclusive, the ITAT held that s. 153 prescribes the outer limitation for completing the assessment, while s. 144C(13) only restricts the time within which the AO must pass the final order after DRP directions and does not extend the statutory limitation. Consequently, the final assessment order dated 18.10.2024 was held barred by limitation and was quashed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the final assessment order was barred by limitation under section 153(1) read with section 153(4) in a case involving reference to the Transfer Pricing Officer, notwithstanding completion of the procedure under section 144C and passing of the final order after receipt of directions from the Dispute Resolution Panel.

(ii) Whether section 144C(13), by reason of its non-obstante clause, overrides and thereby enlarges or displaces the outer limitation prescribed under section 153 for completion of assessment.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) & (ii) (clubbed): Limitation for completion of assessment-interaction between section 153 and section 144C(13)

Legal framework (as discussed by the Court): The Court examined section 153(1) (as modified for the relevant assessment year providing a 9-month limitation from the end of the assessment year) and section 153(4) (extending the available period by 12 months where a reference under section 92CA(1) is made). It also considered the scheme of section 144C, including section 144C(13) prescribing the time to pass the final order upon receipt of directions from the Dispute Resolution Panel, and its non-obstante clause.

Interpretation and reasoning: The Court held that section 153 provides the outer limit for completion of assessment, and in a case involving a Transfer Pricing Officer reference, the extension contemplated by section 153(4) applies, resulting in a fixed last date for completing the assessment. It found that the assessee's case, being one with a section 92CA reference, had an outer limitation ending on 31.12.2023. The Court rejected the contention that section 144C(13) operates to exclude section 153 entirely; instead, it treated section 144C(13) as a provision that restricts the Assessing Officer to pass the final order within one month of receipt of Dispute Resolution Panel directions, but does not enlarge the overall limitation prescribed under section 153. The Court adopted the reasoning that sections 144C and 153 are not mutually exclusive, but overlap and must be harmonised so that section 144C procedure is completed within the outer time permitted by section 153.

Conclusions: Since the final assessment order was passed on 18.10.2024, beyond the outer limitation date of 31.12.2023 determined under section 153(1) read with section 153(4), the Court held it to be time-barred and quashed it. The Court disposed of the appeal on this legal ground alone and expressly kept other issues on merits open, permitting revival if a pending decision of the Supreme Court on the limitation controversy necessitates modification of the Court's order.

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