Final tax assessment timing dispute: limitation u/s153(1)/153(4) versus s.144C(13); order quashed as time-barred.

The dominant issue was whether the final assessment order was within limitation: whether time must be computed under s.153(1) r/w s.153(4), expiring on 30.09.2021, or under s.144C(13), as one month from the end of the month of DRP directions, expiring on 31.07.2023. Following its earlier decision and applying HC precedents, the ITAT held that statutory limitation is governed by s.153(1) r/w s.153(4), not extended by s.144C(13) in the manner claimed; accordingly, the last permissible date was 30.09.2021. Since the AO passed the final assessment on 07.07.2023, it was time-barred and was quashed, allowing the appeal.

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ISSUES PRESENTED AND CONSIDERED

1. Whether the final assessment order was barred by limitation under section 153(1) read with section 153(4), notwithstanding the time-limit mechanism in section 144C(13) and the non-obstante clause therein.

2. Whether the additional ground challenging limitation was admissible at the appellate stage as a pure question of law requiring no further factual enquiry.

ISSUE-WISE DETAILED ANALYSIS

Issue 1: Limitation for passing the final assessment order in an eligible assessee/DRP case

Legal framework (as applied by the Court): The Court treated section 153(1) as prescribing the outer statutory time limit for completion of assessment, with section 153(4) providing a 12-month extension where a reference under section 92CA(1) is made. The Court examined section 144C(13) as prescribing the time within which the Assessing Officer must pass the final order after receipt of DRP directions, and considered the effect of the non-obstante clause in section 144C(13).

Interpretation and reasoning: The Court found no dispute on the key dates and accepted that, when computed under section 153(1) read with section 153(4), the last permissible date for passing the final assessment order was 30.09.2021. The final assessment order was, however, passed on 07.07.2023. The Court rejected the position that compliance with section 144C(13) (one month from the end of the month of DRP directions) could override or enlarge the outer limitation prescribed under section 153. Relying on its own earlier co-ordinate bench approach (which in turn applied the High Court reasoning referred to in the order), the Court held that sections 144C and 153 operate in a manner where section 144C(13) restricts the post-DRP completion window but does not displace the overarching limitation under section 153. Accordingly, the Court concluded that the operative limitation must be computed under section 153(1) read with section 153(4), and the order passed beyond that outer limit is without authority.

Conclusion: The Court held that the final assessment order dated 07.07.2023 was barred by limitation (outer limit being 30.09.2021) and therefore liable to be quashed. Other grounds on merits were kept open, with liberty to seek revival if the pending Supreme Court adjudication on the limitation controversy necessitates modification.

Issue 2: Admissibility of the additional ground on limitation

Legal framework (as applied by the Court): The Court treated the additional ground as raising a pure legal issue going to the root of validity of the assessment order, capable of decision on the existing record, and therefore entertainable at the appellate stage.

Interpretation and reasoning: The Court found that adjudication of the limitation plea did not require investigation of new facts or fresh evidence and could be decided on undisputed dates already on record. On that basis, it admitted the additional ground for adjudication.

Conclusion: The additional ground challenging the assessment as time-barred was admitted and, upon consideration, succeeded; the assessment was quashed on limitation.

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