Income tax final assessment order timing dispute-limitation u/s153(1) read with s.153(4); order quashed as time-barred.

The dominant issue was whether the final assessment order was time-barred, requiring determination of the correct limitation provision. Applying precedent and maintaining consistency with prior ITAT rulings relying on HC decisions, the Tribunal held that the limitation had to be computed under s.153(1) read with s.153(4) of the Act, not under s.144C(13). On that basis, the statutory last date for passing the final assessment order was 30.09.2021. Since the AO passed the final assessment order on 07.07.2023, it was beyond limitation; the order was quashed and the appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the additional grounds challenging the validity of the final assessment order on pure questions of law (including limitation) should be admitted at the appellate stage.

(ii) Whether the final assessment order passed under section 143(3) read with section 144C(13) was barred by limitation, i.e., whether the overall time-limit is governed by section 153(1) read with section 153(4) or by the one-month period in section 144C(13) computed from receipt of DRP directions.

(iii) Consequential relief: whether, upon holding the assessment time-barred, the final assessment order is liable to be quashed and whether the merits of transfer pricing adjustments should remain open subject to the outcome of pending adjudication by the Supreme Court on the limitation controversy.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Admission of additional grounds (legal grounds going to root of matter)

Legal framework (as discussed by the Tribunal): The Tribunal applied the principle permitting admission of a pure legal ground requiring no fresh investigation of facts, where it goes to the root of the matter.

Interpretation and reasoning: The Tribunal found that the additional ground(s) raised were purely legal, determinable from material already on record, and did not require any further verification or investigation of facts.

Conclusion: The additional ground(s) were admitted for adjudication.

Issue (ii): Whether limitation under section 153 governs final assessment notwithstanding section 144C(13)

Legal framework (as deliberated): The Tribunal examined the interplay between section 153 (time limit for completion of assessment, including extension where a reference to the transfer pricing authority is made) and section 144C (procedure for eligible assessees, including the requirement to pass the final order within one month from the end of the month of receipt of DRP directions). The Tribunal addressed the argument that section 144C(13) contains a non-obstante clause and the counter-argument that section 144C(13) does not enlarge the outer limitation prescribed under section 153.

Interpretation and reasoning: The Tribunal noted there was no dispute on key dates and that, if computed under section 153(1) read with section 153(4), the outer limit for completion of assessment for the year in question was 30.09.2021. The Tribunal framed the determinative question as whether limitation is (a) the section 153-based outer limit, or (b) the one-month period from the end of the month in which DRP directions were issued under section 144C(13). Relying on its own earlier decision on the identical controversy (which, in turn, applied High Court reasoning on harmonising sections 153 and 144C), the Tribunal held that sections 144C and 153 are not mutually exclusive; the non-obstante clause in section 144C(13) is construed as ensuring expeditious passing of the final order after DRP directions, but not as extending or overriding the outer limitation under section 153 for completing the assessment. Accordingly, the Tribunal treated section 153 as controlling the outer time limit and section 144C(13) as an additional, internal procedural deadline within that outer limit.

Conclusion: The Tribunal held that the applicable limitation for passing the final assessment order was 30.09.2021 under section 153(1) read with section 153(4), and that the impugned final assessment order, having been passed after that date, was barred by limitation and invalid.

Issue (iii): Relief-quashing of time-barred assessment; effect on merits pending Supreme Court adjudication

Interpretation and reasoning: Having held the final assessment order time-barred, the Tribunal treated the order as liable to be quashed. The Tribunal also recorded that the limitation controversy is pending before the Supreme Court and therefore preserved liberty to the parties to seek revival if the Supreme Court's decision necessitates modification of the Tribunal's order. Since the appeal was disposed of on the limitation issue, the Tribunal kept other grounds on merits open for adjudication only if revival becomes necessary.

Conclusion: The final assessment order was quashed as barred by limitation; the appeal was allowed on this legal issue, with liberty to revive and with merits kept open depending on the Supreme Court's eventual determination on the limitation question.

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