Income tax final assessment limitation dispute u/s153 vs s.144C(13), order dated 25.07.2024 quashed as time-barred.

The dominant issue was whether the final assessment order was time-barred and whether limitation had to be computed under s.153(1) r/w s.153(4) or under s.144C(13) of the Act. Applying binding HC precedents and its own earlier decision, the ITAT held that statutory limitation must be computed under s.153(1) r/w s.153(4); on that basis, the last permissible date was 30.09.2023. As the AO passed the final order on 25.07.2024, it was beyond the prescribed period and was quashed as barred by limitation; liberty was reserved to seek revival of the appeal on merits depending on the SC's pending decision on the same issue.

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1. ISSUES PRESENTED AND CONSIDERED

1. Whether additional grounds raising a legal plea could be admitted at the appellate stage when they arise from facts already on record and bear on the assessee's tax liability.

2. Whether the final assessment order was barred by limitation, including: (i) whether the general COVID-period extension directed by the Supreme Court could extend the Assessing Officer's statutory time limit for passing an assessment order; and (ii) whether limitation for passing a final order in an "eligible assessee" case is governed by section 153(1) read with section 153(4) or by section 144C(13) (one month from receipt of directions of the DRP).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Admissibility of additional grounds raising a legal plea

Legal framework (as discussed by the Court): The Court considered the Tribunal's wide powers under section 254 and the permissibility of urging additional grounds under Rule 11 of the ITAT Rules, including the requirement that the affected party be given sufficient opportunity of being heard.

Interpretation and reasoning: The Court rejected the Revenue's objection that an additional ground is admissible only where a non-taxable item is taxed or a permissible deduction is denied. It held that this was a misconstruction of the principle relied upon by the Revenue, and that the Tribunal's jurisdiction is enabling in nature to examine any question of law arising from facts already on record and having a bearing on the assessee's tax liability. The Court further held that Rule 11 permits raising an additional ground with the Tribunal's leave, and the only relevant safeguard is granting the other party sufficient opportunity, which was provided.

Conclusion: The additional grounds were admitted for adjudication as they raised a pure question of law arising from facts already on record and affecting tax liability, and the Revenue had adequate opportunity to respond.

Issue 2: Limitation-validity of the final assessment order

Legal framework (as discussed by the Court): The Court examined limitation for completing assessment under section 153(1) and extension under section 153(4) where there is a reference to the TPO under section 92CA(1). It also examined the time prescription under section 144C(13) (passing the final order within one month from the end of the month in which DRP directions are received) and considered the Revenue's argument based on the Supreme Court's COVID limitation-extension directions. The Court additionally addressed the Revenue's submission that section 144C, due to its non-obstante clause, constitutes a complete code overriding section 153.

Interpretation and reasoning (COVID extension argument): The Court followed an earlier Tribunal view (expressly relied upon) that the Supreme Court's COVID-related extension of limitation applies to judicial/quasi-judicial proceedings for filing/ pursuing remedies, and does not extend the statutory time limit for tax authorities to pass original assessment orders beyond the time prescribed by the Act. Accordingly, the Revenue's plea that the assessment limitation stood extended by the Supreme Court's COVID orders was rejected.

Interpretation and reasoning (section 153 vs. section 144C): The Court identified undisputed dates and accepted that, if computed under section 153(1) read with section 153(4), the outer limit for completing the final assessment was 30.09.2023, while the final order was passed on 25.07.2024. The Court then held that limitation for passing the final assessment order must be governed by section 153(1) read with section 153(4), and that section 144C(13) does not enlarge that outer statutory limitation but only imposes a further restriction requiring the Assessing Officer to pass the final order promptly after receiving DRP directions. The Court rejected the Revenue's contention that section 144C operates as an exclusive limitation regime displacing section 153.

Conclusion: The Court held that the final assessment order was barred by limitation because the statutory outer limit under section 153(1) read with section 153(4) expired on 30.09.2023, and the order dated 25.07.2024 was beyond that time. The final assessment order was therefore quashed, the appeal was allowed on this legal ground, and all other merits issues were kept open. Given that the limitation question was stated to be pending before the Supreme Court, the Court permitted revival of the appeal if the Supreme Court's decision necessitates modification of the order.

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