Tax assessment time-limit dispute u/s153 vs s.144C(13) for final order; assessment 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 IT Act. Relying on its earlier co-ordinate bench decision, which in turn followed HC precedents, the Tribunal held that statutory limitation for a final order passed u/s 143(3) r/w s.144C(13) and s.144B must be calculated in accordance with s.153(1) read with s.153(4). Applying that computation, the impugned final assessment order was held barred by limitation and was quashed; the taxpayer's appeal was allowed.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the final assessment order was barred by limitation under section 153 notwithstanding completion within the one-month period contemplated under section 144C(13) after receipt of DRP directions.

(ii) If barred by limitation, whether the final assessment order was liable to be quashed as void ab initio, with other merits grounds left open.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Limitation-interplay between section 153 and section 144C(13)

Legal framework (as discussed by the Court): The Court examined the statutory time bar for completing an assessment under section 153(1) and the extension of time by 12 months where a reference is made to the TPO under section 153(4). It also considered the scheme of section 144C, including that the final order is to be passed within one month from the end of the month in which DRP directions are received under section 144C(13).

Interpretation and reasoning: On the admitted chronology, the Court found that the outer limitation for completing the assessment (after the 12-month extension for TPO reference) expired on 30/09/2023. Although the draft order was issued before that date, the final assessment order was passed on 25/07/2024, about ten months after the statutory bar date. The Court applied the principle that section 153 constitutes a statutory bar and that the procedure/timeline under section 144C cannot be used to override or revive jurisdiction once limitation under section 153 has expired. The Court rejected the revenue contention that compliance with the one-month period under section 144C(13) after DRP directions would validate an otherwise time-barred assessment.

Conclusion: The Court held that the assessment was barred by limitation under section 153, and that section 144C(13) does not enlarge or override the time limit prescribed in section 153 for completing the final assessment.

Issue (ii): Consequence of limitation breach-validity of final assessment order and treatment of other grounds

Interpretation and reasoning: Having held that the final assessment order was passed beyond the permissible time limit, the Court held that the order could not be sustained in law. Since the jurisdiction to complete the assessment had lapsed, the final assessment order was treated as non-est/invalid.

Conclusion: The Court quashed the final assessment order as void ab initio. Because the appeal was allowed on this legal ground, the Court refrained from adjudicating the transfer pricing adjustments on royalty, interest on debentures, and interest on receivables; those merits issues were left open.

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