2025 (12) TMI 1643 - AT - Income Tax

Time limit for final assessment order after DRP directions: s.153(1) r/w s.153(4) applied; order quashed as late.

The dominant issue was the statutory time-limit for passing the final assessment order after DRP directions-whether it was governed by s.144C(13) (one ... Limitation period for passing the final assessment order u/s 144C(13) -limitation as provided u/sec.153(1) read with sub-section(4) - whether the limitation period for passing the final assessment order is (a) 30.09.2023, as per the provisions of section 153(1) read with section 153(4) of the Act, or (b) 31.07.2024, i.e., one month from the end of the month in which directions of the Ld. DRP were passed, as per the provisions of section 144C(13) of the Act? - HELD THAT:- We note that an identical issue has been considered by this Tribunal in the case of Aveva Solutions India LLP, Hyderabad [2025 (12) TMI 1208 - ITAT HYDERABAD] held that the statutory limitation is to be calculated in accordance with the provisions of section 153(1) read with section 153(4) of the Act. Therefore, as a matter of consistency, following the order of this Tribunal, we hold that the limitation period for passing the final assessment order by the Ld. AO in the present case is 30.09.2023. However, the final assessment order has been passed by the Ld. AO on 29.07.2024, which is well beyond the statutory time limit. Therefore, we hold that the final assessment order dated 29.07.2024 passed by the Ld. AO is barred by limitation, and consequently, the same is liable to be quashed. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the final assessment order was barred by limitation because it was not passed within the time limit computed under section 153(1) read with section 153(4), notwithstanding the one-month period contemplated in section 144C(13) after receipt of DRP directions. 2. Consequence of the assessment being time-barred: whether the final assessment order was liable to be quashed and whether other (merits) grounds required adjudication at this stage. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Whether limitation under section 153 governed the final assessment order, and whether section 144C(13) could extend the outer limit Legal framework (as discussed by the Court): The Court examined limitation by reference to the time limit for completing assessment for the relevant assessment year under section 153(1) and the extension of 12 months where a transfer pricing reference is made under section 92CA(1) by virtue of section 153(4). It also considered section 144C(13) concerning passing the final order after DRP directions, and the interaction between these provisions for an 'eligible assessee'. Interpretation and reasoning: The Court found no dispute on dates: the outer limit computed under section 153(1) read with section 153(4) expired on 30.09.2023; the draft order was dated 29.09.2023; DRP directions were issued on 25.06.2024; and the final order was passed on 29.07.2024. The only determinative question was whether the final order could be sustained as within time merely because it was made within the one-month period counted from DRP directions under section 144C(13), or whether section 153 controlled the overall outer limitation. Following an earlier co-ordinate bench decision relied upon by the Court (which applied the reasoning that sections 144C and 153 operate harmoniously and that section 144C(13) does not enlarge the statutory outer limit under section 153), the Court held that the limitation must be determined under section 153(1) read with section 153(4), and section 144C(13) only restricts the time available after DRP directions within the remaining permissible period. Conclusion: The Court conclusively held that the applicable outer limitation for passing the final assessment order was 30.09.2023 under section 153(1) read with section 153(4), and since the final assessment order dated 29.07.2024 was beyond that date, it was barred by limitation and liable to be quashed. Issue 2: Effect of the finding of limitation and treatment of remaining grounds Legal framework (as discussed by the Court): The Court proceeded on the basis that a time-barred assessment order is invalid and cannot survive. It also noted that the limitation issue was pending adjudication before the Supreme Court on the same controversy, and addressed how that pendency affected disposal. Interpretation and reasoning: Having held the final order time-barred, the Court quashed the final assessment order and allowed the appeal on this legal issue alone. The Court did not adjudicate the transfer pricing or corporate tax grounds on merits, and expressly kept them open. Given that the limitation controversy was stated to be pending before the Supreme Court, the Court granted liberty to the parties to seek revival for adjudication on merits if the Supreme Court's eventual decision necessitates modification of the present outcome. Conclusion: The Court allowed the appeal by quashing the final assessment order as barred by limitation, did not decide other grounds on merits, and permitted revival of the appeal only if required due to the Supreme Court's decision on the limitation issue.