Assessment order after DRP directions: can AO pass it beyond s.144C(13) one-month deadline? Held time-barred.

Whether an assessment order giving effect to DRP directions can be passed beyond the time limit in s.144C(13) was the dominant issue. The HC held that s.144C(13) imposes a mandatory obligation on the AO to complete the assessment within one month from the end of the month in which the DRP directions are received; statutory timelines cannot be waived, and the AO is strictly bound to act in the manner prescribed. Applying its earlier decision in the anonymized assessee's own case, the HC held that proceedings to make the transfer pricing addition stood barred by limitation once the s.144C(13) period expired, and the AO could not thereafter invoke s.144C(13) to complete the assessment.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the time limit in section 144C(13) for passing the final assessment order applies even where directions under section 144C(5) are issued by the DRP in remand/second-round proceedings.

(ii) If section 144C(13) applies, whether failure to pass the final assessment order within the prescribed period renders the pending proceedings to give effect to the DRP directions barred by limitation, and consequently requires the proposed transfer pricing adjustment to be treated as non-est.

(iii) What consequential relief follows, including recomputation of total income, refund, and statutory interest; and the extent to which questions regarding correctness of refund computation/interest remain open for pursuit in accordance with law.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i) - Applicability of section 144C(13) timeline to DRP directions issued in remand proceedings

Legal framework: The Court confined itself to interpretation of section 144C(13) as referred to in the judgment, namely that the Assessing Officer must pass the final assessment order within one month from the end of the month in which the DRP's directions are received.

Interpretation and reasoning: The Court held that section 144C(13) is expressed in mandatory terms. Once the DRP issues directions under section 144C(5), the Assessing Officer has no discretion to deviate from the statutorily prescribed procedure and timeline. The Court rejected the Revenue's contention that section 144C(13) timelines do not apply where DRP directions are issued in a remand/second round; accepting such a contention would negate the mandatory language of section 144C(13) and render its timelines ineffective. The Court expressly limited its decision to section 144C(13) and kept broader interpretative issues concerning sections 144C and 153 open.

Conclusion: Section 144C(13) applies to DRP directions even when issued in remand proceedings, and the Assessing Officer is bound to complete the assessment within the statutory one-month period.

Issue (ii) - Consequence of non-compliance: limitation and "non-est" transfer pricing adjustment

Legal framework: The Court applied the consequence flowing from the mandatory time limit under section 144C(13) as understood and applied in its own earlier decisions (referred to in the judgment), without entering into the larger pending controversy beyond section 144C(13).

Interpretation and reasoning: The Court found that despite the DRP's directions requiring the Assessing Officer to give effect under section 144C(13), the final assessment order conforming to those directions was not passed within the prescribed period. Given the mandatory nature of the timeline, the Court held that the Assessing Officer cannot revive or continue proceedings after expiry of the section 144C(13) time frame.

Conclusion: The proceedings to give effect to the DRP's directions became time-barred, and the transfer pricing adjustment amount addressed by those directions was required to be treated as non-est.

Issue (iii) - Consequential directions: recomputation, refund, and interest; scope of remaining disputes

Legal framework: The Court directed consequential recomputation excluding the transfer pricing adjustment and ordered payment of resulting refund with statutory interest under section 244A, as referenced in the judgment. The Court also noted that a rectification order had been passed during pendency of the petition and a refund amount had been credited.

Interpretation and reasoning: Having declared the transfer pricing adjustment non-est, the Court directed recomputation of total income for the relevant assessment year by excluding that adjustment. Since a rectification order had already been passed and a refund credited, the Court did not decide other grounds, but preserved the taxpayer's liberty to (a) contest, after verification, the correctness of the refunded amount and computation, and (b) pursue claims for interest under section 244A in accordance with law.

Conclusion: The Assessing Officer was directed to recompute income excluding the transfer pricing adjustment and to pay the resulting further refund with statutory interest within the time stipulated by the Court, while leaving the taxpayer free to pursue disputes regarding correctness of refund computation and interest entitlement in accordance with law.

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