Validity of time-barred income tax assessment after DRP directions quashed as barred by limitation per Tribunal precedent

Validity of an income-tax assessment framed after directions from the dispute resolution panel is examined against the statutory time limitation; the article records that, following earlier Tribunal precedent, the assessment order dated 15.02.2022 was held to be barred by limitation and therefore liable to be quashed. The analysis emphasises adherence to consistency in Tribunal decisions when applying the limitation period to assessments made in lieu of time limitation under the assessment provisions, resulting in invalidation of time-barred assessments rendered after DRP directions.

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Issues: Whether the final assessment orders passed under section 143(3) r.w.s.144C(13) of the Income-tax Act, 1961 for AY 2017-18 and AY 2018-19 are barred by limitation under section 153 of the Income-tax Act, 1961.

Analysis: The Tribunal examined the statutory timeline for completion of assessments under section 153 and the special procedure and timelines under section 144C. The Tribunal considered the effect of a reference to the Transfer Pricing Officer under section 92CA on extension of time under section 153(4), the temporary extensions effected by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and related notifications, and the scope of the non-obstante clause in section 144C(13). Relying on authorities including decisions of the Madras and Bombay High Courts and Tribunal precedents, the Tribunal applied principles of harmonious construction to hold that section 144C does not operate to displace the outer limitation prescribed by section 153; section 144C(13) only prescribes the time within which the final order must be passed after receipt of DRP directions and does not enlarge the outer statutory limitation under section 153. Applying those principles to the facts and dates on record, the Tribunal found that the impugned assessment orders were passed after the expiry of the applicable limitation period as extended by section 153(4) and the TOLA notification, and that the Supreme Court's suo motu extension did not operate to permit passing assessment orders beyond the statutory limitation under section 153 in these proceedings.

Conclusion: The assessment orders for AY 2017-18 and AY 2018-19 are time-barred under Section 153 of the Income-tax Act, 1961 and are quashed; the appeals are allowed on this legal ground, with liberty to revive other issues if the Supreme Court later decides the point otherwise.

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