Limitation under Section 153 read with Section 144C leads to quashing of assessment order; revival permitted pending Supreme Court ruling

Interplay between limitation and tribunal reassessment is addressed: the article explains that where limitation under the assessment statute operates against a final assessment passed under the alternate dispute resolution procedure, the assessment is barred by limitation and must be quashed; this conclusion was reached by applying consistency with binding coordinate decisions and precedent. It further notes that where the same limitation question is pending before the Supreme Court, parties may be granted liberty to revive proceedings for adjudication on merits if the higher courts ultimate ruling mandates modification of the quashing.

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Issues: Whether the final assessment order passed under Section 143(3) read with Section 144C(13) r/w Section 144B of the Income-tax Act, 1961 for Assessment Year 2020-21 is barred by limitation under Section 153 read with Section 144C of the Act.

Analysis: The issue concerns the applicable time limit for completion of assessment where proceedings involve the Dispute Resolution Panel (DRP) under Section 144C. The statutory scheme includes time prescriptions in Section 153 for completion of assessments and a multi-stage mechanism in Section 144C providing for draft order, filing of objections, DRP directions and final order. The Madras High Court's ratio in CIT v. Roca Bathroom Products held that Sections 144C and 153 are mutually inclusive and that the outer time limit prescribed by Section 153 applies to final assessment orders under Section 144C(13); the non-obstante clause in Section 144C(13) does not wholly exclude Section 153. Coordinate decisions of the Hyderabad Bench applied that ratio to quash final orders beyond the Section 153 outer limit, while the Revenue urged deferral pending the Larger Bench/Supreme Court proceedings and relied on principles of institutional restraint and Section 158AB procedure. The Tribunal applied the binding effect of the Madras High Court decision, noted absence of any stay on that judgment, considered the factual timeline (draft order 27.09.2023; objections filed 27.10.2023; DRP directions 28.06.2024; final order 26.07.2024; outer limit under Section 153(1) r/w Section 153(4) expired 30.09.2023), and followed coordinate Hyderabad decisions while preserving parties' rights to revive other issues if the Supreme Court's Larger Bench decision requires modification.

Conclusion: The final assessment order dated 26/07/2024 is barred by limitation under Section 153 read with Section 144C and is quashed; decision is in favour of the Assessee.

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