2026 (1) TMI 1481 - AT - Income Tax

Transfer pricing limitation under section 144C and section 153 treated together, leading to quashing of time-barred assessments.

Validity of final assessment orders under transfer pricing provisions turns on whether the limitation in the specialised assessment regime is to be read ... Validity of the assessment order on the ground of limitation as per the provisions of section 144C(13) r.w.s. 153 - Limitation for passing final assessment order - Interplay of Sections 144C and 153 - HELD THAT:- Limitation for passing the final assessment order u/s 144C(13) of the Act is to be seen only with reference to the timeline specified u/s.144C of the Act only without referring to provisions of section 153 of the Act. We find that identical submissions were made by the Department in the case of Roca Bathroom Products P. Ltd.[2021 (4) TMI 355 - MADRAS HIGH COURT] rejected the arguments of the Department and held that provisions of section 144C and 153 of the Act are mutually inclusive as both contain provisions relating to section 92CA of the Act and are inter-dependent and are overlapping. Hence, the period of limitation for passing the final assessment order u/s. 144C(13) of the Act has to be determined with reference to section 144C r.w.s 153 of the Act. A perusal of dates for passing the final assessment order in the impugned assessments years would clearly show that the final assessment order for the respective assessment years have been passed by the AO beyond the period of limitation u/s. 144C(13) r.w.s. 153 of the Act. Thus, following the ratio laid down in Roca Bathroom Products P. Ltd. (supra), we hold that final assessment orders for AYs 2010-11 & 2011-12 passed beyond the period of limitation are without jurisdiction. Consequently, the assessment orders for AYs 2010-11 & 2011-12 are quashed. Issues: (i) Whether the final assessment orders passed under section 144C(13) read with section 153 of the Income-tax Act, 1961 are time-barred and, if so, whether such orders are without jurisdiction and liable to be quashed.Analysis: The issue requires examination of the statutory timelines in section 144C and section 153 and their interplay where DRP proceedings are invoked. Section 144C provides a multi-stage mechanism with specified time windows for draft order, filing objections, DRP directions and passing of the final order; section 153 prescribes outer time limits for completion of assessment proceedings, including on remand. The reasoning in the cited authority adopts a construction that the timelines under section 153 continue to apply when proceedings are remitted (or continued) under section 144C, making the provisions mutually inclusive rather than mutually exclusive. Application of those principles to the undisputed date chart shows that the final orders were passed after the outer limitation dates calculated with reference to section 144C read with section 153.Conclusion: The final assessment orders passed beyond the period of limitation under section 144C(13) read with section 153 are without jurisdiction and are quashed; outcome is in favour of the assessee.