Outer limitation governs DRP assessments, making a final order beyond Section 153's statutory period invalid despite Section 144C proceedings

The outer limitation under Section 153 continues to govern final assessments made after the DRP process under Section 144C, because the provisions must be read harmoniously and Section 144C(13) does not wholly exclude Section 153. Applying the reasoning in Roca Bathroom Products, the Tribunal treated the applicable outer limit as 30 September 2021; a final assessment order made on 29 July 2022 was therefore beyond limitation and invalid. The Tribunal also rejected deferral merely because the statutory issue was pending before the Supreme Court and an interim order existed in Shelf Drilling. Section 158AB was regarded as the Revenue's mechanism for dealing with an identical pending question, while the unstayed High Court precedent remained applicable. The assessment was annulled and the connected rectification appeal became infructuous.

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Issues: (i) Whether adjudication of the limitation ground should be deferred because the interplay of Sections 144C and 153 of the Income-tax Act, 1961 is pending before the Supreme Court and an interim order exists in the Shelf Drilling matter; (ii) Whether the final assessment order passed under Section 143(3) read with Section 144C(13) and Section 144B for Assessment Year 2018-19 was barred by limitation under Section 153(1) read with Section 153(4) of the Income-tax Act, 1961.

Issue (i): Whether adjudication of the limitation ground should be deferred because the interplay of Sections 144C and 153 of the Income-tax Act, 1961 is pending before the Supreme Court and an interim order exists in the Shelf Drilling matter.

Analysis: The Tribunal relied on the coordinate bench view that a pending Supreme Court proceeding on the same question does not require automatic deferral of hearing. It treated Section 158AB of the Income-tax Act, 1961 as the statutory mechanism available to the Revenue where an identical question of law is pending before a higher court. It further accepted that the interim order in Shelf Drilling only prevented citation of that judgment as precedent and did not bar reliance on the unstayed Madras High Court decision in Roca Bathroom Products. Applying the principle that, in the absence of any contrary decision of another competent High Court, an available High Court ruling on an all-India tax statute is to be followed, the Tribunal declined to postpone adjudication.

Conclusion: The issue was decided in favour of the assessee; the Revenue's preliminary objection and request to defer adjudication were rejected.

Issue (ii): Whether the final assessment order passed under Section 143(3) read with Section 144C(13) and Section 144B for Assessment Year 2018-19 was barred by limitation under Section 153(1) read with Section 153(4) of the Income-tax Act, 1961.

Analysis: The Tribunal adopted the reasoning of the Madras High Court in Roca Bathroom Products that Sections 144C and 153 are not mutually exclusive and must be read harmoniously. The non obstante clause in Section 144C(13) was treated as limited in operation and not as excluding the outer limitation under Section 153. On the dates recorded, the normal limitation under Section 153(1) expired on 30.09.2020 and, with the transfer pricing extension under Section 153(4), the outer limit expired on 30.09.2021. The final assessment order was passed only on 29.07.2022. The Tribunal therefore held that the entire assessment process, including the DRP stage and final order, had to culminate within the statutory outer limit and that the order made beyond that date was invalid.

Conclusion: The issue was decided in favour of the assessee; the final assessment order was held to be barred by limitation and was quashed.

Final Conclusion: The assessment was annulled on the legal ground of limitation by applying the binding precedent relied upon by the Tribunal, and the connected rectification appeal was treated as infructuous, with liberty reserved to seek revival if the larger Bench decision of the Supreme Court later requires modification.

Ratio Decidendi: The outer limitation under Section 153 of the Income-tax Act, 1961 continues to govern a final assessment order passed after the DRP process under Section 144C, since the two provisions are to be read harmoniously and the non obstante clause in Section 144C(13) does not exclude Section 153 in its entirety; a pending SLP or interim order in another matter does not prevent the Tribunal from following an unstayed High Court precedent on the same statutory question.

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