DRP Mechanism Under Section 144C Cannot Override Limitation Under Section 153; ITAT Holds Coca Cola India’s Assessments Time-Barred
Pranav B Prem
The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that the Dispute Resolution Panel (DRP) mechanism under Section 144C of the Income Tax Act, 1961 cannot override the statutory limitation prescribed under Section 153, and accordingly quashed the final assessment orders passed against Coca Cola India as being barred by limitation. The Tribunal held that assessments framed under Section 144C(13) must also adhere to the outer time limits prescribed under Section 153, and the mere fact that the DRP procedure was followed does not extend or suspend the statutory limitation period.
The core dispute before the Tribunal concerned the validity of the final assessment orders on the ground of limitation, particularly the interplay between Section 144C, which provides for reference to the Dispute Resolution Panel, and Section 153, which prescribes the time limits for completion of assessments under the Act.
The central question was whether assessments completed pursuant to DRP directions could be sustained even if they were passed beyond the limitation period specified under Section 153, or whether both provisions must be read harmoniously to determine the outer time limit available to the Assessing Officer.
Coca Cola India contended that the final assessment orders for the relevant assessment years were passed beyond the statutory time limit. It was argued that Section 144C does not operate as an independent or self-contained code and must be read together with Section 153. Reliance was placed primarily on the judgment of the Madras High Court in CIT v. Roca Bathroom Products (P) Ltd., wherein it was held that Sections 144C and 153 are mutually inclusive and that DRP proceedings are only a continuation of the assessment process.
The assessee placed on record a detailed chart of dates demonstrating that, even after accounting for the timelines under Section 144C, the Assessing Officer had exceeded the maximum period permissible under Section 153 while passing the final assessment orders.
The Revenue, on the other hand, argued that Section 144C is a special provision containing its own timelines and is a self-contained mechanism. It was contended that the non obstante clause in Section 144C overrides Section 153, and that accepting the assessee’s interpretation would render the DRP mechanism unworkable and lead to impractical results.
The ITAT rejected the preliminary objection raised by the Revenue. It observed that there is no stay on the Madras High Court’s ruling in Roca Bathroom Products, and that a stay of the operative portion of a judgment does not nullify its ratio decidendi unless the judgment is expressly set aside. The Tribunal noted that the assessee had relied solely on the Roca Bathroom decision and not on the Bombay High Court ruling in Shelf Drilling, which is under interim restraint. It further observed that several coordinate benches of the ITAT have consistently followed Roca Bathroom in similar matters.
The Tribunal reiterated that DRP proceedings are a continuation of the assessment proceedings and do not create a parallel or independent assessment framework. Statutory timelines, the Bench observed, must be strictly construed and adhered to, especially where they go to the root of the jurisdiction of the Assessing Officer.
Relying extensively on the reasoning in Roca Bathroom Products, the ITAT held that Sections 144C and 153 are not mutually exclusive but mutually inclusive. The outer limitation prescribed under Section 153 applies even where the DRP mechanism is invoked. The non obstante clause in Section 144C(13) does not completely exclude the application of Section 153, but only restricts the Assessing Officer from taking advantage of any longer timelines once DRP directions are received.
The Tribunal further held that administrative delays, internal movement of files, or pendency before the DRP cannot extend statutory limitation periods. Once the limitation period expires, the Assessing Officer loses jurisdiction to pass a valid assessment order. Accordingly, holding that the final assessment orders had been passed beyond the time limit prescribed under Section 153, the ITAT quashed the impugned assessments as being time-barred. The appeals filed by Coca Cola India were thus allowed on the ground of limitation alone, without going into the merits of the additions made by the Assessing Officer.
Cause Title: Coca Cola India Inc. Versus DDIT
Case No.: I.T.A No.5223/Del/2010
Coram: Shri Vikas Awasthy, Judicial Member and Shri Sanjay Awasthi, Accountant Member
