DRP Timeline Cannot Override Statutory Limitation; Time-Barred Assessment Quashed: ITAT Hyderabad
Pranav B Prem
The Income Tax Appellate Tribunal (ITAT), Hyderabad Bench ‘A’ has held that the timeline prescribed for issuing the final assessment order under the Dispute Resolution Panel (DRP) mechanism cannot override the statutory limitation under Section 153 of the Income Tax Act. It ruled that in cases involving a reference to the Transfer Pricing Officer (TPO), the outer limitation under Section 153(1) read with Section 153(4) remains binding and that Section 144C(13) does not enlarge or extend that time limit. Consequently, the final assessment order dated 18 October 2024 was declared time-barred.
A bench comprising Vice President Vijay Pal Rao and Accountant Member Madhusudan Sawdia was hearing the appeal filed by Aveva Solutions India LLP for Assessment Year 2021–22, which had undergone assessment under the DRP route pursuant to a reference to the TPO. The assessee challenged the final assessment order on the ground that it was barred by limitation since the statutory deadline expired on 31 December 2023 under Section 153.
The assessee contended that Section 153(1) prescribes a nine-month limitation from the end of the assessment year, which ended on 31 December 2022. Since the case involved a reference under Section 92CA, Section 153(4) provided a further extension of twelve months, making 31 December 2023 the final statutory date for completing the assessment. It was argued that the draft assessment order itself was issued so late that the mandatory thirty-day period for filing objections before the DRP could not have been accommodated without breaching the statutory limitation. Counsel for the assessee, Senior Advocate Percy Pardiwala, submitted that even if the assessee had accepted or objected to the draft order immediately, it would still have been impossible to comply with the statutory deadline under Section 153.
The revenue argued that Section 144C begins with a non obstante clause and is a special code for eligible assessees opting for the DRP route. It submitted that once DRP directions are received, the final assessment order need only be passed within one month as required under Section 144C(13), irrespective of the broader limitation under Section 153. The department also requested that the matter be kept open pending a larger-bench ruling of the Supreme Court, pointing to divergent earlier findings.
Rejecting the revenue’s contention, the Tribunal held that Section 144C does not displace the limitation prescribed under Section 153. Relying on the Madras High Court’s ruling in CIT v. Roca Bathroom Products (2022) 445 ITR 537 and the Bombay High Court’s ruling in Shelf Drilling Ron Tappmeyer Ltd. (2023) 457 ITR 161, the bench reiterated that both provisions are inter-dependent and overlapping and must be harmoniously read. It observed that Section 144C(13) merely restricts the Assessing Officer to pass the final order within one month of receiving DRP directions but does not extend the overall time limit available for completing assessments.
The Tribunal further noted that permitting the DRP mechanism to override statutory limitation would defeat the object of Section 153. It concluded that since the statutory deadline had lapsed on 31 December 2023, any final assessment order passed beyond that date — including the order dated 18 October 2024 — would be void.
Holding that the final assessment order was barred by limitation, the ITAT quashed the assessment order dated 18 October 2024. The bench left the other grounds raised by the assessee open, permitting revival of the appeal if the upcoming Supreme Court judgment on the issue requires modification of the present order.
Appearance
Counsel For Petitioner: Percy Perdiwala, Advocate
Counsel For Respondent: U Mini Chandran
Cause Title: Aveva Solutions India LLP Versus ITO
Case No: ITA No.1170/Hyd/2024
Coram: Vijay Pal Rao (Vice President), Madhusudan Sawdia (Accountant Member)
