Tribunal reiterates that DRP mechanism under Section 144C does not override limitation under Section 153

The Delhi “H” Bench of the Income Tax Appellate Tribunal has quashed the final assessment order passed against Ahresty India Private Limited for Assessment Year 2014–15, holding that the order was barred by limitation under the Income Tax Act, 1961.

Background

The assessee challenged the final assessment order dated October 30, 2018, which followed transfer pricing proceedings and directions issued by the Dispute Resolution Panel (DRP). During the appellate proceedings, Ahresty India raised an additional legal ground contending that the assessment was time-barred, as the outer limitation period under Section 153(1) read with Section 153(4) had expired on December 31, 2017. The Tribunal admitted the additional ground, noting that it involved a pure question of law and required no further factual verification. The Revenue opposed adjudication on limitation, arguing that the issue concerning the interplay between Sections 144C and 153 is unsettled and pending before the Supreme Court of India in ACIT v. Shelf Drilling Ron Tappmeyer Ltd. It was contended that the Tribunal should defer hearing until the Larger Bench of the Supreme Court settles the issue.

Tribunal’s Findings

Rejecting the Revenue’s plea for deferral, the Tribunal relied on its earlier decision in Teva Pharmaceutical & Chemical Industries India Pvt. Ltd. and reiterated that there is no embargo on deciding the issue. The Bench placed reliance on the Madras High Court ruling in Roca Bathroom Products Pvt. Ltd., which held that Sections 144C and 153 are mutually inclusive and interdependent. The Tribunal emphasised that the non-obstante clause in Section 144C(13) does not exclude the application of Section 153. The statutory time limit under Section 153 applies to the final assessment order, even in cases routed through the DRP. On facts, the Tribunal noted that although the draft assessment order was passed within time, the final assessment order dated October 30, 2018 was issued well beyond the permissible limitation period. Accordingly, the ITAT quashed the final assessment order for AY 2014–15 as barred by limitation. However, following the consistent approach adopted in similar matters, the Tribunal granted liberty to both parties to seek revival of the appeal on merits if the Supreme Court’s eventual ruling on the limitation issue necessitates modification.

The appeal filed by Ahresty India was allowed on the legal issue of limitation alone.