The Income Tax Appellate Tribunal Delhi has delivered a pivotal ruling affirming that final assessment orders issued beyond the statutory time limit under Section 153 of the Income Tax Act, even when involving transfer pricing adjustments under Section 144C, are void ab initio. This decision reinforces the non-negotiable nature of limitation periods in tax proceedings and curtails the Revenue’s ability to prolong assessments indefinitely under the guise of procedural complexity.
Background & Facts
The Dispute
The appellant, Groupe SEB India Pvt. Ltd., challenged the Final Assessment Order dated 31/07/2022 for Assessment Year 2018-19, which was passed under Section 143(3) read with Section 144C(13) following a transfer pricing reference. The assessee contended that the order was time-barred under Section 153(1) read with Section 153(4), which prescribes a maximum outer limit of 33 months for completion of assessment in cases involving transfer pricing adjustments.
Procedural History
The timeline of proceedings was as follows:
- 31/03/2019: End of relevant Assessment Year 2018-19
- 22/09/2021: Draft assessment order passed by the Assessing Officer (within 18 months + 12-month extension under Section 153(4))
- 15/06/2022: Directions issued by the Dispute Resolution Panel (DRP) under Section 144C(5)
- 31/07/2022: Final assessment order passed by the Assessing Officer
The assessee argued that the final order, issued 10 months beyond the 33-month outer limit, was invalid. The Revenue opposed this, citing the non-obstante clause in Section 144C(13) and pending litigation before the Supreme Court in ACIT v. Shelf Drilling Ron Tappmeyer Ltd.
Relief Sought
The assessee sought quashing of the final assessment order on grounds of limitation and requested that the appeal be decided on merits only if the Supreme Court reverses the current interpretation.
The Legal Issue
The central question was whether the 33-month outer limit under Section 153 of the Income Tax Act continues to apply to final assessment orders issued after DRP directions under Section 144C, or whether the non-obstante clause in Section 144C(13) overrides this limitation.
Arguments Presented
For the Appellant
The appellant relied on the Madras High Court’s judgment in Roca Bathroom Products (P.) Ltd. v. CIT, which held that Section 144C and Section 153 are mutually inclusive, not exclusive. It argued that the DRP proceedings are a continuation of the assessment process and must conclude within the statutory timeline. The assessee further cited the Tribunal’s own decision in Teva Pharmaceutical & Chemical Industries India Pvt. Ltd., which followed Roca and quashed time-barred orders. The non-obstante clause, it contended, only permits a 30-day window to issue the final order after receiving DRP directions - not to extend the overall 33-month limit.
For the Respondent
The Revenue contended that Section 144C(13) creates a self-contained mechanism for transfer pricing assessments, and the non-obstante clause excludes the application of Section 153’s time limits. It argued that the Supreme Court’s pending adjudication in Shelf Drilling rendered any Tribunal decision premature. The Revenue further asserted that the DRP’s delay was administrative and不应 affect the assessee’s substantive rights.
The Court's Analysis
The Tribunal undertook a detailed statutory interpretation, applying the doctrine of harmonious construction. It rejected the Revenue’s argument that Section 144C operates as a standalone code, emphasizing that both Sections 144C and 153 are interdependent provisions governing the same subject matter - assessment of income involving transfer pricing.
"The provisions under Section 144C and Section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter-dependent and overlapping."
The Tribunal examined the structure of Section 144C, noting that while subsection (13) permits a 30-day window to issue the final order after DRP directions, this does not negate the overarching 33-month limit under Section 153. It held that the non-obstante clause serves only to ensure expeditious finalization after DRP directions - not to suspend the statutory deadline.
The Tribunal also invoked the principle of reasonable time from Bharat Steel Tubes Ltd. v. State of Haryana and State of Punjab v. Bhatinda District Coop. Milk Producers Union Ltd., observing that even in the absence of a statutory limit, delay beyond three years is unreasonable. Here, the delay of over five years was palpably unjust and prejudicial to the assessee’s right to finality.
The Tribunal distinguished Nokia India and Vedanta Ltd., which dealt with different factual matrices, and affirmed that the 33-month limit applies to the final order, not merely the draft. It further held that transfer of files between DRP offices cannot extend statutory timelines.
The Verdict
The assessee prevailed. The Tribunal held that the final assessment order dated 31/07/2022 was barred by limitation under Section 153 read with Section 144C, and quashed it. The Tribunal granted liberty to the parties to revive the appeal on merits if the Supreme Court’s pending decision alters the legal position.
What This Means For Similar Cases
Final Assessment Orders Must Comply with Section 153 Timelines
- Practitioners must calculate the 33-month limit from the end of the relevant A.Y., including all DRP and TPO proceedings
- Any final order issued beyond this period is void, regardless of whether DRP directions were received
- The Revenue cannot rely on administrative delays or file transfers to justify non-compliance
Non-Obstante Clause in Section 144C(13) Is Narrowly Construed
- The clause permits only a 30-day window to issue the final order after DRP directions
- It does not override the outer limit under Section 153
- Draft orders must be issued well before the 33-month deadline to allow time for DRP review
Liberty to Revive Appeals Is Conditional and Strategic
- Taxpayers should seek quashing on limitation grounds even if other issues remain pending
- The liberty granted is not a guarantee of reinstatement - it is contingent on the Supreme Court’s final ruling
- Practitioners must preserve all evidence and documentation for potential revival
