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Facts
The assessee filed an appeal against the final assessment order passed under section 143(3)/144C(13) for the Assessment Year 2015-16. The primary contention was that the order was barred by limitation.
Held
The Tribunal held that the final assessment order was passed beyond the prescribed time limit under section 144C(13) of the Act. Relying on various judicial pronouncements, the Tribunal concluded that the delay in passing the order made it invalid and liable to be quashed.
Key Issues
Whether the final assessment order passed under section 144C(13) is barred by limitation, and if so, whether it is liable to be quashed.
Sections Cited
143(3), 144C, 92CA(3), 37(1), 28, 271(1)(c), 144B, 153, 153B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’: NEW DELHI
Before: SHRI PRAKASH CHAND YADAV & SHRI MANISH AGARWAL
Assessee by Shri Aditya Vohra, Adv. Shri Arpit Goyal, CA and Ms. Mansha Bhalla, CA Department by Shri S.K. Jadhav, CIT-DR Date of Hearing 28/07/2025 Date of Pronouncement 31/07/2025 O R D E R
PER MANISH AGARWAL, AM:
This appeal is filed by the assessee against the final order passed u/s 143(3)/144C(13) of the Income Tax Act, 1961 (the Act, in short) by the Assistant Commissioner of Income Tax, TPO-1(2)(2), New Delhi (referred to as ‘the AO’) vide order dated 20.12.2019 for the Assessment Year 2015-16.
The assessee has challenged the final order by raising the following grounds of appeal: “1.
1. That on facts and circumstances of the case and in law, the order dated 02.12.2019 passed by the AO ("AO") under section 143(3) read with section 144C of the Income-tax Act, 1961 ("the Act") for assessment year 2015-16 is bad in law and void ab initio.
2. That on facts and circumstances of the case and in law, the impugned order is barred by limitation as prescribed under section 144C of the Act and therefore, is illegal and liable to be quashed.
/Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO 3. That the AO/ TPO/ DRP erred on facts and in law in making an adjustment of Rs.105,07,00,000 to the arm's length price of 'international transactions' of sale of APIs and formulations, undertaken by the Appellant with the Associated Enterprises ("AEs"), on the basis of the order passed under section 92CA(3) of the Act by the Transfer Pricing Officer ("TPO") and Dispute Resolution Panel ("DRP"). 3.1 That the AO/TPO/DRP erred on facts and in law in considering the Appellant as the tested party for benchmarking international transaction of provision of sale of APIs and formulations, applying TNMM, not appreciating that the Appellant being the manufacturer of such formulations, undertaking complex operations and owning intangibles, is more complex entity than the AEs. 3.2 That the AO/TPO/ DRP erred on facts and in law in rejecting benchmarking analysis undertaken by the assessee taking the AEs as the tested party, allegedly on the basis that the AEs are the creator of the assessee and that assessee does not hold controlling stakes and comprehensive authority over its AEs, not appreciating that the AEs are merely undertaking marketing activities for the Appellant. that "just because the AE performs a simpler function in this transaction with the assessee, would not render it simpler entity". 3.4 That the AO/TPO/DRP erred on facts and in law in not appreciating that functions performed, assets utilized, and risks assumed by the respective AEs in an international transaction are required to be taken into consideration for selection of the least complex entity as the tested party. 3.5 That the AO/TPO/ DRP erred on facts and in law in rejecting AEs as tested party without taking cognizance of the financial data submitted for AEs as well as foreign comparable companies by the Appellant during the course of assessment proceedings. 3.6 Without prejudice, that while computing the entity wide operating profit margin of the Appellant for benchmarking the international transaction of sale of APIs and formulations to AEs applying TNMM, the DRP/TPO erred on facts and in law in not excluding the extra- ordinary expenses amounting to Rs. 174,68,31,146 incurred towards unabsorbed cost, excess cost due to external procurement of APIs, testing charges and scrapping of inventory from the cost for computing the profit level indicator of operating profit cost. 3.7 That the TPO/DRP erred in considering the expense amounting to Rs. 16,48,00,000 on account of exceptional scrapping of inventory as operating in nature while computing the operating profit margin of the Appellant without appreciating that such cost has also been disallowed by the AO, resulting in a double-adjustment of the same amount. 3.8 Without prejudice, that the DRP erred on facts and in law in considering extra-ordinary expenditure incurred by the Appellant on account of suspension of production at Kalyani plant, as part of operating costs, allegedly holding that "all these alleged extra-ordinary expenses are due to violations of the US FDA approval for manufacturing API in which the involvement of the management has been specifically pointed out and cannot be considered as having occurred during the normal course of business." 3.9 That the TPO/ DRP erred on facts and in law in not appreciating that the aforesaid extra-ordinary expenditure/ costs incurred during the year under consideration is required to be excluded to establish comparability of the Appellant with the independent comparable companies in terms of Rule 10B(2) and Rule 10B(3) of the Income-tax Rules, 1962.
/Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO 3.10 Without prejudice, that the TPO/ DRP erred on facts and in law in rejecting the contention of the Appellant that since the AEs have incurred a loss in relation to goods sold by the Appellant to the AEs, which in turn were sold by the AEs to ultimate third party customer(s), no Transfer Pricing adjustment was even otherwise warranted. 3.11 Without prejudice, that the TPO/DRP erred on facts and in law in not appreciating that the adjustment made in relation to an international transaction cannot exceed the profits retained and the amount of margin retained by the AEs. 3.12 Without prejudice, that the TPO/ DRP erred on facts and in law in considering incorrect margin of the companies considered by him as comparable to the Appellant for benchmarking the international transactions of sale of APIs and formulations.
4. That the DRP erred on facts and in law in enhancing the income of the Appellant by disallowing expenses amounting to Rs.41,26,51,244 incurred by the assessee for undertaking corrective and remedial measures against procedural irregularities found in the manufacturing process, allegedly concluding that "such expenses cannot be considered in the 'normal' process of business and the claim in the P&L is not allowable." 4.1 That the DRP erred on facts and in law in failing to appreciate that the expenditure incurred by the Appellant in correcting the procedural irregularities in manufacturing process cannot be said to have been incurred for a purpose which is an offence or prohibited by law, so as to warrant disallowance under section 37(1) of the Act. 4.2 That the DRP erred on facts and in law in failing to appreciate that the expenditure on correcting the procedural irregularities in manufacturing process was necessitated purely on account of commercial/ business considerations and not for any purpose prohibited by law and was thus, allowable in terms of section 37(1) of the Act.
5. That the DRP erred on facts and in law in enhancing the income of the Appellant by disallowing expenses amounting to Rs. 16,48,00,000 charged to the profit & loss account by the assessee on account of exceptional scrapping of inventory. 5.1 That the DRP erred on facts and in law in failing to appreciate that the expense claimed on account of exceptional scrapping of inventory was a trading loss incurred in the course of carrying on of business and thus, allowable as deduction under section 28 of the Act.
6. That the AO erred on facts and in law in reducing depreciation claimed by the Appellant by disallowing Rs.8,97,377 on the ground that capital investment subsidy received by the Appellant from the State Government was towards cost of plant and machinery, thereby, reducing the Written Down Value of plant and machinery and consequently, depreciation claimed thereon. 6.1 That the AO erred on facts and in law in not appreciating that subsidy received from the State Government was on capital account and was not directly or indirectly related to meeting any portion of the cost of any fixed asset. 6.2 That the AO erred on facts and in law in not following the binding decisions of the Hon'ble Tribunal, Delhi Benches on the issue of capital subsidy in Appellant's own cases for earlier assessment years.
7. That the AO erred on facts and in law in initiating penalty proceedings under section 271(1)(c) of the Act.”
Since in grounds of appeal Nos. 1.1 and 2, assessee has raised legal issues of jurisdiction and limitation thus the same are taken up first for consideration.
Brief facts of the case are that the draft Assessment Order was passed on 24/12/2018 by Assistant Commissioner of Income Tax, Circle -9(2), New Delhi. The assessee filed objections before ld. DRP on 22.01.2019 i.e. within the permissible time limit allowed for filing the objections before the ld. DRP. The ld. DRP has given directions in terms of its order passed u/s 144C(5) of the Act dt. 26.09.2019. In compliance to the directions given by the ld. DRP, the TPO has passed the effect order on 26.11.2019 with a copy to the Jurisdictional assessing officer. The due date for passing of the final Assessment Order was 31.10.2019. Even if it is presumed that the order of ld. DRP was received by the AO in the month of October, 2019, the limitation for completion of final assessment order u/s 144C(13) expired on 20.11.2019. However, the final Assessment Order was passed on 20.12.2019 which is in divergence to due date prescribed u/s144C (13) of the Act, the assessee submits that the final order passed by the Assessing Officer is barred by limitation, and hence, should be treated as void.
On the other hand the ld. CIT DR vehemently supported the order of the lower authorities and argued that in the present case the draft assessment order was passed by the Faceless Assessment officer and after the directions given by the ld. DRP while disposing the objections raised by the assessee, the effect order was passed by the TPO as certain issues were sent to the TPO by the ld. DRP. The TPO has passed the effect order on 26.11.2019 thus the final order passed by the Jurisdictional Assessing officer on 20.12.2019 is well within the period of limitations as provided in section 144C (13) of the Act.
We have heard the parties and perused the material available on record. For the sake of ready reference, the Provisions of section 144C are reproduced as under:
/Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO “144C. Reference to dispute resolution panel. (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee. (2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order- (a) file his acceptance of the variations to the Assessing Officer; or (b) file his objections, if any, to such variation with,- (i) the Dispute Resolution Panel; and (ii) the Assessing Officer. (3) The Assessing Officer shall complete the assessment on the basis of the draft order, if- (a) the assessee intimates to the Assessing Officer the acceptance of the variation; or (b) no objections are received within the period specified in sub-section (2). (4) The Assessing officer shall, notwithstanding anything contained in section 153, pass the assessment order under sub-section (3) within one month from the end of the month in which,- (a) the acceptance is received; or (b) the period of filing of objections under sub-section (2) expires. (5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment. (6) The Dispute Resolution Panel shall issue the directions referred to in sub- section (5), after considering the following, namely:- (a) draft order; (b) objections filed by the assessee; (c) evidence furnished by the assessee; (d) report, if any, of the Assessing Officer, Valuation Officer of Transfer Pricing Officer or any other authority; (e) records relating to the draft order; (f) evidence collected by, or caused to be collected by, it; and (g) result of any enquiry made by, or caused to be made by, it. (7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),- (a) make such further enquiry, as it thinks fit; or /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO (b) cause any further enquiry to be made by any income-tax authority and report the result of the same to it. (8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order. (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members. (10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer. (11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively. (12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee. (13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153, the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received. (14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee. (15) For the purposes of this section,- (a) "Dispute Resolution Panel" means a collegium comprising of three Commissioners of income-tax constituted by the Board for this purpose; (b) "eligible assessee" means,- (i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of section 92-CA; and (ii) any foreign company.’ 7. A reference is also made to the provisions of section 144B relating to the faceless assessment pertaining to the assessment completed in case of eligible assessee u/s 144C of the Act, the relevant provisions are as under:
/Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO 144B.Faceless Assessment. (1) Notwithstanding anything to the contrary contained in any other provision of this Act, the assessment, reassessment or recomputation under sub-section (3) of section 143 or under section 144 or under section 147, as the case may be, with respect to the cases referred to in sub-section (2), shall be made in a faceless manner as per the following procedure, namely:— (i) the National Faceless Assessment Centre shall assign the case selected for the purposes of faceless assessment under this section to a specific assessment unit through an automated allocation system; (ii) the National Faceless Assessment Centre shall intimate the assessee that assessment in his case shall be completed in accordance with the procedure laid down under this section; (iii) a notice shall be served on the assessee, through the National Faceless Assessment Centre, under sub-section (2) of section 143 or under sub- section (1) of section 142 and the assessee may file his response to such notice within the date specified therein, to the National Faceless Assessment Centre which shall forward the same to the assessment unit; (iv) ….(xx) (xxi) in case of an eligible assessee, where there is a proposal to make any variation which is prejudicial to the interest of such assessee, as mentioned in sub-section (1) under section 144C, the National Faceless Assessment Centre shall serve the draft order referred to in clause (xx) on the assessee; (xxii)…(xxiii) (xxiv) where a draft order is served on the assessee as referred to in clause (xxi), such assessee shall,— (a) file his acceptance of the variations proposed in such draft order to the National Faceless Assessment Centre; or (b) file his objections, if any, to such variations, with— (I) the Dispute Resolution Panel, and (II) the National Faceless Assessment Centre, within the period specified in sub-section (2) of section 144C; (xxv) …(xxvi) (xxvii) where the eligible assessee files objections with the Dispute Resolution Panel, under sub-clause (b) of clause (xxiv), the National Faceless Assessment Centre shall send such intimation along with a copy of objections filed to the assessment unit; (xxviii) the National Faceless Assessment Centre shall, in a case referred to in clause (xxvii), upon receipt of the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, forward such directions to the assessment unit; (xxix) the assessment unit shall, in conformity with the directions issued by the Dispute Resolution Panel under sub-section (5) of section 144C, complete the assessment within the time allowed in sub-section (13) of section 144C and initiate penalty proceedings, if any, and send a copy of the assessment order to the National Faceless Assessment Centre; /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO (xxx) the National Faceless Assessment Centre shall, upon receipt of the assessment order referred to in clause (xxvi) or clause (xxix), as the case may be, serve a copy of such order and notice for initiating penalty proceedings, if any, on the assessee, along with the demand notice, specifying the sum payable by, or the amount of refund due to, the assessee on the basis of such assessment; (xxxi) …(xxxii) (2) … 8. From the perusal of sub-section (13) of section 144C it is clear that the final assessment order has to be passed by the Assessing officer within a period of one month from the end of the month in which the directions from the DRP are received. Further as per clause (xxviii) and (xxix) of sub-section 1 to section 144B provides that the Faceless Assessment Centre after receiving the directions of the DRP, sent them to the Assessment unit who shall pass the final assessment order in accordance with section 144C(13). Thus, in any case whether the assessment is completed by Jurisdictional Assessing officer or by Faceless assessing officer, the final order should be passed within the time prescribed u/s 144C(13) of the Act.
9. It appears that no final order was passed by Jurisdictional assessing officer or by the Faceless Assessment Centre after the directions given by Ld. DRP on 26.09.2019, within a period of one month from the end of September, 2019 i.e. the month when such directions were received by the Assessing Office. As observed above, as per section 144C(13), the final assessment order should be passed by the Assessing Officer within a period of one month from the end of the month in which such direction is received. In the instant case the directions were given by Ld. DRP on 29/09/2019 thus for the AO for passing the final order, the limitation expired on 31.10.2019. It is also relevant to state here that when DRP issued directions, TPO has no power to resume jurisdiction and the TPO could only pass the effect order which in no case extended the time limit for passing the Final Assessment Order available to Assessing Officer in terms of section 144C(13) of the Act. Accordingly, in the present case, the limitation for /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO passing final order by AO expired on 31.10.2019 thus the final assessment order passed on 20.12.2019 is barred by limitations and is void and invalid order.
One more fact that needs to be considered is that the AO in its order at page 2 last para observed that the DRP has passed the rectification order on 07/11/2019 which was forwarded to TPO for giving effect. Thereafter the final order u/s 144C(13) was passed on 28.12.2019 considering the adjustments worked out by TPO on the rectified directions of ld. DRP. In this regard, we are of the view that in terms of the provisions of section 144C(13), the AO has to pass the final order within a period of one month from the end of the month in which order of DRP u/s 144C(5) of the Act giving directions on the objections of the assessee is received by the AO. There is no provision in section 144C(13) where it is provided that the limitations provided in section 144C(13) could be taken from the date of receipt of order u/s 154 by the DRP. If there is any error in the directions given by the DRP in its order u/s 144C(5), the DRP could pass rectification order u/s 154 and AO is free to give effect to that rectification order u/s 154 itself within the time allowed under the Act. The AO can pass a rectification order u/s 154 giving effect to such rectification order of DRP however, this cannot allow the AO to extend the limitation to pass the final assessment order after the direction of DRP u/s 144C(5) even if such order contained any error. This proposition finds support from the order of Co-ordinate Bench of Tribunal in the case of Michael Page International Recruitment (Pvt.) Ltd. vs. DCIT reported in [2022] 143 taxmann.com 253 (Mum. Tribunal) wherein the Co-ordinate Bench has held that “section 144C(13) enjoins the AO to complete the assessment in conformity with the directions issued by the DRP. It is not open him to hold to give effect to this direction even if he finds the same to be Prima facie incorrect. Thus, whatever has been directed by the DRP is to implement within the permitted time limit, if there are mistakes in the directions of the DRP, that rectification can only be done by the DRP itself.”
/Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO 11. The Hon’ble jurisdictional High Court in the case of PCIT Vs. M/s Fibrehome India Pvt. Ltd. in of 2024 vide order dt. 05.02.2024 has held as under: “3. We note that an identical question has been answered by us in W.P.(C) 15381 of 2022 titled as "Louis Dreyfus Company India Private Limited vs. Deputy Commissioner of Income Tax Circle 13(1), Delhi & Ors." in favour of the assessee / petitioner. While dealing with this question, we had observed as follows:- "14. The determination which the AO makes in the first instance is recognized to be a draft of the proposed order of assessment by virtue of section 144C(1) of the Act. If the assessee be aggrieved by the proposed order of assessment, it is entitled to file objections before the DRP in accordance with Section 144C(2) of the Act. The power of the AO to complete the assessment on the basis of the draft order stands interdicted in case objections have come to be preferred within the 30 day period as contemplated in Section 144C(2) of the Act. It is the DRP which thereafter proceeds to decide the objections and frame directions to enable the AO to complete the assessment in accordance with Section 144C(5) of the Act.
In terms of sub-section (13) of Section 144C of the Act, the AO is mandated to complete the assessment "in conformity with the directions" as framed by the DRP. That very provision commands the AO to complete the assessment within one month from the end of the month in which such a direction is received.
16. This is evident from Section 144C of the Act which is extracted herein below:- ……..
17. As is manifest from a reading of sub-section (13) of Section 144C of the Act, the AO is not accorded any discretion in the framing of an order of assessment once directions have come to be framed by the DRP. In fact, the provision requires the AO to frame an order of assessment in conformity with those directions and without providing any further opportunity of hearing to the assessee. This principle of law has been affirmed by the Bombay High Court in the aforenoted paragraphs of Vodafone Idea and in Shell India Markets Private Limited v. Additional Commissioner of Income Tax Officer, National Faceless /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO Assessment Centre & Ors. The relevant paragraph of the decision in Shell India are extracted hereinbelow: "10. Sub-section (13) of Section 144C, therefore, is very clear inasmuch as the Assessing Officer shall, upon receipt of the directions issued under sub-section (5), in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received, Sub-section (13) also provides that the Assessing Officer can complete the assessment without providing any further opportunity of being heard to the assessee. This means that the moment the Assessing Officer receives the directions under sub-section (5), he has to straightaway complete the assessment and he does not even have to hear the assessee. The Assessing Officer shall simply comply with the directions received from the DRP within one month from the end of the month in which such direction is received."
In this backdrop, we note that both the judgments of the Bombay High Court in Shell India and Vodafone Idea construe the time lines as provided in Section 144C to be mandatory in character. In our considered opinion, this interpretation is in accord with the intent behind insertion of that provision and the bare text and spirit of that section. Thus, we accord our approval to the interpretation as set out in the aforenoted decisions of the Bombay High Court.
Further, the procedure of assessment as provided under Section 144C does not envisage or contemplate the interdiction or involvement of the TPO once a directive has been framed by the DRP. The role of the TPO comes to an end once an order as contemplated under Section 92 CA(4) of the Act has come to be framed and remitted to the AO. There was thus no occasion for the TPO having resumed proceedings post the passing of the direction by the DRP on 20 June 2022.
Undisputedly, the directive of the DRP came to be uploaded on the ITBA portal on 24 June 2022. It is additionally stated to have been dispatched through Speed Post to the third respondent (TPO) and the fourth respondent (Additional/Joint/Deputy/Assistant Commissioner of Income Tax, National Faceless Assessment Centre, New Delhi) on 27 June 2022. It is thereafter that the TPO appears to have passed the order dated 25 July 2022.
XXX XXX XXX 22. It is thus manifest that as per the provisions of E-as, 2019, all orders, notices and decisions have to be necessarily uploaded on the ITBA portal and as part of the larger faceless assessment regime which now holds the field. The uploading of the directive of the DRP on the ITBA portal would thus constitute valid and sufficient service and the period of limitation as prescribed in Section 144C(13) of the Act would be liable to be computed bearing that crucial date in mind. Once the aforesaid position becomes clear, it is evident that the order of assessment, if at all could have been framed lastly by 31 July 2022. There has thus been an abject failure on the part of the first respondent to comply with the mandatory timelines as incorporated in the aforenoted provisions. Accordingly, the writ petition is liable to be allowed and the impugned order of assessment and the consequential penalty proceedings are thus liable to be set aside on this short score alone."
4. We, consequently, find no merit in the instant appeal and the same shall stand dismissed.”
In the case of Vodafone Idea Limited V. CPC, Benglauru, Writ Petition No.15398 of 2023 (Bombay High Court) vide order dated 8.11.2023 has held as under: “20. Section 144C of the Act is a self contained provision which carves out a separate class of assessees, i.e.. 'eligible assessee Section 144C of the Act was inserted in the Finance Act of 2009 and came into effect from 1 October 2009. In the notes on clauses to the Finance Bill. 2009 (Budget 2009-2010), the reason for insertion of Section 144C is given as under: "The subjects of transfer pricing audit and the taxation of foreign company are at nascent stage in India. Often the Assessing Officers and Transfer Pricing Officers tend to take a conservative view. The correction of such view take very long time with the existing appellate structure. With a view to provide speedy disposal, it is proposed to amend the Income-tax Act so as to create an alternative dispute resolution mechanism within the income-tax department and accordingly, section 144C has been proposed to be inserted so /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO as to provide inter alia the Dispute Resolution Panel as an alternative dispute resolution mechanism."
Thus, if the provisions of Section 144C as mandated by the Statute are not strictly adhered the entire object of providing for an alternate redressal mechanism in the form of DRP stand defeated. That is not the intention of the legislature when the provision was introduced in the Act. Section 144C(10) of the Act provide that the directions of DRP are binding on the AO. By failing to pass any order in terms of the provision, the AO cannot be permitted to defeat the entire exercise and render the same futile. When a Statute prescribes the power to do a certain thing in a certain way, then the thing must be done in that way and other methods of performance are forbidden. Once the statute has prescribed a limitation period for passing the final order, it is expected that the internal procedure of the department should mould itself to give meaning to and act in aid of the provision. Any procedural defect (there is none in this case) in the internal mechanism of the working of E- assessment Scheme, cannot operate against the interest of assessee. Hence, the FAO cannot be believed that the DRP direction was received by him only on 23rd August 2023 despite being uploaded on the ITBA portal on 25th March 2021. The failure on the part of department to follow the procedure under Section 144C of the Act is not merely a procedural irregularity, but is an illegality and vitiates the entire proceeding.
In a decision in the matter of Turner International India Private Limited v. Deputy Commissioner of Income Tax, Circle-25(2), New Delhi, the Delhi High Court has held that the question "whether the final assessment order stands vitiated for failure to adhere to the mandatory requirements of Section 144C of the Act?", is no longer res integra and any order passed contrary to Section 144C of the Act cannot be sustained.
In a decision cited by Mr. Mistri in the matter of Shell India Markets (P) Ltd. (supra), this Court has also held as follows: "10. Sub-section (13) of Section 144C, therefore, is very clear inasmuch as the Assessing Officer shall, upon receipt of the directions issued under Sub-section (5), in conformity with the directions, complete the assessment within one month from the end of the month in which such direction is received. Sub-section (13) also provides that the Assessing Officer can complete the assessment without providing any further opportunity of being heard to the assessee. This means that the moment the Assessing Officer receives the directions under Sub-section (5), /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO he has to straightaway complete the assessment and he does not even have to hear the assessee. The Assessing Officer shall simply comply with the directions received from the DRP within one month from the end of the month in which such directions is received."
In view of the aforesaid discussion, we have no hesitation in holding that the assessment order dated 31" August 2023 passed by FAO two years after the DRP directions, is time barred and cannot be sustained. Consequently, the ROI as filed has to be accepted. Petitioner is entitled to receive the refund together with interest, in accordance with law. The procedure to be completed within 30 days of this order being unloaded. This would, however, not preclude revenue, should the need arise, from reopening the assessment by following due process and in accordance with law.
Rule is thus made absolute in terms of prayer clause (A) which reads as under: "A. that this Hon'ble Court be pleased to issue a Writ of Mandamus or any other writ in the nature of Mandamus, order or direction under Article 226 of the Constitution of India calling for the records of the case so as to examine the failure of Respondent Nos. 1 and 2 to give refund of tax paid by the Petitioner for the assessment year 2016-2017 which is in excess of legitimate tax due on the returned income of the Petitioner and directing Respondent Nos. 1 and 2 to forthwith grant the refund for the assessment year 2016-2017 along with the applicable rate of interest."
Before we part, we strongly recommend that a detailed enquiry be initiated on the failure on the part of the Faceless Assessing Officer concerned to act in accordance with the provisions of the Act and the lack of diligence on the part of officials concerned and the system itself insofar as it relates to the present assessment. Strict action should be taken against persons responsible for the laxity and lethargy displayed which has caused a huge loss to the exchequer and in turn to the citizens of this country. A copy of this order be circulated to the CBDT and the Principal Secretary, Ministry of Finance, GOI.
Mr. Singh seeks stay of the judgment. Stay refused.”
Further the decision of Hon’ble Madras High Court in the case of M/s Taeyang Metal India Private Limited vs. DCIT in Writ Petition No.12159 of /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO 2023 and W.M.P. No.11989 of 2023 vide order dated 23.02.2024 has held as under: “6. The interpretation of sub-section 13 of Section 144C takes center stage in the adjudication of this dispute. The said sub-section is set out below: "(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained in section 153 [or section 153B], the assessment without providing any further opportunity of being heard to the assessee, within one month from the end of the month in which such direction is received." From the above provision, it is evident that the specified time limit is one month from the end of the month in which directions are received. It is also clear that the time limit should be computed from the date of receipt of directions issued under sub-section (5) thereof. Sub-section (5) of Section 144C deals with the issuance of directions by the DRP. The admitted position is that the DRP issued directions on 16.06.2022 and this fact is borne out by examining the proceedings of the DRP, which is contained at page Nos. 122 to 130 of the typed set of papers. The said proceedings also record that the copy of the directions of the DRP is being forwarded to the assessee, the assessing officer and the TPO. The assessing officer referred to therein is the National Faceless Assessment Centre, Delhi. The petitioner has placed on record a communication from the Secretary and ACIT to the DRP. The said communication states that the assessing officer in the captioned case is the National Faceless Assessment Centre, Delhi and that a scanned copy of the proceedings was uploaded to the National Faceless Assessment Centre on 17.06.2022.
From the above discussion, the conclusion that emerges is that the directions of the DRP were forwarded to the assessing officer, i.e. National Faceless Assessment Centre, Delhi by uploading the same on 17.06.2022. Although learned senior standing counsel contends that the jurisdictional assessing officer received the directions only on 17.03.2023, for purposes of sub-section (13) of Section 144C, the date of receipt should be reckoned as B COREY date of receipt by the National Faceless Assessment Centre on 17.06.2022. The internal arrangement by which the assessment proceedings relating to the petitioner were purportedly transferred so as to ensure that the proceedings are not barred by limitation is not material for this purpose. Indeed, as contended by learned counsel for the petitioner, the /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO communication dated 12.04.2022 from the PCCIT of the National Faceless Assessment Centre seeking approval for transfer so as to complete assessment within the period of limitation underscores the fact that the income tax authorities were mindful of the fact that assessment would be barred by limitation unless such assessment is proceeded with and completed expeditiously.
All that remains is to examine whether the assessment proceedings would be barred by limitation if computed from the end of June 2022. If so computed, the period of one month expired on 31.07.2022, whereas the assessment order came to be issued on 25.03.2023. Hence, the assessment order was issued beyond the time limit specified in sub-section (13) of Section 144C. By taking into account not only statutory prescription but also the interpretation thereof by the Division Bench of this Court in Roca and that of the Division Bench of the Delhi High Court in Louis Dreyfus, 1 conclude that the assessment order cannot be sustained.
In view of the conclusion that the assessment proceedings are barred by limitation, it is unnecessary to examine as to whether the assessing officer was duly authorized to exercise jurisdiction either under the WhatsApp message issued on 13.04.2022 or upon the physical file being signed on 21.04.2022.”
Further the decision of the ITAT, Chennai Bench ‘D” in the case of M/s Cognizant Technology Solutions India Private Limited (as successor-in- interest of M/s KBACE Technologies Private Limited) vs. ACIT in IT(TP)A 61/CHNY/2023 vide order dated 29/05/2024 has held has under:
“10. We have heard rival submissions in the light of facts of the case, evidence placed on record and judicial citations relied upon. Ground of appeal no.1 is general in nature and hence bereft of any meritorious adjudication. Coming to grounds of appeal Nos. 2 to 6 whereby the assesse has challenged procedural irregularities in giving effect proceedings and thus arguing that the AO dated 18.05.2023 is barred by limitations, we find considerable force in the arguments put forth by the assesse. Facts on records indicate that the DRP Bangalore had given its directions on 01.12.2022. Within the meanings of section 144C(13) was incumbent on the AO to have passed his order on or before 31.01.2023. The DR could not controvert the said timeline by placing any evidence suggesting different service dates upon the AO. The Law prescribed u/s. 144C(13) unequivocally postulates that pursuant to the receipt of directions in a calendar month, the AO is /Del/2020 Fresenius Kabi Oncology Ltd. vs. ITO mandated to pass his final order before the end of following calendar month. Statutory stipulations prescribed in 144C(13) do not make any difference as to whether a set aside assessments would be given different timelines. The argument of CIT(DR) have accordingly been found to be not in consonance with statutory regulations governing the matter.
The case law relied upon by the assesse of 18/05/2023 Adobe system supra supports its case. Accordingly, the order u/s 143(3) r.w.s 1440 F.W.S 920A r.w.s 254 of the Income Tax Act dated 18.05.2023 is held to be barred by limitation and hence quashed. The grounds of appeal
numbers 2-6 thus stands allowed.”
15. In the light of the above discussion and by respectfully following the aforesaid catena of judgements including of hon’ble jurisdictional high court and various benches of Tribunal, we are of the considered view that the final order passed by the Jurisdictional assessing officer is invalid on limitations issue. Accordingly, the same is hereby quashed. As a consequence, Grounds appeal Nos. 1 containing sub grounds Nos. 1.1 and 1.3 of the assessee are allowed.
Since, we have already decided and allowed the assessee’s ground of appeal No.1.1 and 2 taken on limitation issue, thus the other grounds of appeal taken are not adjudicated
In the result appeal of the assessee is allowed. Order pronounced in the open Court on 31.07.2025