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Facts
The assessee's appeal is against an assessment order for Assessment Year 2021-22, which included various transfer pricing adjustments related to interest on supplier's credit, External Commercial Borrowings (ECB), and management service fees. The primary ground of appeal contested by the assessee is that the final assessment order, passed on 18.10.2024, is barred by limitation as it was issued beyond the statutory time limit prescribed under Section 153 of the Income Tax Act.
Held
The Tribunal found that the assessment order was passed beyond the extended limitation period, which expired on 31.12.2023, even after accounting for the 12-month extension due to a Section 92CA reference. Relying on precedents from the Madras and Bombay High Courts, the Tribunal quashed the assessment order on the legal issue of limitation, keeping the other substantive issues open for potential revival if the Supreme Court's decision on similar matters necessitates modification.
Key Issues
Whether the assessment order passed by the Assessing Officer for Assessment Year 2021-22 is barred by limitation under Section 153 of the Income Tax Act, specifically considering the extended time limits for cases involving a reference under Section 92CA.
Sections Cited
143(3), 144B, 144C, 144C(1), 144C(4), 144C(12), 144C(13), 144C(15)(b), 147, 148, 153, 153(1), 153(1A), 153(1B), 153(2), 153(2A), 153(3), 153(3A), 153(4), 153B, 92CA, 92CA(1), 142, 245Q, 250, 254, 260, 262, 263, 264, 90, 90-A
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Income Tax Appellate Tribunal, Hyderabad ‘A’ Bench, Hyderabad
Before: SHRI VIJAY PAL RAO & SHRI MADHUSUDAN SAWDIA
आदेश/ORDER
PER VIJAY PAL RAO, VICE PRESIDENT :
This appeal by the assessee is directed against the assessment order passed u/s. 143(3) r.w.s. 144C(13) r.w.s. 144B of the Income Tax Act, 1961 (in short “the Act”) for the Assessment Yea 2021-22.
The assessee has raised the following grounds of appeal :
3. In Ground No.12, the assessee has challenged the validity of assessment order being barred by limitation as prescribed u/s. 153 of the Act. The learned Authorised Representative of the assessee has submitted that since it is a case of reference made u/s.92CA of the Act, the time period as per provisions of section 153 of the Act, the ordinary limitation period for passing the assessment order within 9 months from the end of the Asst. Year i.e. from 31.03.2022 is further extended by sub-section 4 of section 153 by 12 months due to the reason that a reference u/s.92CA(1) of the Act is made. Thus the Ld. AR has submitted that the limitation for passing the assessment order was to expire on 31.12.2023 whereas the Assessing Officer has passed the assessment order on 18.10.2024 which is barred by limitation. In support of his contention, he has relied upon the Judgment of Hon’ble Madras High Court in the case of CIT vs., Roca Bathroom Products (P.) Ltd., [2022] 445 ITR 537 (Madras) as well as the Judgment of Hon’ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd., vs., ACIT, International Taxation [2023] 457 ITR 161 (Bombay). The Ld. AR has further submitted that this Tribunal in the case of Aveva Solutions India LLP Vs. ITO in dated 19.11.2025 has also considered and decided an identical issue.
4. On the other hand, learned DR has submitted that the provisions of sec.144C begins with a non-obstante clause and, therefore, sec.144C is a Code in itself so far as the assessments in case of an “eligible assessee” and, therefore, the non-obstante clause in sec.144C(13) excludes the provisions of sec.153 of the Act. Learned DR has submitted that sec.153 of the Act exists in the Income Tax Act for a consequently longer period of time, whereas sec.144C of the Act is relatively a new provision introduced in 2009 and, therefore, the effect of non-obstante clause in sec.144C makes it clear that the provisions of sec.144C would prevail over the provisions of sec.153 of the Act. The learned DR has further submitted that the Income Tax Act provides two different methods of assessment one for the “eligible assessee” as defined u/sec.144C(15)(b) of the Act and the “other method” is applicable for the assessees’ who falls under the normal category. In case of ordinary or normal category of assessee , the assessment order must be completed within the limitation as provided u/sec.153(1) of the Act, whereas, if the matter is referred to the TPO u/sec.92CA of the Act, this period of limitation is further extended by a period of 12 months as per sub-sec.(4) of sec.153. The learned DR has further submitted that as per the special provisions u/sec.144C, the assessee is having an option to accept the Draft Assessment Order and variations in the draft assessment or to object the same by filing objections before the DRP or to the Assessing Officer for going to challenge the order of the Assessing Officer under regular appeal before the learned CIT(A). Therefore, once the assessee decided to go for the objections before the DRP, the limitation for completing the assessment is applicable as provided u/sec.144C(13) of the Act. Thus, the learned DR has submitted that once the Final Assessment Order is passed within the period of 30 days from the receipt of the DRP directions, then, it is well within the period of limitation provided u/sec.144C(13) of the Act. The learned DR has further submitted that this issue is pending adjudication before the Hon’ble Supreme Court. Earlier the Division Bench of the Hon’ble Supreme Court has given divergent decisions and, therefore, now this controversy has to be resolved by a Larger Bench of Hon’ble Supreme Court. Thus, the learned DR has submitted that till the dispute is resolved by the Larger Bench of the Supreme Court, this issue may be kept open.
We have considered the rival submissions as well as relevant material on record. The assessment year under consideration is 2021-22 and therefore the normal limitation period for completing the assessment as per section 153(1) read with 3rd proviso is 9 months from the end of the assessment year, which means the limitation was upto 31.12.2022. Since it is a case of reference made u/s.92CA of the Act, therefore, as per sub-section (4) of section 153 of the Act, the time limitation get extended by 12 months and thereby the limitation for completing the assessment was available with the Assessing Officer was up to 31.12.2023. The Assessing Officer passed the final assessment order on 18.10.2024 which is clearly beyond the limitation period expiring on 31.12.2023. At the outset, we note that an identical issue has been considered by us in the case of Aveva Solutions India LLP Vs. ITO (supra) in para Nos.7 to 14 held as under :
“7. We have considered the rival submissions as well as relevant material on record. In the case in hand, the assessee has challenged the validity of the assessment order passed u/sec.143(3) r.w.s.144C(13) of the Act dated 18.10.2024 being barred by limitation as provided u/sec.153 of the Act. At the outset, it is noted that the limitation for passing the assessment orders is provided u/sec.153 of the Act and the relevant provisions are in sub- sec.(1) and sub-sec.(4) of sec.153 reads as under : "153. Time limit for completion of assessment, reassessment and re- computation.— (1) No order of assessment shall be made under section 143 or section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable. Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: Provided further that in respect of an order of assessment relating to the assessment year commencing on – (i) the 1st day of April, 2019, the provisions of this sub- section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted. (ii) the 1st day of April, 2020, the provisions of this sub- section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted.
Provided also that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "nine months" had been substituted: Provided also that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2022, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted: (1A) xxxxx xxxxx (1B) xxxxx xxxxx (2) xxxxx xxxxx (3) xxxxx xxxxx (3A) xxxxx xxxxx (4) Notwithstanding anything contained in sub-sections (1), (1A), (2) (3) and (3A), where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections (1), (1A), (2), (3) and (3A) shall be extended by twelve months. (5) Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer [or the Transfer Pricing Officer, as the case may be], wholly or partly, otherwise than by making a fresh assessment or reassessment [or fresh order under section 92CA, as the case may be], such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be. Provided that where it is not possible for the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer [or the Transfer Pricing Officer, as the case may be], if satisfied, may allow an additional period of six months to give effect to the order.
Provided further that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 shall be made within the time specified in sub-section (3).”
A co-joined reading of sub-sec.(1) with third proviso of this sub-section of sec.153 makes it clear that in normal course, no order of assessment shall be made after the expiry of 9 months from the end of the assessment year in which the income was first assessable. The third proviso is relevant for the case in hand because the assessment year under consideration is 2021-2022 and, therefore, the period of 21 months from the end of the assessment year is reduced to 9 months. Sub-sec.(4) contemplates the cases where a reference u/sec.92CA(1) is made during the course of assessment proceedings, then, the period available for completion of the assessment shall be extended by 12 months. It is an undisputed fact that the present case is falling in the category of an “eligible assessee” where reference u/sec.92CA(1) was made by the Assessing Officer to the TPO and, therefore, the time limit for completing the assessment was extended by 12 months whereby the Assessing Officer was required to complete the assessment by 31.12.2023. The Assessing Officer has passed the Final Assessment Order on 18.10.2024 in pursuance to the Directions dated 24.09.2024 of the DRP. This controversy of the limitation applicable u/sec.153 or u/sec.144C(13) was considered by the Hon’ble Madras High Court in the case of CIT vs., Roca Bathroom Products (P.) Ltd., (supra) and held in Paras-18 to 28 as under :
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Thus, the Hon’ble Madras High Court has held that provisions of sec.144C and 153 are not mutually exclusive, but, are rather mutually inclusive. The period of limitation u/sec.153 is applicable for completing the assessment and sec.144C(13) is only in the nature of restricting the time period, within which, the Assessing Officer is required to pass the Final Assessment Order after the Directions of the DRP and not enlarging the limitation provided u/sec.153 of the Act.
Similar view has been taken by the Hon’ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd., vs., ACIT, International Taxation (supra) in Paras-23 to 34 as under :
Therefore, following the Judgments of Hon’ble Madras High Court as well as Hon’ble Bombay High Court cited (surpa), we hold that the assessment order passed by the Assessing Officer on 18.10.2024 is barred by limitation and consequently, the same is liable to be quashed. We order accordingly.
Since the issue is pending adjudication before the Hon’ble Supreme Court in the case of ACIT-[International Taxation] vs., Shelf Drilling Ron Tappmeyer Ltd., [2025] 177 taxmann.com 262 (SC) and the first attempt to resolve the dispute by the Hon’ble Supreme Court is not successful due to divergent views of the Division Bench of the Hon’ble Supreme Court and, therefore, the matter is required to be resolved by the Larger Bench of the Hon’ble Supreme Court. Since the matter is yet to be resolved by the Hon’ble Supreme Court, therefore, we allow the parties to get this appeal revived if the decision of the Hon’ble Supreme Court on this issue necessitates modification of this order.
The Hon’ble jurisdictional High Court in the case of Kotha Kantaiah vs., Income Tax Officer in WP.No.344 of 2025 vide order dated 24.04.2025 while dealing with the issue of validity of the notice issued u/sec.148 issued by the Jurisdictional Assessing Officer [in short “JAO”] instead of Faceless Assessing Officer [in short “FAO”] as per the Faceless Assessment Scheme has quashed the notice issued u/sec.148 by the JAO and consequently, re-assessment order, but, granted the liberty to the parties to get the petition revived as per the outcome of the Judgment of the Hon’ble Supreme Court on the identical issue. The relevant part of the Judgment of Hon’ble Jurisdictional High Court of Telangana in the case of Kotha Kantaiah vs., Income Tax Officer (supra) in Paras-15 to 18 of the said judgement is as under : “ 15. What is worrying this Bench more is the fact that an endeavour is being made whole heartedly to ensure not to generate further litigation on issues which have been laid to rest by a large number of High Courts all of whom have taken a consistent stand that the action of the Income Tax Department being violative of the ---
Accordingly, we dispose of this appeal on this legal issue and keep open the other issues raised by the assessee on the merits if the Hon’ble Supreme Court decides this issue otherwise.” Following the judgments of Hon’ble Madras High Court in the case of CIT Vs. Roca Bathroom Products (P) Ltd. (supra) as well as Hon’ble Bombay High Court in the case of Shelf Drilling Ron Tappmeyer Ltd. Vs. ACIT (supra) and to maintain the rule of consistency, we follow the decision of this Tribunal in the case of Aveva Solutions India LLP Vs. ITO (supra) and consequently decide this issue in favour of the assessee by holding the notice issued by the Assessing Officer u/s.148 on 18.10.2024 beyond the limitation period as provided u/s.153(4) of the Act and liable to be quashed. We order accordingly.
Since the issue is still pending adjudication before the Hon’ble Supreme Court in the case of ACIT (International Taxation) Vs. Shelf Drilling Ron Tappmeyer Ltd. (supra), the parties are at liberty to get this appeal revived if the judgment of Hon’ble Supreme Court on this issue necessitate modification of this order. Accordingly, we dispose of this appeal on this legal issue and kept open the other issues raised by the assessee on merits if the Hon’ble Supreme Court decides this legal issue otherwise.
In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 26th Nov., 2025.