GROUPE SEB INDIA PRIVATE LIMITED,DELHI vs. ASSISTANT COMMISSIONER OF INCOME TAX (OSD), DELHI

The Revenue respectfully submits that this issue is highly contentious one and has not reached finality as it is pending before the Hon'ble Supreme Court for consideration of Larger Bench. Therefore, final adjudication of limitation issue by this Hon'ble Tribunal at this stage would be premature and will result in avoidable multiplicity of proceedings, which will involve incurrence of significant cost and resources and lead to uncertainty in tax administration. B. Supreme Court / High Court proceedings governing the issue (i) Split verdict by S.C. and Larger Bench reference in case of Shelf Drilling 4. In ACIT (International Taxation) v. Shelf Drilling Ron Tappmeyer Ltd. reported in [2025] 177 taxmann.com 262 (SC), the Hon'ble Supreme Court delivered a split verdict on the interplay of sections 144C and 153 and referred the issue to a Larger Bench.

It is settled law that a split verdict declares no law under Article 141 of the Constitution, and the legal position remains open until authoritatively settled by a majority decision.

From the language used by Hon'ble Supreme Court in its interim order, it is evident that it is the ration, reasoning or basis of judgement of Hon'ble High Court of Bombay in case of Shelf Drilling (supra) which can not form basis for decision on the same issue in any other case including instant appeals. In other words, it is not only that above judgment in case of Shelf Drilling can not be used as precedent in any other case, but also the reasoning given in judgement of Bombay High Court in case of Shelf Drilling Ron Tappmeyer Ltd or similar reasoning given in any other case including in the judgment of Madras High Court in case of Roca Bathroom Products (P.) Ltd cannot form basis for deciding the above issue of time limitation. Any such reliance would also be contrary to sound principles of judicial proprietary and institutional respect. This argument is duly supported by the judicious view taken by Hon'ble High Court of Bombay in the case of Paypal Payments Pvt. Ltd as discussed in subsequent paragraph. (iii) Bombay High Court decision in case of Paypal Payments Pvt. Ltd. (WPL (L) No.30944 of 2023, order dated 07.08.2024) 8. The Revenue further places reliance on the order dated 07.08.2024 passed by the Hon'ble Bombay High Court in case of Paypal Payments Private Limited v. ACIT (Writ Petition (L) No.30944 of 2023). In the said order, the Hon'ble Bombay High Court, while considering the very issue of interpretation of section 144C(1), 144C(4) and 144C(13) vis-à-vis section 153, recorded that the Supreme Court had, on 22.09.2023, directed that the Shelf Drilling judgment shall not be cited as precedent and clarified that the operative portion applies only inter partes. The Hon'ble High Court further noted that there was "quite a debate" on what one is permitted to do with the Shelf Drilling decision in view of the Supreme Court restraint. After hearing both parties in detail and after taking into consideration judgement of Hon'ble Madras High Court in the case of Roca Bathroom, Hon'ble Bombay HC, in its wisdom, has not quashed the assessment order and gave the parties the liberty to apply in the event of rendering a final order by Hon'ble Supreme Court on the impugned issue. The said view was again reiterated in the case of same assessee i.e. Paypal Payments Private Limited for another year in Writ petition (I) no. 27849 of 2024 vide judgement dated September 9, 2024 reported at [2024] 166 taxmann.com 521 (Bombay).

The above decision supports the Revenue's submission that, pending Supreme Court adjudication, the justifiable course available for this Hon'ble Tribunal is to defer adjudication of present appeals respecting the higher wisdom of Hon'ble High Court and Hon'ble Supreme Court. (iv) Grant of leave in Roca Bathroom and pendency before Hon'ble S.C. - legal implications 10. The Hon'ble Supreme Court has granted leave in CIT v. Roca Bathroom Products (P.) Ltd., reported in [2023] 147 taxmann.com 224 (SC). The grant of leave signifies that the issue is admitted for final adjudication, and the correctness of the Madras High Court judgment stands squarely under scrutiny. The order granting leave neither affirm the High Court's view, nor does it declare law. Once leave is granted, the High Court judgment loses finality.

It is respectfully. submitted that the ratio laid down by the Hon'ble Bombay High Court in Shelf Drilling Ron Tappmeyer Ltd. and by the Hon'ble Madras High Court in Roca Bathroom Products (P.) Ltd. arises on the same legal controversy, namely the computation of limitation involving the interplay of sections 144C and 153. The principle enunciated in both decisions is, in substance, identical-i.e., that the timelines under section 153 continue to govern and must subsume the DRP mechanism under section 144C. In this context, it is material that the Hon'ble Supreme Court has passed a specific interim direction that the judgment of the Hon'ble Bombay High Court in case of Shelf Drilling shall not be cited as a precedent in any other subsequent matter. The Revenue, therefore, submits that, when the Supreme Court has expressly restrained reliance on the Shelf Drilling ratio, the same ratio cannot be permitted to be applied indirectly through relying on another non-jurisdictional decision ( Such as Roca Bathroom decision of Madras High Court) laying down an identical preposition, particularly when said Roca Bathroom decision of Madras High Court itself is under appeal, and leave has been granted by the Hon'ble Supreme Court. Accordingly, Roca Bathroom decision or any other decision on the said issue cannot be treated as determinative or enforced as a basis to conclude the controversy in present appeals, and the issue ought to await authoritative settlement by the Hon'ble Supreme Court. (v) Hon'ble Supreme Court judgment in case of UP Rashtriya Chini Mill Adhikari Parishad, Lucknow Vs. State of U.P. and others, I.A No. 4 of 1995 in SLP(C) no 19963 of 1992 dated 2nd July 1995 (copy enclosed) : 12. In this case, Hon'ble Supreme Court had made following observation when a Division Bench of High Court decided an issue which was pending consideration before Full Bench of High Court. "The matter was pending consideration before a Full Bench of High Court. Needless to say that the appropriate course for the Division Bench would have been to wait the decision of the Full Bench which finally delivered his verdict on 15.11.1994 overruling the Division Bench."

Similar objections were raised by the ld. DR in the case of Li & Fung (India) P. Ltd. in & for AY 2018-19 & 2020-21 decided on 21.01.2026. The Tribunal rejected objections of the Department by observing as under:

Be that as it may, the assessee has not placed reliance on the judgment rendered in the case of Shelf Drilling (supra) but has pleaded its case following the decision rendered in the case of Roca Bathroom Products P Ltd. (supra) in which there is no stay order. Therefore, in our humble opinion there is no impediment in hearing the appeal of the assessee on the issue of “limitation in passing the final assessment order with reference to the provisions of section 144C r.w.s. 153 of the Act”. Thus, the preliminary objection raised by the Department is rejected.” For parity of reasons, the objections of the Department for taking up of these appeals for hearing at this stage are rejected.

On merits the ld. DR has made following written submissions:-

Section 144C prescribes a complete statutory cycle: This section deals with passing of draft order; right to file objections within statutorily defined time; DRP directions within statutorily defined time; and final order thereafter within a statutorily defined time. The Act itself allocates specific time windows for different actions, indicating that Parliament contemplated a multi-stage mechanism involving different authorities operating beyond the draft assessment order.

A harmonious construction of section 144C and 153 of the Act suggests that section 153 governs the stage up to passing of the draft order in time, while the special regime of section 144C governs time taken from draft order to completion of process before DRP to passing of final assessment order after the draft stage. Otherwise, the mandatory statutory time windows within section 144C would be rendered redundant or illusory, which can never be intent of legislature.

The non obstante language in section 144C dealing with passing of the final order makes it evident that Parliament intended post-draft finalization under section 144C to operate notwithstanding the general limitation in section 153.

A further significant facet is that it is the eligible assessee, which has option to activate or not to activate the DRP route. If objections before DRP are not filed, the statute permits expedited finalization. If objections are filed, the statutory mechanism consumes time by design. Still it remains expeditious way of finalization of dispute as stage of appeal before CIT(A) is done away with if option to file objection before DRP is chosen by the Assessee. Further, demand crystallizes only after DRP direction is given effect to by the Assessing officer. Hence, this is the way objective of expeditious disposal of disputes and ease of doing business is sought to be achieved by section 144C. The assessee cannot, after choosing the statutory route of DRP and availing benefit of expeditious and easier disposal of disputes provided by the code, contend that the assessment becomes void due to the time consumed in the process statutorily created for benefit of assessee.

In case, interpretation provided by the assessee is accepted, then it would lead to many absurdities in operation of 144C provisions. Firstly, at the stage of passing of draft assessment order, it is not known to the A.O. as to whether the assessee would choose DRP route or not. If the interpretation furthered by the assessee is accepted, then in every case of eligible assessee, which involved issue of draft assessment order, the AO would be required to pass draft assessment order at least 11 months before the time barring date prescribed under section 153 of the Act irrespective of the fact whether the assessee chooses DRP route or not. If Assessee does not choose DRP route, then while on one hand, such early finalization of assessment cuts down time available with the AO to pass assessment order affecting level of inquiries/verifications, on the other hand the DRP route would go unutilized. This contradiction itself shows that interpretation of section 144C of the Act relied upon by the assessee is required to be discarded. Secondly, with the overall time limits for completing assessments as prescribed under section 153 of the Act ever decreasing as an effort by the legislature to cut down overall time, if period of 11 months is counted backward from such shortened time limit allowed under section 153, then in many cases (such as not involving TP reference), the draft assessment order would be required to be issued even before end of the relevant assessment year. In many cases even involving Transfer Pricing Reference, such time available with the A.O. and T.P.O will be only few months, effectively scuttling possibility of any meaningful verification or scrutiny of details frustrating very purpose of entire scrutiny assessment related provisions under the I.T. Act. Such a situation will be hit by doctrine of impossibility or doctrine of frustration and courts should avoid any interpretation of 144C and 153 provisions of the Act which leads to such situations as 'Law does not compel the impossible'. This aspect having serious repercussions has not been considered while interpreting the interplay between section 153 and 144C of the Act. This again creates a very absurd situation which could never have been contemplated by the Legislature.Thirdly, it needs to be appreciated that overall mandate to reduce time lines for completing the assessment is being achieved by the Legislature over the years by way of shortening time lines given in section 153 of the Act. Section 144C is not meant for that as it has already very shortened and stiff timelines prescribed. Section 144C is meant for providing the alternate dispute resolution mechanism to eligible assessee and for doing away with one appellate level i.e. CIT(A) from entire chain of tax litigation. This objective requires to be appreciated for interpretation of section 144C of the Act.

Reliance is placed on principle of 'ut res magis valeat quam pereat' which has been upheld by Hon'ble S.C. In multiple cases (such as N B Sanjana Vs Elphinstone Spinning & Weaving Mills, AIR 1971 SC 2039, Cit Vs. Sun Engineering Works, AIR 1993 SC 43, P 57), it has been held by Hon'ble Supreme Court that one important consideration in construing a machinery section is that it should be so construed as to effectuate the liability imposed by the charging section and to make the machinery workable. Further, in case of W TRamsey Ltd v Inland Revenue Commissioners (1981) 1 All ER 865, it has been held that the context, scheme of the relevant Act as a whole and its purpose are as relevant in construing a taxing Act as in construing any other Act. (Source : Principles of Statutory Interpretation by Justice G P Singh, 15" Edition, page 629, 639).

Non applicability of judgement in the case of Roca Bathroom Products P. Ltd [2022] 140 taxmann.com 304 (Madras)- In the case of Roca Bathroom, the assessment years involved were A.Y. 2009-10 and 2010-11 and there issue involved was relating to section 153(2A) of the Act and there was inordinate delay on the part of the Department in passing final assessment order during set aside proceedings. Hence, that judgement was passed in its own peculiar facts and would not be applicable to any other case not involving such inordinate delay. As highlighted in para 18 above, that if the interpretation as argued by the assessee is accepted, then it would create a situation where in some of the assessment years in many cases, time available with the AO to pass final assessment year would be reduced to negative or hardly few months. Similar will be the case with the TPO. This is due to the fact that different assessment years have different time lines to complete final assessment as given in the proviso below 153(1) of the Act. Such cases and assessment years would be hit by doctrine of impossibility and interpretation as submitted by the assessee can not accepted at all. Therefore, each case and Assessment year would be required to be dealt and examined separately to see if sufficient or atleast some reasonable time was available with the AO and TPO to finalize the assessment. Mass application of ration of Roca Bathroom ( supra) decision can not be made due to distinguishable facts in the case of Roca Bathroom (supra). Hence, without prejudice to all other arguments, the ration of Roca Bathroom decision can be made applicable only where there is inordinate delay in completing set aside proceedings similar to the case of ROCA Bathroom, there was delays of many years. Hence, without prejudice to all arguments in earlier paragraphs, the ration of Roca Bathroom decision can not be applied to present appeals due to distinguishable facts as discussed above.

In view of the above, it is submitted that time limits prescribed under section 144C are in addition to the time limit prescribed under section 153 of the I.T. Act. In present appeals, the final assessment order has been passed within the time limit prescribed under section 144C of the Act. Further the case of Roca Bathroom is distinguishable on facts and hence, no applicable to present appeals. Hence, the assessee's contention is required to be rejected on merit on this count.”

We have considered the submissions made by rival sides on merits of the issue before us. The crux of submissions on merits by the department is, that limitation for passing the final assessment order under section 144C(13) of the Act is to be seen only with reference to the timeline specified u/s. 144C of the Act only without referring to provisions of section 153 of the Act. We find that identical submissions were made by the Department before the Hon’ble Madras High Court in the case of Roca Bathroom Products P. Ltd. (supra). The Hon’ble High Court rejected the arguments of the Department and held that provisions of section 144C and 153 of the Act are mutually inclusive as both contain provisions relating to section 92CA of the Act and are inter-dependent and are overlapping. Hence, the period of limitation for passing the final assessment order u/s.144C(13) of the Act has to be determined with reference to section 144C r.w.s 153 of the Act. For the sake of completeness, the relevant excerpts from the judgment rendered in the case of Roca Bathroom Products P. Ltd. (supra) are reproduced herein below:-

Admittedly, the facts including the dates are not under dispute. As regards the appeal in W.A.No.1854 of 2021, even though the remand was on 24-1-2013 and the assessee had received the order on 8-2-2013, the first notice by the DRP was issued on 19-2-2014 and the first hearing in the Chennai office was on 10-3-2014. Therefore, it is lucid that the DRP had the knowledge of the order before 19-2-2014. The matter was heard on various dates in Chennai office and written submissions were also filed. Thereafter, the files have been transferred to Bengaluru by the CBDT notification dated 31.12.2014. The Learned Judge relying upon the findings in the batch of cases which was decided first and rendered additional findings, which have been extracted in paragraphs 10 and 11 above, has allowed the writ petitions holding that the time limit under Section 153 (2A) was not adhered to and in any case, the proceedings have not been concluded within a reasonable time.

As rightly contended by the learned senior counsels and affirmed by the Learned Judge, the DRP proceedings is a continuation of assessment proceedings. To put it further, it is a part of assessment proceedings, once the objections are filed and under section 144C (12) a period of 9 months is prescribed, within which, directions are to be issued by the DRP, failing which any directions are to be treated as otiose. As seen from the timeline discussed in the earlier paragraphs, the original assessment proceedings are to be completed within 21 months and the additional time of 12 months is granted when proceedings before TPO is pending. The TPO has to pass orders before 60 days prior to the last date. Then 30 days time is given to the assessee to file their objection before the DRP and the DRP is given 9 months time and thereafter, within one month from the end of the month of receipt of directions from DRP, the final order is to be passed. This court is not in consonance with the contention of the learned senior panel counsel for the appellants/ revenue that the time period of 33 months, provided initially is for the draft order and not for the final order. A careful perusal of the timeline would indicate that the time limit is for the final assessment and not for the draft order. The anomaly in the argument is that in the present cases, no fresh draft order was passed, but the DRP had issued the notices. If the contention of the appellants / revenue was to hold some water, they must have passed the draft assessment order immediately on receipt of the order from the Tribunal, but instead, notice was issued by the DRP. In any case, it is a far cry for the revenue as because no order has been passed for more than 5 years.

As held above, the assessment has to be concluded within 21 months when there is no reference and when there is a reference, it has to be concluded within 33 months. In the additional 12 months, the draft order is to be passed, the objections have to be filed, the DRP has to issue the directions and the final order is to be passed. The provisions under section 144C and section 153 are not mutually exclusive as both contain provisions relating to Section 92CA and are inter-dependant and overlapping. On remand, prior to amendment as per Section 153 (2A), the Assessing officer is given 12 months to pass a fresh assessment order. Therefore, it is incumbent on him to do so, irrespective of the fact that DRP has completed the hearing and issued the directions or not. As rightly held by the learned judge, we are of the view that the DRP ought to have concluded the proceedings within 9 months from the date of receipt of the Tribunal's order, when it had issued a notice on 19-2-2014 and conducted the hearing as early as on 10-3-2014 and on several dates. The DRP at Chennai, in fact ought to have passed orders before 19-11-2014, even if the date of receipt of the notice is taken as 19-2-2014. In that event, the assessing officer ought to have passed the order before 31-12-2014 or at the latest before 31-3-2015 considering that the order was received during the Financial year 2013-14. The transfer of the files to Bengaluru, after the lapse of the time, will not indefinitely extend the time and can have no impact on the time lines. It is an inter-department arrangement and it cannot defeat the rights of the assessee.” [Emphasized by us]

The stand of the Revenue is that section 144C of the Act is a complete code in itself for completing the assessments where reference is made to Dispute Resolution Panel (DRP) and in sub section (1) to section 144C of the Act there is “non obstante” clause which mandates exclusion of all other provisions contained in the Act. The Hon’ble Single Judge of the Madras High Court in the case of Roca Bathroom Products (P.) Ltd. vs. Dispute Resolution Panel-2, 127 taxman.com 332 (Madras) while dealing with aforesaid arguments made on behalf of the Department in a lucid manner explained the reason for reading section 144C & 153 of the Act together for determining limitation for passing the final assessment order, and held:-

The purpose is to fast-track a specific type of assessment. This does not however lead to the conclusion that overall time limits have been eschewed in the process. In fact, the argument to the effect that proceedings before the DRP are unfettered by limitation would run counter to the avowed object of setting up of the DRP a high powered and specialised body set up for dealing with matters of transfer pricing. Having set time limits every step of the way, it does not stand to reason that proceedings on remand to the DRP may be done at leisure sans the imposition of any time limit at all.

Sub-section (13) to section 144C, in my view, imposes a restriction on the Assessing Officer and denies him the benefit of the more expansive time limit available under section 153 to pass a final order of assessment as he has to do so within one month from the end of the month when the directions of the DRP are received by him, even without hearing the assessee concerned.

Barring this, I find nothing in the language of sections 144C or 153 to lead me to the conclusion that the latter is operated from the operation of the former. The specific exclusion of section 153 from section 144C(13) can be read only in the context of that specific sub-section and once again, reiterates the urgency that sets the tone for the interpretation of section 144C itself.” The Division Bench affirmed aforesaid findings of the Hon’ble Single Judge and further, after considering various decisions viz. Sultana Begum vs. Prem Chand Jain [1997] 1 SCC 373; CIT vs. Hindustan Bulk Carriers [2023] 126 Taxman 321/259 ITR 449; & Franklin Templeton Trustee Services (P.) Ltd. vs Amruta Garg 124 taxmann.com 326, held as under:-

The assessees have furnished date chart in their respective appeals tabulating various dates including the due date for passing the final assessment order and the actual date for passing the final assessment order. The dates furnished by the assessees are tabulated hereinbelow: - Sequence of Events ITA No. No.5984/Del/2014 6021/Del/2024 6047/Del/2024 (AY 2021-22) (AY 2021-22) (AY 2021-22) Date of Draft Assessment Order 26.12.2023 27.12.2023 07.12.2023 u/s.144C(1) of the Act Date of DRP directions u/s.144C(5) 11.09.2024 27.09.2024 30.09.2024 of the Act Due date for passing Final 31.12.2023 31.12.2023 31.12.2023 Assessment Order u/s.144C(13) r.w.s. 153(4) of the Act Actual date of Final Assessment 29.10.2024 29.10.2024 23.10.2024 Order (A.Y 2021-22) IT (TP)A No. 6047/Del/2024(A.Y 2021-22) The dates mentioned in the table furnished by the assessees have not been disputed by the Revenue. A perusal of dates for passing the final assessment order in the respective appeals would clearly show that the final assessment order in the respective appeals have been passed by the AO beyond the period of limitation u/s.144C(13) r.w.s. 153 of the Act. Thus, following the ratio laid down in the case of Roca Bathroom Products P. Ltd. (supra), we hold that final assessment orders in the appeals by different assessees passed beyond the period of limitation is without jurisdiction. Consequently, the final assessment orders in the respective appeals are quashed.

Since, the assessees succeeds on the legal issue of validity of the final assessment order, at this stage we do not intend to adjudicate other grounds of appeal. Hence, all other grounds in the respective appeals are left open.

Before parting with the order, we may observe that both sides are at liberty to revive the appeal in case the Hon’ble Apex Court allows the appeal of Revenue in the case of Roca Bathroom Products P. Ltd. (supra).

In the result, appeals of the assessees are allowed.