Applicability of limitation for completion of assessment u/s 153 to a DRP proceeding under Section 144C – matter to be referred to larger bench
In a recent judgment, Supreme Courts gave split judgment on the interpretation of applicability of limitation for completion of assessment u/s 153 to a DRP proceeding under Section 144C of the Income Tax Act, 1961 (the Act).
ABCAUS Case Law Citation:
4683 (2025) (08) abcaus.in SC
The issue involved in the case was the interpretation of Section 144C in light of Section 153 of the Act. The question was on the applicability of Section 153 to a proceeding under Section 144C of the Act namely, whether the period of eleven months as envisaged under Section 144C of the Act should be over and above the limitation period prescribed, particularly, under Section 153(1) or (3), as the case may be. In other words, whether the time consumed for concluding the proceeding under Section 144C has to be subsumed within the limitation prescribed under Section 153(1) or (3) or as the case may be.
The Bombay High Court had allowed the writ petitions filed by the respondents-assessees by holding that no final assessment orders can be passed in these cases as the same would be time barred and hence the return of income filed by the respondents-assessees have to be accepted.
It was held by Hon’ble Judge Shri B.V. Nagarathna that the period under Section 144C of the Act is to be subsumed within the time prescribed under Section 153(1) of the Act and the High Court was correct in taking the view that the proceedings had become time-barred as no final assessment order in compliance with the provisions of Section 144C could be passed due to the impending expiry of the limitation period.
However, Hon’ble Judge Shri Satish Chandra Sharma has opined that the timelines prescribed under Section 153 will be applicable upto the stage of passing the draft assessment order under Section 144C(1). Once the procedure under Section 144C(1) gets triggered, the time available with the Dispute Resolution Panel to carry out the process conceived under Section 144C(5) to Section 144C(12) and the time available with the assessing officer under Section 144C(13), will be over and above the timelines prescribed under Section 153. This interpretation would ensure a smooth functioning of Section 153 and Section 144C of the Act.
In view of the divergent views expressed by the two Hon’ble Judges of the division bench of the Hon’ble Supreme Court, the Registry was directed to place the matter before Hon’ble the Chief Justice of India for constituting an appropriate Bench to consider the issues which arise in these matters afresh.
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