Special vs General: Time Limit Conflict between Section 144C(13) and Section 153 of Income Tax Act, 1961

Introduction

The Indian income-tax regime is witnessing a contentious conflict regarding assessment time limits. Specifically, the courts are divided on whether the special timeline in Section 144C(13) of the Income Tax Act, 1961 which was introduced for Dispute Resolution Panel (DRP) proceedings overrides the general limitation period in Section 153. High Courts of Bombay and Madras have ruled that the overall time limit in Section 153 must still be honored even when the DRP route is invoked. This contrasts with earlier Income Tax Appellate Tribunal (‘ITAT’) decisions favouring the Revenue, which treated Section 144C as a self-contained procedure extending the time beyond Section 153. The debate has significant ramifications: if Section 153’s outer limit prevails, numerous past assessments completed after DRP directions would retrospectively become time-barred.

Recognizing the gravity of the issue, the Revenue filed a Special Leave Petition (SLP) before the Supreme Court, challenging Madras High Court’s decision in CIT v. Roca Bathroom Products (P) Ltd.). The Supreme Court has directed that the Bombay High Court’s ruling in Shelf Drilling (another case in hand) not be cited as precedent pending its final decision. Recently in August 2025, the Supreme Court bench comprising of Justice Nagarathna and Justice Satish Chandra delivered a split verdict and have referred this issue to the larger bench, thus signifying the importance of the issue.

Legislative Framework of Section 144C and Section 153

Section 153 establishes the outer time limits for completing assessments, reassessments, or recomputations from the end of the relevant assessment year (extended or reduced in specific cases), whereas Section 144C, Inserted by the Finance (No. 2) Act, 2009, created an alternate dispute resolution mechanism for certain assessees primarily those involving variations arising from transfer pricing or foreign company cases (termed “eligible assessees” as per section 144C 15(b)).

Section 144C lays down specific timelines for each stage: the assessee’s objections must be filed within 30 days of the draft order, the DRP must issue its directions within nine months from the end of the month in which the draft order was forwarded to the assessee, and crucially, Section 144C(13) provides that upon receipt of the DRP’s directions, “the Assessing Officer shall, in conformity with the directions, complete (…) notwithstanding anything to the contrary contained in Section 153 (or Section 153B) the assessment … within one month from the end of the month in which such direction is received.”. In simpler terms, Section 144C(13) mandates that the final assessment order following a DRP direction must be passed within 30 days, and it does so with a non obstante clause overriding Section 153’s time limits.

These parallel provisions gave rise to the present conflict: Does the 30-day period in Section 144C(13) operate independent of the general outer limit, or must the entire process (draft, DRP, and final order) still conclude before the Section 153 deadline. Since the DRP’s consideration can take several months, a final order issued within 30 days of DRP directions will almost certainly breach the original Section 153 deadline. Until recently, the tax department assumed that Section 153’s limit applies only up to the stage of the draft order, and that the final order timeline is governed exclusively by Section 144C(13). However, assessees have challenged this, arguing that the failure to complete the assessment within Section 153’s overall time frame (despite the DRP process) renders the final order invalid as time-barred. This debate has led to contrary judicial pronouncements, outlined below.

Judicial Views on the Timeline Conflict

The conflict has also come up in various cases before the ITAT and in continuation to the High Courts such as Madras and Bombay High court, ITAT in multiple cases such as Religare Capital Markets vs DCIT[1] and Principal Commissioner of Income Tax-13 v. Sterling Oil Resources Ltd[2] endorsed the position that Section 144C has a special scheme of arrangement which displaces the general time limit.

The Madras High Court in CIT v. Sanmina SCI India Pvt. Ltd[3]. also characterized Section 144C as a self-contained, special mechanism, with the consequence that the time limits in that section (and not Section 153) govern DRP matters. In other words, so long as the Section 144C procedures and their deadlines are adhered to.

Contrary to this position, Madras and Bombay High Court have taken the view that Section 153’s outer limit continues to govern, even in cases where the DRP route is invoked. Notably, the Madras High Court’s decision in Roca Bathroom Products (P.) Ltd. v. DRP (2021, single judge, upheld by a Division Bench in 2022) based on the principle of legislative intention held that the DRP process was not intended to eschew overall time limits; accepting a construction that DRP proceedings are “unfettered by limitation” would run counter to the object of providing a prompt dispute resolution mechanism. Similarly, the Bombay High Court in Shelf Drilling Ron Tappmeyer Ltd. v. ACIT (2023) held that Section 153 is not excluded by Section 144C, and that even in remand situations involving the DRP, the final order must fall within Section 153’s timeframe. The Bombay High Court acknowledged that Section 144C(13) sets specific timelines “to ensure prompt and expeditious finalization” after the DRP, but concluded this cannot mean the legislature gave a complete go-by to the overall limit in Section 153. With respect to the non obstante clause in Section 144C(13), the Bombay High Court opined after reading the memo of finance act 2009 which introduced the DRP mechanism that it serves a limited purpose that is, to ensure that, “dehors the [general] time limit,” once DRP directions are issued the final order must be passed within 30 days, no more.

These divergent interpretations have led the Income Tax Department to take the matter to the Supreme Court.

The author in this article analyses the conflicting interpretations, arguing that Section 144C(13) being a special provision with non obstante clause should govern the time limit for DRP cases to the exclusion of Section 153’s general limits. The author will examine the legislative framework, judicial treatments, and legal principle of generalibus specialia derogant to demonstrate why the special procedure in Section 144C prevails. Additionally, the author also discusses the nature of Section 144C as a self-contained code, the role of non obstante clauses and strict interpretation in tax law. A hypothetical timeline scenario is included to illustrate how subordinating Section 144C to Section 153 would render the DRP mechanism unworkable.

1. Section 144C as a Self-Contained Special Code

As per the principle of generalibus specialia derogant, when a special provision conflicts with a general provision, the special one prevails. This rule has been applied by both High Courts and Apex Court to IT Act cases regarding conflict of sections.

In the case of Britannia Industries Ltd. vs. CIT (Calcutta High Court) ITA NO. 46 of 2002, Dated 13th August 2002,  a conflict arose between Section 37(1) which is general provision allowing business expenditure deductions and 37(4)of the IT Act which is a specific provision disallowing guest-house expenses. The Calcutta High Court held that “rent for guest-houses is specially excluded… by section 37(4). Rent can never be claimed under the residuary provision [Section 37(1)] when a special section already exists for it. Reading the general… and the special…, there is no way but to allow the special section to prevail.”

Moreover, the Supreme Court in the case of Commercial Tax Officer, Rajasthan v. Binani Cements Ltd on on February 19, 2014 held that the specific provisions of Item 1-E of Annexure C of the Rajasthan Sales Tax New Incentive Scheme, which governed large-scale cement units, would override the general provisions applicable to “prestigious units.” The Court categorically applied the doctrine of generalia specialibus non derogant and ruled that where the legislature has consciously carved out a special category with a lower exemption cap for cement units, such specific restriction must prevail, and the assessee cannot seek recourse to broader, general incentive provisions to claim higher exemption.

Section 144C of the Income Tax Act is a special provision that establishes an alternative assessment mechanism for a specific and narrow category of cases, primarily those involving international taxation and transfer pricing disputes. It sets out a complete and self-contained procedure for assessment in the case of “eligible assessees”. (defined under 144C15(b))

It is not in question that Section 144C(13) is a special code within itself, even the single bench of Madras HC in the case of Roca bathroom[4] and Bombay HC in the case of Shelf drilling[5] even though held that 153 overrides the time limit prescribed under section 144C accepted the fact that section 144C is a special code within itself.

Section 253 of the IT Act which pertains to the appeals to the tribunals treats a DRP-directed final order (which is under section 144C) as a separate category for appeal purposes under sub section (1)(d). This statutory distinction underscores that a DRP order is not treated as a regular assessment order passed under Section 143(3), reinforcing the distinct procedural identity of Section 144C.

Furthermore, section 263 of the IT act which is about revision of orders prejudicial to the assessee gives power to principal commissioner and commissioner to revise any order passed by AO or the TPO but in certain circumstances does not give the power to revise order which has been passed after the directions of Dispute Resolution Panel thus, further strengthening the argument that section 144C is a complete code within itself.[6]

Thus, as per the settled position of courts on the principle of generalia specialibus non derogant, section 144C take precedence over section 153.

2. Strict Interpretation Requires Section 144C(13) to Override Section 153

It is a foundational principle in tax jurisprudence that fiscal statutes must be interpreted strictly. The courts are bound to go by the plain language of the statute, without importing any limitations, assumptions, or equity into the text. This was clearly stated in Cape Brandy Syndicate v. IRC (1921)[7], where the court held that in tax law, one must only look at what is clearly stated; nothing can be implied, and there is no room for intendment.

This rule has been consistently upheld by the Supreme Court of India in cases such as A.V. Fernandez v. State of Kerala[8] and Sales Tax Commissioner v. Modi Sugar Mills[9], both of which affirm that nothing can be added to or taken away from the words of a taxing statute on the basis of logic or fairness.

Coming to the present dispute, Section 144C(13) of the Income Tax Act contains a non obstante clause which reads: “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.”. The presence of such a clause is a legislative signal that the provision is intended to override any conflicting content section 153.

In Roca Bathroom Products Pvt. Ltd. v. DRP, the Madras High Court interpreted this clause narrowly. The court held that the non obstante clause is to only limit the time limit given to the AO in a case where an extra time limit under 153 is available after DRP issues its directions.

The court did the fundamental error as this interpretation restricts the scope of the non obstante clause by reading into it a limitation which does not exist in the statute. If the legislature had intended the non obstante clause to simply exclude the application of the extended time limit under Section 153, then the clause would have explicitly stated “notwithstanding the extended time limit under section 153.” The fact that the legislature instead used the broader phrase “notwithstanding anything to the contrary contained in section 153” shows a conscious and deliberate intention to override Section 153 in its entirety that is, 1) where extra time is provided under 153 and 2) when the time limit under section 153 is getting extended. 

Moreover, the only permissible departure from the rule of strict interpretation arises when applying the plain text would lead to absurdity or manifest injustice.

In the Commissioner of Income Tax vs. Sri J. H. Gotla[10] (1985), the Supreme Court, while deciding the case, put emphasis on certain rules of interpretation of taxing statutes as follows:

“If strict literal interpretation of the provision leads to absurdity, the interpretation that does not lead to absurdity would be preferred over the strict literal interpretation.”

However, no such absurdity arises in the present context. Section 144C(13) itself imposes a strict one-month time limit on the Assessing Officer for passing the final assessment order after receipt of DRP directions. This ensures procedural discipline and finality. There is no scope for indefinite delay, nor any procedural vacuum. Therefore, there is no justification to override the clear language of the statute on the basis of presumed legislative intent.

It follows, then, that the non obstante clause in section 144C(13) overrides applicability of section 153 in cases where DRP route has been taken.

3. The Practical impracticality of making section 144C(13) subordinate to section 153

An analysis of the statutory framework under the Income-tax Act, particularly in cases involving reference to the Transfer Pricing Officer (TPO), reveals a tension between the procedural timelines prescribed under Section 144C and the outer limit for completion of assessments set under Section 153. This can be illustrated through a practical timeline concerning Assessment Year (AY) 2023–24.

Assuming a reference to the TPO is made, the outer deadline for passing the final assessment order under Section 153(1), read with Section 153(4), would fall on 31 March 2026 two years from the end of the relevant assessment year. Section 92CA requires the TPO to pass their order at least 60 days prior to this terminal date, i.e., by 30 January 2026. However, the Act does not explicitly provide a deadline for the Assessing Officer (AO) to issue the draft assessment order. The assessee, upon receiving such a draft, is granted 30 days to file objections before the Dispute Resolution Panel (DRP).

Section 144C(12) mandates the DRP to issue its directions within nine months from the end of the month in which the draft order is served. Following this, Section 144C(13) requires the AO to pass the final assessment order within one month from the end of the month in which DRP directions are received.

In situations where the TPO exercises their fulltime allowance and issues their order on 30 January 2026, the AO is then left with less than two months to issue the draft order, receive and process objections, await DRP directions, and finally issue the assessment order. This leads to impracticality and timeline issue.

Conclusion

As we await the larger bench’s decision on the pending SLP. The ultimate ruling will have wide ramifications on past and ongoing assessments If the Court upholds the special provision’s override, it will reinforce legislative supremacy and clarify the law in favour of the DRP scheme’s integrity. If it rules otherwise, the legislature may need to step in to fine-tune the statutes (perhaps by explicitly extending Section 153 in such cases, prospectively). For now, the better view as argued above is that Section 144C(13), with its non obstante clause, governs the time limit to pass final assessment orders in DRP matters, overriding Section 153’s general time frame. This view best reconciles the texts and avoids making either provision dysfunctional.

Notes:

[1] [2019] 111 taxmann.com 387 (Delhi – Trib.)[10-10-2019]

[2] [2025] 171 taxmann.com 581 (Bombay)[11-02-2025]

[3] Commissioner of Income Tax, Chennai vs. Sanmina SCI India (P.) Ltd. [2017] 85 taxmann.com 29 (Madras)/[2017] 398 ITR 645 (Madras)/[2017] 297 CTR 491 (Madras)[08-08-2017]

[4] Commissioner of Income Tax & Anr. v. Roca Bathroom Products Pvt. Ltd., 2022 SCC OnLine Mad 8777 (Madras HC) ¶ 15.

[5]Shelf Drilling Ron Tappmeyer Ltd. v. Assistant Commissioner of Income-Tax,
2023 BHC-OS-7855-D (Bom HC), decided on 4 August 2023, ¶ 23.

[6] Religare Capital Markets Ltd. v. DCIT, [2019] 111 taxmann.com 387 (Delhi-Trib.) ¶ 13.

[7] Cape Brandy Syndicate v. IRC, [1921] 1 KB 64 (CA).

[8] A.V. Fernandez v. State of Kerala [AIR 1957 SC 657]

[9] Sales Tax Commissioner v. Modi Sugar Mills [AIR 1961 SC 1047]

[10] Commissioner of Income-Tax v. J. H. Gotla, (1985) 156 ITR 323 (SC).