ITAT Quashes Final Assessment Order Passed Beyond Section 144C(13) Limitation

Rolls Royce India Pvt. Vs DCIT (ITAT Delhi)

Overview: ITAT DELHI quashes the final assessment order for being passed beyond the statutory time limit prescribed under Section 144C(13) of the Income Tax Act, rendering it void ab initio and legally unenforceable.

Facts- The assessee filed its return of income, which was processed under Section 143(1) of the Income Tax Act. Subsequently, the case was selected for scrutiny and referred to the Transfer Pricing Officer (TPO) for examination of various issues, including the verification of high-value international transactions for determination of the arm’s length price (ALP) under Section 92CA(3) of the Act.

Pursuant to the TPO’s findings, certain adjustments were proposed, leading to the issuance of a draft assessment order under Section 144C on 24.03.2021. The assessee raised objections against the said draft order before the Dispute Resolution Panel (DRP), which issued its directions to the TPO on 21.09.2021. the Ld. AO was supposed to complete the assessment on or before 31.10.2021 but Ld. AO passed the impugned final assessment order on 18.11.2021

Issue- Whether the final Assessment Order is time barred as per section 144C(13) of the Act?

Observations-
Section 144C(13) of the Income Tax Act mandates that the Assessing Officer (AO) shall pass the final assessment order within one month from the end of the month in which the Dispute Resolution Panel (DRP) issues its directions. Crucially, no further opportunity of being heard is to be provided to the assessee at this stage. In the present case, the DRP issued its directions on 21.09.2021. Accordingly, the AO was required to complete the assessment and pass the final order on or before 31.10.2021, in strict compliance with the statutory timeline. However, the AO passed the final assessment order on 18.11.2021, well beyond the permissible time limit under Section 144C(13). Relying on settled judicial precedents, the Tribunal held that an assessment order passed beyond the prescribed limitation period is time-barred, void ab initio, and devoid of any legal force. The Tribunal accordingly quashed the final assessment order dated 18.11.2021 for being passed in violation of the statutory time frame laid down under the Act.