The time limit for completing assessments under Section 144C(13) of the Income Tax Act is mandatory, and failure to comply renders the assessment invalid.

Judgment :

(Jitendra Jain) :

1. This appeal is filed under Section 260A of the Income Tax Act, 1961 (‘The Act’) by the appellant-revenue for the assessment year 2010-11 challenging the order of the Income-tax Appellate Tribunal (‘Tribunal’) dated 22 June 2016.

2. The following substantial question of law proposed by the appellant- revenue is admitted and by consent of both the parties taken up for final hearing :

“Whether on the facts and in circumstances of the case and in law, the Hon’ble ITAT was justified in considering the order passed by the AO under Section 143 (3) r.w.s. 144C (13) being barred by limitation of time and not deciding the issue on merits ?”

3. Brief undisputed facts are as under :-

(i) The respondent-assessee filed its return of income for the assessment year 2010-11 on 13 October 2010. On 6 September 2012, a reference was made under Section 92CA of the Act to the Transfer Pricing Officer (TPO), who vide order dated 28 January 2014 proposed an adjustment of Rs.108.36 crore to be made to the arm’s length price of the international transactions. Pursuant to the said TPO’s order, a draft assessment order was framed on 28 March 2014.

(ii) The appellant objected to the above draft assessment order by filing objections with the Dispute Resolution Panel (DRP) in terms of Section 144C of the Act. On 19 December 2014, the DRP gave its direction and held that share application money was in the nature of interest-free loan and directed the TPO/Assessing Officer (AO) to consider the SBI PLR of FY 2009-10 for evaluating the interest that should be charged on the loan transaction.

(iii) The directions of the DRP were received by the AO on 23 December 2014. The said directions were forwarded by the AO to the TPO on 5 January 2015. The TPO carried out the mandate of the DRP and re- determined the adjustments to be made to Rs.49.39 crore. The said re-determination by the TPO was made on 27 January 2015. The final assessment order under Section 144C (13) of the Act was passed on 27 February 2015.

4. Being aggrieved by the final assessment order, the respondent- assessee filed an appeal to the Tribunal and the Tribunal vide impugned order dated 22 June 2016 held that as the assessment order is framed beyond the period of one month from the end of the month in which the DRP’s directions were received by the AO, the assessment order was barred by limitation as per Section 144C (13) of the Act.

5. It is on the above backdrop that the present appeal is filed by the appellant-revenue challenging the order of the Tribunal.

Submissions of the Appellant-Revenue :

6. Mr. Sharma, learned counsel for the appellant-revenue submits that the time limit provided by Section 144C (13) of the Act is directory and not mandatory and, therefore, the delay of a month should not be treated as fatal for coming to the conclusion that the assessment order is bad and barred by limitation. He submits that the efforts put in by 3 Commissioners constituting the DRP would go in vain if such an interpretation is adopted. He submits that the Co-ordinate Bench of this Court in the case of APM Terminals India Private Limited Vs. Assessment Unit, Income Tax Department-NFAC & Ors., (2024) 159 taxmann.com 742 (Bombay) and Sulzer Pumps India Private Limited Vs. Dy. Commissioner of Income Tax, Circle-15(3)(2) & Ors., (2024) 465 ITR 619 supports the submissions made by him. Mr. Sharma, therefore, submits that the order of the Tribunal should be reversed and question should be answered in favour of the appellant-revenue.

Submissions of the Respondent-Assessee :

7. Mr. Pardiwalla, learned Senior Counsel for the respondent-assessee submits that the provisions relating to limitation should be construed strictly and there is no provision for condoning the delay if the order is not passed within the time limit provided under Section 144C (13) of the Act. Learned Senior Counsel submits that the time limit provided under the Act should be strictly complied with by the Officers in passi