The main legal principle established in the judgment is that the failure to comply with the time limits prescribed under Section 144C of the Income Tax Act constitutes an illegality that vitiates the entire proceeding, rather than a mere procedural irregularity.

JUDGMENT :

SHOBA ANNAMMA EAPEN, J.

1. This writ petition has been filed by the petitioner challenging the order passed by the assessing authority under the provisions of the Income Tax Act, 1961 (for short “the Act”) on the ground that it is issued beyond the period fixed under Sub-Section (13) of Section 144C of the Act.

2. Brief facts of the case are as follows:

The petitioner, an assessee on the rolls of the third respondent under the provisions of the Act, is engaged in the business of software development services and business process & computer services to its associated enterprises. The petitioner is a 100% export-oriented unit (EOU) and in connection with its business activities, they obtained registration as a new Software Technology Park of India (STPI) unit in Techno-Park, Thiruvananthapuram. Being a 100% export-oriented unit, the petitioner was claiming the benefit of deduction envisaged under Section 10B of the Act. Subject to the compliance of the conditions under Section 10B of the Act, the said deduction was to run consecutively for a period of ten years. For the assessment year 2009-10, the petitioner filed return on 29.09.2009 declaring a total income of Rs. 66,66,453/-. The case was selected for scrutiny and notices dated 01.09.2010 and 23.06.2011 under Sections 143(2) and 142(1) of the Act respectively were issued. Since the petitioner had entered into international transactions with its associated enterprises, the file was referred to the Transfer Pricing Officer under Section 92CA of the Act to determine the Arm's Length Price (for short “ALP”) in respect of such transactions. The Transfer Pricing Officer, vide order dated 24.01.2013, made a total adjustment of Rs. 6,03,55,394/- in the international transactions entered into by the petitioner. The assessing officer issued Ext.P1 draft assessment order dated 21.03.2013 in accordance with subsection (1) of Section 144C of the Act. On receipt of Ext.P1 notice, the petitioner filed Ext.P2 reply before the Dispute Resolution Panel (for short “DRP”) as well as the assessing officer in terms of Sub-Section (2) of Section 144C of the Act. After considering the objections filed by the petitioner, the DRP issued Ext.P3 directions on 09.12.2013 to the assessing authority in accordance with Sub-Section (4) of Section 144C of the Act, on receipt of which, the assessing authority passed Ext.P4 assessment order dated 27.03.2014 in terms of Sub-Section (13) of Section 144C of the Act. According to the petitioner, the consequential order ought to have been passed on or before 31.01.2014 as per subsection (13) of Section 144C of the Act, wherein it is stipulated that upon receipt of the directions issued under Sub-Section (5), the assessing officer shall complete the assessment, in conformity with the directions, notwithstanding anything to the contrary contained in section 153, 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. It is alleged that on a reading of Ext.P4 order itself, it is clear that the order has been passed beyond the time prescribed in Sub-Section (13) of Section 144C of the Act. It is further alleged that it could be seen from Ext.P4 that a substantial portion of the liability arises out of the direction of the DRP and the consequent decision of the assessing authority to deny the benefit of Section 10B of the Act to the petitioner. According to the petitioner, they are entitled to deduction in respect of the profit and gains derived by a 100% EOU from the export of articles or things or computer software for a period of ten consecutive assessment years, beginning with the assessment year relevant to the previous year, in which it began to manufacture or produce such articles or things or computer software. It is pointed out that the claim of the petitioner for deduction under Section 10B of the Act has been accepted by the second respondent for the asses