Time-limit prescribed under section 153 would prevail overthe time-limit prescribed under section 144C of the Act.

Facts of the Case:

  • Shelf Drilling Ron Tappmeyer Limited (hereinafter referred to as “the Assessee”) is a non-resident company, filed its return of income for AY 2014-15. Subsequently assessment proceedings were initiated against the Assessee and AO passed the draft assessment order against which went for Dispute Resolution Pannel (DRP) route prescribe u/s 144C of the Income Tax Act, 1961 (the Act).
  • AO passed the final order in pursuance of the directions given by the DRP against which the Assessee filed appeal before ITAT. ITAT after considering all the facts available on record, remanded back the matter for fresh adjudication vide order dated 04.10.2019.
  • Thereafter, various questionnaires were served upon the Assessee and finally draft assessment order was passed by the AO on 28.09.2021. Against the draft assessment order, the Assessee again filed its objections before DRP. Along with, the Assessee also filed the writ petition before the High Court challenging the assessment as same was time barred as per the provisions of Taxation and other laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (TOLA).
  • As per the provisions of Section 153(3) of the Act and proviso thereto, the due date to pass fresh order pursuant to the order of ITAT would expire on 31st March 2021, i.e., 12 months from the end of the financial year in which the order was received by the specified authority. CBDT had extended this timeline under TOLA till 30.09.2021 for passing fresh order.
  • However, AO’s (respondent) contention was that no time limit prescribed under Section 144C(1) of the Act to pass draft assessment order, the question of the assessment being barred under Section 153(3) of the Act did not arise. Further, the provision of Section 144C of the Act which starts with a non obstante clause was inserted later than the incorporation of the non obstante clause in Section 153 of the Act. Thus, provisions of Section 144C prevail over the provisions of Section 153 of the Act.
  • The small question that has been put forth for consideration before Hon’ble High Court was whether Assessee was right in its contention and the assessment proceedings was time barred and return of income should be accepted or not.

Observation And Conclusion:

Hon’ble High Court held that:

  • It will be difficult to accept the AO’s contention that provisions of Section 153 of the Act will not apply where Section 144C is applicable. It would also mean that the time prescribed in Section 153 (1) of the Act cannot apply where Section 144C of the Act is applicable in the case of an eligible assessee.
  • Having considered the language of S. 144C and S. 153 of the Act, it cannot be accepted that the provisions of Section 153 are excluded to the operation of Section 144C. Within twelve months prescribed u/s 153(3) of the Act, AO has to ensure that the entire procedure prescribed under Section 144C of the Act was completed and passed final assessment order. Accordingly, AO will have no authority to pass any final assessment order as the same was time barred.
SW Point of View:There are two ways to interpret the law, one is in words and second is in spirit. In the above case, the Hon’ble High Court has interpreted the law in spirit and not in words to be in line with the intention of the law makers. The time-limit prescribed under section 153 of the Act would prevail over and above assessment time-limit prescribed under section 144C of the Act because Assessing Officer may follow procedure prescribed under section 144C but then entire procedure has to be commenced and concluded within twelve months period provided under section 153(3) of the Act. 

[2023] 153 taxmann.com 162 (Bombay)
HIGH COURT OF BOMBAY
Shelf Drilling Ron Tappmeyer Limited
v.
Assistant Commissioner of Income-tax (IT), Circle-4(2)(1), Mumbai

Lakshay Prakash Jonwal, Direct Tax Associate, SW India