Limitation – Assessment u/s 144C – Section 144C does not exclude operation of section 153 – Notice by DRP four years after direction by Tribunal – Barred by limitation

Limitation – Assessment u/s 144C – Section 144C does not exclude operation of section 153 – Notice by DRP four years after direction by Tribunal – Barred by limitation

For the A.Y. 2009-10, by an order dated 18th December, 2015, the Tribunal had set aside the order passed u/s 144C and remanded the matter to the Dispute Resolution Panel (DRP) for fresh examination. For the A.Y. 2010-11, by an order dated 23rd September, 2016, the Tribunal had set aside the order passed u/s 144C and remanded the matter to the A.O. for passing a fresh order. No further proceedings were initiated by the DRP and the A.O. pursuant to the order of the Tribunal. Therefore, on 21st August, 2019, the assessee wrote to the A.O. seeking refund of the tax paid for both the years. The aforesaid letter triggered notices dated 6th January, 2020 from DRP calling upon the assessee to appear for a hearing. The assessee filed writ petitions and challenged the notices on the ground of limitation.

The Madras High Court allowed the writ petitions and held as under:

‘i) Section 144C is a self-contained code of assessment and time limits are in-built at each stage of the procedure contemplated. Section 144C envisions a special assessment, one which includes the determination of arm’s length price of international transactions engaged in by the assessee. The Dispute Resolution Panel (DRP) was constituted bearing in mind the necessity for an expert body to look into intricate matters concerning valuation and transfer pricing and it is for this reason that specific timelines have been drawn within the framework of section 144C to ensure prompt and expeditious finalisation of this special assessment. The purpose is to fast-track a specific type of assessment.

ii) This does not, however, lead to the conclusion that overall time limits have been eschewed in the process. In fact, the argument that proceedings before the DRP are unfettered by limitation would run counter to the avowed object of setting up of the DRP, a high-powered and specialised body set up for dealing with matters of transfer pricing. Having set time limits at every step of the way, it does not stand to reason that proceedings on remand to the DRP may be done at leisure sans the imposition of any time limit at all. Sub-section (13) to section 144C imposes a restriction on the A.O. and denies him the benefit of the more expansive time limit available u/s 153 to pass a final order of assessment as he has to do so within one month from the end of the month in which the directions of the DRP are received by him, even without hearing the assessee concerned. The specific exclusion of section 153 from section 144C(13) can be read only in the context of that specific sub-section and, once again, reiterates the urgency that sets the tone for the interpretation of section 144C itself.

iii) The notices issued by the Dispute Resolution Panel after a period of four years from the date of order of the Tribunal would be barred by limitation by application of the provisions of section 153(2A). The writ petitions are allowed.’