Supreme Court of India
Assistant Commissioner Of Income Tax vs Shelf Drilling Ron Tappmeyer Limited on 8 August, 2025
2025 INSC 946
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NOS.________OF 2025
(Arising out of SLP (Civil) Nos.20569-20572 of 2023)
Assistant Commissioner of Income Tax
(International Taxation) & Others … Appellants
Versus
Shelf Drilling Ron Tappmeyer Ltd. Etc. … Respondent(s)
WITH
SPECIAL LEAVE PETITION (CIVIL) NO.25798 OF 2024
INDEX
1. Factual Background: ............................................................................................... 3
2. Submissions: ........................................................................................................... 8
3. Opinion of Learned Satish Chandra Sharma J.: ................................................... 18
4. Relevant Provisions: .............................................................................................. 24
5. Material relied upon by the Respondents in support of their Submissions: ........... 41
6. Principles of Statutory Interpretation: .................................................................. 55
7. Non-Obstante Clause: ............................................................................................. 61
8. Analysis of the Provisions: .................................................................................... 71
9. Scheme of Section 144C: ....................................................................................... 78
10. Relevant Case Law: .............................................................................................. 98
11. Meaning of Assessment Order: ...........................................................................103
12. Summary of Conclusions: ..................................................................................107
Signature Not Verified
Digitally signed by
NEETU SACHDEVA
Date: 2025.08.08
16:11:09 IST
Reason:
Page 1 of 112
JUDGMENT
NAGARATHNA, J.
Leave granted in SLP (Civil) Nos.20569-20572 of 2023.
2. I have perused the judgment authored by my learned Brother
Satish Chandra Sharma, J. I am unable to persuade myself to
concur with the reasoning adopted by my learned Brother, hence
my separate opinion.
2.1 In the present cases, the respondents in the first batch of
cases being non-resident assessees engaged in the business of
exploration in terms of Section 44BB of the Income Tax Act, 1961
(for short, “the Act”), are eligible assessees within the meaning of
Section 144C.
2.2 Briefly stated the issue which arises in these appeals is the
interpretation to be given to Section 144C in light of Section 153 of
the Act. The question which falls for consideration is on the
applicability of Section 153 to a proceeding under Section 144C of
the Act namely, whether the period of eleven months as envisaged
under Section 144C of the Act should be over and above the
limitation period prescribed, particularly, under Section 153(1) or
Page 2 of 112
(3), as the case may be. In other words, whether the time consumed
for concluding the proceeding under Section 144C has to be
subsumed within the limitation prescribed under Section 153(1) or
(3) or as the case may be. It is worth noting that the question is
one of statutory interpretation i.e. the interplay between Sections
153 and 144C and not one of normatively assessing the adequacy
of time available to the Revenue or an assessee, under any
scenario. If this Court were to assign its own view to the adequacy
of statutory prescribed timelines, then it will amount to ignoring
the cardinal principles of interpreting fiscal statutes. While my
learned Brother has allowed the appeals filed by the Revenue, I
have decided to dismiss the same.
Factual Background:
3. Briefly stated, the respondents in Civil Appeal arising out of
SLP(C) No. 20569-20572/2023 are group companies incorporated
overseas and are engaged in the business of shallow water drilling
for clients engaged in the oil and gas industry. Respondents have
been filing their return of income under the Act. The four special
leave petitions filed before this Court arise from four writ petitions
being W.P. No.2340/2021, W.P. No.2661/2021, W.P.
Page 3 of 112
No.3059/2021 and W.P. No.3060/2021 preferred by the
respondents before the Bombay High Court, which were allowed by
the High Court vide common impugned order dated 04.08.2023.
Considering the material similarities in all writ petitions, the
common impugned order narrated and discussed the facts in W.P.
No.2661/2021 and we will narrate the same insofar as concurrent
with others which is from SLP(C) Nos.20570/2023. SLP(C)
Nos.20569-20570/2023 concern Assessment Year (A.Y.) 2014-15
and SLP(C) Nos.20571-20572/2023 concern A.Y. 2018-19.
3.1 The respondents in the above cases are non-resident
assessees, which are engaged, inter alia, in the business of
providing services or facilities in connection with prospecting for or
extraction or production of mineral oils, had the option to compute
their income on presumptive basis under Section 44BB of the Act;
however, for A.Y. 2014-15, the respondents opted out of the option
to compute their income on presumptive basis and declared a total
loss of Rs.120,18,44,672/- in their Return of Income filed on
29.11.2014. Vide Notice issued under Section 143(2) dated
28.08.2015, respondents’ Return of Income was selected for
scrutiny. Subsequently, the Draft assessment order was issued on
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26.12.2016 computing the respondent’s total income at
Rs.4,34,79,980/-. Undisputedly, Respondents are eligible
assessees as per Section 144C(15) of the Act. In accordance with
Section 144C, respondents filed their objections before the Dispute
Resolution Panel (for short, ‘DRP’) against the draft assessment
order, which eventually did not accept respondents’ case and by an
order dated 28.09.2017 gave directions to the Assessing Officer.
Upon receipt of the directions of the DRP, the Assessing Officer
passed the final assessment order on 30.10.2017 under Section
143(3) read with Section 144C(13) of the Act.
3.2 Aggrieved by the said Order dated 30.10.2017, the
respondents filed an appeal before the Income Tax Appellate
Tribunal (‘Tribunal’, for short) which by way of its order dated
04.10.2019 allowed the appeal and remanded the matter to the
Assessing Officer for fresh adjudication. Pursuant to such remand,
on 05.02.2020, the respondent, informed the Assessing Officer
about the order and requested for an early disposal of the same.
More than a year thereafter, on 22.02.2021, the respondent was
called upon to produce certain contractual details and supply
reasons for incurring a loss during A.Y. 2014-15. Further
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information was requested vide notice dated 10.09.2021 issued
under Section 142(1) of the Act. Subsequently, several notices
were issued under Section 142(1) of the Act calling upon the
respondent to provide documents and details. Finally, on
23.09.2021 at 09:42 AM, the respondent was issued a show cause
notice allowing it time to respond till 03:30 PM on the next day i.e.
24.09.2021. As required, the respondent filed its response on
24.09.2021. Thereafter, an assessment order came to be passed in
remand on 28.09.2021, which was clarified on 29.09.2021 to be a
draft assessment order.
3.3 In compliance with Section 144C(2), the respondent filed its
objections before the DRP on 27.10.2021 and also filed the writ
petitions before the High Court impugning the draft assessment
order dated 28.09.2021 by contending that no final assessment
order could be passed now as the period of limitation expired on
30.09.2021 under Section 153(3) of the Act read with the
provisions of the Taxation and other laws (Relaxation and
Amendment of Certain Provisions) Act, 2020 (for short, ‘TOLA”)
and the Notification issued thereunder.
Page 6 of 112
3.4 A perusal of the Memorandum of W.P. No.2340/2021
annexed by Petitioners confirms that the facts and dates in SLP(C)
No.20569/2023 are congruent to those discussed above and
therefore, the same need not reiterated.
3.5 The facts of SLP(C) Nos.20571-20572/2023 (arising out of
W.P. Nos.3059-3060/2021) are slightly different although they call
for an answer to the same question of law. Unlike the two other
petitions which concern an order passed on remand, in these
Petitions the original orders of assessment were required to be
passed within the period of limitation set out in Section 153(1) of
the Act. On 30.11.2018, the respondents therein filed their Return
of Income declaring total loss for AY 2018-19. On 23.11.2020, the
first notices under Section 142(1) were issued to them, which were
replied to. Several other notices under Section 142(1) were issued
and replies given before, finally, on 23.09.2021 a Show Cause
Notice was issued in both cases and draft assessment orders under
Section 144C passed on 28.09.2021. As per Section 153(1) of the
Act, the limitation for passing of final assessment orders is eighteen
months from the end of the Assessment Year. Ordinarily, the
original due date would have been 30.09.2020, however, due to the
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operation of the TOLA and the Notifications issued thereunder, the
due date was extended to 30.09.2021. Vide the Common Impugned
Order, the High Court was of the view that there is no difference in
the legal principle falling for consideration in all these petitions
since, in these two petitions, the draft order under Section 144C
was passed on 28.09.2021 and no final assessment order could
forthwith be passed due to the expiry of due date on 30.09.2021.
Being aggrieved by the said reasoning, the revenue has
preferred these appeals.
3.6 The impugned order in SLP(C) No.25798 of 2024 is against an
interim order passed by the Bombay High Court and the Writ
Petition is pending adjudication.
Submissions:
4. We have heard learned Additional Solicitor General (ASG) Sri
N. Venkataraman for the revenue and learned senior counsel Sri
J.D. Mistry for the respondents at length. We have also perused
the material on record.
4.1 Learned Additional Solicitor General contended that the
method of assessment which is contemplated for eligible assessees
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as defined under Section 144C(15) of the Act is distinct from the
normal category of assessees as there is a departure in the
assessment procedure under Section 144C of the Act which is a
Code by itself. This is because under Section 144C(1) of the Act, a
draft order has to be made and communicated to the eligible
assessees who are defined under Section 144C(15) of the Act. That
a draft assessment order is not an enforceable order but is made
by the Assessing Officer prior to the making of a final assessment
order which is in the case of eligible assessees only. The
respondents herein fall within clause (b) of Section 144C(15). That
insofar as an ordinary assessment is concerned, the time frame is
as provided under Section 153 of the Act but if there is a variation
arising in respect of a proceeding before the Transfer Pricing
Officer, then under Section 92CA of the Act as there is an extension
of the period of twenty-one months contemplated under Section
153(1) of the Act by a further period of twelve months, the total
time period is increased to thirty-three months for passing an
assessment order from the end of the relevant year. That, Section
144C has its own timeline which is in addition to what is prescribed
Page 9 of 112
under Section 153 of the Act as it is in the nature of an exception
to the latter provision.
4.2 It was submitted by Sri Venkataraman that under Section
144C of the Act, non-obstante clauses have been used in three sub-
sections and the import of those clauses have to be clearly
interpreted. In this context, he submitted that the Court must also
bear in mind the difference between a non-obstante clause and a
“subject to” clause which are used as distinct legislative devices for
bringing forth the intent of the legislature, which is the Parliament
in the instant case. Having regard to the non-obstante clause in
sub-section (1) of Section 144C of the Act, it was submitted that
there is no time frame envisaged for passing of a draft order by the
Assessing Officer when a matter is remanded from the Tribunal
under Section 254 of the Act. That the non-obstante clause would
indicate that the time frame of twelve months mentioned in the
proviso to sub-section (3) of the Section 153 would not apply to the
passing of a draft order under sub-section (1) of Section 144C of
the Act. However, the non-obstante clauses in sub-sections (4) and
(13) of Section 144C would indicate that the said clauses are
referrable directly to Section 153(3) of the Act. That, having regard
Page 10 of 112
to the use of the non-obstante clauses under Section 144C of the
Act, the said Section would have to be interpreted in juxtaposition
with Section 153(3) of the Act which deals with the limitation for
the passing of an assessment order pursuant to a remand order
passed by the Tribunal.
4.3 Learned Additional Solicitor General further submitted that
in the impugned orders of the Bombay High Court which have
followed the judgment of the Madras High Court in the case of
Commissioner of Income Tax vs. Roca Bathroom Products Pvt.
Ltd., 2022 SCC Online Madras 8777 (“Roca Bathroom
Products”) are wholly incorrect inasmuch as the High Courts have
failed to appreciate the fact that Section 144C is a Code by itself
with regard to the making of an assessment order insofar as the
category of eligible assessees are concerned. Hence, the said
judgments require to be overruled. A similar view has also been
taken by the Delhi High Court which is also incorrect.
5. Per contra, learned senior counsel Sri Mistry at the outset
submitted that the Special Leave Petitions ought to be dismissed
owing to “low tax effect”. However, the said submission has not
Page 11 of 112
been acted upon by us having regard to the important question of
law which has been raised in these appeals.
5.1 Learned senior counsel for the respondents commenced his
arguments by submitting that under the Act, there are only four
provisions which empower the Assessing Officer to make an
assessment order which are Sections 143(3), 144, 147 and 158.
The exception to this is Section 172 of the Act under which an
assessment order is passed on the landing of a ship on the Indian
shores.
5.2 Arguing on the merits of the case, Sri Mistry contended that
Section 153(1) of the Act prescribes the limitation period for
completion of assessment, reassessment or recomputation which
is twenty-one months subject to the provisos therein when an
assessment is made under Sections 143 or 144 of the Act; that, in
a case where Section 92C applies, sub-section (4) of Section 153
may have expressly extended the limitation period by twelve
months which is by way of a recent amendment and is not
applicable to the respondents-assessees in the present cases. Also,
while calculating the period of limitation, the Explanation to
Section 153 expressly provides the specific periods to be excluded.
Page 12 of 112
However, there is no reference to the time consumed in a
proceeding under Section 144C being excluded and thereby
extending the period of limitation as provided under sub-section
(3) of Section 153 of the Act which is applicable to the present
cases. Therefore, in all cases, pertaining to an eligible assessee,
the procedure contemplated under Section 144C has to be within
the time frame prescribed under Section 153(3) of the Act. There is
no additional limitation period contemplated over and above what
is prescribed in Section 153(3) of the Act which deals with a de
novo assessment being made on the setting aside or cancellation of
the assessment by the Tribunal under Section 254 of the Act. That
in the instant case, there has been a breach of the limitation period
while passing the re-assessment order. Hence, the High Court held
that the re-assessment order was barred by limitation.
5.3 Elaborating on the said contention, it was argued that the
overall time frame for passing an assessment/reassessment order
is prescribed under Section 153(1) of the Act, which is a period of
twenty-one months subject to the provisos thereto but when
Section 153(3) applies, the procedure under Section 144C must be
completed within the overall period of twelve months prescribed
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under Section 153(3). That the expression “an order of fresh
assessment” means a final assessment order and not to a draft
order to be passed in twelve months. Hence, an intermediary
mechanism has been envisaged under Section 144C of the Act
before the final order is passed under that Section itself. Further,
specific timelines have been indicated under Section 144C for
various stages to be completed, which must be strictly adhered to
in order to comply with the limitation period prescribed under
Section 153(3) of the Act. In this regard, the judgment of the
Madras High Court in the case of Roca Bathroom Products was
relied upon.
5.4 Learned senior counsel submitted that the conundrum in
this case is regarding a harmonious interpretation of Section
153(3) with Section 144C of the Act. In this regard, our attention
was drawn to the Explanation to Section 153 which specifically
excludes certain periods under certain circumstances while
calculating the limitation period of twelve months under the
proviso to Section 153(3) of the Act. It was submitted that if the
Parliament intended that the period consumed while carrying out
the procedure under Section 144C of the Act had to be excluded
Page 14 of 112
from Section 153(3) of the Act then there would have been an
express provision to that effect. In the absence of such a provision,
the Court would have to strictly interpret Section 144C in light of
Section 153(3) of the Act having regard to the intention of the
Parliament vis-à-vis eligible assessees.
5.5 Applying the aforesaid submissions to the facts of the case,
learned senior counsel Sri Mistry submitted that in the instant
case, the order of the Tribunal is dated 04.10.2019 and in terms of
the proviso to Section 153(3) of the Act, a period of twelve months
is the maximum period in which a final assessment order has to
be made de novo by bearing in mind the procedure envisaged under
Section 144C of the Act in which event, there would be a period of
eighteen months available from 04.10.2019 for passing such a de
novo order whereas twelve months is the minimum period available
to pass such an order if the order of the Tribunal is dated 31st
March of a particular year as the period of twelve months have to
be calculated from the end of the financial year in which the order
of the Tribunal is received by the concerned Income Tax
Commissioner. That Section 153(3) has been amended in the year
2016 which is after the insertion of Section 144C to the Act and
Page 15 of 112
the Parliament was well aware of the process envisaged under
Section 144C of the Act insofar as eligible assessees are concerned
with regard to making of a final assessment order within the
aforesaid time frame.
5.6 In this regard, reliance was placed on the judgment of this
Court in Kalyankumar Ray vs. Commissioner of Income Tax,
West Bengal, (1991) 191 ITR 634 (SC) (“Kalyankumar Ray”) to
contend that assessment under the Act is an integrated process
involving not only the assessment of the total income but also the
determination of tax and the latter is as crucial for the assessee as
the former. This is because under Section 143(3) the Assessing
Officer has to determine, by an order in writing, not only the total
income but also the net sum which will be payable by the assessee
for the assessment year in question and the demand notice under
Section 156 has to be issued in consequence of such an order. The
same principle would squarely apply to Section 144C of the Act in
the case of eligible assessees also insofar as the limitation period
is concerned.
5.7 That an order passed under Section 144C of the Act is not
appealable before the Commissioner (Appeal) but directly before
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the Tribunal vide Section 246A(1)(a). On the other hand, an
assessment order made pursuant to the directions of the DRP is
appealable under Section 253(1)(d) of the Act before the Tribunal.
Thus, an assessment order made under Section 144C is also an
assessment made within the meaning of Section 143(3) but
appealable before the Tribunal. Therefore, the limitation period
prescribed under Section 153(3) to an order made under Section
144C of the Act is squarely applicable. Even though, no limitation
period has been prescribed to make a draft assessment order
pursuant to a remand made by the Tribunal on setting aside or
cancelling the assessment, the fact remains that a final assessment
order must be made under Section 144C within the limitation
prescribed under the proviso to Section 153(3) of the Act.
5.8 It was emphatically submitted by learned senior counsel Sri
Mistry that the non-obstante clause in sub-section (1) of Section
144C of the Act is not with reference to the limitation period
prescribed under Section 153 of the Act. Since a draft order has to
be made prior to a final assessment order in the case of eligible
assessees unlike other categories of assessees, the Parliament has
envisaged a special procedure as opposed to the procedure
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contemplated in the case of ordinary assessees. In this regard,
reliance was placed on the judgments of this Court in Central
Bank of India vs. State of Kerala, (2009) 4 SCC 94 and In Re:
Interplay Between Arbitration Agreements under Arbitration,
1996 & Stamp Act, 1899, (2024) 6 SCC 1 in the context of
interpretation of a non-obstante clause.
Opinion of Learned Satish Chandra Sharma J.:
6. My learned Brother Satish Chandra Sharma, J. who has
penned his judgment is of the view that the learned Additional
Solicitor General is right in his submissions and therefore has
allowed the Revenue’s appeals while rejecting the contentions
advanced on behalf of the respondents-assessees. He has opined
that judgments of the Madras High Court in Roca Bathroom
Products as well as the impugned orders have to be set-aside.
6.1 Referring to Roca Bathroom Products, my learned brother
has stated that sub-section (4) of Section 153 of the Act applied to
the instant case, which providing for an additional period of twelve
months to complete the assessment and to pass a final order when
there is a reference to the Transfer Pricing Officer in terms of
Section 92CA of the Act. The Madras High Court on the other hand,
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held that the proceedings before the DRP and the passing of the
Draft Assessment and thereafter the Final Assessment Orders
ought to take place within the period of limitation of twelve months
as prescribed under Section 153(3) of the Act and not under an
additional period of twelve months. The above reasoning has not
been accepted by my learned Brother by observing that a fine
balance has to be maintained between ensuring that the revenue
authorities must have ample time and opportunity to assess the
income and to ensure that there is no evasion of tax or escapement
of income while at the same time, the rights of the assessees in
having their return scrutinised on a timely basis must be balanced.
6.2 In the above backdrop, it has been reasoned that if the entire
procedure contemplated in terms of Section 144C of the Act has to
be subsumed within the overall time period prescribed under
Section 153(3) of the Act, then it would result “in a complete
catastrophe for recovering lost tax”, as a narrower period of time will
pressurise the Assessing Officer and as a result, the system will
become unworkable. However, under Section 144C, specified
timelines have been prescribed within which the assessment order
must be passed. That although Section 153(3) does not distinguish
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between persons who are to be assessed under Section 144C of the
Act or otherwise, in fact, those whose assessments/reassessments
are made under Section 143(3) are different from those under
Section 144C of the Act. That under Section 144C of the Act, a
totally distinct procedure is contemplated and if a matter is
referred to the DRP, then the final assessment has to be made
within the period of eleven months from the date of forwarding of
the draft assessment order to the DRP.
6.3 According to my learned brother, the High Courts of Bombay
and Madras have erred in opining that no exception has been
carved out for Section 144C of the Act in any of the sub-sections of
Section 153 and therefore, the procedure under Section 144C must
necessarily conclude within the timeframe prescribed under
Section 153(3) of the Act. My learned Brother has agreed with this
view only to a limited extent, insofar as the timeline prescribed
under Section 153(3) is concerned in as much as it must apply to
the proceedings under Section 144C of the Act but only insofar as
they relate to the passing of the draft assessment order
contemplated under sub-section (1) of Section 144C of the Act. In
other words, the view taken by my learned Brother is that in
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addition to the timeframe stipulated under Section 153(3) of the
Act, i.e., twelve months for making an assessment order, the
timeframe that is taken for completing the proceeding under
Section 144C would also have to be excluded from the aforesaid
twelve months which would automatically extend the limitation
period beyond the twelve months as contemplated under Section
153(3) of the Act. This view is sought to be justified by holding that
sub-sections (4) and (13) of Section 144C of the Act which contain
the non-obstante clauses, exclude the application of Section 153(3)
of the Act and the timelines prescribed thereunder. However, the
High Courts of Madras and Bombay have taken the view that the
timeline under Section 144C further reduces the timeline available
to the Assessing Officer to pass an assessment order under that
provision and that it limits the timeline in order to achieve the
mandate under Section 153(3) of the Act which according to my
learned Brother is an incorrect view.
6.4 That, after the directions are issued by the DRP under
Section 144C, a period of one month is contemplated for passing
the final assessment order, which in any case has to be passed
within an overall twelve months period, under Section 153(3) of the
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Act. But learned Brother Sharma, J. has opined that the timelines
in sub-sections (4) and (13) of Section 144C of the Act are
independent of the timeline contemplated under Section 153(3) of
the Act and Section 144C operates in a timeline in addition to the
timeline contemplated under Section 153(3) of the Act. Therefore,
the Bombay and Madras High Courts were not correct in their
conclusions.
6.5 It is further reasoned by my learned Brother that Section
153(3) of the Act which prescribes the period of twelve months is
only for the purpose of passing a draft order. The non-obstante
clause contained in sub-sections (4) and (13) of Section 144C of the
Act extend the timeline for passing a final order; that sub-section
(4) of Section 144C operates only when the variation proposed in
the draft assessment order is not accepted or when the period of
filing objections before DRP has expired, which is subsequent to
the passing of the draft assessment order. Therefore, the Assessing
Officer has to comply with the requirements of Section 153(3) of
the Act only insofar as the passing of the draft assessment order is
concerned and if the variations made by him in the said order are
accepted or objections are not made within a period of thirty days,
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then the period of one month is extended for passing the final
assessment order under Section 144C(4) of the Act.
6.6 Applying the said reasoning to the present case, it has been
held that the Tribunal passed the remand order on 04.09.2019 and
Assessing Officer ought to have passed the draft assessment order
before 30.09.2021 and if in case the acceptance was received or no
objection was filed before 30.10.2021 then the final order had to
be passed in a month’s time. But if objections were received from
the eligible assessee then sub-sections (12) and (13) of Section
144C would apply and the Assessing Officer would have an
additional period of one month to pass the final assessment order.
This means that if the DRP issues directions, then within a period
of one month, the final assessment order has to be passed, which
is practically impossible, and the provision would be reduced to an
absurdity. Therefore, the view of the High Court of Madras and
Bombay was not acceptable to my learned Brother.
6.7 Thus, according to my learned Brother, Sharma, J. the
timeline mentioned under Section 153(3) would apply only to the
passing of the draft assessment order and if Section 92C applies,
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then the period would automatically be extended by twelve months
under Section 153(4) of the Act.
6.8 Therefore, the impugned orders of the Bombay High Court
have been set-aside and the appeals have been allowed by directing
the revenue authorities to pass afresh an appropriate order in
accordance with law, reserving liberty to the assessees to take
recourse to remedies available under the law (by referring to the
liberty granted to the parties in terms of paragraph 20 of the
judgment and order dated 30.08.2021 passed by the Bombay High
Court in Writ Petition No.30944 of 2021).
Relevant Provisions:
7. Before proceeding further, it would be useful to extract the
relevant provisions of the Act as under:
“2. Definitions. – In this Act, unless the context otherwise
requires, -
xxx
(40) “regular assessment" means the assessment made
under sub-section (3) of section 143 or section 144;”
7.1 Section 44BB is a special provision for computing profits and
gains in connection with the business of exploration etc., of mineral
oils which provision is applicable to the respondent assessees. The
Page 24 of 112
explanation in Section 44BB states that a plant includes ships,
aircrafts, vehicles, drilling units, scientific apparatus and
equipment, used for the purposes of such business and the
expression “minerals oil” includes petroleum and natural gas.
7.2 Section 139 speaks of filing of return of income. Section 143
deals with ‘assessment’ while Section 144 deals with ‘best
judgment assessment’. Under Section 144A the Joint
Commissioner has the power to issue directions in certain cases
while under Section 144BA reference can be made to the Principal
Commissioner or Commissioner in certain cases. Section 144C
deals with reference to dispute resolution panel. The time limit for
completion of assessment, reassessment and recomputation is
prescribed under Section 153 of the Act. The said Section
prescribes the limitation period for the making of, inter alia,
assessment orders on the application of several other provisions
which is relevant for the purposes of this case. Sections 144C and
153 are extracted as under:
“144C. Reference to dispute resolution panel. - (1) The
Assessing Officer shall, notwithstanding anything to the
contrary contained in this Act, in the first instance,
forward a draft of the proposed order of assessment
(hereafter in this section referred to as the draft order) to
the eligible assessee if he proposes to make, on or after the
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1st day of October, 2009, any variation which is prejudicial
to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall,
within thirty days of the receipt by him of the draft order,—
(a) file his acceptance of the variations to the Assessing
Officer; or
(b) file his objections, if any, to such variation with,—
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on
the basis of the draft order, if—
(a) the assessee intimates to the Assessing Officer the
acceptance of the variation; or
(b) no objections are received within the period specified
in sub-section (2).
(4) The Assessing Officer shall, notwithstanding anything
contained in section 153 or section 153B, pass the
assessment order under sub-section (3) within one month
from the end of the month in which,—
(a) the acceptance is received; or
(b) the period of filing of objections under sub-section (2)
expires.
(5) The Dispute Resolution Panel shall, in a case where any
objection is received under sub-section (2), issue such
directions, as it thinks fit, for the guidance of the Assessing
Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions
referred to in sub-section (5), after considering the
following, namely:—
(a) draft order;
(b) objections filed by the assessee;
Page 26 of 112
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation
Officer or Transfer Pricing Officer or any other
authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it;
and
(g) result of any enquiry made by, or caused to be made
by, it.
(7) The Dispute Resolution Panel may, before issuing any
directions referred to in sub-section (5),—
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any income-
tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or
enhance the variations proposed in the draft order so,
however, that it shall not set aside any proposed variation
or issue any direction under sub-section (5) for further
enquiry and passing of the assessment order.
Explanation.—For the removal of doubts, it is hereby
declared that the power of the Dispute Resolution Panel to
enhance the variation shall include and shall be deemed
always to have included the power to consider any matter
arising out of the assessment proceedings relating to the
draft order, notwithstanding that such matter was raised
or not by the eligible assessee.
(9) If the members of the Dispute Resolution Panel differ in
opinion on any point, the point shall be decided according
to the opinion of the majority of the members.
(10) Every direction issued by the Dispute Resolution
Panel shall be binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued
unless an opportunity of being heard is given to the
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assessee and the Assessing Officer on such directions
which are prejudicial to the interest of the assessee or the
interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued after
nine months from the end of the month in which the draft
order is forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-
section (5), the Assessing Officer shall, in conformity with
the directions, complete, notwithstanding anything to the
contrary contained in section 153 or section 153B, the
assessment 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.
(14) The Board may make rules for the purposes of the
efficient functioning of the Dispute Resolution Panel and
expeditious disposal of the objections filed under sub-
section (2) by the eligible assessee.
(14A) The provisions of this section shall not apply to any
assessment or reassessment order passed by the
Assessing Officer with the prior approval of the Principal
Commissioner or Commissioner as provided in sub-
section (12) of section 144BA.
(14B) The Central Government may make a scheme, by
notification in the Official Gazette, for the purposes of
issuance of directions by the dispute resolution panel, so
as to impart greater efficiency, transparency and
accountability by—
(a) eliminating the interface between the dispute
resolution panel and the eligible assessee or any other
person to the extent technologically feasible;
(b) optimising utilisation of the resources through
economies of scale and functional specialisation;
(c) introducing a mechanism with dynamic jurisdiction
for issuance of directions by dispute resolution panel.
(14C) The Central Government may, for the purpose of
giving effect to the scheme made under sub-section (14B),
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by notification in the Official Gazette, direct that any of the
provisions of this Act shall not apply or shall apply with
such exceptions, modifications and adaptations as may be
specified in the notification.
(14D) Every notification issued under sub-section (14B)
and sub-section (14C) shall, as soon as may be after the
notification is issued, be laid before each House of
Parliament.
(15) For the purposes of this section,—
(a) "Dispute Resolution Panel" means a collegium
comprising of three Commissioners of Income-tax
constituted by the Board for this purpose;
(b) "eligible assessee" means,—
(i) any person in whose case the variation referred to
in sub-section (1) arises as a consequence of the
order of the Transfer Pricing Officer passed under
sub-section (3) of section 92CA; and
(ii) any non-resident not being a company, or any
foreign company:
Provided that such eligible assessee shall not include
person referred to in sub-section (1) of section 158BA or
other person referred to in section 158BD.
(16) The provisions of this section shall not apply to any
proceedings under Chapter XIV-B.
xxx
153. Time limit for completion of assessment,
reassessment and recomputation. - (1) No order of
assessment shall be made under section 143 or section
144 at any time after the expiry of twenty-one months from
the end of the assessment year in which the income was
first assessable:
Provided that in respect of an order of assessment relating
to the assessment year commencing on the 1st day of
April, 2018, the provisions of this sub-section shall have
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effect, as if for the words "twenty-one months", the words
"eighteen months" had been substituted:
Provided further that in respect of an order of assessment
relating to the assessment year commencing on—
(i) 1st day of April, 2019, the provisions of this sub-
section shall have effect, as if for the words "twenty-one
months", the words "twelve months" had been substituted;
(ii) 1st day of April, 2020, the provisions of this sub-
section shall have effect, as if for the words "twenty-one
months", the words "eighteen months" had been
substituted:
Provided also that in respect of an order of assessment
relating to the assessment year commencing on the 1st
day of April, 2021, the provisions of this sub-section shall
have effect, as if for the words "twenty-one months", the
words "nine months" had been substituted:
Provided also that in respect of an order of assessment
relating to the assessment year commencing on or after
the 1st day of April, 2022, the provisions of this sub-
section shall have effect, as if for the words "twenty-one
months", the words "twelve months" had been substituted.
(1A) Notwithstanding anything contained in sub-section
(1), where a return under sub-section (8A) of section 139 is
furnished, an order of assessment under section
143 or section 144 may be made at any time before the
expiry of twelve months from the end of the financial year
in which such return was furnished.
(1B) Notwithstanding anything in sub-section (1), where a
return is furnished in consequence of an order under
clause (b) of sub-section (2) of section 119, an order of
assessment under section 143 or section 144 may be
made at any time before the expiry of twelve months from
the end of the financial year in which such return was
furnished.
(2) No order of assessment, reassessment or
recomputation shall be made under section 147 after the
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expiry of nine months from the end of the financial year in
which the notice under section 148 was served:
Provided that where the notice under section 148 is served
on or after the 1st day of April, 2019, the provisions of this
sub-section shall have effect, as if for the words "nine
months", the words "twelve months" had been substituted.
(3) Notwithstanding anything contained in sub-sections
(1), (1A) and (2), an order of fresh assessment or fresh
order under section 92CA, as the case may be, in
pursuance of an order under section 250 or section
254 or section 263 or section 264, setting aside or
cancelling an assessment, or an order under section 92CA,
as the case may be, may be made at any time before the
expiry of nine months from the end of the financial year in
which the order under section 250 or section 254 is
received by the Principal Chief Commissioner or Chief
Commissioner or Principal Commissioner or
Commissioner or, as the case may be, the order
under section 263 or section 264 is passed by
the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner, as the case
may be:
Provided that where the order under section
250 or section 254 is received by the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner or, as the case may be,
the order under section 263 or section 264 is passed by
the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner, as the case
may be, on or after the 1st day of April, 2019, the
provisions of this sub-section shall have effect, as if for the
words "nine months", the words "twelve months" had been
substituted.
(3A) Notwithstanding anything contained in sub-sections
(1), (1A), (2) and (3), where an assessment or reassessment
is pending on the date of initiation of search under section
132 or making of requisition under section 132A, the
period available for completion of assessment or
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reassessment, as the case may be, under the said sub-
sections shall,—
(a) in a case where such search is initiated under section
132 or such requisition is made under section 132A;
(b) in the case of an assessee, to whom any money,
bullion, jewellery or other valuable article or thing
seized or requisitioned belongs to;
(c) in the case of an assessee, to whom any books of
account or documents seized or requisitioned pertains
or pertain to, or any information contained therein,
relates to,
be extended by twelve months.
(4) Notwithstanding anything contained in sub-sections
(1), (1A), (2), (3) and (3A), where a reference under sub-
section (1) of section 92CA is made during the course of
the proceeding for the assessment or reassessment, the
period available for completion of assessment or
reassessment, as the case may be, under the said sub-
sections (1), (1A), (2), (3) and (3A), shall be extended by
twelve months.
(5) Where effect to an order under section 250 or section
254 or section 260 or section 262 or section
263 or section 264 is to be given by the Assessing Officer
or the Transfer Pricing Officer, as the case may be, wholly
or partly, otherwise than by making a fresh assessment or
reassessment or fresh order under section 92CA, as the
case may be, such effect shall be given within a period of
three months from the end of the month in which order
under section 250 or section 254 or section 260 or section
262 is received by the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or
Commissioner, as the case may be, the order
under section 263 or section 264 is passed by
the Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner, as the case
may be:
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Provided that where it is not possible for the Assessing
Officer or the Transfer Pricing Officer, as the case may be,
to give effect to such order within the aforesaid period, for
reasons beyond his control, the Principal Chief
Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, as the case may be on
receipt of such request in writing from the Assessing
Officer or the Transfer Pricing Officer, as the case may be,
if satisfied, may allow an additional period of six months
to give effect to the order:
Provided further that where an order under section
250 or section 254 or section 260 or section
262 or section 263 or section 264 requires verification of
any issue by way of submission of any document by the
assessee or any other person or where an opportunity of
being heard is to be provided to the assessee, the order
giving effect to the said order under section 250 or section
254 or section 260 or section 262 or section
263 or section 264 shall be made within the time specified
in sub-section (3).
(5A) Where the Transfer Pricing Officer gives effect to an
order or direction under section 263 by an order under
section 92CA and forwards such order to the Assessing
Officer, the Assessing Officer shall proceed to modify the
order of assessment or reassessment or recomputation, in
conformity with such order of the Transfer Pricing Officer,
within two months from the end of the month in which
such order of the Transfer Pricing Officer is received by
him.
(6) Nothing contained in sub-sections (1), (1A) and (2) shall
apply to the following classes of assessments,
reassessments and recomputation which may, subject to
the provisions of sub-sections (3), (5) and (5A), be
completed—
(i) where the assessment, reassessment or
recomputation is made on the assessee or any person
in consequence of or to give effect to any finding or
direction contained in an order under section 250,
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section 254, section 260, section 262, section 263, or
section 264 or in an order of any court in a proceeding
otherwise than by way of appeal or reference under
this Act, on or before the expiry of twelve months from
the end of the month in which such order is received
or passed by the Principal Chief Commissioner or
Chief Commissioner or Principal Commissioner or
Commissioner, as the case may be; or
(ii) where, in the case of a firm, an assessment is made on
a partner of the firm in consequence of an assessment
made on the firm under section 147, on or before the
expiry of twelve months from the end of the month in
which the assessment order in the case of the firm is
passed.
(7) Where effect to any order, finding or direction referred
to in sub-section (5) or sub-section (6) is to be given by the
Assessing Officer, within the time specified in the said sub-
sections, and such order has been received or passed, as
the case may be, by the income-tax authority specified
therein before the 1st day of June, 2016, the Assessing
Officer shall give effect to such order, finding or direction,
or assess, reassess or recompute the income of the
assessee, on or before the 31st day of March, 2017.
(8) Notwithstanding anything contained in the foregoing
provisions of this section, sub-section (2) of section
153A or sub-section (1) of section 153B or section 158BE,
the order of assessment or reassessment, relating to any
assessment year, which stands revived under sub-section
(2) of section 153A or sub-section (5) of section 158BA,
shall be made within a period of one year from the end of
the month of such revival or within the period specified in
this section or sub-section (1) of section 153B or section
158BE, whichever is later.
(9) The provisions of this section as they stood immediately
before the commencement of the Finance Act, 2016, shall
apply to and in relation to any order of assessment,
reassessment or recomputation made before the 1st day of
June, 2016:
Page 34 of 112
Provided that where a notice under sub-section (1)
of section 142 or sub-section (2) of section 143 or section
148 has been issued prior to the 1st day of June, 2016 and
the assessment or reassessment has not been completed
by such date due to exclusion of time referred to
in Explanation 1, such assessment or reassessment shall
be completed in accordance with the provisions of this
section as it stood immediately before its substitution by
the Finance Act, 2016 (28 of 2016).
Explanation 1.—For the purposes of this section, in
computing the period of limitation—
(i) the time taken in reopening the whole or any part of
the proceeding or in giving an opportunity to the
assessee to be re-heard under the proviso to section
129; or
(ii) the period commencing on the date on which stay
on the assessment proceeding was granted by an
order or injunction of any court and ending on the
date on which certified copy of the order vacating the
stay was received by the jurisdictional Principal
Commissioner or Commissioner; or
(iii) the period commencing from the date on which the
Assessing Officer intimates the Central Government
or the prescribed authority, the contravention of the
provisions of clause (21) or clause (22B) or clause
(23A) or clause (23B), under clause (i) of the first
proviso to sub-section (3) of section 143 and ending
with the date on which the copy of the order
withdrawing the approval or rescinding the
notification, as the case may be, under those clauses
is received by the Assessing Officer; or
(iv) the period commencing from the date on which the
Assessing Officer directs the assessee to get his
accounts audited or inventory valued under sub-
section (2A) of section 142 and—
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(a) ending with the last date on which the assessee
is required to furnish a report of such audit or
inventory valued under that sub-section; or
(b) where such direction is challenged before a
court, ending with the date on which the order
setting aside such direction is received by the
Principal Commissioner or Commissioner; or
(v) the period commencing from the date on which the
Assessing Officer makes a reference to the Valuation
Officer under sub-section (1) of section 142A and
ending with the date on which the report of the
Valuation Officer is received by the Assessing
Officer; or
(vi) the period (not exceeding sixty days) commencing
from the date on which the Assessing Officer
received the declaration under sub-section (1)
of section 158A and ending with the date on which
the order under sub-section (3) of that section is
made by him; or
(vii) in a case where an application made before the
Income-tax Settlement Commission is rejected by it
or is not allowed to be proceeded with by it, the
period commencing from the date on which an
application is made before the Settlement
Commission under section 245C and ending with
the date on which the order under sub-section (1)
of section 245D is received by the Principal
Commissioner or Commissioner under sub-section
(2) of that section; or
(viii) the period commencing from the date on which an
application is made before the Authority for Advance
Rulings or before the Board for Advance Rulings
under sub-section (1) of section 245Q and ending
with the date on which the order rejecting the
application is received by the Principal
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Commissioner or Commissioner under sub-section
(3) of section 245R; or
(ix) the period commencing from the date on which an
application is made before the Authority for Advance
Rulings or before the Board for Advance Rulings
under sub-section (1) of section 245Q and ending
with the date on which the advance ruling
pronounced by it is received by the Principal
Commissioner or Commissioner under sub-section
(7) of section 245R; or
(x) the period commencing from the date on which a
reference or first of the references for exchange of
information is made by an authority competent
under an agreement referred to in section
90 or section 90A and ending with the date on
which the information requested is last received by
the Principal Commissioner or Commissioner or a
period of one year, whichever is less; or
(xi) the period commencing from the date on which a
reference for declaration of an arrangement to be an
impermissible avoidance arrangement is received by
the Principal Commissioner or Commissioner under
sub-section (1) of section 144BA and ending on the
date on which a direction under sub-section (3) or
sub-section (6) or an order under sub-section (5) of
the said section is received by the Assessing Officer;
or
(xii) the period (not exceeding one hundred and eighty
days) commencing from the date on which a search
is initiated under section 132 or a requisition is
made under section 132A and ending on the date on
which the books of account or other documents, or
any money, bullion, jewellery or other valuable
article or thing seized under section 132 or
requisitioned under section 132A, as the case may
be, are handed over to the Assessing Officer having
jurisdiction over the assessee,—
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(a) in whose case such search is initiated
under section 132 or such requisition is made
under section 132A; or
(b) to whom any money, bullion, jewellery or other
valuable article or thing seized or requisitioned
belongs to; or
(c) to whom any books of account or documents
seized or requisitioned pertains or pertains to,
or any information contained therein, relates to;
or
(xiii) the period commencing from the date on which the
Assessing Officer makes a reference to the Principal
Commissioner or Commissioner under the second
proviso to sub-section (3) of section 143 and ending
with the date on which the copy of the order under
clause (ii) or clause (iii) of the fifteenth proviso to
clause (23C) of section 10 or clause (ii) or clause (iii)
of sub-section (4) of section 12AB, as the case may
be, is received by the Assessing Officer,
shall be excluded:
Provided that where immediately after the exclusion of the
aforesaid period, the period of limitation referred to in sub-
sections (1), (1A), (2), (3) and sub-section (8) available to
the Assessing Officer for making an order of assessment,
reassessment or recomputation, as the case may be, is less
than sixty days, such remaining period shall be extended
to sixty days and the aforesaid period of limitation shall be
deemed to be extended accordingly:
Provided further that where the period available to the
Transfer Pricing Officer is extended to sixty days in
accordance with the proviso to sub-section (3A) of section
92CA and the period of limitation available to the
Assessing Officer for making an order of assessment,
reassessment or recomputation, as the case may be, is less
than sixty days, such remaining period shall be extended
to sixty days and the aforesaid period of limitation shall be
deemed to be extended accordingly:
Page 38 of 112
Provided also that where a proceeding before the
Settlement Commission abates under section 245HA, the
period of limitation available under this section to the
Assessing Officer for making an order of assessment,
reassessment or recomputation, as the case may be, shall,
after the exclusion of the period under sub-section (4)
of section 245HA, be not less than one year; and where
such period of limitation is less than one year, it shall be
deemed to have been extended to one year; and for the
purposes of determining the period of limitation
under sections 149, 154, 155 and 158BE and for the
purposes of payment of interest under section 244A, this
proviso shall also apply accordingly:
Provided also that where the assessee exercises the option
to withdraw the application under sub-section (1)
of section 245M, the period of limitation available under
this section to the Assessing Officer for making an order of
assessment, reassessment or recomputation, as the case
may be, shall, after the exclusion of the period under sub-
section (5) of the said section, be not less than one year;
and where such period of limitation is less than one year,
it shall be deemed to have been extended to one year:
Provided also that for the purposes of determining the
period of limitation under sections 149, 154 and 155, and
for the purposes of payment of interest under section
244A, the provisions of the fourth proviso shall apply
accordingly:
Provided also that where after exclusion of the period
referred to in clause (xii) the period of limitation for making
an order of assessment, reassessment or recomputation,
as the case may be, ends before the end of the month, such
period shall be extended to the end of such month.
Explanation 2.—For the purposes of this section, where, by
an order referred to in clause (i) of sub-section (6),—
(a) any income is excluded from the total income of the
assessee for an assessment year, then, an assessment
of such income for another assessment year shall, for
the purposes of section 150 and this section, be
Page 39 of 112
deemed to be one made in consequence of or to give
effect to any finding or direction contained in the said
order; or
(b) any income is excluded from the total income of one
person and held to be the income of another person,
then, an assessment of such income on such other
person shall, for the purposes of section 150 and this
section, be deemed to be one made in consequence of
or to give effect to any finding or direction contained in
the said order, if such other person was given an
opportunity of being heard before the said order was
passed.”
7.3 Section 246A deals with appeals before the Commissioner
(Appeals) which is essentially with regard to an assessment order
passed under sub-section (3) of Section 143 or sub-section (12) of
Section 144BA or Section 144 made by the Assessing Officer.
However, any order passed in pursuance of the directions of the
DRP is not appealable to the Commissioner (Appeals) as the same
is excluded under the said provision. On the other hand, under
Section 253(1)(d), an order passed by an Assessing Officer under
sub-section (3) of Section 143 or Section 147 or Section 153A or
Section 153C in pursuance of the directions issued by the DRP, or
an order passed under Section 154 in respect of such order can be
appealed directly to the tribunal.
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Material relied upon by the Respondents in support of their
Submissions:
8. Learned senior counsel for the respondents relied upon the
Budget Speeches of the Finance Ministers of the relevant years in
support of their submission that it has been the intention of the
Parliament to reduce the time consumed in making an assessment
order in the case of eligible assessees. The relevant portions are
extracted as under:
(i) Speech of Finance Minister on July 6, 2009
“96. In order to further improve the investment
climate in the country, we need to facilitate the resolution
of tax disputes faced by foreign companies within a
reasonable time frame. This is particularly relevant for
such companies in the Information Technology (IT) sector.
I, therefore, propose to create an alternative dispute
resolution mechanism within the Income Tax Department
for the resolution of transfer pricing disputes. To reduce
the impact of judgemental errors in determining transfer
price in international transactions, it is proposed to
empower the Central Board of Direct Taxes (CBDT) to
formulate ‘safe harbour’ rules.
(underlining by me)
(ii) Memorandum Regarding Delegated Legislation
Clause 55
“Clause 55 of the Bill seeks to insert a new section 144C
relating to reference to Dispute Resolution Panel.
The proposed new section provides for a dispute resolution
mechanism for the purpose of speedy disposal of the
Page 41 of 112
objections raised by the eligible assessee under this new
section.
Accordingly, it is proposed to empower the Board to make
rules for the efficient functioning of the Dispute Resolution
Panel for expeditious disposal of the objections filed by the
eligible assessee.”
xxx
Provision for constitution of alternate dispute
resolution mechanism
The dispute resolution mechanism presently in place is
time consuming and finality in high demand cases is
attained only after a long-drawn litigation till Supreme
Court. Flow of foreign investment is extremely sensitive to
prolonged uncertainty in tax related matter. Therefore, it
is proposed to amend the Income-tax Act to provide for an
alternate dispute resolution mechanism which will
facilitate expeditious resolution of disputes in a fast track
basis.
The salient features of the proposed alternate dispute
resolution mechanism are as under:—
(1) The Assessing Officer shall, forward a draft of the
proposed order of assessment (hereinafter in this section
referred to as the draft order) to the eligible assessee if he
proposes to make, on or after the 1st day of October, 2009,
any variation in the income or loss returned which is
prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall,
within thirty days of the receipt by him of the draft order,-
(a) File his acceptance of the variations to the Assessing
Officer; or
(b) File his objections, if any, to such variation with,—
(i) The Dispute Resolution Panel; and
(ii) The Assessing Officer.
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(3) The Assessing Officer shall complete the assessment on
the basis of the draft order, if —
(a) The assessee intimates to the Assessing Officer the
acceptance of the variation; or
(b) No objections are received within the period specified
in sub-section (2).
(4) The Assessing Officer shall, notwithstanding anything
contained in section 153, pass the assessment order under
sub-section (3) within one month from the end of the
month in which,—
(a) The acceptance is received; or
(b) The period of filing of objections under sub-section (2)
expires.
(5) The Dispute Resolution Panel shall, in a case where any
objections are received under sub-section (2), issue such
directions, as it thinks fit, for the guidance of the Assessing
Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions
referred to in sub-section (5), after considering the
following, namely:—
(a) Draft order;
(b) Objections filed by the assessee;
(c) Evidence furnished by the assessee;
(d) Report, if any, of the Assessing Officer, Valuation
Officer or Transfer Pricing Officer or any other
authority;
(e) Records relating to the draft order;
(f) Evidence collected by, or caused to be collected by, it;
and
(g) Result of any enquiry made by, or caused to be made
by it.
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(7) The Dispute Resolution Panel may, before issuing any
directions referred to in sub-section (5), -
(a) Make such further enquiry, as it thinks fit; or
(b) Cause any further enquiry to be made by any income
tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or
enhance the variations proposed in the draft order so,
however, that it shall not set aside any proposed variation
or issue any direction under sub-section (5) for further
enquiry and passing of the assessment order.
(9) If the members of the Dispute Resolution Panel differ in
opinion on any point, the point shall be decided according
to the opinion of the majority of the members.
(10) Every direction issued by the Dispute Resolution
Panel shall be binding on the Assessing Officer.
(11) No direction under sub-section (5) shall be issued
unless an opportunity of being heard is given to the
assessee and the Assessing Officer on such directions
which are prejudicial to the interest of the assessee or the
interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued after
nine months from the end of the month in which the draft
order is forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-
section (5), the Assessing Officer shall, in conformity with
the directions, complete, notwithstanding anything to the
contrary contained in section 153, the assessment without
providing any further opportunity of being heard to the
assessee, within one month from the end of the month in
which the direction is received.
(14) The Board may make rules for the efficient functioning
of the Dispute Resolution Panel and expeditious disposal
of the objections filed, under sub-section(2), by the eligible
assessee.
Page 44 of 112
(15) For the purposes of this section,—
(a) “Dispute Resolution Panel” means a collegium
comprising of three commissioners of Income-tax
constituted by the Board for this purpose;
(b) “eligible assessee” means,-
(i) any person in whose case the variation referred to
in sub-section (1) arises as a consequence of the
order of the Transfer Pricing Officer passed under
sub-section (3) of section 92CA; and
(ii) any foreign company.
Further, it is proposed to make consequential
amendments—
(i) in sub-section (1) of section 131 so as to provide that
“Dispute Resolution Panel” shall have the same
powers as are vested in a Court under the Code of Civil
Procedure, 1908 (5 of 1908);
(ii) in clause (a) of sub-section (1) of section 246 so as to
exclude the order of assessment passed under sub-
section (3) of section 143 in pursuance of directions of
“Dispute Resolution Panel” as an appealable order and
in clause (c) of sub-section (1) of section 246 so as to
exclude an order passed under section 154 of such
order as an appealable order;
(iii) in sub-section (1) of section 253 so as to include an
order of assessment passed under sub-section (3) of
section 143 in pursuance of directions of “Dispute
Resolution Panel” as an appealable order.
These amendments will take effect from 1st October, 2009.
[Clauses 49,55,71,72]”
(underlining by me)
Page 45 of 112
(iii) Notes on Clauses
Clause 55 of the Bill seeks to insert a new section 144C in
the Income-tax Act relating to Dispute Resolution Panel.
The subjects of transfer pricing audit and the taxation of
foreign company are at nascent stage in India. Often the
Assessing Officers and Transfer Pricing Officers tend to
take a conservative view. The correction of such view take
very long time with the existing appellate structure.
With a view to provide speedy disposal, it is proposed to
amend the Income-tax Act so as to create an alternative
dispute resolution mechanism within the income-tax
department and accordingly, section 144C has been
proposed to be inserted so as to provide inter alia the
Dispute Resolution Panel as an alternative dispute
resolution mechanism.
This amendment will take effect from 1st October, 2009.
(iv) Explanatory Notes to the Provisions of the Finance
Act, 2016 dated 20th January 2017
57. Rationalisation of time limit for assessment,
reassessment and recomputation.
57.1 The existing statutory time limit for completion of
assessment proceedings is two years from the end of the
assessment year in which the income was first assessable.
It is desirable that proceedings under the Act are finalised
more expeditiously as digitisation of processes within the
Department has enhanced its efficiency in handling
workload. In order to simplify the provisions of existing
section 153 of the Income-tax Act by retaining only those
provisions that are relevant to the current provisions of the
Income-tax Act, section 153 of the Income-tax Act has
been amended by substituting the existing section with the
following changes in time limit from the existing time
limits:
(i) the period, for completion of assessment under section
143 or section 144 has been changed from existing two
years to twenty-one months from the end of the
Page 46 of 112
assessment year in which the income was first
assessable;
(ii) the period for completion of assessment under section
147 has been changed from existing one year to nine
months from the end of the financial year in which the
notice under section 148 was served;
(iii) the period for completion of fresh assessment in
pursuance of an order under section 254 or section
263 or section 264, setting aside or cancelling an
assessment has been changed from existing one year
to nine months from the end of the financial year in
which the order under section 254 is received by the
Principal Chief Commissioner or Chief Commissioner
or Principal Commissioner or Commissioner, or the
order under section 263 or section 264 is passed by
the Principal Commissioner or Commissioner
57.2 It is further provided that the period for giving effect
to an order, under sections 250 or 254 or 260 or 262 or
263 or 264 of the Income-tax Act or an order of the
Settlement Commission under sub-section (4) of section
245D of the Income-tax Act, where effect can be given
wholly or partly otherwise than by making a fresh
assessment or reassessment shall be three months from
the end of the month in which order is received or passed,
as the case may be, by the Principal Chief Commissioner
or Chief Commissioner or Principal Commissioner or
Commissioner. It is also provided that in a case where it is
not possible for the Assessing Officer to give effect to such
order within the aforesaid period, for reasons beyond his
control, the Principal Commissioner or Commissioner on
receipt of such reasons in writing from the Assessing
Officer, if satisfied, may allow additional time of six months
to give effect to the said order. However, in respect of cases
pending as on 1st June 2016, the time limit for passing
such order has been extended to 31.3.2017.
57.3 It is also provided that where the assessment,
reassessment or recomputation is made on the assessee or
any person in consequence of or to give effect to any
Page 47 of 112
finding or direction contained in an order under section
250, 254, 260, 262, 263, or section 264 of the Income-tax
Act or in an order of any court in a proceeding otherwise
than by way of appeal or reference under the Income-tax
Act, then such assessment, reassessment or
recomputation shall be made on or before the expiry of
twelve months from the end of the month in which such
order is received by the Principal Commissioner or
Commissioner. However, for cases pending as on
1.6.2016, the time limit for taking requisite action is
31.3.2017 or twelve months from the end of the month in
which such order is received, whichever is later.
57.4 Where an assessment is made on a partner of the firm
in consequence of an assessment made on the firm under
section 147 of the Income-tax Act, such assessment shall
be made on or before the expiry of twelve months from the
end of the month in which the assessment order in the
case of the firm is passed. However, for cases pending as
on 1.6.2016, the time limit for taking requisite action shall
be 31.3.2017 or twelve months from the end of the month
in which order in case of firm is passed, whichever is later.
57.5 Similarly, consequential changes in time limit for
completion of assessment or reassessment by the
Assessing Officer have been made in accordance with the
extension of time limit provided to the Transfer Pricing
Officer in certain cases by amendment in subsection (3A)
to section 92CA of the Income-tax Act.
57.6 The provisions of section 153 of the Income-tax Act
as they stood immediately before their amendment by the
Act shall apply to and in relation to any order of
assessment, reassessment or recomputation made before
the 1st of June, 2016.
57.7 Applicability: These amendments take effect
retrospectively from 1st of June, 2016
(underlining by me)
Page 48 of 112
(v) Explanatory Notes to the Provisions of the Finance
Act, 2017 dated 15th February 2018
60. Rationalisation of time limits for completion of
assessment, reassessment and re-computation and
reducing the time for filing revised return.
60.1 The provisions of section 153 of the Income-tax Act
specify the time limit for completion of assessment,
reassessment and re-computation of cases mentioned
therein.
60.2 In an effort to minimise human interface and move
towards technology, massive computerisation has been
carried out in the Department, which has translated into
overall enhanced efficiency in the functioning of the
Department. In view of the same, sub-section (1) of section
153 of the Income-tax Act has been amended to provide
that for the assessment year 2018-19, the time limit for
making an assessment order under sections 143 or 144 of
the Income-tax Act shall be reduced from twenty-one
months to eighteen months from the end of the
assessment year, and for the assessment year 2019-20
and onwards, the said time limit shall be twelve months
from the end of the assessment year in which the income
was first assessable.
60.3 Sub-section (2) of section 153 of the Income-tax Act
has further been amended to provide that the time limit
for making an order of assessment, reassessment or
recomputation under section 147 of the Income-tax Act, in
respect of notices served under section 148 of the Income-
tax Act on or after the 1st day of April, 2019 shall be twelve
months from the end of the financial year in which notice
under section 148 is served.
60.4 Sub-section (3) of section 153 of the Income-tax Act
has also been amended to provide that the time limit for
making an order of fresh assessment in pursuance of an
order passed or received in the financial year 2019-20 and
onwards under sections 254 or 263 or 264 of the Income-
tax Act shall be twelve months from the end of the financial
year in which order under section 254 is received or order
Page 49 of 112
under section 263 or 264 is passed by the authority
referred to therein.
(underlining by me)
(vi) Memorandum Explaining the provisions in the
Finance Bill 2021
Reduction of time limit for completing assessment
Section 153 of the Act contains provisions in respect of
time-limit for completion of assessment, reassessment and
re-computation under the Act. The sub-section (1) of the
said section provides that the time-limit for passing an
assessment order under section 143 or 144 of the Act shall
be 21 months from the end of the assessment year in
which the income was first assessable. However, this time
limit had earlier been curtailed in order to improve the
efficacy and efficiency of the Department to give effect to
computerization of processes under the Act. As a result,
the time limit for completion of assessment proceedings
under sections 143 or 144 of the Act was reduced to 18
months for A.Y. 2018-19 and 12 months for A.Y. 2019-20
and subsequent assessment years vide the Finance Act,
2017.
Since then, the assessment procedure has been completely
overhauled by the introduction of the Faceless Assessment
Scheme, 2019. The assessment procedure is now
conducted in a completely faceless and jurisdiction-less
way where all internal and external communication is
made electronically and different aspects of the
assessment procedure like verification, scrutiny of books
of accounts etc. are carried on by different units. The
person-to-person interface between the taxpayer and the
Department has been eliminated. This team-based
approach for assessment with a dynamic jurisdiction is
technologically driven and very efficient. Thus, the time
required for completion of assessment procedure needs to
be further reduced.
Page 50 of 112
The benefits of shorter time period for scrutiny proceedings
are manifold. On the one hand, it reduces the compliance
burden on the taxpayers who find it easier to explain
matters pertaining to a recent previous year which also
improve the ease of doing business. On the other hand, it
enhances the ability of the Department to detect and bring
to tax any leakages of revenue as the instances of tax
evasion come to the notice of the Department within a
shorter span of time.
Hence, it has been proposed that the time limit for
completion of assessment proceedings may be reduced
further by three months. Thus the time for completing of
assessment is proposed to be nine months from the end of
the assessment year in which the income was first
assessable, for the assessment year 2021-22 and
subsequent assessment years.
This amendment will take effect from 1st April, 2021
[Clause 41]”
(underlining by me)
(vii) Memorandum Explaining the provisions in the
Finance Bill 2022
2. As part of this process of making the tax administration
transparent and efficient, provisions for notifying faceless
schemes under sections 92CA, 144C, 253 and 264A were
introduced in the Act through Taxation and Other Laws
(Relaxation and Amendment of Certain Provisions) Act,
2020 with effect from 01.11.2020 and under section 255,
was inserted through Finance Act, 2021 with effect from
01.04.2021:
S. Section Scheme Date of
No. Limitation
1. 92CA Faceless 31st day of
determination March, 2022
of arm’s
length price
2. 144C Faceless 31st day of
Dispute March, 2022
Page 51 of 112
Resolution
Panel
3. 253 Faceless 31st day of
appeal to March, 2022
Appellate
Tribunal
4. 255 Faceless 31st day of
procedure of March, 2023
Appellate
Tribunal
3. Section 92CA and section 144C are principally related
to the transfer pricing functions and international taxation
which are presently out of the regime of faceless
assessment. New schemes for these two functions are a
part of the assessment function and should follow the
faceless assessment procedure, wherein certain
modifications are proposed which will have an impact on
the information technology structure. Therefore,
notification at this time shall result in delay in stabilization
of the systems.
4. As for notification of scheme under section 255, the
Appellate Tribunal is deemed to be a civil court for all the
purposes of section 195 of the Act and Chapter XXXV of
the Code of Criminal Procedure, 1898. Therefore, a scheme
governing the procedures to be followed by such a body
needs to be formulated after due consultations with
Ministry of Law & Justice. Similarly, the scheme under
section 253 have to follow the scheme under section 255.
5. In light of the above limitations it is proposed to extend
the date for issuing directions for the purposes of these
sections 92CA, 144C, 253 and 255 till 31st March, 2024.
(underlining by me)
Page 52 of 112
8.1 A perusal of the speech of the Finance Minister dated
06.07.2009 in support of the Finance (No.2) Bill, 2009 (for short,
‘the 2009 Bill’) makes it apparent that the intent of the Parliament
behind Section 144C is to expedite the final disposal of tax disputes
pertaining to an eligible assessee. It should be recalled that a three-
Judge Bench of this Court in Shree Sajjan Mills Ltd. vs. CIT,
(1985) 4 SCC 590 observed that the principle that a taxing statute
should be strictly construed does not exclude a reasonable
construction which gives effect to the purpose or intention of a
provision as apparent from the scheme of the Act. It goes without
saying that such reasonable construction is to be achieved only
with the assistance of the internal and external aids permissible
under the law and not by drawing reliance on any superlative or
equitable considerations or, even, the goal of “recovering lost tax”.
8.2 Supporting legislative intent is also clear from the
Memorandum to the 2009 Bill which vide clause (55) introduced
Section 144C in the Act. The Memorandum specifically noted that
the 2009 Bill amended the Act, inter alia, with a view
to ‘encouraging the growth of foreign investment in India by
providing for a speedy dispute resolution mechanism.’ It was
Page 53 of 112
cautiously noted that flow of foreign investment is extremely
sensitive to prolonged uncertainty in tax matters and the alternate
dispute mechanism was being brought in precisely to usher in a
regime of expeditious resolution of tax disputes. The note on clause
(55) exhibits a similar intent. It is noted that the ‘subjects of
transfer pricing audit and the taxation of foreign company are at
nascent stage in India. Often the Assessing Officers and Transfer
Pricing Officers tend to take a conservative view.’ The same note
further explained that course correction from such a view took a
very long time within the then existing appellate structure, and
therefore Section 144C was inserted to ensure speedy disposal by
the creation of the DRP as an ‘alternative dispute resolution
mechanism within the income-tax department’. In my view, these
notes reinforce the evident parliamentary intent. In particular, it is
useful to emphasise that DRP was envisioned as an alternative
dispute resolution mechanism ‘within the income-tax department’.
This informs us that the procedure under Section 144C envisions
the procedure to be completed between the Revenue and the
assessee and within such procedure, the compartmentalised
limitations for the DRP and Assessing Officer are outlined in the
Page 54 of 112
relevant sub-sections. The import of this conspectus approach is a
stricter interpretation of the timelines of Section 144C. To read it
otherwise, would only inflate the timelines for completion of
assessment order of an eligible assessee which would be doing
violence to the intent implicit from the text.
8.3 Bearing the above object of the Parliament as adumbrated by
the Budget speeches of the Finance Ministers for the respective
years the provision under consideration would have to be
interpreted on the basis of the settled rules and principles of
interpretation of statutes which I shall now discuss.
Principles of Statutory Interpretation:
9. Before proceeding further, it would be useful to discuss the
relevant principles of statutory interpretation from authoritative
sources.
9.1 A statute or any enacting provision therein must be so
construed as to make it effective and operative. Thus, courts
should lean against construction which reduces a provision to a
futility. It has been observed by Lord Dunedin of the House of Lords
that “A statute is designed to be workable, and the interpretation
thereof by a court should be to secure that object, unless crucial
Page 55 of 112
omission or clear direction makes that end unattainable.” vide
Whitney vs. Inland Revenue Commissioner, (1926) A.C. 37
(“Whitney”). Therefore, any construction which would defeat the
plain intention of the Legislature must be rejected by the courts.
Hence, courts should avoid a construction which would reduce the
provision to futility and rather accept a construction based on the
view that Parliament or any Legislature would legislate only for the
purpose of bringing about an effective result. It is in that context
that purposive construction by court is gaining acceptance rather
than holding that there is absurdity in the statute. The doctrine of
purposive interpretation may be taken recourse to for the purpose
of giving full effect to the statutory provisions and the courts must
state what meaning the statue should bear rather than rendering
the statute a nullity.
9.2 Another principle of statutory interpretation is that when the
words of a statute are clear, plain or unambiguous, i.e., they are
reasonably susceptible to only one meaning, courts are bound to
give effect to that meaning irrespective of consequences. The
results of the construction are then not a matter for the court, even
though they may be strange or surprising, unreasonable or unjust
Page 56 of 112
or oppressive. Gajendragadkar, J. in Kanailal Sur vs.
Paramnidhi Sadhu Khan , AIR 1957 SC 907 opined thus:
“If the words used are capable for one construction only
then it would not be open to the courts to adopt any other
hypothetical construction on the ground that such
hypothetical construction is more consistent with the
alleged object and policy of the Act.”
S.R. Das, J. in CIT, Agri vs. Keshab Chandra Mandal, AIR
1950 SC 265 observed thus:
“Hardship or inconvenience cannot alter the meaning of
the language employed by the Legislature if such meaning
is clear on the face of the statute or the rules.”
He further observed that:
“The spirit of the law may well be an elusive and unsafe
guide and the supposed spirit can certainly not be given
effect to in opposition to the plain language of the sections
of the Act”. Vide Rananjaya Singh vs. Baijnath Singh,
AIR 1954 SC 749.”
9.3 Similarly, Subba Rao, J. observed that in interpretation of a
statute, the primary test is – the language employed in the Act and
when the words are clear and plain, the court is bound to accept
the expressed intention of the Legislature, vide MV Joshi vs. MU
Shimpi, AIR 1961 SC 1494.
Page 57 of 112
9.4 This means that mere hardship cannot be a ground for not
giving effective and grammatical meaning to every word of the
provisions of a statute if the language used therein is unequivocal.
Thus, an unambiguous and plain statute must be given its full
interpretation. It has been observed that unambiguous means
“unambiguous in context”. The expression “context” in this
connection is used in a wide sense as including not only other
enacting provisions of the same statute, but its preamble, the
existing state of the law, other statutes in pari materia and the
mischief which by those and other legitimate means can be
discerned that the statute was intended to remedy. In this context,
it would be useful to recall the words of Grover, J. in VO
Tractoroexport vs. Tarapore and Co., AIR 1971 SC 1, which
are as follows:-
“We are aware of no rule of interpretation by which rank
ambiguity can be first introduced by giving certain
expressions a particular meaning and then an attempt can
be made to emerge out of semantic confusion and
obscurity by having resort to presumed intention of the
Legislature to give effect to international obligations.”
9.5 On the other hand, plain meaning rule applies at the stage
when the words have been construed in their context and the
conclusion has been reached that they are susceptible to only one
Page 58 of 112
meaning. In that event, the meaning so derived is to be given effect
to irrespective of consequences.
9.6 Further, while interpreting a statute it must be read as a
whole and one provision of the Act should be construed with
reference to other provisions in the same Act so as to make out a
consistent enactment of the whole statutes. Such a construction
has a merit of avoiding any inconsistency or repugnancy either
within a Section or between a Section and other parts of the
statutes. It is the duty of the courts to avoid a clash between two
Sections of the same Act and “whenever it is possible to do so, to
construe provisions which appear to conflict so that they harmonise”.
While doing so the edges have to be ironed out so as to read the
provisions of an Act in consonance with the object of the Act. Thus,
the provisions of one Section of a statute cannot be used to defeat
another section of the same statute. The same rule applies to a
sub-section of a Section. In Venkataramana Devaru vs. State
of Mysore AIR 1958 SC 255, Venkatarama Aiyar, J. said that “the
rule of construction is well settled that when there are in an
enactment two provisions which cannot be reconciled with each
other, they should be so interpreted that, if possible, effect should be
Page 59 of 112
given to both. This is what is known as the rule of harmonious
construction.”
9.7 Therefore, effect should be given to both provisions. Thus, a
construction which reduces one of the provisions to a “useless
lumber” or ‘dead letter’ is to be avoided. One of the ways in dealing
with such a situation is to find out which of the two apparently
conflicting provisions is more general and which is more specific
and to construe the same accordingly. However, if a specific
provision has to be read within the mandate of a general provision
then the same has to be accordingly construed so as to give effect
to the mandate of the general provision. However, if a situation
arises where two Sections of the Act cannot be reconciled, as there
is an absolute contradiction between them, it is often said that the
latter must prevail. Another way of looking at such a situation is to
ascertain which is the leading provision and which is the
subordinate provision and which must give way to the other, but
only if a harmonious construction of two apparently contradictory
provisions is possible which will not lead to any absurdity or give
rise to practical inconvenience or make well-established provision
of existing law nugatory, then the same should be resorted to. In
Page 60 of 112
other words, an interpretation which would dilute the intention of
the Parliament or give rise to an absurdity or lead to any provision
of law being rendered nugatory has to be eschewed.
(Source: GP Singh – Principles of Statutory Interpretation,
15th Ed. LexisNexis).
Non-Obstante Clause:
10. A non-obstante clause is generally incorporated in a statute
to give an overriding effect to a particular section or the statute as
a whole. While interpreting a non-obstante clause, the court is
required to find out the extent to which the legislature intended to
do so and the context in which the non-obstante clause is used.
This rule of interpretation has been applied in several decisions.
10.1 In R.S. Raghunath vs. State of Karnataka, (1992) 1 SCC
335, a three-Judge Bench of this Court referred to the earlier
judgments and observed as under:
“11. … the non obstante clause is appended to a provision
with a view to give the enacting part of the provision an
overriding effect in case of a conflict. But the non obstante
clause need not necessarily and always be coextensive
with the operative part so as to have the effect of cutting
down the clear terms of an enactment and if the words of
the enactment are clear and are capable of a clear
interpretation on a plain and grammatical construction of
the words the non obstante clause cannot cut down the
construction and restrict the scope of its operation. In
Page 61 of 112
such cases the non obstante clause has to be read as
clarifying the whole position and must be understood to
have been incorporated in the enactment by the legislature
by way of abundant caution and not by way of limiting the
ambit and scope of the Special Rules.”
10.2 In A.G. Varadarajulu vs. State of T.N., (1998) 4 SCC 231
(“A.G. Varadarajulu “) this Court relied on the judgment
in Aswini Kumar Ghose vs. Arabinda Bose, (1952) 2 SCC 237.
This Court while interpreting the non-obstante clause contained in
Section 21-A of the Tamil Nadu Land Reforms (Fixation of Ceiling
on Land) Act, 1961 held:
“16. It is well settled that while dealing with a non obstante
clause under which the legislature wants to give overriding
effect to a section, the court must try to find out the extent
to which the legislature had intended to give one provision
overriding effect over another provision. Such intention of
the legislature in this behalf is to be gathered from the
enacting part of the section. In Aswini Kumar
Ghose v. Arabinda Bose [(1952) 2 SCC 237 : AIR 1952 SC
369] Patanjali Sastri, J. observed: (AIR p. 377, para 27)
‘27. … The enacting part of a statute must, where
it is clear, be taken to control the non obstante
clause where both cannot be read harmoniously’;’”
10.3 In Interplay Between Arbitration Agreements under
A&C Act, 1996 and Stamp Act, 1899, (2024) 6 SCC 1, a
sevenJudge bench of this Court observed in Paragraphs 83-84 as
under:
Page 62 of 112
“83. …. A clause beginning with the expression
‘notwithstanding anything contained in this Act or in some
particular provision in the Act or in some particular Act or
in any law for the time being in force, or in any contract’ is
more often than not appended to a section in the beginning
with a view to give the enacting part of the section in case
of conflict an overriding effect over the provision of the Act
or the contract mentioned in the non obstante clause. It is
equivalent to saying that in spite of the provision of the Act
or any other Act mentioned in the non obstante clause or
any contract or document mentioned the enactment
following it will have its full operation or that the provisions
embraced in the non obstante clause would not be an
impediment for an operation of the enactment.’ [As
observed in Chandavarkar Sita Ratna Rao v. Ashalata S.
Guram, (1986) 4 SCC 447, at pp. 477-78, para 67.]
84. Although a non obstante clause must be allowed to
operate with full vigour, its effect is limited to the extent
intended by the legislature. In Icici Bank
Ltd. v. Sidco Leathers Ltd. [Icici Bank
Ltd. v. Sidco Leathers Ltd., (2006) 10 SCC 452] a two-
Judge Bench of this Court held that a non obstante clause
must be interpreted by confining it to the legislative policy.
Thus, even if a non obstante clause has wide amplitude,
the extent of its impact has to be measured in view of the
legislative intention and legislative policy. [JIK Industries
Ltd. v. Amarlal V. Jumani, (2012) 3 SCC 255 : (2012) 2 SCC
(Civ) 82 : (2012) 2 SCC (Cri) 125] In view of this settled
legal position, the issue that arises for our consideration is
the scope of the non obstante clause contained in Section
5 of the Arbitration Act.”
The seven-Judge Bench was considering the non-obstante
clause in Section 5 of the Arbitration Act, which for immediate
reference, is extracted as under:
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“Section 5. Extent of judicial intervention.—
Notwithstanding in any other law for the time being in
force, in matters governed by this part, no judicial
authority shall intervene except where so provided in this
part.”
10.4 It was further observed in reference to ICICI Bank Ltd. vs.
Sidco Leathers Ltd., (2006) 10 SCC 452 : (2006) 131 Comp Cas
451, that even if a non-obstante clause has wide amplitude, the
extent of its impact has to be measured in view of the legislative
intention and legislative policy.
Further, the utility of non-obstante clause is where there is a
conflict between what is stated in a provision and any other law for
the time being in force, or anything else contained in the said
enactment. As already noted, only in the case of a conflict, the
object is to give the enacting or operative portion of the section an
overriding effect, not otherwise. In other words, only in a case of a
conflict, a provision in an enactment containing a non-obstante
clause, would be given its full operation and what is stated in the
non-obstante clause will not be an impediment for the operation of
the particular provision in the enactment. This would mean that
what is stated in the non-obstante clause would not take away the
effect of any provision of the Act which follows the same.
Page 64 of 112
10.5 In Aswini Kumar Ghose vs. Arabinda Bose, (1952) 2 SCC
237 : AIR 1952 SC 369, this Court speaking through Patanjali
Sastri, C.J. observed that only when there is any inconsistency
between what is contained in a provision of an enactment and a
non-obstante clause would make the latter in what is to yield to
what is stated in the provision following the same. In other words,
it is only when the enacting part of the statute cannot be read
harmoniously with what is stated in the non-obstante clause,
would the non-obstante clause result in yielding to what is stated
in the enacting part. Similarly, in Municipal Corpn., Indore vs.
Ratnaprabha, (1976) 4 SCC 622 : AIR 1977 SC 308, it was
observed that there should be a clear inconsistency between a
special enactment or rules and a general enactment.
10.6 In the matter of interpretation of a non-obstante clause,
paragraphs 82 and 83, in the judgment authored by me in
Muhammad Abdul Samad vs. State of Telangana, (2025) 2
SCC 49 can be usefully extracted as under:
“82. A non obstante clause is usually appended to a
section in the beginning with a view to give the enacting
part of the section, in case of a conflict, an overriding effect
over the provision or the Act mentioned in the non
obstante clause. In other words, in spite of the provision
or the Act mentioned in the non obstante clause, the
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enactment following it will have its full operation or that
the provisions embraced in the non obstante clause will
not be an impediment for the operation of the enactment.
Thus, a non obstante clause is a legislative device used by
a Parliament or legislature sometimes to give an overriding
effect to what has been specified in the enacting part of a
section in case of a conflict with what is contained in the
non obstante clause as stated above.
83. Further, a non obstante clause has to be distinguished
from the expression “subject to” where the latter would
convey the idea of a provision yielding place to another
provision or other provisions to which it is made subject
to. Also, the expression “notwithstanding anything in any
other law” in a section of an Act has to be contrasted with
the use of the expression “notwithstanding anything
contained in this Act”, which has to be construed to take
away the effect of any provision of that particular Act in
which the section occurs but it cannot take away the effect
of any other law. [Source : Principles of Statutory
Interpretation by Justice G.P. Singh, 15th Edn., Chapter
5.4, p. 284.]”
In the above case, this Court was considering the non-
obstante clause in Section 3 of the Muslim Women (Protection of
Rights of Divorce), Act 1986 vis-à-vis Section 125 of the Code of
Criminal Procedure, 1973 in the matter of the entitlement of a
divorced Muslim woman to maintenance.
10.7 Recently, a two-Judge Bench of this Court speaking through
Oka, J. in Chief Commissioner of Central Goods and Service
Tax vs. Safari Retreats Private Limited, (2025) 2 SCC 523 dealt
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on rules regarding the interpretation of taxing statutes in
paragraph 27 which can be usefully extracted as under:
“27. Regarding the interpretation of taxation statutes, the
parties have relied on several decisions. The law laid down
on this aspect is fairly well settled. The principles
governing the interpretation of the taxation statutes can
be summarised as follows:
27.1. A taxing statute must be read as it is with no
additions and no subtractions on the grounds of legislative
intendment or otherwise;
27.2. If the language of a taxing provision is plain, the
consequence of giving effect to it may lead to some absurd
result is not a factor to be considered when interpreting
the provisions. It is for the legislature to step in and remove
the absurdity;
27.3. While dealing with a taxing provision, the principle
of strict interpretation should be applied;
27.4. If two interpretations of a statutory provision are
possible, the Court ordinarily would interpret the provision
in favour of a taxpayer and against the Revenue;
27.5. In interpreting a taxing statute, equitable
considerations are entirely out of place;
27.6. A taxing provision cannot be interpreted on any
presumption or assumption;
27.7. A taxing statute has to be interpreted in the light of
what is clearly expressed. The Court cannot imply
anything which is not expressed. Moreover, the Court
cannot import provisions in the statute to supply any
deficiency;
27.8. There is nothing unjust in the taxpayer escaping if
the letter of the law fails to catch him on account of the
legislature's failure to express itself clearly;
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27.9. If literal interpretation is manifestly unjust, which
produces a result not intended by the legislature, only in
such a case can the Court modify the language;
27.10. Equity and taxation are strangers. But if
construction results in equity rather than injustice, such
construction should be preferred;
27.11. It is not a function of the Court in the fiscal arena
to compel Parliament to go further and do more;
27.12. When a word used in a taxing statute is to be
construed and has not been specifically defined, it should
not be interpreted in accordance with its definition in
another statute that does not deal with a cognate subject.
It should be understood in its commercial sense. Unless
defined in the statute itself, the words and expressions in
a taxing statute have to be construed in the sense in which
the persons dealing with them understand, that is, as per
the trade understanding, commercial and technical
practice and usage.”
(underlining by me)
That was a case concerning interpretation of the expression
“plant and machinery” and “plant or machinery” in Sections 17(5)(c)
and 17(5)(d) of the Central Goods and Services Tax Act, 2017.
Paragraph 36 of the said judgment also observed on the use of
non-obstante clause as under:
“36…..A non obstante clause is a device used by the
legislature that is usually employed to give an overriding
effect to certain provisions over some contrary provisions
that may be found in the same or some other enactments.
Such a clause is used to indicate that the said provision
should prevail despite anything to the contrary in the
provisions mentioned in the non obstante clause. ...”
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10.8 Further, in RBI vs. Peerless General Finance and
Investment Co. Ltd., (1987) 1 SCC 424, this Court observed, that
interpretation is best which makes the textual interpretation match
the contextual. Chinnappa Reddy, J. speaking for the Bench
stressed on the importance of rule of contextual interpretation and
observed as under:
“33. Interpretation must depend on the text and the
context. They are the bases of interpretation. One may well
say if the text is the texture, context is what gives the
colour. Neither can be ignored. Both are important. That
interpretation is best which makes the textual
interpretation match the contextual. A statute is best
interpreted when we know why it was enacted. With this
knowledge, the statute must be read, first as a whole and
then section by section, clause by clause, phrase by phrase
and word by word. If a statute is looked at, in the context
of its enactment, with the glasses of the statute-maker,
provided by such context, its scheme, the sections,
clauses, phrases and words may take colour and appear
different than when the statute is looked at without the
glasses provided by the context. With these glasses we
must look at the Act as a whole and discover what each
section, each clause, each phrase and each word is meant
and designed to say as to fit into the scheme of the entire
Act. No part of a statute and no word of a statute can be
construed in isolation. Statutes have to be construed so
that every word has a place and everything is in its place.
It is by looking at the definition as a whole in the setting of
the entire Act and by reference to what preceded the
enactment and the reasons for it that the court construed
the expression ‘prize chit’ in Srinivasa [Srinivasa
Enterprises v. Union of India, (1980) 4 SCC 507] and we
find no reason to depart from the court's construction.”
(underlining by me)
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The above approach is useful while interpreting a non-obstante
clause in a statute.
10.9 This Court has in a number of cases relied on the following
words of Rowlatt, J. in Cape Brandy Syndicate vs. Inland
Revenue Commissioner [(1921) 1 KB 64] :
“In a taxing Act one has to look merely at what is clearly
said. There is no room for any intendment. There is no
equity about a tax. There is no presumption as to a tax.
Nothing is to be read in, nothing is to be implied. One can
only look fairly at the language used.”
10.10 In Central India Spg., Wvg. & Mfg. Co. Ltd. vs.
Municipal Committee, 1957 SCC OnLine SC 18, it was observed
that in construing the words of the statute if there are two possible
interpretations then effect is to be given to the one that favours the
citizen and not the one that imposes a burden on him. In CIT vs.
Shahzada Nand & Sons, (1966) 60 ITR 392, this Court
reiterated the applicability of the aforesaid principle in context of
fiscal statute. In CIT vs. Jargaon Electric Supply Co. Ltd.,
(1960) 40 ITR 184, this Court speaking through Hidayatullah, J.
repelled the contention of the Revenue that it would be unjust to
allow escapement of tax in the facts therein by observing that there
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is no question of unjustness involved if the income tax law is
deficient due to the legislature failure’s to express itself clearly.
Bearing in mind the above principles of interpretation of
statutes, I shall proceed to analyse the relevant provisions of the
Act having a bearing on the controversy.
Analysis of the Provisions:
11. Section 143 of the Act deals with assessment, while Section
144 thereof speaks of Best Judgment Assessment. Section 143 of
the Act speaks of an assessment made when a return has been
filed under Section 139 or in response to a notice under sub-
section (1) of Section 142 and the return is processed leading to an
assessment order being passed by the Assessing Officer. However
when any person fails to make the return required under sub-
section (1) of Section 139 and has not made a return or a revised
return of that section or fails to comply with all the terms of a notice
issued under Section 142 or having made a return fails to comply
with all the terms of a notice issued under sub-section (2) of Section
143, then the Assessing Officer, after taking into account all
relevant material which the Assessing Officer has gathered, shall,
after giving the assessee an opportunity of being heard, make an
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assessment of the total income or loss to the best of his judgment
and determine the sum payable by the assessee on the basis of
such assessment. It is not necessary to go into the other aspects of
Section 143 or Section 144 of the Act.
11.1 The other relevant provisions which could be referred to are
Section 144A which deals with power of Joint Commissioner to
issue directions in certain cases; Section 144B which speaks of
faceless assessment and Section 144C discusses a reference to a
DRP with which we are concerned in the present cases.
11.2 The time limit for completion of an assessment, re-
assessment and re-computation is delineated in Section 153 of the
Act. The said Section has been substituted by the Finance Act,
2016 w.e.f. 01.06.2016. Sub-section (1) of Section 153 refers to an
assessment being made under Section 143 or Section 144, while
sub-section (1A) has a non-obstante clause to sub-section (1) of
Section 153, so also sub-section (1B) has a non-obstante clause
with reference to sub-section (1) of Section 153. Sub-section (2) of
Section 153 deals with an assessment, re-assessment or re-
computation made under Section 147 wherein the limitation period
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has been prescribed. This is in the case of income escaping
assessment which is dealt with under Section 147 of the Act.
11.3 Sub-section (1) to Section 153 prescribes the limitation
period for making of an order of assessment under Section 143 or
Section 144 which is twenty-one months. However, various
provisos to the said sub-section prescribe reduced limitation
periods having regard to the commencement of the respective
assessment years. In certain cases, the period of limitation is
reduced from twenty-one months to eighteen months while in other
cases to twelve months and as also nine months. Having regard to
the facts of the present two cases, the period of limitation under
first proviso to sub-section (1) of Section 153 is 18 months as the
applicable assessment year is 2018-2019.
Sub-section (3) of Section 153 is relevant for the purposes of
this case. It states that notwithstanding anything contained in sub-
sections (1), (1A), and 2, an order of fresh assessment or fresh order
under Section 92CA, as the case may be, in pursuance of an order
under Section 250 or Section 254 (relevant to the present cases)
or Section 263 or Section 264, setting aside or cancelling an
assessment or an order under Section 92CA, as the case may be,
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shall be made at any time before the expiry of nine months from
the end of the financial year in which the order under Section 250
or Section 254 is received by the Principal Chief Commissioner or
Chief Commissioner, or Principal Commissioner or Commissioner,
as the case may be, or, as the case may be, the order under Section
263 or Section 264 is passed by the Principal Chief Commissioner
or Chief Commissioner or Principal Commissioner or
Commissioner, as the case may be.
11.4 However, the proviso to sub-section (3) of Section 153 states
that where the order under Section 250 or 254 is received by the
Principal Chief Commissioner or Chief Commissioner or Principal
Commissioner or Commissioner, as the case may be, the order
under Section 263 or Section 264 is passed by the Principal
Commissioner or Commissioner on or after the 1st day of April,
2019, the provisions of this sub-section should have been, as if for
the words “nine months”, the words “twelve months” have been
substituted.
11.5 Sub-section (3A) of Section 153 also begins with a non-
obstante clause with reference to sub-sections (1), (1A), (2) and (3).
Sub-section (4) states that notwithstanding anything contained in
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sub-sections (1), (1A), (2), (3) and (3A), where a reference under
sub-section (1) of Section 92C A is made during the course of the
proceedings for the assessment or re-assessment, the period
available for completion of assessment or re-assessment, as the
case may be, under the said sub-sections (1), (1A), (2), (3) and (3A)
shall be extended by twelve months. This sub-section was added
by an amendment with effect from 01.04.2023. However, the same
is not applicable to the facts of the case. Section 92CA deals with
a reference to the Transfer Pricing Officer. Sub-section (3A) of
Section 92CA, inter alia, refers to Section 153 of the Act, which
deals with the period of limitation for the purpose of Section 92CA.
11.6 Explanation (1) to Section 153 deals with certain situations
in reference to which certain periods shall be excluded while
computing the period of limitation prescribed under the said
Section. For instance, under clause (2) to Explanation (1), the
period during which the assessment proceeding is stayed by an
order of injunction of any court has to be excluded while
calculating the period of limitation under Section 153.
11.7 For the purposes of this case, Section 254 and sub-section
(3) of Section 153 including the proviso thereto are relevant. This
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is because where an assessment order has been set aside and the
matter has been remanded under Section 254 by the Tribunal (as
in the present case), then, in terms of the proviso to sub-section (3)
of Section 153, a fresh assessment order shall have to be made at
any time before the expiry of twelve months from the end of the
financial year in which the order under Section 254 is received by
the Principal Chief Commissioner or Chief Commissioner etc. as
the case may be.
11.8 Thus, on a reading of the proviso to sub-section (3) of Section
153, along with the main provision, it becomes clear that the period
of twelve months has to be calculated from the end of the financial
year in which the order is received by the Principal Chief
Commissioner or Chief Commissioner etc., as the case may be.
Therefore, what is of significance is the date of the commencement
of the limitation period of twelve months which commences from
the end of the financial year in which the order passed under
Section 254 by the Tribunal, setting aside or cancelling an
assessment is received by the Principal Chief Commissioner or
Chief Commissioner etc. For example, if the order is passed by the
Tribunal on 01.02.2021 and it is received by the concerned
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commissioner on 01.03.2021, then the limitation period of twelve
months would be from the end of the financial year in which the
order under Section 254 was received, i.e., twelve months from
31.03.2021, which would be 31.03.2022, within which the fresh
assessment order would have to be made. This would effectively
mean thirteen months in total from the date of receipt of the order.
11.9 However, in a case where Section 144C applies, i.e., where
a reference to the DRP applies, then in such a case the time frame
has been given for the conclusion of the proceedings initiated under
the said provision which is totally only eleven months from the date
of passing the draft order. The procedure contemplated under
Section 144C applies to only two categories of assesses, who are
called as eligible assessees under clause (b) of sub-section 15 to
Section 144C. The first category of eligible assessee is any person
in whose case the variation referred to in sub-section (1) of Section
144C arises as a consequence of the order of the Transfer Pricing
Officer passed under sub-section (3) of Section 92CA and the
second category is in the case of any non-resident not being a
company or any foreign company. The proviso thereto states that
such eligible assessee shall not include persons referred to in sub-
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section (1) of Section 158BA or other persons referred to in Section
158BD. Therefore, in the case of only the aforesaid two categories
of eligible assesses, the procedure contemplated under Section
144C applies.
11.10 When Section 92CA applies to any eligible assessee,
then sub-section (4) of Section 153 states that the period available
for completion of an assessment or re-assessment, as the case may
be, under sub-sections (1), (1A), (2), (3) and (3A) of Section 153
shall be extended by twelve months. This sub-section is applicable
with effect from 01.04.2023 and not for the period prior thereto.
Further, in the case of any other eligible assessee, who is a non-
resident, there is no such extension of the period of limitation.
11.11 The question then is, how the limitation period
prescribed under Section 153(3) of the Act can be reconciled with
the procedure as well as the period contemplated under Section
144C of the Act in a case where Section 254 of the Act applies.
Scheme of Section 144C:
12. Before answering the above question, it is necessary to dilate
on the scheme of Section 144C of the Act. Sub-section (1) of Section
144C contains a non-obstante clause. It states that the Assessing
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Officer shall, notwithstanding anything to the contrary contained
in the Act, in the first instance, forward a draft of the proposed
order of assessment (draft order) to the eligible assessee, if he
proposes to make, on or after 01.10.2009 any variation which is
prejudicial to the interest of such assessee. It must be noted that
this non-obstante clause is notwithstanding anything to the
contrary contained in the Act and not with reference to only Section
153 which deals with only the limitation period for making an
assessment or re-assessment. As already extracted above, sub-
section (1) of Section 144C prescribes that the Assessing Officer
shall forward a “draft” of the proposed “order of assessment”. The
careful drafting by the legislature must be given heed to. The
provision for forwarding of a draft of the proposed order of
assessment speaks plainly that this sub-section is only concerned
with a “draft order” and cannot be a final order of assessment.
Therefore, any provisions that would relate to an order of
assessment have no bearing on any interpretation to be given to
such a draft order.
12.1 On receipt of the draft order, the eligible assessee shall,
within thirty days of the receipt by him of the draft order—(a) file
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his acceptance of the variation to the Assessing Officer; or (b) file
his objections, if any, to such variation with—(i) the DRP and (ii)
the Assessing Officer, [vide Section 144C(2)]. Therefore, the eligible
assessee has thirty days’ time from the date of receipt of the draft
order to either file his acceptance or his objections. If no objections
are received within the aforesaid period of thirty days or the
assessee intimates to the Assessing Officer the acceptance of the
variation, then in terms of sub-section (3) of Section 144C, the
Assessing Officer shall complete the assessment on the basis of the
draft order within the prescribed period of limitation as per sub-
section (4) of Section 144C.
12.2 Sub-section (4) is significant inasmuch as it contemplates a
limitation period within which the Assessing Officer has to pass an
assessment order in terms of sub-section (3) of Section 144C. This
sub-section again contains a non-obstante clause. This non-
obstante clause is however notwithstanding anything contained in
Section 153 or Section 153B. The Assessing Officer shall,
notwithstanding the aforesaid provisions, pass the assessment
order under sub-section (3) within one month from the end of the
month in which—(a) the acceptance is received, or (b) the period of
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filing objections under sub-section (2) expires. Thus, the
stipulation of period of one month in sub-section (4) is for the
Assessing Officer to complete the assessment order having regard
to either clauses (a) or (b) of sub-section (2) of Section 144C, as the
case may be, although under the proviso to sub-section (3) of
Section 153 the period of limitation prescribed to make a fresh
assessment order is twelve months.
12.3 What would be the next step when objections are received
under sub-section (2) of Section 144C? In a case where objections
are received under sub-section (2), the DRP shall issue directions
as it thinks fit for the guidance of the Assessing Officer to enable
him to complete the assessment. The directions to be issued by the
DRP under sub-section (5) of Section 144C shall be having regard
to certain material which are enumerated in sub-section (6) of
Section 144C. The procedure to be followed by the DRP is
contemplated under sub-section (7) of Section 144C and the nature
of the order to be passed by the DRP is as per sub-section (8) of
Section 144C. The Explanation to sub-section (8) of Section 144C
is for the purpose of removal of doubts.
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12.4 The following paragraph from the Manual of Office
Procedure, 2019 of the Income Tax Department throws useful light
on the nature of a draft order forwarded by the Assessing Officer to
the Assessee under Section 144C(1) and the proceedings before the
DRP inasmuch as it clarifies that the DRP:
“5.7 It needs to be emphasized that the proceeding before
the DRP is not an appeal proceeding but a correcting
mechanism through which the proposed assessment order
is reviewed by a Panel of higher Income-tax Authorities. It
is a continuation of the Assessment proceedings till such
time a final order of assessment which is appealable is
passed by the Assessing Officer. This also finds support
from Section 144C(6) which enables the DRP to collect
evidence or cause any enquiry to be made before giving
directions to the Assessing Officer under Section 144C(5).
The DRP procedure can only be initiated by an assessee
objecting to the draft assessment order. This would enable
correction in the proposed order (draft assessment order)
before a final assessment order is passed.”
12.5 Sub-section (10) of Section 144C states that every direction
issued by the DRP shall be binding on the Assessing Officer. Sub-
section (11) of Section 144C contemplates that an opportunity of
being heard is given to the assessee and the Assessing Officer on
such directions which are prejudicial to the interest of the assessee
or the interest of the Revenue before passing any such direction.
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12.6 Sub-section (12) of Section 144C is significant inasmuch as
it states that no direction under sub-section (5) shall be issued
after nine months from the end of the month in which the draft
order is forwarded to the eligible assessee. Therefore the DRP is
rendered functus officio on completion of the period of nine months
as stipulated. Thus, this period of limitation is to be strictly
complied with by the DRP.
12.7 As already noted, a draft order is forwarded to the eligible
assessee under sub-section (1) of Section 144C and thirty days’
time is granted to pass a final order, if no objections are received
or if there is an acceptance of the variation of the draft order by the
assessee in a month’s time. Thus, in the above circumstances the
period of limitation is thirty days from date of forwarding the draft
orders to an eligible assessee. This is as opposed to sub-section (3)
of Section 153 and the proviso thereto where the period of
limitation is twelve months to make a final order. Hence, the non-
obstante clause under sub-section (4) of Section 144C of the Act.
However, if there are objections, which have to be made within
thirty days from the date of receipt of the draft order, then within
nine months from the end of the month in which the draft order is
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forwarded to the eligible assessee, the DRP has to issue directions.
If directions are issued by the DRP to the Assessing Officer within
a period of nine months, on receipt of the said directions issued
under sub-section (5) of Section 144C, the Assessing Officer shall
in conformity with the said directions, complete the assessment
without providing any further opportunity of being heard to the
assessee within one month from the end of the month in which
such directions are received. However, there is again a non-
obstante clause in sub-section (13) of Section 144C i.e., the
completion of the assessment order shall be notwithstanding
anything contrary contained in Section 153 or Section 153B.
12.8 What emerges on a conjoint reading of the aforesaid
provisions is that the Assessing Officer has only thirty days’ time
to pass a final assessment order, irrespective of whether the draft
assessment order is accepted or in the face of objections raised by
the eligible assessee, the DRP issues directions to the Assessing
Officer. The submission of learned senior counsel for the
respondents is that in the instant case, the Assessing Officer
passed the assessment order within a period of twenty days from
the date of receipt of the directions from the DRP but nevertheless
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breached the limitation period prescribed under sub-section (3) of
Section 153 of the Act and hence, the High Court granted relief to
the assessee.
12.9 Thus, it is noted that there are three non-obstante clauses
in Section 144C. Sub-section (1) is notwithstanding anything to the
contrary contained in the Act, while sub-section (4) and (13) are
notwithstanding anything contained in Section 153 or 153B of the
Act. The object and purpose of having the non-obstante clause in
the aforesaid manner has to be ascertained inasmuch as the
interpretation to sub-section (3) of Section 153 in light of Section
144C has to be made in the present cases in order to answer the
rival contentions advanced at the Bar.
12.10 As already noted, Section 144C applies to an eligible
assessee. The respondents in these cases are eligible assessees and
there is no dispute about the said fact. When an order is passed
under Section 254 by the Tribunal setting aside or cancelling an
assessment, then a re-assessment has to be made within twelve
months as stipulated in the proviso to sub-section (3) of Section
153 which delineates the time frame for completion of assessment
or a re-assessment etc. As already noted, the period of twelve
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months commences from the end of the financial year in which the
order under Section 254 is received by the Principal Chief
Commissioner or Chief Commissioner etc. On receipt of such an
order from the Tribunal, when a re-assessment has to be made and
Section 144C is applicable, then a fresh draft assessment order has
to be forwarded to the assessee as per sub-section (1) of Section
144C of the Act.
12.11 There is no time limit stipulated under sub-section (1) of
Section 144C for forwarding a draft order to the eligible assessee
after receipt of the order from the Tribunal under Section 254 of
the Act. The question that would arise is, whether, the Assessing
Officer can forward the draft order at any point of time or take his
own sweet time to do so, since sub-section (1) of Section 144C
contains a non-obstante clause which is notwithstanding anything
contained under the Act or, on the contrary, the Assessing Officer
is bound to follow a timeline for forwarding a draft order to the
eligible assessee.
12.12 No doubt, sub-section (3) of Section 153 which
prescribes the limitation period does not make any distinction
between an eligible assessee and any other assessee. The limitation
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period of twelve months prescribed under Section 254 applies to
all categories of assessees without any distinction being made
between any particular category of assessee as per the proviso
thereto. Then, within what time the Assessing Officer has to
forward a draft order to the eligible assessee while acting under
sub-section (1) of Section 144C pursuant to an order under Section
254 of the Act. Although sub-section (1) of Section 144C states
“notwithstanding anything to the contrary contained in this Act”
does the said expression refer to Section 153 which prescribes the
limitation period for completion of assessment or re-assessment or,
whether the non-obstante clause has been used in sub-section (1)
of Section 144C in order to emphasize on a distinct and different
procedure contemplated under the Act in the case of only eligible
assessees as opposed to other categories of assessees. In my view,
the non-obstante clause in sub-section (1) of Section 144C implies
that it overrides all sections of the Act contrary to the procedure
contemplated under Section 144C of the Act inasmuch as it
contemplates a special procedure insofar as eligible assessees are
concerned. This means that insofar as the eligible assessees are
concerned, their assessment is subject to a distinct procedure
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under Section 144C, wherein a draft assessment order has to be
made in the first instance. This is opposed to the case of other
assessees, wherein such a procedure of making a draft order is not
envisaged and only a final assessment order is passed by the
Assessing Officer. Therefore, the requirement of a non-obstante
clause vis-à-vis eligible assessees has been met by the Parliament
under Section 144C of the Act as a legislative device. This is
because the procedure and process of assessment/re-assessment
in the case of eligible assesses is different from that of other
categories of assessees inasmuch as a draft order has to be made
and communicated to an eligible assessee under sub-section (1) of
Section 144C of the Act in the first instance, which is not so in the
case of other category of assessees. That is the precise object for
insertion of a non-obstante clause under sub-section (1) of Section
144C of the Act.
12.13 To reiterate, the non-obstante clause in sub-section (1)
of Section 144C of the Act has been invoked by the Parliament in
order to make a distinction between eligible assessees and other
category of assessees in the matter of assessment/re-assessment
where a draft assessment order has to be made by the Assessing
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Officer in the first instance leading to DRP directions being issued
to the Assessing Officer in case there is a reference to the DRP,
which is not so in the case of other assessees. The discussion in
this regard has been made above and hence would not call for a
repetition. Thus, the non-obstante clause in sub-section (1) of
Section 144C is not related to the overall limitation period
prescribed under Section 153 of the Act but with the aspect of there
being a distinct procedure which has been envisaged in the case of
only eligible assessees.
12.14 On the other hand, if the non-obstante clause under
sub-section (1) of Section 144C is to be construed only in the
context of the limitation period under Section 153 inasmuch as the
procedure contemplated under Section 144C would be a time frame
to be considered over and above what is contemplated under
Section 153(3), it would lead to an absurd result. That is why, the
non-obstante clause in sub-section (1) of Section 144C cannot be
held to be with reference to Section 153(3) at all. This is because a
non-obstante clause is with regard to anything contrary contained
in the Act vis-à-vis sub-section (1) of Section 144C and Section 153
is not contrary to Section 144C. The scope and ambit of the two
Page 89 of 112
provisions are distinct inasmuch as Section 153 deals with
limitation period with respect to completion of assessments and re-
assessments while Section 144C deals with a procedure to be
complied with for making an assessment order only in the case of
eligible assessees. There is no contradiction between Section 144C
and Section 153 of the Act. Therefore, sub-section (1) of Section
144C has to be read as prescribing a unique procedure insofar as
eligible assessees are concerned inasmuch as notwithstanding
anything contrary contained in the Act vis-à-vis various categories
of assessees, Section 144C is applicable only in the case of eligible
assessees and not to any other category of assessee.
12.15 This intention of the Parliament to make a distinction
between eligible assessees and other category of assessees under
Section 144C(1) has to be borne in mind. This aspect would become
clearer when the two other non-obstante clauses in sub-section (4)
and sub-section (13) of Section 144C are compared with sub-
section (1) thereof. In the aforesaid two sub-sections, the non-
obstante clause is with specific reference to Section 153 or Section
153B only and in relation to any other Section of the Act. This is
because under sub-section (4) of Section 144C, the period within
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which the assessment order is to be made is stipulated i.e. within
thirty days from the date of receipt of the draft order by the
assessees in terms of sub-section (1) of Section 144C when there
is an acceptance of the draft order made by the Assessing Officer
or no objections are filed. This is notwithstanding anything
contained in Section 153 or Section 153B. This period stipulated
is as opposed to twelve months being available to an Assessing
Officer to make an assessment order under sub-section (3) of
Section 153 of the Act.
12.16 Similarly, under sub-section (13) of Section 144C the
assessment has to be completed within one month from the end of
the month in which the direction is received from the DRP under
sub-section (5) of Section 144C. This is notwithstanding anything
contained to the contrary in Section 153 or Section 153B.
12.17 Therefore, on a comparison of the expressions of the
non-obstante clause in sub-section (1) of Section 144C with sub-
section (4) and sub-section (13) thereof, it is clear that the
Parliament has applied the legislative device of the non-obstante
clause in different ways to bring out distinct legislative intents.
Therefore, sub-section (1) of Section 144C is not relatable to
Page 91 of 112
Section 153 i.e., the limitation period at all. It deals with a totally
distinct procedure to be adopted in the case of an eligible assessees
as compared to other category of assessees in terms of the
procedure contemplated under the said Section by initially making
a draft assessment order, whereas sub-section (4) and sub-section
(13) of Section 144C directly refer to and have a bearing on Sections
153 or 153B, which deal with limitation period. This is because
narrower limitation periods are prescribed to do certain things as
contemplated under the said sub-sections. The object and purpose
of prescribing narrower limitation periods (one month) in sub-
section (4) of Section 144C and one month in sub-section (13) of
Section 144C is to ensure that the proviso to sub-section (3) of
Section 153 is ultimately complied with as it prescribes the overall
limitation period of twelve months for completion of an assessment
or re-assessment, inter alia, when Section 254 of the Act applies.
12.18 If Section 144C applies to an eligible assessee, then the
maximum period that is contemplated for passing the final
assessment order is eleven months from the date of receipt of the
draft order by the eligible assesses; the shortest period would be
two months, when the draft order is accepted by the eligible
Page 92 of 112
assessee, for passing the final order. Also, nine months is the
maximum period for the DRP to issue directions to the Assessing
Officer in case objections are received to a draft assessment order
from an eligible assessee.
12.19 In cases where Section 144C applies, the maximum
period stipulated for completion of a final assessment order under
the said provision being eleven months would still be within the
limitation period of twelve months prescribed under the proviso to
Section 153(3) of the Act. This would mean that a draft assessment
order has to be forwarded by the Assessing Officer to the eligible
assessees within one month from the end of the financial year in
which the order under Section 254 of the Act is received by the
Principal Chief Commissioner, Chief Commissioner etc., as the
case may be. Then, one month’s time is the shortest period of time
to prepare the draft assessment order under Section 144C of the
Act by the concerned Assessing Officer.
12.20 Therefore, there has to be a system put in place, if not
already in place, under which the order of the Tribunal passed
under Section 254 of the Act is communicated to the concerned
Assessing Officer of a particular eligible assessee. As soon as the
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papers are received by the Principal Chief Commissioner or Chief
Commissioner etc., pursuant to an order passed under Section 254
of the Act, the same has to be forwarded and ultimately the final
assessment order has to be made within twelve months from the
end of the financial year in which the order under Section 254 was
received by the Principal Chief Commissioner or Chief
Commissioner etc., as the case may be. In which event, this would
imply that a copy of the same would also have to be simultaneously
sent to the Assessing Officer concerned and the minimum period
that the Assessing Officer would have for making the draft order
would be thirty days, depending on when the order is received by
the Principal Chief Commissioner or Chief Commissioner, etc., as
the case may be.
12.21 In this context, it is relevant to note the non-obstante
clause in sub-section (4) of Section 153 of the Act which applies
when a reference under sub-section (1) of Section 92CA is made
during the course of the proceeding for the assessment or re-
assessment, then the period available for completion of assessment
or re-assessment, as the case may be, under sub-section (3) of
Section 153 shall be extended by twelve months. This provision
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applies with effect from 01.04.2023. However, such a provision is
wholly conspicuous by its absence in the case of an eligible
assessee who falls under the category of any non-resident not being
a company, or a foreign company. Therefore, what follows is that
in the case of any non-resident not being a company, or a foreign
company, there is no extension of the period of limitation beyond
twelve months as stipulated under the proviso to sub-section (3) of
Section 153.
12.22 To reiterate, whether or not the Assessing Officer has
adequate or negligible time to deliver on the statutory obligations
under Section 144C, or otherwise, cannot have a bearing on our
interpretation of the Act. It is a well settled principle that the
legislature is assumed to have the wisdom and knowledge behind
promulgating any provision. As it is concluded that the procedure
under Section 144C is subsumed within the time limits prescribed
under Section 153, it is not for this Court to sit on whether the
applicable period of time is adequate or not. A statute cannot be
held to be unworkable, or an interpretation said to give rise to
absurdity, only because of some asymmetry in time available to the
Assessing Officer for passing a draft order in case of an eligible
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assessee under Section 144C as compared to final assessment
order in case of an ordinary assessee.
12.23 In the same context, where the statute gives a beneficial
option to an assessee, the exercise of such an option cannot be a
ground to justify leaving the assessee worse off. Merely because an
eligible assessee chooses to exercise their option to file objections
before the DRP, that is no ground for extension of the limitation
period. At the cost of repetition, to consider any of the
aforementioned factors would tantamount to inserting practicable
considerations and questions of equity in interpreting fiscal
statutes.
12.24 Furthermore, it was contended on behalf of the Revenue
that accepting the arguments of the respondent-assessee would
defeat the working of the Act as the non-obstante clause in Section
144C(1) would then be limited to the procedure of passing a draft
assessment order instead of final assessment order under Section
143(3) without subsuming the associated timelines under Section
153. There is no difficulty in rejecting this submission because
Section 144C(1) is not concerned with the passing of a final
assessment order in the first place. That the draft order passed
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under Section 144C(1) not be bound by Section 153 is no
hindrance to giving effect to the working of the Act, and in
particular Section 144C. I do not see any difficulty in a scenario
where Assessing Officers assessing a small set of eligible assessees
would have to work backwards and accommodate for the entire
timelines prescribed under Section 144C. Arguendo, that the
Parliament could not have conceived such a procedure to be
followed by Assessing Officers, it is not for a court to import
provisions in the statute to supply any assumed deficiency,
especially when the statute is otherwise workable. In the present
case, the Act is certainly workable if the proceedings under Section
144C are subsumed within the limitation prescribed under Section
153(1) or (3), or as the case may be.
12.25 It was also argued that if the scheme of Section 144C is
interpreted such that the Assessing Officer has to work backwards,
then the failure of an Assessing Officer to stick by the timeline
would lead to absurdity and render the Act unworkable. In my
view, the failure of an Assessing Officer to abide by the statutory
timelines cannot be the basis for assuming any absurdity in the
statute. A provision in a taxing statute which is ostensibly
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beneficial to the assessee must be interpreted as it is and not by
hypothetical scenarios.
Relevant Case Law:
13. The judgments cited at the Bar on the provisions under
consideration could be discussed at this stage.
13.1 The judgment of the Madras High Court in Roca Bathroom
Products has been a subject matter of discussion and has been
referred to extensively during the course of hearing. That was also
a case which assailed a notice related to the assessment year 2010-
11 as being bereft of jurisdiction and barred by limitation, by way
of a writ petition filed before the High Court. Another writ petition
was filed by the assessee therein seeking a writ of prohibition
restraining the respondent therein from continuing with
proceedings for assessment for the very same assessment year. The
third and fourth writ petitions were filed seeking quashing of the
communication dated 06.01.2020 with respect to the assessment
year 2009-10 and a direction for refund of the tax paid by the
petitioner therein along with interest in accordance with Section
244A of the Act. In the fourth writ petition, a writ of prohibition
was also sought to restrain the respondents therein from
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continuing or proceeding further in relation to the assessment year
2009-10.
13.2 It would be useful to refer to the facts of the said case. The
petitioner therein filed return of income that was selected for
scrutiny and referred to the Transfer Pricing Officer (TPO) and a
transfer pricing order was passed on 23.01.2013 and a draft order
was passed on 30.03.2013 making various adjustments to the
income returned as well as incorporating the adjustments
proposed in the transfer pricing order. The petitioner therein filed
objections to the draft assessment which was confirmed in terms
of Section 144C of the Act. Thereafter, a final assessment order was
passed on 16.01.2014. Being aggrieved by this, the petitioner
therein filed an appeal. The Appellate Tribunal vide its order dated
18.12.2015 remanded the matter to respondent No.1 therein for
fresh examination. The contention of the petitioner therein was
that as per the provisions of Section 153(2A) [unamended] / 153(3)
[post amendment], an order of fresh assessment in pursuance of
an order under Section 254 setting aside or cancelling the
assessment had to be made at any time before the expiry of one
year/nine months respectively from the end of the financial year in
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which the order was issued under Section 254 was received by the
Principal Chief Commissioner/Commissioner. That the notice was
issued pursuant to the remand dated 06.01.2020 which was
barred by limitation inasmuch as for the assessment order year
2009-10, the limitation period under Section 153(2A) had expired
on 31.03.2017 and for the assessment year 2010-11 the period had
expired on 31.12.2017.
13.3 While discussing the procedure contemplated under Section
144C of the Act, the Madras High Court held that sub-section (13)
of Section 144C imposes a restriction on the Assessing Officer and
denies him the benefit of the more extensive time limit available
under Section 153 to pass the final order of assessment as he has
to do so within one month from the end of the month when the
directions of the DRP are received by him and there is also no
requirement for hearing the assessee at that stage. That Section
144C(13) contains a non-obstante clause which is to emphasize
the urgency contemplated as compared to Section 153.
13.4 Reliance was placed on the judgment of the Bombay High
Court in the case of Pr. CIT vs. Lionbridge Technologies Pvt. Ltd.
(2019) 260 Taxman 273 (Bom.), wherein it was held that the final
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assessment could be made only if the draft assessment had been
forwarded by the Assessing Officer to the assessee within the time
limit prescribed under Section 153(2A) of the Act. Nokia India P.
Ltd. vs. DCIT, (2018) 407 ITR 20 (Delhi) (HC) (“Nokia India P.
Ltd.”)was also referred to wherein it was observed that where the
matter has been remanded to be redone, it would hardly make a
difference as to, whether, the remand has been to the Transfer
Pricing Officer or the DRP, thus indicating that the provisions of
Section 144C were also covered by the limitation of time set out in
Section 153(3) of the Act. Although Civil Appeal was admitted
before this Court against the judgment of the Delhi High Court in
Nokia India P. Ltd., there had been no stay of the said judgment
and the Civil Appeal was finally disposed of due to low tax effect.
13.5 The Madras High Court ultimately held in Roca Bathroom
Products that since the impugned notice issued by the DRP was
after a period of four years from the date of the order of the
Tribunal, it was barred by limitation under Section 153(2A) of the
Act. Consequently, the writ petitions were allowed. The Revenue
filed writ appeals before the Division Bench of the Madras High
Court against the aforesaid order. The Division Bench of the
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Madras High Court speaking through Mahadevan, J. while holding
that the facts of the case were not in dispute, by a detailed
Judgment dismissed the appeals filed by the Revenue. It would be
useful to extract paragraph 27 of the said judgment.
“27. For the reasons set out herein before, we conclude as
under :
(a) The provisions of sections 144C and 153 are not
mutually exclusive, but are rather mutually
inclusive. The period of limitation prescribed under
section 153(2A) or 153(3) is applicable, when the
matters are remanded back irrespective of whether
it is to the Assessing Officer or Transfer Pricing
Officer or the Dispute Resolution Panel, the duty is
on the Assessing Officer to pass orders.
(b) Even in the case of remand, the Transfer Pricing
Officer or the Dispute Resolution Panel have to
follow the time limits as provided under the Act. The
entire proceedings including the hearing and
directions have to be issued by the Dispute
Resolution Panel within nine months as
contemplated under section 144C(12) of the Income-
tax Act.
(c) Irrespective of whether the Dispute Resolution Panel
concludes the proceedings and issues directions or
not, within nine months, the Assessing Officer is to
pass orders within the stipulated time.
xxx
(f) The non obstante clause would not exclude the
operation of section 153 as a whole. It only implies
that irrespective of availability of larger time to
conclude the proceedings, final orders are to be
passed within one month in line with the scheme of
the Act.
Page 102 of 112
(g) When no period of limitation is prescribed, orders
are to be passed within a reasonable time, which in
any case cannot be beyond three years. However,
when the statute prescribes a particular period
within which orders are to be passed, then such
period, irrespective of whether it is short or long,
shall be applicable.”
Meaning of Assessment Order:
14. Sub-section (1) as well as sub-section (3) of Section 153 of the
Act use the expression “no order of assessment” and “an order of
fresh assessment” respectively. The word “assessment” is the
process of determining the total income of the assessee and the
sum payable by the assessee as income tax/surcharge/super tax
etc. vide CIT vs. JK Commercial Corpn. Ltd., (1976) 4 SCC 517.
In Auto & Metal Engineers vs. Union of India (1997) 7 SCC 734,
the Supreme Court held that the expression “assessment
proceeding” occurring in Section 153 Explanation (1) means the
entire process of assessment starting from the stage of filing of
return under Section 139 or issuance of notice under section
142(1) till the making of an order of assessment. The word “order
of assessment” cannot be construed to mean assessment of total
income only. Those words would mean an order in writing whereby
the total income of the assessee is assessed and tax payable by him
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is determined vide CIT vs. Purshottamdas T. Patel, (1994) 209
ITR 52 (Guj).
14.1 In Whitney, Lord Dunedin explained the imposition of tax by
the Revenue:
‘Now, there are three stages in the imposition of a tax:
there is the declaration of liability, that is, the part of
the statute which determines what persons in respect
of what property are liable. Next, there is the
assessment. Liability does not depend on assessment.
That, ex hypothesi, has been already fixed. But
assessment particularises the exact sum which a
person liable has to pay. Lastly comes the methods of
recovery if the person taxed does not voluntarily pay.”
14.2 In Kalyankumar Ray, this Court speaking through
Ranganathan, J. observed as under:
“‘Assessment’ is one integrated process involving not only
the assessment of the total income but also the
determination of the tax. The latter is as crucial for the
assessee as the former. Section 144, which also describes
the same process, makes no distinction as suggested. It
will not be therefore correct to read the provision as leaving
undefined the process of determination of the net sum
payable by the assessee. In our opinion, therefore, learned
counsel for the petitioner is right in his submission that
the ITO has to determine, by an order in writing, not only
the total income but also the net sum which will be payable
by the assessee for the assessment year in question and
that the demand notice under Section 156 has to be issued
in consequence of such an order.”
Page 104 of 112
14.3 Thus, the expression “the assessing officer shall, in
conformity with the directions, complete notwithstanding anything
to the contrary contained in Section 153 or 153(B), the
assessment…within one month from the end of the month in which
such direction is received” in sub-section (13) of section 144C has
to be harmoniously read with sub-section (3) of Section 153
wherein it is stated that “an order of fresh assessment” has to be
made within twelve months from the end of the financial year in
which the order under Section 254 is received by the Principal
Chief Commissioner or Chief Commissioner etc,… as the case may
be. When the aforesaid provisions are harmoniously read, it would
inevitably mean that the procedure contemplated under Section
144C applicable to an eligible assessee has to be concluded within
a period of twelve months as stipulated in proviso to sub-section
(3) of Section 153 as interpreted by me above.
15. Having considered the language of Sections 144C and 153,
the High Court refused to accept that the provisions of Section 153
are excluded to the operation of Section 144C. Even when the
Assessing Officer has to follow the procedure prescribed under
Section 144C of the Act, the same has to be commenced and
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concluded in terms of sub-section (3) of Section 153 of the Act. The
said provision is applicable to an eligible assessee inasmuch as
when the procedure under Section 144(C)(1) has to be followed.
Consequently, the rest of the provisions of Section 144C would
become applicable. This is only when the Assessing Officer intends
to make any variation which is prejudicial to the interest of the
eligible assessee. Then a draft order has to be made in the first
instance. In my view, even in such a case, the assessment has to
be concluded within twelve months as stipulated in Section 153(3)
of the Act where there has been remand by the Tribunal to the
Assessing Officer under Section 254 of the Act. Therefore, within
the period of twelve months prescribed under Section 153(3), the
Assessing Officer has to ensure that the entire procedure under
Section 144C is completed (as and when it is applicable) and pass
a final assessment order.
15.1 The Assessing Officer has to be prompt, attentive and
conscious of passing an order envisaged under Section 144C(1) of
the Act and not be reminded about doing so. Therefore, even when
Section 144C applies to a case, the twelve month period stipulated
under Section 153(3) has to be applied. Thus, the procedure under
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Section 144C has to be concluded within the time frame envisaged
under Section 153(3) or Section 153(1) as the case may be. If the
above interpretation is made, then, there would be a harmonious
interpretation of Sections 144C and 153. Therefore, the non-
obstante clauses in sub-sections of Section 144C have been
accordingly interpreted.
15.2 The object is to conclude the proceedings and make an
assessment as expeditiously as possible. If orders are not made
within the time stipulated under Section 153(3), then there would
be no final assessment order and the return of income as filed by
the assessee would have to be accepted.
Summary of Conclusions:
15.3 The summary of the aforesaid discussion can be made
as under:
(i) Section 143 of the Act states that when a return has been
filed under Section 139 or in response to a notice of sub-section (1)
of Section 142, and the same is processed, it would lead to an
assessment order being passed by the Assessing Officer. Section
144 deals with ‘best judgment assessment’. Sections 143 speaks of
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final assessment order being made in the case of all category of
assessees except eligible assessees.
(ii) On the other hand, Section 144C discusses a reference to a
DRP in case when a draft order is made by an Assessing Officer
which is not accepted by an eligible assessee. Thus, in so far as
only an eligible assessee, as defined under sub-section 15 of
Section 144C of the Act is concerned, notwithstanding anything to
the contrary contained in the Act, if the Assessing Officer proposes
to make, on or after 01.10.2009 any variation in the return which
is prejudicial to the interest of such an assessee only a draft order
has to be made and not a final assessment order.
Therefore, the non-obstante clause in sub-section (1) of
Section 144C has to be juxtaposed with reference to Section 143 of
the Act and all other Sections which deal with making of an
assessment order. This is because both Section 143 of the Act as
well as Section 144C of the Act deal with the passing of assessment
orders depending on the category to which the assessee belongs,
as already stated: if the assessee is an eligible assessee, sub-
section (1) of Section 144C would apply, if a variation is to be made,
Page 108 of 112
and in all other cases sub-section (3) of Section 143 of the Act
would apply.
(iii) On the other hand, the non-obstante clauses in sub-sections
(4) and (13) of Section 144C are only with reference to Section 153
of the Act. The time lines provided under the aforesaid sub-sections
144C and the time line provided under Section 153 of the Act deal
with respective limitation periods and therefore, the Parliament has
used the expression “notwithstanding anything contained in
Section 153”.
Sub-sections (4) and (13) of Section 144C when juxtaposed
with Section 153 of the Act make it evident that they both deal with
only the period of limitation in making an assessment order and
not the manner of passing an assessment order.
(iv) An assessment order or an order of assessment encompasses
the entire process of assessment commencing from the stage of
filing of a return till the making of an assessment of the total
income and also the determination of the taxes which is
contemplated under Section 153 of the Act in so far as the
limitation period for the said procedure is concerned. That is not
exactly the exercise that is carried out under sub-section (1) of
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Section 144C as the said assessment order is not a final
assessment order but only a draft assessment order. This is unlike
assessment orders made under sub-section (3) of Section 143 or
sub-section (13) of Section 144C of the Act which are final
assessment orders.
(v) Therefore, the expressions “assessment” used in Section 143
of the Act and “make an assessment of the total income or loss of
the assessee, and determine the sum payable by him or refund of
any amount due to him on the basis of such assessment”, and the
expression “the assessment” in sub-section (13) of Section 144C as
well as the expression “assessment order” in sub-section (4) of
Section 144C have to be given an identical meaning under Section
153 of the Act, i.e., final assessment order although, the
assessment orders are made in a distinct manner and under a
different procedure as they apply to different categories of
assessees as noted above.
In view of my aforesaid interpretation of Section 144C vis-à-
vis Section 153 of the Act, I arrive at the same conclusion as in
W.P. 3059-3060/2021 by the Bombay High Court. In these cases,
the question pertains not to fresh assessment orders passed on
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remand but original assessment orders. On 30.11.2018, the
petitioners therein filed their Return of Income declaring total loss
for AY 2018-19. According to the time limit in respect of A.Y. 2018-
19 under first proviso to Section 153(1) of the Act, any original
order of assessment was required to be passed within the period of
eighteen months from the end of the assessment year in which the
income became assessable. Therefore, the period of eighteen
months would have ordinarily expired on 30.09.2020. However, as
already noted, due to the operation of the TOLA and the
Notifications issued thereunder the due date was extended to
30.09.2021. Finally, draft assessment orders under Section 144C
were passed only on 28.09.2021. As we have already held that the
period under Section 144C of the Act is to be subsumed within the
time prescribed under Section 153(1) of the Act, we find that the
High Court was correct in taking the view that since the draft order
under Section 144C was passed only on 28.09.2021, the
proceedings had become time-barred as no final assessment order
in compliance with the provisions of Section 144C could be passed
due to the impending expiry of the limitation period on 30.09.2021.
Page 111 of 112
15.4 I therefore find that the High Court was right in allowing
the writ petitions filed by the respondents-assessees by holding
that no final assessment orders can be passed in these cases as
the same would be time barred and hence the return of income
filed by the respondents-assessees have to be accepted. I reiterate
the same and also state that this would not preclude the Revenue
from taking any other step in accordance with law.
Consequently, I do not find any merit in these appeals filed
by the Revenue as the impugned order is correct.
15.5 In SLP(C) No.25798/2024, what is assailed by the
Revenue is an interim order passed in WP(L) No.30944/2023. By
the said order, the High Court has continued the interim order
dated 28.06.2024. The main writ petition is pending before the
High Court. I do not propose to interfere with the said interim order
and hence, this Special Leave Petition stands dismissed.
….……………………………………..J.
(B.V. NAGARATHNA)
NEW DELHI;
AUGUST 08, 2025.
Page 112 of 112
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL Nos. OF 2025
[Arising out of SLP (C) Nos. 20569-72 OF 2023]
ASSISTANT COMMISSIONER OF
INCOME TAX AND ORS. …APPELLANT(S)
VERSUS
SHELF DRILLING RON
TAPPMEYER LIMITED …RESPONDENT(S)
WITH
CIVIL APPEAL NO. OF 2025
[Arising out of SLP (C) No. 25798 of 2024]
JUDGMENT
SATISH CHANDRA SHARMA, J.
1. Leave granted.
2. The present appeals challenge the judgment and order dated 04.08.2023 passed by the High Court of Bombay in Writ Petition 2340 of 2021 and other connected matters.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 1 of 513. The present dispute raises important questions of law relating to the interpretation and interplay between Section 144C and Section 153(3) of the Income Tax Act, 1961. More specifically, what are the periods of limitations prescribed for the revenue authorities to take action against an Assessee and how the limitation periods and procedures prescribed in these two sections coexist.
4. The facts necessary for the adjudication of the present appeals are as follows:
5. The Respondent/Shelf Drilling Ron Tappmeyer Ltd. exercised its option under Section 44BB of the Income Tax Act and declared a total loss of Rs. 120,18,44,672/- for the assessment year 2014-2015. On 28th August 2015, the Appellant issued a notice under Section 143(2) of the Income Tax Act. Pursuant to this, a Draft Assessment Order in terms of Section 144C of the Income Tax Act was passed on 26.12.2016, and rejected the books of Account furnished by the Respondent, and assessed its income at Rs. 4,34,79,980/-. The Dispute Resolution Panel, in terms of Section 144C of the Income Tax Act, gave its recommendations on 28th September 2017, and the final assessment order was passed on 30.10.2017.
6. Aggrieved by this order, the Respondent approached the Income Tax Appellate Tribunal, which remanded the matter SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 2 of 51 back to the Assessing Officer on the ground that the revenue authorities were not justified in rejecting the books of account furnished by the Respondent and therefore directed them to carry out the assessment afresh. This order came to be passed on 04.10.2019.
7. It is a matter of record that after the remand order passed by the Appellate Tribunal, a notice was issued on 23.09.2021, and a Draft Assessment Order was passed on 28.09.2021. This Draft Assessment Order was challenged before the High Court of Bombay on the ground that the maximum permissible time period as prescribed under Section 153(3) of the Income Tax Act had already expired and that, therefore, subsequent proceedings were vitiated and could not continue, and no final assessment order could be passed.
8. The writ petition filed by the Respondent was allowed by way of judgment and order dated 04.08.2023. The High Court took the view that the time period provided by Section 153(3) of the Income Tax Act is subsumed within the time contemplated in terms of Section 144C of the Income Tax Act. This Court is therefore required to analyze and interpret the maximum permissible time periods prescribed as per the Income Tax Act in terms of proceedings under Section 144C read with Section 153(3) of the Income Tax Act.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 3 of 519. It is therefore appropriate to refer to Section 153 of the Income Tax Act.
"153. Time limit for completion of assessment, reassessment and recomputation.— (1) No order of assessment shall be made under Section 143 or Section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable:
[Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “eighteen months” had been substituted:
[Provided further that in respect of an order of assessment relating to the assessment year commencing on—
(i) the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “twelve months” had been substituted;
(ii) the 1st day of April, 2020, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “eighteen months” had been substituted : ]] [Provided also that in respect of an order of assessment relating to the assessment year commencing on [* * *] the 1st day of April, 2021, the provisions of this sub-section shall have effect, SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 4 of 51 as if for the words “twenty-one months”, the words “nine months” had been substituted : ] [Provided also that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2022, the provisions of this sub-section shall have effect, as if for the words “twenty-one months”, the words “twelve months” had been substituted.] [(1-A) Notwithstanding anything contained in sub-
section (1), where a return under sub-section (8-A) of Section 139 is furnished, an order of assessment under Section 143 or Section 144 may be made at any time before the expiry of [twelve months] from the end of the financial year in which such return was furnished.] [(1-B) Notwithstanding anything in sub-section (1), where a return is furnished in consequence of an order under clause (b) of sub-section (2) of Section 119, an order of assessment under Section 143 or Section 144 may be made at any time before the expiry of twelve months from the end of the financial year in which such return was furnished.] (2) No order of assessment, reassessment or recomputation shall be made under Section 147 after the expiry of nine months from the end of the financial year in which the notice under Section 148 was served:
[Provided that where the notice under Section 148 is served on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 5 of 51 if for the words “nine months”, the words “twelve months” had been substituted.] (3) Notwithstanding anything contained in [sub-
sections (1), (1-A) and (2)], an order of fresh assessment [or fresh order under Section 92-CA, as the case may be,] in pursuance of an [order under Section 250 or Section 254] or Section 263 or Section 264, setting aside or cancelling an assessment, [or an order under Section 92-CA, as the case may be] may be made at any time before the expiry of nine months from the end of the financial year in which the [order under Section 250 or Section 254] is received by the Principal Chief Commissioner or Chief Commissioner or [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,] or, as the case may be, the order under Section 263 or Section 264 is passed by the [Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,]:
[Provided that where the order under Section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under Section 263 or Section 264 is passed by the Principal Commissioner or Commissioner on or after the 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words “nine months”, the words “twelve months” had been substituted.] [(3-A) Notwithstanding anything contained in sub- sections (1), (1-A), (2) and (3), where an SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 6 of 51 assessment or reassessment is pending on the date of initiation of search under Section 132 or making of requisition under Section 132-A, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections shall,—
(a) in a case where such search is initiated under Section 132 or such requisition is made under Section 132-A;
(b) in the case of an assessee, to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to;
(c) in the case of an assessee, to whom any books of account or documents seized or requisitioned pertains or pertain to, or any information contained therein, relates to, be extended by twelve months.] (4) Notwithstanding anything contained in [sub-
sections (1), (1-A), (2), (3) and (3-A)], where a reference under sub-section (1) of Section 92-CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said [sub-sections (1), (1-A), (2), (3) and (3-A)] shall be extended by twelve months.
(5) Where effect to an order under Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264 is to be given by the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] wholly or partly, otherwise than by making a fresh assessment or reassessment SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 7 of 51 [or fresh order under Section 92-CA, as the case may be,] such effect shall be given within a period of three months from the end of the month in which order under Section 250 or Section 254 or Section 260 or Section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under Section 263 or Section 264 is passed by 3407[the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,]:
Provided that where it is not possible for the Assessing Officer [or the Transfer Pricing Officer, as the case may be,] to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer, 3409[or the Transfer Pricing Officer, as the case may be,] if satisfied, may allow an additional period of six months to give effect to the order:
[Provided further that where an order under Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under Section 250 or Section 254 or Section 260 or Section 262 or Section 263 or Section 264 shall be made within the time specified in sub-section (3).] SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 8 of 51 [(5-A) Where the Transfer Pricing Officer gives effect to an order or direction under Section 263 by an order under Section 92-CA and forwards such order to the Assessing Officer, the Assessing Officer shall proceed to modify the order of assessment or reassessment or recomputation, in conformity with such order of the Transfer Pricing Officer, within two months from the end of the month in which such order of the Transfer Pricing Officer is received by him.] (6) Nothing contained in [sub-sections (1), (1-A) and (2)] shall apply to the following classes of assessments, reassessments and recomputation which may, subject to the provisions of [sub- sections (3), (5) and (5-A)], be completed—
(i) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under Section 250, Section 254, Section 260, Section 262, Section 263, or Section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, on or before the expiry of twelve months from the end of the month in which such order is received or passed by the [Principal Chief Commissioner or Chief Commissioner or] Principal Commissioner or Commissioner, as the case may be; or
(ii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under Section 147, on or before the expiry of twelve months from the end of the month in which the assessment order in the case of the firm is passed.SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 9 of 51
(7) Where effect to any order, finding or direction referred to in sub-section (5) or sub-section (6) is to be given by the Assessing Officer, within the time specified in the said sub-sections, and such order has been received or passed, as the case may be, by the income-tax authority specified therein before the 1st day of June, 2016, the Assessing Officer shall give effect to such order, finding or direction, or assess, reassess or recompute the income of the assessee, on or before the 31st day of March, 2017.
(8) Notwithstanding anything contained in the foregoing provisions of this section, sub-section (2) of Section 153-A or sub-section (1) of [Section 153-B or Section 158-BE], the order of assessment or reassessment, relating to any assessment year, which stands [revived under sub-section (2) of Section 153-A or sub-section (5) of Section 158-
BA], shall be made within a period of one year from the end of the month of such revival or within the period specified in this section or sub-section (1) of [Section 153-B or Section 158-BE], whichever is later.
(9) The provisions of this section as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputation made before the 1st day of June, 2016:
[Provided that where a notice under sub-section (1) of Section 142 or sub-section (2) of Section 143 or Section 148 has been issued prior to the 1st day of June, 2016 and the assessment or reassessment has not been completed by such date due to SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 10 of 51 exclusion of time referred to in Explanation 1, such assessment or reassessment shall be completed in accordance with the provisions of this section as it stood immediately before its substitution by the Finance Act, 2016 (28 of 2016).] Explanation 1.— For the purposes of this section, in computing the period of limitation—
(i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be re-heard under the proviso to Section 129; or [(ii) the period commencing on the date on which stay on the assessment proceeding was granted by an order or injunction of any court and ending on the date on which certified copy of the order vacating the stay was received by the jurisdictional Principal Commissioner or Commissioner; or]
(iii) the period commencing from the date on which the Assessing Officer intimates the Central Government or the prescribed authority, the contravention of the provisions of clause (21) or clause (22-B) or clause (23-A) or clause (23-B) [, under clause (i) of the first proviso] to sub-section (3) of Section 143 and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those clauses is received by the Assessing Officer; or
(iv) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited [or inventory valued] under sub-
section (2-A) of Section 142 and— SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 11 of 51
(a) ending with the last date on which the assessee is required to furnish a report of such audit [or inventory valuation] under that sub-section; or
(b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or
(v) the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of Section 142-A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer; or
(vi) the period (not exceeding sixty days) commencing from the date on which the Assessing Officer received the declaration under sub-section (1) of Section 158-A and ending with the date on which the order under sub-section (3) of that section is made by him; or
(vii) in a case where an application made before the Income-tax Settlement Commission is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which an application is made before the Settlement Commission under Section 245-C and ending with the date on which the order under sub-section (1) of Section 245-D is received by the Principal Commissioner or Commissioner under sub-section (2) of that section; or
(viii) the period commencing from the date on which an application is made before the [Authority for Advance Rulings or before the Board for SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 12 of 51 Advance Rulings] under sub-section (1) of Section 245-Q and ending with the date on which the order rejecting the application is received by the Principal Commissioner or Commissioner under sub-section (3) of Section 245-R; or
(ix) the period commencing from the date on which an application is made before the [Authority for Advance Rulings or before the Board for Advance Rulings] under sub-section (1) of Section 245-Q and ending with the date on which the advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under sub-section (7) of Section 245-R; or
(x) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in Section 90 or Section 90-A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; or
(xi) the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner or Commissioner under sub-section (1) of Section 144-BA and ending on the date on which a direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the [Assessing Officer; or
(xii) the period (not exceeding one hundred and eighty days) commencing from the date on which a search is initiated under Section 132 or a SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 13 of 51 requisition is made under Section 132-A and ending on the date on which the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing seized under Section 132 or requisitioned under Section 132-A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee,—
(a) in whose case such search is initiated under Section 132 or such requisition is made under Section 132-A; or
(b) to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to; or
(c) to whom any books of account or documents seized or requisitioned pertains or pertains to, or any information contained therein, relates to; or] [(xiii) the period commencing from the date on which the Assessing Officer makes a reference to the Principal Commissioner or Commissioner under the second proviso to sub-section (3) of Section 143 and ending with the date on which the copy of the order under clause (ii) or clause (iii) of the fifteenth proviso to clause (23-C) of Section 10 or clause (ii) or clause (iii) of sub-section (4) of Section 12-AB, as the case may be, is received by the Assessing Officer,] shall be excluded:
Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in [sub-sections (1), (1-A), (2)], (3) and sub-section (8) available to the SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 14 of 51 Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:
Provided further that where the period available to the Transfer Pricing Officer is extended to sixty days in accordance with the proviso to sub-section (3-A) of Section 92-CA and the period of limitation available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:
Provided also that where a proceeding before the Settlement Commission abates under Section 245- HA, the period of limitation available under this section to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, shall, after the exclusion of the period under sub-section (4) of Section 245-HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under Sections 149, [* * *] 154, 155 and 158-BE and for the purposes of payment of interest under Section 244-A, this proviso shall also apply accordingly: [Provided also that where the assessee exercises the option to withdraw the application under sub-SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 15 of 51
section (1) of Section 245-M, the period of limitation available under this section to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, shall, after the exclusion of the period under sub-section (5) of the said section, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year:
Provided also that for the purposes of determining the period of limitation under Sections 149, 154 and 155, and for the purposes of payment of interest under Section 244-A, the provisions of the fourth proviso shall apply accordingly:] [Provided also that where after exclusion of the period referred to in clause (xii), the period of limitation for making an order of assessment, reassessment or recomputation, as the case may be, ends before the end of the month, such period shall be extended to the end of such month.] Explanation 2.— For the purposes of this section, where, by an order referred to in clause (i) of sub- section (6),—
(a) any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of Section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order; or
(b) any income is excluded from the total income of one person and held to be the income of another SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 16 of 51 person, then, an assessment of such income on such other person shall, for the purposes of Section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, if such other person was given an opportunity of being heard before the said order was passed.]"
10. At this stage, it is relevant to note that Section 153 of the Income Tax Act has been a part of the Income Tax Act for a significantly longer period of time, whereas Section 144C of the Income Tax Act is a relatively new provision, introduced in 2009. Both these provisions have a common salutary objective in mind, which aims to restrict or regulate the powers of revenue authorities to take appropriate steps against assessees.
11. Section 153 of the Income Tax Act prescribes various time limits within which assessment, reassessment, and recomputation of income of Assessees has to take place by the revenue authorities. Section 153(3) of the Income Tax Act specifically deals with orders of fresh assessments passed as a result of setting aside or cancelling an assessment. This is an event likely to happen when an appellate authority such as the Income Tax Appellate Tribunal or the High Court sets aside any order of an assessing officer, and asks for fresh computation. Section 153(3) of the Income Tax Act provides that a fresh order must be passed before the expiry of 9 months from the SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 17 of 51 end of the financial year in which the order is received by the Commissioner. The proviso to this sub-section also provides that in case the order is received on or after the first day of April 2019, the 9 month period shall be 12 months.
12. In the facts of the present case, it is clear that the Income Tax Appellate Tribunal passed an order of remand on 04.10.2019. The end of the financial year insofar as this order is concerned would be 31.03.2020, as a result of which, in the facts of the present case, if Section 153(3) of the Income Tax Act is to be strictly construed, it would mean that the fresh assessment order had to be passed by or before 31.03.2021. In the facts of the present case, it is also relevant to note that the financial year ended on 31.03.2020 at a time when the entire world was in lockdown as a result of the spread of the coronavirus pandemic.
13. In view of the delays and disruptions caused by the coronavirus pandemic, the Central Board of Direct Taxes issued Notification being S.O. 966(E) dated 27.02.2021, in which the time limit for the completion of assessments, reassessments, and recomputation under Section 153 or Section 153B was extended till 30th day of September 2021.
"MINISTRY OF FINANCE (Department of Revenue) (CENTRAL BOARD OF DIRECT TAXES) SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 18 of 51 NOTIFICATION S.O. 966(E).—In exercise of the powers conferred by sub-section (1) of Section 3 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (38 of 2020) (hereinafter referred to as the said Act), and in partial modification of the notification of the Government of India in the Ministry of Finance, (Department of Revenue) No. 93/2020 dated the 31st December, 2020, published in the Gazette of India, Extraordinary, Part-II, Section 3, Sub- section (ii), vide number S.O. 4805(E), dated the 31st December, 2020 (hereinafter referred to as the said notification), the Central Government hereby specifies, for the purpose of sub-section (1) of Section 3 of the said Act, that,— (A) where the specified Act is the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as the Income-tax Act) and the completion of any action, as referred to in clause (a) of sub-section (1) of Section 3 of the said Act, relates to passing of any order—
(a) for imposition of penalty under Chapter XXI of the Income-tax Act, —
(i) the 29th day of June, 2021 shall be the end date of the period during which the time limit specified in or prescribed or notified under the Income-tax Act falls, for the completion of such action; and
(ii) the 30th day of June, 2021 shall be the end date to which the time limit for completion of such action shall stand extended;SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 19 of 51
(b) for assessment or reassessment under the Income-tax Act, and the time limit for completion of such action under Section 153 or Section 153-B thereof, —
(i) expires on the 31st day of March, 2021 due to its extension by the said notification, such time limit shall stand extended to the 30th day of April, 2021;
(ii) is not covered under (i) and expires on 31st day of March, 2021, such time limit shall stand extended to the 30th day of September, 2021; (B) where the specified Act is the Prohibition of Benami Property Transaction Act, 1988, (45 of 1988) (hereinafter referred to as the Benami Act) and the completion of any action, as referred to in clause (a) of sub-section (1) of Section 3 of the said Act, relates to issue of notice under sub-
section (1) or passing of any order under sub- section (3) of Section 26 of the Benami Act,—
(i) the 30th day of June, 2021 shall be the end date of the period during which the time limit specified in or prescribed or notified under the Benami Act falls, for the completion of such action; and
(ii) the 30th day of September, 2021 shall be the end date to which the time limit for completion of such action shall stand extended.
[Notification No. 10/2021/F. No. 370142/35/2020-TPL] SHEFALI SINGH, Under Secy., Tax Policy & Legislation Division"
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 20 of 5114. It is the case of the Respondent that the revenue authorities were required to pass the Draft Assessment Order by or before the date prescribed under Section 153(3) of the Income Tax Act, failing which such order could no longer be passed because of the time limit constraint prescribed under Section 153(3) of the Income Tax Act.
15. The Appellant, on the other hand, contends that Section 144C of the Income Tax Act is a complete code in itself which posts various timelines within which the assessing authorities are required to take certain steps failing which their actions will be time-barred.
16. It is therefore relevant to examine the scope, object, and purpose behind the introduction of Section 144C of the Income Tax Act and the ambit within which this section seeks to operate. The memorandum and explanatory notes of Finance Act No.2 of 2009 explained the reasons for introducing Section 144C of the Income Tax Act, which reads as under:-
" Provision for constitution of alternate dispute resolution mechanism The dispute resolution mechanism presently in place is time consuming and finality in high demand cases is attained only after a long drawn litigation till Supreme Court. Flow of foreign investment is extremely sensitive to prolonged uncertainty in tax related matter. Therefore, it is SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 21 of 51 proposed to amend the Income-tax Act to provide for an alternate dispute resolution mechanism which will facilitate expeditious resolution of disputes in a fast track basis."
17. Section 144C of the Income Tax Act, 1961 reads as under:-
"[144-C. Reference to Dispute Resolution Panel.— (1) The Assessing Officer shall, notwithstanding anything to the contrary contained in this Act, in the first instance, forward a draft of the proposed order of assessment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the 1st day of October, 2009, any variation [* * *] which is prejudicial to the interest of such assessee.
(2) On receipt of the draft order, the eligible assessee shall, within thirty days of the receipt by him of the draft order,—
(a) file his acceptance of the variations to the Assessing Officer; or
(b) file his objections, if any, to such variation with,—
(i) the Dispute Resolution Panel; and
(ii) the Assessing Officer.
(3) The Assessing Officer shall complete the assessment on the basis of the draft order, if—
(a) the assessee intimates to the Assessing Officer the acceptance of the variation; or SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 22 of 51
(b) no objections are received within the period specified in sub-section (2).
(4) The Assessing Officer shall, notwithstanding anything contained [in Section 153 or Section 153-B], pass the assessment order under sub-
section (3) within one month from the end of the month in which,—
(a) the acceptance is received; or
(b) the period of filing of objections under sub- section (2) expires.
(5) The Dispute Resolution Panel shall, in a case where any objection is received under sub-section (2), issue such directions, as it thinks fit, for the guidance of the Assessing Officer to enable him to complete the assessment.
(6) The Dispute Resolution Panel shall issue the directions referred to in sub-section (5), after considering the following, namely:—
(a) draft order;
(b) objections filed by the assessee;
(c) evidence furnished by the assessee;
(d) report, if any, of the Assessing Officer, Valuation Officer or Transfer Pricing Officer or any other authority;
(e) records relating to the draft order;
(f) evidence collected by, or caused to be collected by, it; and SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 23 of 51
(g) result of any enquiry made by, or caused to be made by, it.
(7) The Dispute Resolution Panel may, before issuing any directions referred to in sub-section (5),—
(a) make such further enquiry, as it thinks fit; or
(b) cause any further enquiry to be made by any income tax authority and report the result of the same to it.
(8) The Dispute Resolution Panel may confirm, reduce or enhance the variations proposed in the draft order so, however, that it shall not set aside any proposed variation or issue any direction under sub-section (5) for further enquiry and passing of the assessment order.
[Explanation.—For the removal of doubts, it is hereby declared that the power of the Dispute Resolution Panel to enhance the variation shall include and shall be deemed always to have included the power to consider any matter arising out of the assessment proceedings relating to the draft order, notwithstanding that such matter was raised or not by the eligible assessee.] (9) If the members of the Dispute Resolution Panel differ in opinion on any point, the point shall be decided according to the opinion of the majority of the members.
(10) Every direction issued by the Dispute Resolution Panel shall be binding on the Assessing Officer.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 24 of 51(11) No direction under sub-section (5) shall be issued unless an opportunity of being heard is given to the assessee and the Assessing Officer on such directions which are prejudicial to the interest of the assessee or the interest of the revenue, respectively.
(12) No direction under sub-section (5) shall be issued after nine months from the end of the month in which the draft order is forwarded to the eligible assessee.
(13) Upon receipt of the directions issued under sub-section (5), the Assessing Officer shall, in conformity with the directions, complete, notwithstanding anything to the contrary contained [in Section 153 or Section 153-B], the assessment 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.
(14) The Board may make rules for the purposes of the efficient functioning of the Dispute Resolution Panel and expeditious disposal of the objections filed under sub-section (2) by the eligible assessee.
[(14-A) 3363[* * *]] [(14-A) The provisions of this section shall not apply to any assessment or reassessment order passed by the Assessing Officer with the prior approval of the [Principal Commissioner or Commissioner] as provided in sub-section (12) of Section 144-BA.] [(14-B) The Central Government may make a scheme, by notification in the Official Gazette, for SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 25 of 51 the purposes of issuance of directions by the dispute resolution panel, so as to impart greater efficiency, transparency and accountability by—
(a) eliminating the interface between the dispute resolution panel and the eligible assessee or any other person to the extent technologically feasible;
(b) optimising utilisation of the resources through economies of scale and functional specialisation;
(c) introducing a mechanism with dynamic jurisdiction for issuance of directions by dispute resolution panel.
(14-C) The Central Government may, for the purpose of giving effect to the scheme made under sub-section (14-B), by notification in the Official Gazette, direct that any of the provisions of this Act shall not apply or shall apply with such exceptions, modifications and adaptations as may be specified in the notification:
[* * *] (14-D) Every notification issued under sub-section (14-B) and sub-section (14-C) shall, as soon as may be after the notification is issued, be laid before each House of Parliament.] (15) For the purposes of this section,—
(a) “Dispute Resolution Panel” means a collegium comprising of three Commissioners of Income tax constituted by the Board for this purpose;SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 26 of 51
(b) “eligible assessee” means,—
(i) any person in whose case the variation referred to in sub-section (1) arises as a consequence of the order of the Transfer Pricing Officer passed under sub-section (3) of Section 92-CA; and [(ii) any non-resident not being a company, or any foreign company:] [Provided that such eligible assessee shall not include person referred to in sub-section (1) of Section 158-BA or other person referred to in Section 158-BD.] [(16) The provisions of this section shall not apply to any proceedings under Chapter XIV-B.]"
(emphasis supplied)
18. Sub-Section (1) of Section 144C of the Income Tax Act states that an Assessing Officer, notwithstanding anything to the contrary contained in the Income Tax Act, shall forward a draft of the proposed order of assessment to an Eligible Assessee. This expression "Eligible Assessee" has been defined in Sub- Section (15) to mean a person in whose case a variation arises as a consequence of an order of a Transfer Pricing Officer passed under Sub-Section (3) of Section 92CA of the Income Tax Act. It also includes any non-resident not being a company, or a foreign company. In the facts of the present case, Section SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 27 of 51 144C of the Income Tax Act is applicable to the Respondent as it is a foreign company.
19. Thus, insofar as eligible Assessees are concerned, the Assessing Officer, in terms of Section 144C of the Income Tax Act, is required to pass a Draft Assessment Order and give a copy of this order to the Assessee. This Section provides the Assessee a period of 30 days to either accept the variations proposed by the Assessing Officer or to file its objections to this variation with the Dispute Resolution Panel and the Assessing Officer. If no objections are received within the 30-day time period, or an acceptance is received, Sub-Section (3) mandates that the Assessing Officer complete the assessment, and pass a final Assessment on the basis of the Draft Order. On the other hand, if objections are received by the Dispute Resolution Panel, it must, in terms of Sub-Sections (5) and (6), issue directions as it thinks fit for the guidance of the Assessing Officer to enable him to complete the assessment. Sub-Section (8) also empowers the Dispute Resolution Panel to confirm, reduce, or enhance variations proposed in the Draft Order. Sub- Section (11) specifically provides that an opportunity of hearing must be given in case directions prejudicial to the revenue or the Assessee are being passed. Sub-Section (12) also prescribes that no direction shall be issued after 9 months from the end of the month in which the Draft Order is forwarded to the eligible SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 28 of 51 Assessee. Sub-Section (13) provides that the Assessing Officer, in conformity with the directions of the Dispute Resolution Panel, must complete the assessment within one month from the end of the month in which the direction is received, and that no further opportunity of being heard is to be provided to the Assessee at this stage.
20. These provisions make it abundantly clear that Section 144C of the Income Tax Act contemplates and prescribes a specific procedure and also prescribes very specific fixed timelines for the completion of assessment. From the date of the Draft Assessment Order proposing variations, the entire procedure contemplated will result in an order being passed within an outer limit of roughly 11 months, depending on the date on which the directions, if any, are passed by the Dispute Resolution Panel.
21. The question which arises for the consideration of this court is whether this 11-month period contemplated in Section 144C of the Income Tax Act is subsumed within the outer limit of time to pass an Assessment Order as prescribed under Section 153 of the Income Tax Act or any of its Sub-Sections?
22. The learned Additional Solicitor General, Mr. N. Venkatraman, appearing on behalf of the Appellant, has contended that the Income Tax Act contemplates two different SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 29 of 51 methods of assessment: one for eligible assessees as defined under Section 144C(15)(b) of the Income Tax Act and for other assessees who fall under the normal category. He has submitted that ordinarily an assessment order must be made in terms of Section 153(1) of the Income Tax Act within a period of 21 months from the end of the assessment year in which the income was first assessable. If the variation arises as a result of a proceeding before the Transfer Pricing Officer under Section 92CA of the Income Tax Act, this period of 21 months is further extended by a period of 12 months, giving a total of 33 months to pass the assessment order from the end of the relevant assessment year.
23. He has further argued that because of the special provisions contained within Section 144C of the Income Tax Act, which is a self-contained code and as a procedure is prescribed under Section 144C of the Income Tax Act, its timelines will be in addition to the timelines prescribed in terms of Section 153 of the Income Tax Act. According to the learned Additional Solicitor, the timelines prescribed in Section 153 of the Income Tax Act will apply to the Draft Assessment Order referred to in Section 144C(1) of the Income Tax Act, and that he will be required to ensure that the Draft Assessment Order is passed in terms of the timelines prescribed under Section 153 of the Income Tax Act.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 30 of 5124. It has also been mentioned before this Court that the total tax implication of the decision of the Bombay High Court, which is under challenge before this Court, can have a revenue impact of nearly 1.3 lakh crores, as that is the quantum of dispute in various appeals which are pending in the country which will otherwise be deemed to be time-barred if the interpretation of the High Court of Bombay by way of the impugned order is upheld.
25. A preliminary objection has been taken by the learned Senior Counsel appearing on behalf of the Respondent that the present Special Leave Petition ought to be dismissed on account of the fact that there is a low tax effect. This submission need not detain me any further. Obviously, there is an extremely important question of law which has to be decided by this Court and has country-wide ramifications. The Court is not compelled to dismiss a petition merely because it has a low tax effect.
26. The learned Senior Counsel Mr. Mistry appearing on behalf of the Respondents has contended that Section 153 of the Income Tax Act provides various extended periods of limitations in certain actions. It has been contended that no exception has been carved out in Section 153 of the Income Tax Act in respect of the time taken by the revenue in terms of proceedings under Section 144C of the Income Tax Act.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 31 of 51Reliance has been placed on Section 153(4) of the Income Tax Act, where the period of limitation is extended by 12 months in case a reference has been made to the Transfer Pricing Officer under Section 92CA(1) of the Income Tax Act. Reliance has also been placed on Explanation 1 clauses (iv) to (xiii) 2, all of which have provided extended periods of time within which Assessment Order has to be passed. It has been contended that the Legislature has allowed an extended period of limitation, or excluded a period taken for the proceedings, wherever it intended to give the revenue authorities additional time. He submits that since no such exception has been made for the proceedings contemplated under Section 144C of the Income Tax Act, all the additional time including which is given under Section 144C shall be subsumed under Section 153 of the Income Tax Act, and therefore, the High Court has rightly held that the proceedings challenged before it were barred by limitation.
27. Another ground urged by the Ld. Senior Counsel, is that if it is accepted that the entire procedure contemplated under Section 144C of the Income Tax Act must take place within the overall time period prescribed under Section 153 of the Income Tax Act, it would imply that an Assessing Officer who ordinarily gets a period of 12 months to pass an Assessment Order after an order of remand would now have to pass his SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 32 of 51 Draft Assessment Order, and also provide for one month for the Assessee to file its objections, 9 months for the Dispute Resolution Panel, and thereafter pass his own final assessment order within this time period of 9 months. Reliance has been placed on the decision of the Madras High Court in Commissioner of Income Tax & Anr. v. Roca Bathroom Products Pvt. Ltd., 2022 SCC OnLine Mad 8777.
28. Having heard the Ld. Counsel for the parties, I am of the opinion that the Impugned Order is liable to be set aside, and the Judgement of the Madras High Court also deserves to be set aside, as this interpretation of the interplay between Section 153 and 144 C of the Income Tax Act seems wholly incorrect, and unworkable.
29. In the facts of Roca Bathroom Products Private Limited (supra), it is relevant to mention that the time period under Section 153(4) of the Income Tax Act was applicable, which provides for an additional period of 12 months to complete the assessment and pass the final order in case a reference has been made to the Transfer Pricing Officer in terms of Section 92CA of the Income Tax Act. The High Court took the view that in view of the additional time period of 12 months provided, the proceedings before the Dispute Resolution Panel, the passing of draft assessment and thereafter final assessment order ought to SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 33 of 51 have taken place within this extended period of limitation. I am of the view that this interpretation is totally erroneous.
30. In interpreting the provisions that form the subject matter of the present controversy, this Court is alive to the fact that a fine balance has to be maintained between ensuring that the revenue authorities have ample time and opportunity to assess income and ensure that those who attempt tax evasion, are prosecuted, and the income escaping taxation, is brought within the tax fold. At the same time, the rights of the Assessees, of not having their returns scrutinized after a substantial period of time, must also be balanced. Uncertainty, and giving the revenue the opportunity to reopen the assessment of any taxation from many years ago, is never good for business or promoting foreign investment. At the same time, unscrupulous persons trying to avoid paying the legitimate tax dues must also be dealt with strictly and all taxes which they have sought to avoid must be recovered.
31. If I take the view that the entire procedure prescribed and contemplated in terms of Section 144C of the Income Tax Act must be subsumed within the overall time period prescribed under Section 153 of the Income Tax Act, I am of the opinion that it would result in a complete catastrophe for recovering lost SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 34 of 51 tax. The time period within which the Assessing Officers would have to pass orders would be negligible.
32. In my opinion, this would be totally unworkable. The total time prescribed for passing the assessment orders in the ordinary course is only 12 months from the end of the financial year in which the remand order has taken place from the tribunal. In most of the illustrations and situations dealt with in Section 153 and its many sub-sections, a specified timeline has been prescribed within which the assessment order must be passed.
33. Section 153 in its operation does not distinguish between persons who are suffering assessment under Section 144C of the Income Tax Act or otherwise. This Court is mindful of the fact that the procedure adopted and the recourses available to an Assessee in case of proceedings or reassessment in terms of Section 143(3) of the Income Tax Act are very different from those under Section 144C of the Income Tax Act as already explained in detail above.
34. There is an entire procedure which contemplates giving an Assessee a period of one month to choose to file objections as well as provides an Assessee with an opportunity of hearing which may take up to 9 months before the Dispute Resolution Panel. It is important to note that proceedings before the SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 35 of 51 Dispute Resolution Panel are initiated at the option of the Assessee. It is always open for an Assessee to accept variations proposed by the Assessing Officer in its Draft Order, so therefore it cannot be said that an Assessee is prejudiced by proceedings before the Dispute Resolution Panel or the time that it takes because it is something that an Assessee will initiate and not something that he/she must mandatorily go through.
35. The High Courts of Bombay and Madras have taken the view that the fact that no exception has been carved out for Section 144C of the Income Tax Act in any of the sub-sections of Section 153 of the Income Tax Act makes it clear that the time of Section 144C of the Income Tax Act proceedings must necessarily conclude within the time period prescribed under Section 153 of the Income Tax Act. I agree with this view only to a limited extent, insofar as the timelines prescribed under Section 153 of the Income Tax Act must apply to proceedings under Section 144C of the Income Tax Act, but only insofar as they relate to the passing of the Draft Assessment Order contemplated under Sub-Section (1) of Section 144C of the Income Tax Act.
36. My view in this regard stems from the fact that Sub- Section (4) and Sub-Section (13) of Section 144C of the Income Tax Act provide clear and unequivocal non obstante clauses, SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 36 of 51 which remove the application of Section 153 of the Income Tax Act and the timelines prescribed thereunder. The High Courts of Madras and Bombay have taken the view that this timeline further reduces the time available to the Assessing Officer to pass an assessment order, and that it further limits it. They have taken the view that the 12-month timeline goes out of the window and that the Assessing Officer has only been given a period of one month either after passing the Draft Assessment Order or after receiving the directions from the Dispute Resolution Panel, and at the same time, the Final Assessment Order also has to be passed within the overall 12 month time period.
37. I find this view difficult to accept. No doubt Sub-Section (4) and Sub-Section (13) of Section 144C of the Income Tax Act prescribe very specific timelines for the Assessing Officer to complete and pass the Final Assessment Order, but I am of the view that these timelines are independent of the timelines contemplated in Section 153 of the Income Tax Act, and operate in addition to the timelines contemplated in Section 153 of the Income Tax Act.
38. The Bombay High Court and the Madras High Court have rightly taken the view that the non obstante clauses are SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 37 of 51 only limited to the actual final passing of the order, but the conclusions drawn in my opinion are incorrect.
39. In my opinion, the requirements of Section 153 of the Income Tax Act in terms of timeline are strictly applicable to Section 144C (1) of the Income Tax Act, that is the stage at which the Draft Order has to be passed by the Assessing Officer. The non-obstante clauses contained in Sub-Section (4) and Sub-Section (13) of Section 144C of the Income Tax Act only extend the timeline for the passing of the final order and not that of the Draft Order.
40. Sub-Section (4) operates and comes into existence only in cases in situations when an Assessee subjected to Section 144C of the Income Tax Act accepts the variations proposed in the Draft Assessment Order or if the period of filing objections before the Dispute Resolution Panel expires. In my opinion, the conjoint reading of Section 144C(1), Section 153, and Section 144C(4) of the Income Tax Act make it abundantly clear that the Assessing Officer is obliged to comply with the requirements of Section 153 of the Income Tax Act insofar as it relates to passing the Draft Assessment Order and that he must also necessarily pass the Final Assessment Order within an additional period of one month in case the variations are accepted or the period of limitation for filing objections expires.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 38 of 51In my opinion, this would extend the time available to the Assessing Officer from 31st March of any year to 30th April of that year. In the facts of the present case, this would mean that the Assessing Officer ought to have passed his Draft Assessment Order before 30th September 2021, and in case acceptance was received or no objections were filed, the final assessment order by or before 30th October 2021.
41. Similarly, in the event objections were filed, Section 144C(12) of the Income Tax Act states that such objections have to be decided and directions have to be issued within a period of 9 months. Sub-Section (13) makes it clear that regardless of how long it takes the Dispute Resolution Panel to pass its directions, the Assessing Officer will only have an additional period of one month to pass the Final Assessment Order. This means that if the Dispute Resolution Panel disposes of the objections and issues directions within a period of one month from the date of filing of objections, the Final Assessment Order must be passed within one month from such date which will be practically impossible.
42. It is the contention of Ld. Senior Counsel for the Respondent that the non-obstante clause in Section 144C(1) is limited to provisions contrary to what is contained in elsewhere in the Act and submits that the only aspect contrary in Section SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 39 of 51 144C is passing of a draft assessment order instead of a final assessment order. It was submitted that the non-obstante clause in Section 144C(1) does not extend to the timelines prescribed under Section 153.
43. This submission cannot be accepted. When Section 153(1) is examined, though there is a reference to Section 143 and Section 144, there is no reference to Section 144C. It cannot therefore be held that the timelines under Section 153 also includes the process conceived under Section 144C. The non- obstante clause in Section 144C must be given a construction that would not defeat the working of the Income Tax Act, 1961. Even if the non-obstante clause in Section 144C(1) is limited to passing a final assessment order under Section 143(3), principles of statutory construction would permit an interpretation which would allow the associated timelines for the Section 143(3) exercise prescribed under Section 153 to be covered within the scope of the non-obstante clause in Section 144C. If the Arguments of the Respondents were to be accepted, it would result in an interpretation where the non-obstante clause in Section 144C(1) is limited to a procedure of passing a draft assessment order instead of a final assessment order under Section 143(3) without subsuming the associated timelines attached to such Section 143(3) procedure. In other words, if Section 144C(1) operates notwithstanding the Section 143(3) SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 40 of 51 procedure, it also operates notwithstanding the timelines prescribed under Section 153 for such Section 143(3) procedure. This construction would preserve the sanctity of the provision and would not result in any absurd outcome.
44. If the procedure under Section 144C and its associated timelines prescribed under sub-clause (4) and sub-clause (13) were to be subsumed within the timelines prescribed under Section 153, it would result in a scenario where every assessing officer in the country would have to complete all assessments by working backwards and would have to allow the period of nine months granted to the Dispute Resolution Panel to issue directions under Section 144C(5) r/w Section 144C(12). This would effectively mean that an assessing officer would have to firstly foresee that an eligible assessee would compulsorily file objections to the draft assessment order under Section 144C(2)(b) and the Dispute Resolution Panel would require the entire nine months period to issue any direction. The Parliament while enacting Section 144C, could not have conceived such a procedure to be followed by an assessing officer in the Country.
45. This can also be approached from another angle. If the contentions of the Respondents were to be accepted, and assuming a scenario where the assessing officer does not accommodate for the entire nine-month period for the Dispute SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 41 of 51 Resolution Panel to issue directions, it would result in a scenario where an assessing officer would eat into the time available for the Dispute Resolution Panel to issue directions, which would effectively result in amending the Income Tax Act and the timeline of nine months available with the Dispute Resolution Panel available under Section 144C(12).
46. The non-obstante clauses in Section 144C must therefore be harmoniously construed. The timelines prescribed under Section 153 will be applicable upto the stage of passing the draft assessment order under Section 144C(1). Once the procedure under Section 144C(1) gets triggered, the time available with the Dispute Resolution Panel to carry out the process conceived under Section 144C(5) to Section 144C(12) and the time available with the assessing officer under Section 144C(13), will be over and above the timelines prescribed under Section 153. This interpretation would ensure a smooth functioning of Section 153 and Section 144C.
47. Section 153 is not the only provision for prescribing time limits for assessments and reassessments. Even without a non- obstante clause, the erstwhile Section 158BE provided for independent timelines for block assessments. Timelines for assessment under Section 153A is prescribed under Section SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 42 of 51 153B, which also operates notwithstanding anything contained in Section 153.
48. Section 92CD of the Income Tax Act, 1961 pertains to advanced pricing agreements. Section 92CD(5) operates notwithstanding anything contained in Section 153, Section 153B or Section 144C. Had Section 153 subsumed the timelines prescribed under Section 144C, there was no occasion for the Parliament to specifically mention Section 144C in Section 92CD(5) which too provided alternate timelines, contrary to the timelines prescribed under Section 153. This too is an indication of the intention of the Parliament to operate the timelines under Section 144C over and above Section 153.
49. Ld. Senior Counsel for the Respondent contended that Explanation 1 to Section 153 provides for various time periods arising out of certain circumstances which ought to be excluded while calculating the period of limitation under Section 153 and further contended that there is no reference to Section 144C or to the time-period available to the Dispute Resolution Panel, to be excluded for calculating the limitation under Section 153.
50. This contention too cannot be accepted. Once a draft assessment order is issued under Section 144C, the assessing officer is incapacitated to conduct further independent enquiries or raise any fresh issue in the final assessment order that was SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 43 of 51 not part of the draft assessment order. On an examination of Section 144C, it becomes clear that the assessing officer simply has to pass an assessment order in conformity with the directions issued by the Dispute Resolution Panel if objections are filed by the assessees or simply reiterate the draft assessment order as a final assessment order if no objections are filed. The assessing officer acts in an executory role once the draft assessment order is issued under section 144C(1).
51. In this context, if Explanation 1 to Section 153 is examined, it deals with situations where the Assessing Officer’s Quasi-Judicial Role is eclipsed for a certain period and he is re- vested with the Quasi-Judicial power. The Explanation merely excludes the period of eclipse while computing the limitation under Section 153. The Explanation to Section 153 merely serves this purpose. Since the assessing officer performs an executory role under Section 144C after the draft assessment order is issued, Explanation 1 to Section 153 has no relevance in the context of Section 144C.
52. Even otherwise, since when Section 144C operates not withstanding Section 153, and since the timelines under Section 144C are over and above the timelines under Section 153, Explanation 1 to Section 153 has no relevance.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 44 of 5153. It is settled law that while interpreting statutes the Court must avoid an absurd interpretation and must always strive to interpret the provisions to ensure that the Legislation is not reduced to a futility, and the interpretation must ordinarily be such that it brings about an effective result which was intended by the Legislature. The Supreme Court of India in the case of Commissioner of Income Tax v. Hindustan Bulk Carriers, (2003) 3 SCC 57, has held as under:-
"14. A construction which reduces the statute to a futility has to be avoided. A statute or any enacting provision therein must be so construed as to make it effective and operative on the principle expressed in the maxim ut res magis valeat quam pereat i.e. a liberal construction should be put upon written instruments, so as to uphold them, if possible, and carry into effect the intention of the parties. [See Broom's Legal Maxims (10th Edn.), p. 361, Craies on Statutes (7th Edn.), p. 95 and Maxwell on Statutes (11th Edn.), p. 221.]
15. A statute is designed to be workable and the interpretation thereof by a court should be to secure that object unless crucial omission or clear direction makes that end unattainable. (See Whitney v. IRC [1926 AC 37 : 10 Tax Cas 88 : 95 LJKB 165 : 134 LT 98 (HL)] , AC at p. 52 referred to in CIT v. S. Teja Singh [AIR 1959 SC 352 :
(1959) 35 ITR 408] and Gursahai Saigal v. CIT [AIR 1963 SC 1062 : (1963) 48 ITR 1] .)
16. The courts will have to reject that construction which will defeat the plain intention of the SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 45 of 51 legislature even though there may be some inexactitude in the language used. (See Salmon v.
Duncombe [(1886) 11 AC 627 : 55 LJPC 69 : 55 LT 446 (PC)] AC at p. 634, Curtis v. Stovin [(1889) 22 QBD 513 : 58 LJQB 174 : 60 LT 772 (CA)] referred to in S. Teja Singh case [AIR 1959 SC 352 : (1959) 35 ITR 408] .)
17. If the choice is between two interpretations, the narrower of which would fail to achieve the manifest purpose of the legislation, we should avoid a construction which would reduce the legislation to futility, and should rather accept the bolder construction, based on the view that Parliament would legislate only for the purpose of bringing about an effective result. (See Nokes v. Doncaster Amalgamated Collieries [(1940) 3 All ER 549 : 1940 AC 1014 : 109 LJKB 865 : 163 LT 343 (HL)] referred to in Pye v. Minister for Lands for NSW [(1954) 3 All ER 514 : (1954) 1 WLR 1410 (PC)] .) The principles indicated in the said cases were reiterated by this Court in Mohan Kumar Singhania v. Union of India [1992 Supp (1) SCC 594 : 1992 SCC (L&S) 455 : (1992) 19 ATC 881 : AIR 1992 SC 1].
18. The statute must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make a consistent enactment of the whole statute."
54. The Constitution Bench in the case of Franklin Templeton Trustee Services Private Limited & Anr. v. Amruta Garg & Ors., (2021) 6 SCC 736, has held as under:-
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 46 of 51"17. The concept of “absurdity” in the context of interpretation of statutes is construed to include any result which is unworkable, impracticable, illogical, futile or pointless, artificial, or productive of a disproportionate counter-mischief [ See Bennion on Statutory Interpretation, 5th Edn., p. 969.]. Logic referred to herein is not formal or syllogistic logic, but acceptance that enacted law would not set a standard which is palpably unjust, unfair, unreasonable or does not make any sense. [Bennion on Statutory Interpretation, 5th Edn., p.
986.] When an interpretation is beset with practical difficulties, the courts have not shied from turning sides to accept an interpretation that offers a pragmatic solution that will serve the needs of society [Id, p. 971, quoting Griffiths, L.J.]. Therefore, when there is choice between two interpretations, we would avoid a “construction” which would reduce the legislation to futility, and should rather accept the “construction” based on the view that draftsmen would legislate only for the purpose of bringing about an effective result. We must strive as far as possible to give meaningful life to enactment or rule and avoid cadaveric consequences [ See Principles of Statutory Interpretation by Justice G.P. Singh, 14th Edn., p.
50.] ."
55. The Constitution Bench in the case of Vivek Narayan Sharma & Ors. (Demonetisation Case-5J.) v. Union of India & Ors., (2023) 3 SCC 1, has held as under:-
"134. Legislation has an aim, it seeks to obviate some mischief, to supply an inadequacy, to effect a change of policy, to formulate a plan of SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 47 of 51 government. That aim, that policy is not drawn, like nitrogen, out of the air; it is evidenced in the language of the statute, as read in the light of other external manifestations of purpose [“Some Reflections on the Reading of Statutes” [(1947) 47 Columbia LR 527] , Columbia LR at p. 538]. This is how Justice Frankfurter succinctly propounds the principle of purposive interpretation.
xxx
137. A statute must be construed having regard to the legislative intent. It has to be meaningful. A construction which leads to manifest absurdity must not be preferred to a construction which would fulfil the object and purport of the legislative intent.
xxx
148. It is thus clear that it is a settled principle that the modern approach of interpretation is a pragmatic one, and not pedantic. An interpretation which advances the purpose of the Act and which ensures its smooth and harmonious working must be chosen and the other which leads to absurdity, or confusion, or friction, or contradiction and conflict between its various provisions, or undermines, or tends to defeat or destroy the basic scheme and purpose of the enactment must be eschewed. The primary and foremost task of the Court in interpreting a statute is to gather the intention of the legislature, actual or imputed. Having ascertained the intention, it is the duty of the Court to strive to so interpret the statute as to promote or advance the object and purpose of the enactment. For this purpose, where necessary, the Court may even depart from the rule that plain words should be interpreted according to their SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 48 of 51 plain meaning. There need be no meek and mute submission to the plainness of the language. To avoid patent injustice, anomaly or absurdity or to avoid invalidation of a law, the court would be justified in departing from the so-called golden rule of construction so as to give effect to the object and purpose of the enactment. Ascertainment of legislative intent is the basic rule of statutory construction."
56. Obviously, the two situations contemplated under the Income Tax Act in terms of assessment under Section 144C of the Income Tax Act are vastly different and will obviously take varying amounts of time depending on whether objections are filed before the Dispute Resolution Panel or not. At the cost of repetition, it must be remembered that this option is only exercised by the Assessee. It is also relevant to mention that if adequate opportunity or time is not granted to an Assessee or if the Dispute Resolution Panel is forced to decide the objections in a very quick manner inhibited by the timelines prescribed under Section 153 of the Income Tax Act, it would amount to a violation of the Principles of Natural Justice.
57. It is therefore not possible for this Court to accept the view of the High Courts in this matter.
58. Since I have been informed that this question of law and issue has arisen in a large number of appeals pending in various forums across the country, it is appropriate to clarify and specify SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 49 of 51 the meaning of Section 144C of the Income Tax Act and its applicability alongside Section 153(3) of the Income Tax Act, including situations where Section 92C of the Income Tax Act is invoked.
59. In cases of assessment proceedings under Section 144C, Section 153 of the Income Tax Act and all its sub-sections are fully applicable, and the timelines prescribed therein apply to the Draft Assessment Order, which is to be passed under Sub- Section (1) of Section 144C of the Income Tax Act. If proceedings under Section 92C are also invoked, the time period in view of Section 153(4) of the Income Tax Act would be extended by a period of 12 months.
60. The fixed time periods prescribed under Section 144C of the Income Tax Act must be adhered to, and a final assessment order must be passed either within one month of the Draft Assessment Order if the situation contemplated under Sub- Section (4) takes place, or within a period of 11 months from the passing of the Draft Assessment Order if the Assessee opts to file objections before the Dispute Resolution Panel.
61. In view of the above, the Judgment and Order of the High Court of Bombay dt. 04.08.2023 passed in Writ Petition Nos. 2340, 2661, 3059 and 3060 of 2021 is set aside. Consequently, the appeals are allowed. The Revenue Authorities SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 50 of 51 shall be free to pass appropriate orders in accordance with law. In case the assessee is aggrieved by the orders passed by the revenue authorities, the assessee shall also be free to take recourse to the remedies available under the applicable laws.
62. Civil Appeal No. _________/2025 (arising out of Special Leave Petition No.25798 of 2024) is disposed of in terms of the liberty granted to the parties in terms of Paragraph 20 of the Judgment and Order dated 13.08.2024 passed by the High Court of Judicature at Bombay in Writ Petition (L) No. 30944 of 2023.
……………………………………J. [SATISH CHANDRA SHARMA] NEW DELHI AUGUST 08, 2025.
SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 Page 51 of 51IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NOS. OF 2025 (Arising out of SLP (Civil) Nos.20569-20572 of 2023) Assistant Commissioner of Income Tax (International Taxation) & Others … Appellants Versus Shelf Drilling Ron Tappmeyer Ltd. Etc. … Respondent(s) WITH SPECIAL LEAVE PETITION (CIVIL) NO.25798 OF 2024 ORDER OF THE COURT Having regard to the divergent opinions expressed by us, we direct the Registry to place these matters before Hon’ble the Chief Justice of India for constituting an appropriate Bench to consider the issues which arise in these matters afresh.
….……………………………………..J. (B.V. NAGARATHNA) ….……………………………………..J. (SATISH CHANDRA SHARMA) NEW DELHI;
AUGUST 08, 2025.