The issue before the Supreme Court concerned the correct interpretation of the limitation provisions under Section 153 of the Income-tax Act, 1961, in cases where the special assessment procedure under Section 144C, involving reference to the Dispute Resolution Panel (DRP), is applicable. The central question was whether the time consumed in completing the DRP proceedings under Section 144C must be included within the limitation period prescribed under Section 153, or whether the timelines under Section 144C operate independently of, and in addition to, the limitation prescribed under Section 153.

The respondents, being non-resident assessees engaged in activities governed by Section 44BB of the Act, were eligible assessees within the meaning of Section 144C. Draft assessment orders were issued proposing variations prejudicial to the assessees, following which objections were filed before the DRP. However, final assessment orders could not be passed within the limitation period prescribed under Section 153. The High Courts, relying inter alia on the decision in Commissioner of Income Tax v. Roca Bathroom Products Pvt. Ltd., held that the entire procedure contemplated under Section 144C must be completed within the limitation period under Section 153, failing which the assessments would be barred by limitation.

The Revenue contended that Section 144C is a self-contained code applicable to eligible assessees and that the non-obstante clauses contained in sub-sections (1), (4), and (13) of Section 144C clearly indicate legislative intent to override the timelines under Section 153 to the extent of proceedings before the DRP. It was argued that Section 153 governs only the stage of passing the draft assessment order, while the period consumed thereafter under the DRP mechanism stands statutorily excluded.

Upon examining the statutory scheme, the purpose behind the introduction of Section 144C, and the principles governing interpretation of non-obstante clauses, the Supreme Court held that the timelines prescribed under Section 144C operate notwithstanding the provisions of Section 153. The Court clarified that the limitation under Section 153 applies only up to the stage of issuance of the draft assessment order, and that the subsequent period taken for DRP proceedings and for passing the final assessment order under Section 144C is excluded. Consequently, the contrary views taken by the Bombay and Madras High Courts, including in Roca Bathroom Products Pvt. Ltd., were set aside.

 

Source Link - https://api.sci.gov.in/supremecourt/2023/35225/35225_2023_5_1501_63205_Judgement_08-Aug-2025.pdf

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