Income Tax Act | Deputy Commissioner Cannot Act Beyond DRP Directions; Assessment After S.144C(13) Time Limit Invalid: Bombay High Court

Section 144C(13) of the Income Tax Act, 1961 mandates the completion of the assessment within one month from the end of the month in which DRP directions are received.

Justices B.P. Colabawalla and Amit S. Jamsandekar stated that the Deputy Commissioner cannot act beyond the mandate of Section 144 (C) (13) and also contrary to the directions given by the DRP in sub-section (5) of Section 144 (C) of the Act. The reason being, Section 144(C)(13) mandates that the Deputy Commissioner ought to complete the assessment in conformity with the direction of the DRP, that too within the strict timelines. Further, Section 144 C (10) makes a clear provision that the directions of the DRP are binding on the Assessing Officer.

The main issue raised in the petition is the effect of not completing the assessment within a period of one month from the end of the month in which the Assessing Officer receives such directions from the DRP under Section 144(C) (5) of the Act.

According to the assessee/Petitioner, if the Assessing Officer fails to complete the assessment within the time frame as prescribed by Section 144 (C) (13), the transfer pricing addition ought to be treated as non est on the ground that it becomes time-barred.

The revenue/respondent submitted that the timelines under Section 144 (C) (13) of the Act would not be applicable in the case. According to the Revenue, if the DRP passes directions in a matter that was the subject of remand and if the directions are passed in the second round, then the timelines provided under Section 144(C)(13) of the Act are not applicable.

Therefore, according to the revenue, the Deputy Commissioner is not bound to complete the assessment within one month from the end of the month in which such directions are received.

The issue before the bench was whether the transfer pricing addition of Rs. 5,26,86,111.00 should be treated as non-est on the ground that the proceedings to give effect to the DRP's directions dated 19^th March, 2020, are now barred by limitation.

The bench noted that the language of Section 144 C (13) is clear, unambiguous and mandatory. It provides a mechanism for the steps that must be taken after proceedings under subsection (5) of Section 144(C) are completed. The mechanism envisaged under the section has a strict timeline, which cannot be deviated from by the Assessing Officer.

Therefore, by clear language of Section 144(C) (13) of the Act, the Deputy Commissioner ought to have completed the assessment order within a period of one month from the end of the month in which such direction of the DRP is received, stated the bench.

The bench agreed with the assessee that the Assessing Office does not have any discretion after the DRP issues directions under section 144 C (5), and he cannot deviate from the procedure envisaged under the Section.

The bench held that the proceedings pending before the Deputy Commissioner concerning the transfer pricing addition of Rs. 5,26,86,111.00 are barred by limitation and now outside the purview of Section 144(C)(13) of the Act.

The Deputy Commissioner cannot now invoke the provisions of Section 144 (C) (13) of the Act and complete the assessment because the time frame mandated by the Section has already expired. It is accordingly so declared, added the bench.

The bench directed the department to recompute the assessee's total income for the AY 2010-2011 by excluding the transfer pricing adjustment of Rs. 5,26,86,111.00.

In view of the above, the bench allowed the petition.

Case Title: Archroma International (India) Private Limited v. Deputy Commissioner of Income Tax

Case Number: WRIT PETITION (L) NO.11226 OF 2025

Counsel for Petitioner/Assessee: Mr. J. D. Mistry, Senior Advocate, with Mr. Paras Savla, Mr. Harsh Shah, Mr. Pratik Poddar, Mr. Rajnandini Shukla

Counsel for Respondent/Department: Ms. Sushma Nagaraj, with Mr. Abhinav Palsikar

Click Here To Read/Download The Order