HC Quashes Rs. 5.26 Cr TP Adjustment on Ground of Limitation; AO’s Inaction Violates Section 144C(13)

Archroma International (India) Pvt. Ltd., formerly Huntsman International (India) Pvt. Ltd., challenged the Revenue’s inaction in giving effect to Dispute Resolution Panel (DRP) directions issued on 19 March 2020 for AY 2010-11. The case had travelled through multiple stages: draft assessment in March 2014, objections before the DRP, directions in November 2014, and a final order in December 2014. On appeal, the ITAT in December 2015 remanded the transfer pricing adjustment of Rs. 5.26 crore to the DRP for fresh adjudication. All other issues were simultaneously decided in favour of the assessee. New DRP directions, pursuant to the remand, were issued requiring the AO/TPO to re-examine the corporate service charges segment-wise. Still the AO failed to pass the mandatory final assessment order within the time prescribed under Section 144C(13).

The assessee repeatedly followed up through letters dated August 2020, August 2024, September 2024, and later reminders, but the AO took no action. The assessee therefore sought a declaration that the proceedings had become time-barred by operation of Section 144C(13), rendering the transfer pricing adjustment itself non-est, and requiring a refund of overpaid taxes. The Revenue opposed saying that the one-month limitation does not apply when DRP directions arise out of a remand.

Issue Raised: Whether the one-month time limit in Section 144C(13) applies even to DRP directions issued in remand proceedings, and if failure to act within this period renders the transfer-pricing adjustment non-est.

HC Decided: The Hon’ble High Court held that Section 144C(13) is mandatory, unambiguous, and applicable irrespective of whether the DRP directions arise from an original proceeding or from a remand. The provision expressly requires the AO to complete the assessment “within one month from the end of the month” of receiving DRP directions and contains a non-obstante clause overriding Sections 153 and 153B. The Court rejected the Revenue’s argument that the provision does not apply in remand cases, observing that such an interpretation would render the statutory mandate nugatory. Since the AO admittedly received DRP directions on 19 March 2020 but failed to act for over four years despite repeated reminders, the statutory deadline had long expired.

Therefore, the Court declared the DRP-remand proceedings as barred by limitation under Section 144C(13), held the transfer-pricing adjustment of Rs. 5,26,86,111 as non-est, and directed recomputation of income for AY 2010-11 by excluding the adjustment. The Court further directed the AO to process and pay the resulting refund with statutory interest under Section 244A within eight weeks. While disposing of the petition, the Court asked for compliance reporting on 15 December 2025.

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