ITAT: DRP Route Cannot Save Time-Barred TP Assessments Under Section 153

M/s Western UP Tollway Ltd. and M/s Mahua Bharatpur Expressways Ltd., infrastructure SPVs engaged in toll road projects, were subjected to transfer pricing assessments for AYs 2017-18 and 2018-19. Following reference to the TPO, draft assessment orders were issued, objections were filed before the DRP, and final assessment orders were passed under Section 143(3) read with Sections 144C(13) and 144B, making transfer pricing additions mainly on interest paid on non-convertible debentures.

Before the ITAT, the assessees raised additional legal grounds contending that the final assessment orders were barred by limitation under Section 153, having been passed beyond the outer time limit prescribed under Section 153(1) read with Section 153(4). The Revenue opposed admission of the additional grounds, arguing that Section 144C is a self-contained code with its own limitation and also relied on COVID-related extensions granted by the Supreme Court.

Question of Law: Whether final assessment orders passed under Section 143(3) read with Section 144C(13) are valid if issued beyond the outer limitation prescribed under Section 153(1) read with Section 153(4).

Tribunal’s Decision: The ITAT admitted the additional grounds, holding that pure questions of law can be raised at any stage. On merits, the Tribunal held that Sections 144C and 153 are mutually inclusive, and Section 144C does not override or extend the outer limitation prescribed under Section 153. The non-obstante clause in Section 144C(13) merely requires the AO to pass the final order within one month of receiving the DRP directions and does not extend the statutory time limit.

Relying on Roca Bathroom Products Pvt. Ltd. and Shelf Drilling Ron Tappmeyer Ltd., the Tribunal rejected the Revenue’s reliance on COVID-related extensions, holding that such extensions do not apply to original assessment proceedings. As the final assessment orders were passed beyond the permissible limitation period, they were quashed as time-barred. Liberty was granted to the parties to seek revival of the appeals depending on the outcome of the pending issue before the Supreme Court.

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