ASSISTANT COMMISSIONER OF INCOME TAX (INTERNATIONAL TAXATION) & OTHERS versus SHELF DRILLING RON TAPPMEYER LTD. ETC. (08/08/2025) — Supreme Court headnote

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Summary

A two-Judge Bench split on whether the timelines of the Dispute Resolution Panel procedure under Section 144C of the Income Tax Act, 1961 run over and above, or are subsumed within, the limitation for completing assessments under Section 153. Satish Chandra Sharma J. held that Section 153 governs only the draft assessment order under Section 144C(1), with the DRP and final-order timelines operating in addition, and allowed the Revenue's appeals; Nagarathna J. held that the entire Section 144C procedure must be completed within the Section 153(1) or 153(3) limitation and dismissed the appeals. The matters were directed to be placed before the Chief Justice of India for an appropriate Bench, so no binding ratio emerges.

Issues

Whether the period of about eleven months contemplated by Section 144C of the Income Tax Act, 1961 for the DRP procedure and the final assessment order is in addition to, or subsumed within, the limitation prescribed by Section 153(1) or the proviso to Section 153(3) for completing an assessment or a fresh assessment on remand under Section 254.
Whether the non obstante clauses in Section 144C(1), (4) and (13) exclude the timelines in Section 153, and to what extent.
Whether the absence of any exclusion in Explanation 1 to Section 153 for time taken in DRP proceedings shows that Parliament intended the Section 144C procedure to be completed within the Section 153 period.
Whether draft assessment orders passed on 28.09.2021, two days before the extended limitation of 30.09.2021 under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, left any time for a valid final assessment order.

Provisions considered

Section 144C(1), (2), (4), (5), (12), (13) and (15), Income Tax Act, 1961Sharma J. read the non obstante clauses in sub-sections (4) and (13) as making the one-month periods for the final order, and the DRP's nine months under sub-section (12), independent of and additional to Section 153, with Section 153 governing only the draft order under sub-section (1). Nagarathna J. read the non obstante clause in sub-section (1) as merely marking out a distinct procedure for eligible assessees, and those in sub-sections (4) and (13) as prescribing narrower periods designed to ensure the overall Section 153 limitation is met, so the whole procedure must conclude within twelve months of the remand under the proviso to Section 153(3). (¶¶ Sharma J. 36, Sharma J. 37, Sharma J. 39, Sharma J. 43, Sharma J. 46, Nagarathna J. 12.12, Nagarathna J. 12.14, Nagarathna J. 12.17, Nagarathna J. 12.19)
Section 153(1), (3) with proviso, (4) and Explanation 1, Income Tax Act, 1961Both opinions applied the twelve-month period under the proviso to Section 153(3) for a fresh assessment after a Section 254 remand and the eighteen months under the first proviso to Section 153(1) for AY 2018-19. Sharma J. held Section 153 governs only the draft order and that Explanation 1 is irrelevant because the Assessing Officer's role after the draft order is executory; Nagarathna J. held Section 153 draws no distinction between eligible and other assessees, that Section 153(4) extends time only for transfer-pricing references (from 01.04.2023) and not for non-resident eligible assessees, and that the absence of any exclusion for DRP time is decisive. (¶¶ Sharma J. 11, Sharma J. 12, Sharma J. 33, Sharma J. 39, Sharma J. 50, Sharma J. 51, Sharma J. 59, Nagarathna J. 11.3, Nagarathna J. 11.7, Nagarathna J. 12.12, Nagarathna J. 12.21)
Section 92CD(5), Income Tax Act, 1961Sharma J. relied on this provision, which operates notwithstanding Sections 153, 153B and 144C, as showing that Parliament treats the Section 144C timelines as separate from Section 153. (¶ Sharma J. 48)
Section 3(1) and Notification S.O. 966(E) dated 27.02.2021, Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020The time limit under Section 153 for assessments expiring on 31.03.2021 was extended to 30.09.2021; both opinions treated 30.09.2021 as the operative outer date for the assessments in question. (¶¶ Sharma J. 13, Sharma J. 40, Nagarathna J. 3.3, Nagarathna J. 3.5)

Held

Per Sharma J.: the timelines in Section 153 apply strictly to the stage of passing the draft assessment order under Section 144C(1); the non obstante clauses in Section 144C(4) and (13) extend the time for the final order, which must be passed within one month of acceptance or expiry of the objection period, or within about eleven months of the draft order where objections go to the DRP. Where Section 92CA applies the period is extended by twelve months under Section 153(4). (¶¶ Sharma J. 35, Sharma J. 37, Sharma J. 39, Sharma J. 40, Sharma J. 46, Sharma J. 59, Sharma J. 60)
Per Sharma J.: subsuming the Section 144C procedure within Section 153 would be unworkable and absurd, as the Assessing Officer would have to work backwards and reserve the DRP's full nine months, and a prompt DRP direction could leave an impossible one-month window; the statute must be construed to be workable, and since the DRP procedure is invoked at the assessee's option no prejudice results from the additional time. (¶¶ Sharma J. 31, Sharma J. 32, Sharma J. 34, Sharma J. 41, Sharma J. 44, Sharma J. 45, Sharma J. 53, Sharma J. 56)
Per Sharma J.: once the draft order issues the Assessing Officer acts in an executory role, so Explanation 1 to Section 153, which excludes periods during which the officer's quasi-judicial role is eclipsed, has no relevance to Section 144C; the decisions of the Madras High Court in Roca Bathroom Products and of the Bombay High Court were wrong and were set aside. (¶¶ Sharma J. 28, Sharma J. 29, Sharma J. 50, Sharma J. 51, Sharma J. 52, Sharma J. 57, Sharma J. 61)
Per Nagarathna J.: the question is one of statutory interpretation of a fiscal statute, not of the adequacy of time available to the Revenue; a taxing statute is read as it is, equitable considerations and the goal of recovering lost tax are out of place, and an interpretation favouring the taxpayer is preferred where two are possible. (¶¶ Nagarathna J. 2.2, Nagarathna J. 8.1, Nagarathna J. 10.7, Nagarathna J. 10.9, Nagarathna J. 10.10, Nagarathna J. 12.22)
Per Nagarathna J.: the non obstante clause in Section 144C(1) is not relatable to the limitation in Section 153 at all; it only marks out the distinct draft-order procedure for eligible assessees, whereas the clauses in sub-sections (4) and (13) refer specifically to Section 153 because they prescribe narrower periods intended to ensure the overall twelve-month limitation under the proviso to Section 153(3) is complied with. (¶¶ Nagarathna J. 12.12, Nagarathna J. 12.13, Nagarathna J. 12.14, Nagarathna J. 12.15, Nagarathna J. 12.17)
Per Nagarathna J.: the entire Section 144C procedure, with its maximum of eleven months, must be concluded within the twelve months under the proviso to Section 153(3) (or the period under Section 153(1) for original assessments); the draft order must therefore be forwarded within about one month of the end of the financial year in which the Section 254 order is received, and the Department must put a system in place to communicate Tribunal orders promptly to the Assessing Officer. Section 153(4) extends time only for transfer-pricing references and not for non-resident eligible assessees, and the legislative history of Sections 144C and 153 shows an intent to expedite, not inflate, assessments of eligible assessees. (¶¶ Nagarathna J. 8.2, Nagarathna J. 12.18, Nagarathna J. 12.19, Nagarathna J. 12.20, Nagarathna J. 12.21, Nagarathna J. 14.3, Nagarathna J. 15, Nagarathna J. 15.1)
Per Nagarathna J.: an Assessing Officer's failure to adhere to statutory timelines cannot found a plea of absurdity, and an assessee's exercise of the beneficial option to object before the DRP is no ground for extending limitation; since draft orders were passed on 28.09.2021 against an extended due date of 30.09.2021, no final assessment order could validly follow, the returns as filed must be accepted, and the appeals should be dismissed, without precluding other steps in accordance with law. (¶¶ Nagarathna J. 12.23, Nagarathna J. 12.25, Nagarathna J. 15.2, Nagarathna J. 15.3, Nagarathna J. 15.4)
Both Judges declined to dismiss the petitions on the ground of low tax effect, given the importance of the question of law and its country-wide ramifications. (¶¶ Sharma J. 25, Nagarathna J. 5)
In view of the divergent opinions, the Bench directed that the matters be placed before the Chief Justice of India for constitution of an appropriate Bench to consider the issues afresh.

Result

Split verdict: Sharma J. allowed the Revenue's appeals, set aside the Bombay High Court judgment dated 04.08.2023 and left the Revenue free to pass orders in accordance with law; Nagarathna J. dismissed the appeals and the connected SLP against an interim order. By order of the Court the matters are to be placed before the Chief Justice of India for constituting an appropriate Bench.