Limitations of time under the Income Tax Act are imposed for filing appeals against the assessment order and limitations for passing the assessment order by the income tax officers as well. The provisions of limitation for completion of assessment can be seen under Section 153 of the Income Tax Act, which shall specify the time limit within which the assessments should be completed.
Provisions of the Income Tax Act
As per the provisions of section 153 of the Income Tax Act, when the Assessee is picked for assessment, following are the time limit for completion of assessments:
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However, the chronology of passing the Assessment order is quite interesting, when the assessment is referred to TPO under section 92CA of the Income Tax Act. The TPO shall pass the order under section 92CA and later a draft order shall be passed under Section 144C, later the Assessee has an option to appeal against the draft order under Section 144C(1) before Dispute Resolution Panel, if the Assessee fails to file an appeal/ choose to accept the draft order, later the Assessing Officer shall pass final order under Section 143(3) read with 144C(13) of the Income Tax Act.
Chronology of proceedings
Limitation period
The limitation period for completion of assessments and passing the orders are presented below:
Particulars | Order | Limitation period | Date |
End of Assessment Year | T | 31.03.2024 | |
Time limit for completion of assessment under Section 153(1) (reference not made to TPO) | Due date to issue final assessment order | T + 12 months | 31.03.2025 |
Time limit for issuance of TPO as per Section 92CA (3A) of the Income Tax Act | Due date to issue TP Order under Section 92CA | 60 days prior to the date on which limitation period under Section 153 expires | 31.01.2026 |
Time limit for completion of assessment under Section 153(4) (reference made to TPO) | Due date to issue Draft Assessment order under Section 144C(1) | T + additional 12 months (T + 24 months) | 31.03.2026 |
The process of proceedings is structured in a way to facilitate the Assessee to strategize their appeal at each stage of proceedings. The objective of fixing time limit at various stages of proceedings is to facilitate faster assessment, particularly the order under section 92CA allows the Assessee to peruse the order passed and take appropriate decisions of appealing against the order and it also allows the relevant Income Tax Officer to peruse the order passed by TPO and pass the assessment order accordingly.
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The scheme of Income tax Act is interrelated and interconnected, when the draft order is not passed in time as prescribed under section 92CA, such order cannot be relied upon by the assessing officer while passing assessment order.
The overall limitation period imposed under section 153 shall be complemented only when the inner time limit for passing order under section 92CA by the TPO is followed, Since the limitation period mentioned under section 92CA(3A) is a mandatory provision.
Judicial View
The Karnataka High Court in the case of TATA Power Solar Systems Limited, held that the provisions of Section 92CA is mandatory and the language used under Section 92CA(3A) should be interpreted as per the intent of the legislature, the word ‘may’ used in the provision to be construed as ‘shall’, the word ‘may’ used under the provision imply that the order can be passed any day before 60 days. The impact of proviso clarifies the mandatory nature of the time limit.
The limitation period for passing assessment orders which are referred to TPO is 24 months from the end of assessment year as per section 153(4) of the Income Tax Act. However, The TPO has to pass the order at least 60 days prior to the date on which the limitation period expires as per section 92CA(3A) of the Income Tax Act.
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The limitations period acts as a barrier within which the Revenue authorities are bound to close the proceedings and pass assessment order, any order passed after the limitation period shall cause the transfer pricing proceedings barred by limitation and make the order void ab initio.
Sagar N
An accomplished LLB graduate and a tax practitioner with a strong foundation in direct tax and tax proceedings, also a finalist in both Chartered Accountancy (CA) and Company Secretary (CS) programs. He holds a Master of Commerce (MCom), which complements his legal expertise.
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