Final Income Tax Assessment Passed beyond One Month from DRP directions Barred by Limitation: ITAT Quashes order [Read Order]

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) quashed a final assessment order because it was issued beyond the statutory period of one month from the end of the month in which the Dispute Resolution Panel (DRP) directions were received.

Eaton Power Quality Pvt. Ltd. (the assessee) filed return of income for Assessment Year 2021-22 on March 9, 2022, declaring a total income of ₹42,17,79,822. Due to international transactions exceeding ₹374 crores, the Assessing Officer (AO) referred the matter to the Transfer Pricing Officer (TPO).

The TPO proposed an adjustment of ₹29,88,48,209, leading the AO to issue a draft assessment order. The assessee filed objections against the draft order before the DRP on January 19, 2024. The DRP issued its directions on September 21, 2024, which were received by the AO on the same day.

Aggrieved by the AO’s order, the assessee filed an appeal before the ITAT. The assessee argued that under section 144C(13), the AO was required to complete the assessment within one month from the end of the month in which the DRP directions were received.

The assessee argued that since the directions were received in September 2024, the deadline to pass the order was October 31, 2024.

The two-member bench comprising Aby T. Varkey (Judicial Member) and Amitabh Shukla (Accountant Member) observed that Section 144C was a self-contained provision designed for the speedy disposal of disputes for "eligible assessees".

The tribunal highlighted that the statutory time limit is not a mere formality but a mandatory requirement. It observed that failure to strictly adhere to the limitation period under Section 144C(13) was an illegality.

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The Bench relied on jurisdictional precedents, including the Madras High Court decision in Taeyang Metal India Pvt. Ltd., which held that assessment orders issued beyond the one-month window from the end of the month of DRP receipt cannot be sustained.

It concluded that the final assessment order was passed on November 28, 2024 after the October 31, 2024 deadline and thus the AO acted without jurisdiction. The tribunal set aside the order of the lower authority and quashed the final assessment. The appeal of the assessee was allowed.

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