Relief for Rolls Royce: ITAT Quashes Time-Barred Assessment Order Passed Beyond S.144C(13) Deadline [Read Order]

Rolls Royce India Pvt,appellant-assessee,was part of the Rolls Royce Group and engaged in aero engine products and services. It provided marketing support, engineering and design services, and other support functions in India. The return of income for AY 2017-18 was filed on 17.11.2017 declaring ₹14.00 crore, which was processed under Section 143(1) at ₹14.90 crore.

The case was selected for scrutiny to examine large international transactions. A reference was made to the Transfer PricingOfficer (TPO) under Section 92CA(3), who proposed an adjustment of ₹10.96 crore in respect of marketing support, engineering and design services, supply chain management, and interest on delayed receivables. A draft order under Section 144C was issued on 24.03.2021.

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The assessee raised objections before the Dispute Resolution Panel (DRP). Before the DRP's directions, the TPO passed a rectification order under Sections 154/92CA(5) on 15.09.2021, revising the adjustment to ₹11.11 crore. After considering the DRP’s directions, the final adjustment was reduced to ₹6.06 crore. As a result, the total assessed income was determined at ₹20.97 crore.

During the hearing, the assessee counsel argued that the final assessment order was time-barred and should be quashed. In support, reliance was placed on multiple decisions where assessment orders passed beyond the prescribed time under Section 144C(13) were held invalid.

The counsel referred to the tribunal’s rulings in APM Terminals India Pvt. Ltd. and BBC World Service India Pvt. Ltd., where it was held that the final orders passed after the expiry of the one-month deadline from receipt of DRP directions were void.

The decision in Honda R&D India Pvt. Ltd. was also cited, where the appellate tribunal held that the date of uploading the DRP order on the ITBA portal determined the start of the limitation period. Since the final order in that case was passed beyond the deadline, it was set aside.

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The Bombay High Court’s ruling in Shell India Markets Pvt. Ltd. was highlighted, where it was held that the time limit under Section 144C(13) was not extended by Notification No. 74/2021, and the order passed after the deadline was time-barred.

The counsel also referred to Fiberhome India Pvt. Ltd., where the Tribunal held the final order to be beyond the limitation period. This was upheld by the Delhi High Court in Louis Dreyfus Company India Pvt. Ltd., which confirmed that timelines under Section 144C were mandatory and the assessment had to be completed within one month of the DRP’s direction being uploaded on the portal. Since the order was delayed, it was quashed along with the penalty proceedings.

The two member bench comprising Sudhir Pareek (Judicial Member) and Ramit Kochar (Accountant Member) noted that as per Section 144C(13) of the Act, the Assessing Officer (AO) had to complete the assessment within one month from the end of the month in which the DRP’s directions were received.

In this case, the DRP issued its directions on 21.09.2021, so the deadline for completing the assessment was 31.10.2021. However, the final assessment order was passed on 18.11.2021, which was beyond the permitted time limit.

Relying on earlier judicial rulings, the tribunal held that the delay made the assessment order invalid. Since the order was time-barred, it was quashed as void ab initio. As the assessment itself was set aside, the appellate tribunal found no need to examine the other grounds raised in the appeal.

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