Bombay High Court Declares Tax Proceedings Against Archroma International Time-Barred
Strict Adherence to Timelines Under Section 144(C)(13) of the Income Tax Act is Mandatory, Says Court
In a significant ruling, the Bombay High Court has declared the tax proceedings against Archroma International (India) Private Limited as time-barred, emphasizing the mandatory nature of timelines prescribed under Section 144(C)(13) of the Income Tax Act, 1961. The court found that the Deputy Commissioner of Income Tax failed to adhere to the one-month timeline for completing the assessment following directions issued by the Dispute Resolution Panel (DRP), rendering the proceedings invalid.
Archroma International had challenged the inaction of the tax authorities in implementing the DRP's directions from March 19, 2020, which had not been acted upon within the stipulated timeframe. The DRP had directed the re-examination of corporate service charges related to transfer pricing adjustments, which the company argued should be deemed non-existent due to the delay.
The court, led by Justices B.P. Colabawalla and Amit S. Jamsandekar, underscored that the provisions of Section 144(C)(13) are unequivocal and bind the Assessing Officer to complete the assessment within one month from the month-end of receiving DRP directions. The court rejected the Revenue's argument that the timeline does not apply to remand cases, insisting that no distinction exists between original and remand cases under the Act.
This decision mandates the tax authorities to recompute Archroma's income for the assessment year 2010-2011 by excluding the contested transfer pricing adjustment, and to refund the excess taxes paid, along with statutory interest.
The judgment sets a precedent on the strict interpretation of statutory timelines in tax assessments, reinforcing the importance of procedural compliance in the Indian tax system.
Bottom Line:
Income Tax Act - Strict adherence to timelines prescribed under Section 144(C)(13) is mandatory, even in remand cases, and failure to adhere to the timeline renders proceedings barred by limitation.
Statutory provision(s): Income Tax Act, 1961 Section 144(C)(13), Section 144(C)(5), Section 153, Section 153B, Section 244(A)
