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Priya Tandon – [2025] 179 taxmann.com 113 (Article)

It is oft said that statutes are many spender things – they are so tightly and precisely defined, that the Judiciary’s predictive task is quite straightforward. Although the watertight manner in which a statute is typically drafted indicates that the Legislature wants minimum room for interpretation, however, there may still be some inherent ambiguity or lacuna. It is in a situation of this kind, where a statute operates in the shades of grey, that the Judiciary is constrained to abandon the literal or textualist method of interpretation, in the favour of a different method. The method so adopted to interpret a statute, along with the manner of interpretation thereof, is likely to affect the outcome. Application of an incorrect method or a correct method incorrectly, can equally be an impediment for accomplishing the intended outcome. Of course, since a “no catastrophe” method does not truly exist, a Judge is free to pick the risk s/ he prefers to take. This may result in differing voices speaking for the Bench, which may further perpetuate uncertainty by delaying the justice delivery process. It is against this context, that the author seeks to examine the divergent views in Asstt. CIT v. Shelf Drilling Ron Tappmeyer Ltd.1.

In Shelf Drilling Ron Tappmeyer Ltd. (Supra), the question before the Supreme Court was regarding the applicable limitation for passing an order of assessment in cases involving an “eligible assessee”, where effect is required to be given to an order of Appellate Tribunal, High Court or the Supreme Court. In other words, the question before the Supreme Court was whether the limitation under Section 144C of the Income-tax Act, 1961 (“IT Act”), for completion of the Dispute Resolution process, is subsumed within or stands excluded from the limitation under section 153 of the IT Act, for passing an order of assessment. The Division Bench of the Supreme Court has rendered a split view. Both the views are discussed hereinafter, albeit briefly. Before dwelling into the divergent views on the legal issue involved, it would be relevant to summarise the relevant provisions of the IT Act.

Section 143 of the IT Act states that when a Return of Income is filed and processed, it results in an order of assessment being passed by an Assessing Officer (“AO”). Section 143 deals with an order of assessment in cases involving ordinary assessees, which is required to conform to the timelines under section 153. Section 153(3) sets out the limitation for finalising fresh assessment as a result of setting aside or cancelling an assessment, viz.,12 months from the end of the Financial Year in which order is received by the Commissioner. Section 153(4) states that in the event a reference to a Transfer Pricing Officer is made, then, the period of limitation available for completion of assessment shall stand extended by 12 months.

Parallelly, Section 144C of the IT Act deals with reference to the Dispute Resolution Panel (“DRP”), in cases involving an “eligible assessee”, as identified under Section 144C(15). Therefore, both Sections 143 and 144C deal with passing an order of assessment, depending on the category of assessee involved. Section 144C(1) states that an AO shall, notwithstanding anything contrary contained in the IT Act, forward a draft of the proposed order of assessment to an eligible assessee. Section 144C(2) grants the eligible assessee a period of 30 days to either accept the variations proposed by the AO, or to file its objections against the same before the DRP and the AO. Section 144C(3) requires the AO to complete the assessment on the basis of the draft of the proposed order of assessment, in the event the eligible assessee intimates the AO of its acceptance of the variations, or in the event no objections are preferred within the prescribed time. Section 144C(4) states that the AO shall, notwithstanding anything contained in Section 153, pass an order of assessment under Section 144C(3), within 1 month from the end of the month in which acceptance is received, or within 1 month from the end of the month in which the period available for preferring objections under Section 144C(2) expires. Sections 144C(5) to 144C(7) and 144C(9) require the DRP, in the event objections are received by it, to issue directions as it deems fit, to enable the AO to complete assessment. Section 144C(8) empowers the AO to confirm, reduce or enhance the variations proposed in the draft of the proposed order of assessment. As per Sections 144C(10) and 144C(13), every direction issued by the DRP is binding on the AO, who shall, in conformity with the said directions, complete, notwithstanding anything contrary contained in Section 153, the assessment, within a period of 1 month from the end of the month in which such direction is issued. Section 144C(12) caps the time period for issuance of directions by the DRP at 9 months from the end of the month in which the draft of the proposed order of assessment is forwarded to the eligible assessee. In terms of the above construct, an AO has only 30 days to pass an order of assessment, irrespective of whether a draft of an order of assessment is accepted, or the DRP issues directions in the face of any objections raised.

It is undisputed that the assessees before the Supreme Court are eligible assessees, on whom Section 144C of the IT Act apply. Further, that even though the AO passed orders of assessment prior to the expiry of 30 days from the date of receipt of the directions issued by the DRP, but nonetheless, s/he breached the limitation prescribed under Section 153(3). On the said facts, High Courts concluded that Sections 144C and 153 are mutually exclusive, inasmuch as Section 153 provides for an outer timeline within which an order of assessment has to be passed, after concluding the entire Dispute Resolution process. The Revenue Department’s Special Leave Petitions against the said conclusion of the High Courts were admitted and ultimately, while adjudicating the appeals, the Supreme Court rendered a split view, discussed hereinafter.