Split Supreme Court Bench Records Divergent Views on Whether Time for Section 144C Proceedings Stands Apart from Section 153 Limitation

A bench of Justice B.V. Nagarathna and Justice Satish Chandra Sharma heard appeals by the Revenue against a Bombay High Court order that had quashed draft assessment action taken under Section 144C of the Income‑tax Act as time‑barred; the question was whether the time consumed in proceedings before the Dispute Resolution Panel (DRP) under Section 144C was to be subsumed within, or sit in addition to, the limitation period prescribed under Section 153(3) of the Act.

The Court delivered separate opinions, producing a split decision on the core issue. Justice B.V. Nagarathna held that when an assessment was reopened on remand under Section 254, the twelve‑month period prescribed by the proviso to Section 153(3) had to be applied and the entire process envisaged by Section 144C had to be completed within that period; she therefore found the reassessment orders in the present batch time‑barred and dismissed the Revenue’s appeals. The Court, in her reasoning, observed: By contrast, Justice Satish Chandra Sharma concluded that Section 144C constituted a self‑contained code for eligible assessees and that subsections 4 and 13 of Section 144C—each containing non‑obstante language—meant the statutory timelines under Section 144C operated over and above the limitation in Section 153; he cautioned that subsuming the 144C timeline within Section 153 would, in his view, “result ‘in a complete catastrophe for recovering lost tax’” and accordingly allowed the Revenue’s appeals. Because the two judges issued conflicting opinions, the Court directed the matters to the Chief Justice for constitution of an appropriate larger Bench.

Background The disputes arose from four Special Leave Petitions (arising out of SLP (C) Nos.20569–20572 of 2023, and a connected SLP No.25798 of 2024) filed by the Assistant Commissioner of Income Tax (International Taxation) challenging a common Bombay High Court order of 04.08.2023 which had allowed writ petitions filed by non‑resident group companies (Shelf Drilling Ron Tappmeyer Ltd. and others). The assessees had originally been assessed after draft orders under Section 144C and DRP directions; they appealed and the Income‑tax Appellate Tribunal (ITAT) remanded certain matters to the Assessing Officer under Section 254. After remand, draft assessment orders were issued on 28.09.2021; the assessees challenged those proceedings in the Bombay High Court on the ground that applicable limitation under Section 153(3) (as extended by pandemic‑era notifications) had expired on 30.09.2021 and no fresh/final assessment could be lawfully completed thereafter. The High Court agreed and quashed the revenue action. The Revenue argued before this Court that Section 144C was a distinct, self‑contained procedure for “eligible assessees” with its own timelines (including the DRP’s nine‑month window and the Assessing Officer’s one‑month windows) and that those timelines operated in addition to Section 153; the assessees contended that Section 153’s limitation governed and subsumed the Section 144C timeline so the reassessments were barred. The parties relied on legislative materials, explanatory memoranda and prior High Court rulings (including the Madras decision in Roca Bathroom Products) and contested statutory interpretation principles such as the effect of non‑obstante clauses and the scope of Explanation 1 to Section 153. The two Justices reached opposite conclusions on these interpretive questions. The matter was not finally decided on the merits because the bench split; the Court directed transfer to the Chief Justice for constitution of an appropriate larger Bench. The impugned Bombay High Court order was set aside by Justice Sharma in his opinion; Justice Nagarathna affirmed the High Court result in her opinion; the administrative order referred the case for a larger Bench.

Case Details: Case No.: 2025 INSC 946 (Civ. App. arising out of SLP (C) Nos.20569–20572 of 2023; SLP (C) No.25798 of 2024) Case Title: Assistant Commissioner of Income Tax (International Taxation) & Others v. Shelf Drilling Ron Tappmeyer Ltd. Etc. Appearances: For the Petitioner(s): N. Venkataraman, Additional Solicitor General of India For the Respondent(s): J.D. Mistry, Senior Counsel (for respondents)