Bombay HC upholds DRP Proceedings be time barred if not completed within overall limitation period prescribed

The instant Alert summarizes a recent Bombay High Court (HC) ruling in a batch of writ petitions, with the lead case of Shelf Drilling Ron Tappmeyer Ltd. (Taxpayer) where the issue before the HC pertained to time limit for completion of assessments under the Income Tax Laws (ITL) applicable to assessments and dispute resolution through the Dispute Resolution Panel (DRP) route (DRP Route). 

In this regard, the question before the HC was whether the mechanism to expedite resolution of disputes through the DRP Route is also to be carried out entirely within time limit prescribed under the ITL for the jurisdictional tax authority to complete scrutiny proceedings and pass an assessment order (General Timelines for Assessment).

Tax authority contended that DRP Route is a self-contained code in itself bearing a separate and independent procedure under the ITL which takes precedence, and it overrides the General Timelines for Assessment.

In this backdrop, the Bombay HC relied upon Division Bench Madras HC ruling in the case of Roca Bathroom Products Pvt. Ltd.  and held that General Timelines for Assessment would apply even also to a case where assessment is undertaken through DRP Route. 

The HC further held that the DRP Route overrides the General Timelines for Assessment to a limited extent only at the stage of passing the final assessment order. The purpose of giving such preference to DRP Route is that even where larger time is available under General Timelines for Assessment, the tax authority has to pass the final assessment order within one month from the end of the month in which DRP’s directions are received which is consistent with a fast-track mechanism intent of DRP Route.