Assistant Commissioner of Income Tax (International Taxation) & Others vs Shelf Drilling Ron Tappmeyer Ltd. Etc.

3. Sub-Section (4) and Sub-Section (13) of Section 144C of the Income Tax Act provide clear and unequivocal non obstante clauses, which remove the application of Section 153 of the Income Tax Act and the timelines prescribed thereunder – No doubt SubSection (4) and Sub-Section (13) of Section 144C of the Income Tax Act prescribe very specific timelines for the Assessing Officer to complete and pass the Final Assessment Order, but these timelines are independent of the timelines contemplated in Section

153 of the Income Tax Act, and operate in addition to the timelines contemplated in Section 153 of the Income Tax Act. [Paras 36, 37]

4. The requirements of Section 153 of the Income Tax Act in terms of timeline are strictly applicable to Section 144C (1) of the Income Tax Act, that is the stage at which the Draft Order has to be passed by the Assessing Officer – The non-obstante clauses contained in Sub-Section (4) and Sub-Section (13) of Section 144C of the Income Tax Act only extend the timeline for the passing of the final order and not that of the Draft Order – Sub-Section (4) operates and comes into existence only in cases in situations when an Assessee subjected to Section 144C of the Income Tax Act accepts the variations proposed in the Draft Assessment Order or if the period of filing objections before the Dispute Resolution Panel expires – The conjoint reading of Section 144C(1), Section 153, and Section 144C(4) of the Income Tax Act make it abundantly clear that the Assessing Officer is obliged to comply with the requirements of Section 153 of the Income Tax Act insofar as it relates to passing the Draft Assessment Order and that he must also necessarily pass the Final Assessment Order within an additional period of one month in case the variations are accepted or the period of limitation for filing objections expires – Similarly, in the event objections were filed, Section 144C(12) of the Income Tax Act states that such objections have to be decided and directions have to be issued within a period of 9 months – Sub-Section (13) makes it clear that regardless of how long it takes the Dispute Resolution Panel to pass its directions, the Assessing Officer will only have an additional period of one month to pass the Final Assessment Order – This means that if the Dispute Resolution Panel disposes of the objections and issues directions within a period of one month from the date of filing of objections, the Final Assessment Order must be passed within one month from such date which will be practically impossible. [Paras 39, 40, 41]

5. The non-obstante clauses in Section 144C must be harmoniously construed – The timelines prescribed under Section 153 will be applicable upto the stage of passing the draft assessment order under Section 144C(1) – Once the procedure under Section 144C(1) gets triggered, the time available with the Dispute Resolution Panel to carry out the process conceived under Section 144C(5) to Section 144C(12) and the time available with the assessing officer under Section 144C(13), will be over and above the timelines prescribed under Section 153 – This interpretation would ensure a smooth functioning of Section 153 and Section 144C. [Para 46]

6. Section 153 is not the only provision for prescribing time limits for assessments and reassessments – Had Section 153 subsumed the timelines prescribed under Section 144C, there was no occasion for the Parliament to specifically mention Section 144C in Section 92CD(5) which too provided alternate timelines, contrary to the timelines prescribed under Section 153 – This too is an indication of the intention of the Parliament to operate the timelines under Section 144C over and above Section 153. [Paras 47, 48]

7. The two situations contemplated under the Income Tax Act in terms of assessment under Section 144C of the Income Tax Act are vastly different and will obviously take varying amounts of time depending on whether objections are filed before the Dispute Resolution Panel or not – This option is only exercised by the Assessee – If adequate opportunity or time is not granted to an Assessee or if the Dispute Resolution Panel is forced to decide the objections in a very quick manner inhibited by the timelines prescribed under Section 153 of the Income Tax Act, it would amount to a violation of the Principles of Natural Justice. [Para 56]

8. In cases of assessment proceedings under Section 144C, Section 153 of the Income Tax Act and all its sub-sections are fully applicable, and the timelines prescribed therein apply to the Draft Assessment Order, which is to be passed under SubSection (1) of Section 144C of the Income Tax Act – If proceedings under Section 92C are also invoked, the time period in view of Section 153(4) of the Income Tax Act would be extended by a period of 12 months – The fixed time periods prescribed under Section 144C of the Income Tax Act must be adhered to, and a final assessment order must be passed either within one month of the Draft Assessment Order if the situation contemplated under Sub-Section (4) takes place, or within a period of 11 months from the passing of the Draft Assessment Order if the Assessee opts to file objections before the Dispute Resolution Panel. [Paras 59, 60]

Held [Per B.V. Nagarathna, J.] (Dissenting):

1. Sub-section (3) of S.153 which prescribes the limitation period does not make any distinction between an eligible assessee and any other assessee – The non-obstante clause in sub-section (1) of S.144C implies that it overrides all sections of the Act contrary to the procedure contemplated under S.144C inasmuch as it contemplates a special procedure insofar as eligible assessees are concerned – This means that insofar as the eligible assessees are concerned, their assessment is subject to a distinct procedure under S.144C, wherein a draft assessment order has to be made in the first instance – The non-obstante clause in sub-section (1) of S.144C has been invoked by the Parliament in order to make a distinction between eligible assessees and other category of assessees in the matter of assessment/re-assessment where a draft assessment order has to be made by the Assessing Officer in the first instance leading to DRP directions being issued to the Assessing Officer in case there is a reference to the DRP, which is not so in the case of other assesses – Thus, the non-obstante clause in sub-section (1) of S.144C is not related to the overall limitation period prescribed under S.153 but with the aspect of there being a distinct procedure which has been envisaged in the case of only eligible assessees – If the non-obstante clause under sub-section (1) of S.144C is to be construed only in the context of the limitation period under S.153 inasmuch as the procedure contemplated under S.144C would be a time frame to be considered over and above what is contemplated under S.153(3), it would lead to an absurd result – That is why, the non-obstante clause in sub-section (1) of S.144C cannot be held to be with reference to S.153(3) at all – The scope and ambit of the two provisions are distinct inasmuch as S.153 deals with limitation period with respect to completion of assessments and reassessments while S.144C deals with a procedure to be complied with for making an assessment order only in the case of eligible assesses – There is no contradiction between S.144C and S.153 – Therefore, subsection (1) of S.144C has to be read as prescribing a unique procedure insofar as eligible assessees are concerned inasmuch as notwithstanding anything contrary contained in the Act vis-à-vis various categories of assesses – S.144C is applicable only in the case of eligible assessees and not to any other category of assessee. [Paras 12.12, 12.13 and 12.14]

2. If S.144C applies to an eligible assessee, then the maximum period that is contemplated for passing the final assessment order is eleven months from the date of receipt of the draft order by the eligible assesses; the shortest period would be two months, when the draft order is accepted by the eligible assessee, for passing the final order – Also, nine months is the maximum period for the DRP to issue directions to the Assessing Officer in case objections are received to a draft assessment order from an eligible assessee. [Para 12.18]

3. In cases where S.144C applies, the maximum period stipulated for completion of a final assessment order being eleven months would still be within the limitation period of twelve months prescribed under the proviso to S.153(3) – This would mean that a draft assessment order has to be forwarded by the Assessing Officer to the eligible assessees within one month from the end of the financial year in which the order under S.254 is received by the Principal Chief Commissioner, Chief Commissioner etc., as the case may be – Then, one month’s time is the shortest period of time to prepare the draft assessment order under S.144C by the concerned Assessing Officer. [Para 12.19]

4. As soon as the papers are received by the Principal Chief Commissioner or Chief Commissioner etc., pursuant to an order passed under S.254, the same has to be forwarded and ultimately the final assessment order has to be made within twelve months from the end of the financial year in which the order under S.254 was received by the Principal Chief Commissioner or Chief Commissioner etc., as the case may be – In which event, this would imply that a copy of the same would also have to be simultaneously sent to the Assessing Officer concerned and the minimum period that the Assessing Officer would have for making the draft order would be thirty days, depending on when the order is received by the Principal Chief Commissioner or Chief Commissioner, etc., as the case may be. [Para 12.20]

5. The expression “the assessing officer shall, in conformity with the directions, complete notwithstanding anything to the contrary contained in s.153 or 153(B), the assessment…within one month from the end of the month in which such direction is received” in sub-section (13) of S.144C has to be harmoniously read with sub-section (3) of S.153 – It would inevitably mean that the procedure contemplated under S.144C applicable to an eligible assessee has to be concluded within a period of twelve months as stipulated in proviso to sub-section (3) of S.153. [Para 14.3]

6. Even when the Assessing Officer has to follow the procedure prescribed under S.144C, the same has to be commenced and concluded in terms of sub-section (3) of S.153 – The said provision is applicable to an eligible assessee inasmuch as when the procedure under S.144(C)(1) has to be followed – Consequently, the rest of the provisions of S.144C would become applicable – This is only when the Assessing Officer intends to make any variation which is prejudicial to the interest of the eligible assessee – Then a draft order has to be made in the first instance – Even in such a case, the assessment has to be concluded within twelve months as stipulated in S.153(3) where there has been remand by the Tribunal to the Assessing Officer under S.254 – Within the period of twelve months prescribed under S.153(3), the Assessing Officer has to ensure that the entire procedure under S.144C is completed (as and when it is applicable) and pass a final assessment order. [Para 15]

7. The Assessing Officer has to be prompt, attentive and conscious of passing an order envisaged under S.144C(1) and not be reminded about doing so – Therefore, even when S.144C applies to a case, the twelve month period stipulated under S.153(3) has to be applied – Thus, the procedure under S.144C has to be concluded within the time frame envisaged under S.153(3) or S.153(1) as the case may be [Para 15.1]

8. An assessment order or an order of assessment encompasses the entire process of assessment commencing from the stage of filing of a return till the making of an assessment of the total income and also the determination of the taxes which is contemplated under Section 153 of the Act in so far as the limitation period for the said procedure is concerned – That is not exactly the exercise that is carried out under sub-section (1) of Section 144C as the said assessment order is not a final assessment order but only a draft assessment order – This is unlike assessment orders made under sub-section (3) of Section 143 or sub-section (13) of Section 144C of the Act which are final assessment orders – Therefore, the expressions “assessment” used in Section 143 of the Act and “make an assessment of the total income or loss of the assessee, and determine the sum payable by him or refund of any amount due to him on the basis of such assessment”, and the expression “the assessment” in sub-section (13) of Section 144C as well as the expression “assessment order” in sub-section

(4) of Section 144C have to be given an identical meaning under Section 153 of the Act, i.e., final assessment order although, the assessment orders are made in a distinct manner and under a different procedure as they apply to different categories of assesses – The period under Section 144C of the Act is to be subsumed within the time prescribed under Section 153(1) of the Act. [Paras 15.3(iv) and (v)]

Interpretation of Statutes – Absurdity – Courts must avoid absurd interpretation – Discussed:

Held [Per Satish Chandra Sharma, J.]: While interpreting statutes, the Court must avoid an absurd interpretation and must always strive to interpret the provisions to ensure that the Legislation is not reduced to a futility, and the interpretation must ordinarily be such that it brings about an effective result which was intended by the Legislature. [Paras 53, 54, 55]

Interpretation of Statutes – Purposive Interpretation – Discussed:

Held [Per B.V. Nagarathna, J.]: A statute or any enacting provision therein must be so construed as to make it effective and operative – Courts should avoid a construction which would reduce a provision to a futility and rather accept a construction based on the view that Parliament or any Legislature would legislate only for the purpose of bringing about an effective result. [Para 9.1] Interpretation of Statutes – Literal interpretation – Plain meaning rule – Discussed:

Held [Per B.V. Nagarathna, J.]: When the words of a statute are clear, plain or unambiguous, courts are bound to give effect to that meaning irrespective of consequences – The results of the construction are then not a matter for the court, even though they may be strange or surprising, unreasonable or unjust or oppressive – Hardship cannot be a ground for not giving effective and grammatical meaning to every word of the provisions of a statute if the language used therein is unequivocal – Plain meaning rule applies at the stage when the words have been construed in their context and the conclusion has been reached that they are susceptible to only one meaning. [Paras 9.2-9.5] Interpretation of Statutes – Statute must be read as whole – Harmonious interpretation – Discussed:

Held [Per B.V. Nagarathna, J.]: While interpreting a statute it must be read as a whole and one provision of the Act should be construed with reference to other provisions in the same Act so as to make out a consistent enactment of the whole statutes – Such a construction has a merit of avoiding any inconsistency or repugnancy either within a Section or between a Section and other parts of the statutes – It is the duty of the courts to avoid a clash between two Sections of the same Act and “whenever it is possible to do so, to construe provisions which appear to conflict so that they harmonise” – The provisions of one Section of a statute cannot be used to defeat another section of the same statute – The same rule applies to a sub-section of a Section. [Para 9.6]

Interpretation of Statues – Non-Obstante Clause – Discussed: Held [Per B.V. Nagarathna, J.]: A non-obstante clause is generally incorporated in a statute to give an overriding effect to a particular section or the statute as a whole – While interpreting a non-obstante clause, the court is required to find out the extent to which the legislature intended to do so and the context in which the non-obstante clause is used – The utility of non-obstante clause is where there is a conflict between what is stated in a provision and any other law for the time being in force, or anything else contained in the said enactment. [Paras 10-10.6]