[Section 153]- Time Limit for Completion of All Assessments and Reassessment

Section 153 prescribes strict deadlines for completing assessments, reassessments, and recomputations under the Income Tax Act. Below is a structured breakdown of the time limits, exceptions, and key judicial interpretations.

1. Time Limits for Different Assessments

(A) Regular Assessments (Section 143/144)

• Assessment Year (AY) 2018–19:
  • 18 monthsfrom the end of the AY (i.e., by 30 September 2020).
• AY 2019–20 Onwards:
  • 12 monthsfrom the end of the AY (e.g., for AY 2024–25, deadline: 31 March 2026).

(B) Reassessment (Section 147)

• Notice served before 1 April 2019:
  • 9 monthsfrom the end of the financial year (FY) in which notice under Section 148 was issued.
• Notice served on/after 1 April 2019:
  • 12 monthsfrom the end of the FY in which notice was served.

(C) Fresh Assessments (Set Aside by Appellate Authorities)

• Orders under Sections 254 (ITAT), 263/264 (CIT):
  • 12 monthsfrom the end of the FY in which the order was received/passed.

(D) Transfer Pricing Cases (Section 92CA)

• If a reference is made to the Transfer Pricing Officer (TPO), the time limit under Sections 153(1)–(3)is extended by 12 months.

2. Exceptions and Exclusions

The following periods are excluded from calculating time limits:

1. Stay Orders: Time during which proceedings are stayed by a court.
2. Special Audits (Section 142(2A)): Period from audit direction to report submission.
3. Valuation Reports (Section 142A): Time taken for valuation.
4. Settlement Commission Cases: Period from application to order receipt.

3. Key Judicial Rulings

• Bombay HC Ruling (2023):
  • Held that Section 153applies even to cases under Section 144C (transfer pricing), requiring assessments to be completed within statutory limits.
• Madras HC (Roca Bathroom Case):
  • Time-barred assessments invalidate the order; the taxpayer’s return must be accepted.

4. Consequences of Non-Compliance

• Void Orders: Assessments completed after the deadline are invalidand can be challenged.
• Taxpayer Relief: No fresh demand can be raised if the time limit expires.

5. Summary Table

1.  Period of Limitation to Exclude Certain Periods [Explanation 1 to Section 153]

Explanation 1 to Section 153 of the Income Tax Act, 1961, specifies the periods that must be excluded when calculating the time limit for completing assessments, reassessments, or recomputations. These exclusions ensure that delays caused by specific procedural or administrative factors do not unfairly shorten the statutory timelines. Below is a detailed breakdown:

1. Key Exclusions Under Explanation 1

The following periods are not counted toward the time limits prescribed under Section 153:

(A) Stay Orders by Courts/Tribunals

• The period during which assessment proceedings are stayed by a court or tribunal(e.g., High Court, ITAT) is excluded.

(B) Special Audits (Section 142(2A))

• Time taken for audit-directed assessments, including:
  • The period from the AO’s direction to conduct an audit until the submission of the audit report.

(C) Valuation Reports (Section 142A)

• The time taken to obtain valuation reportsfor assets (e.g., property, jewelry).

(D) Settlement Commission Proceedings (Section 245C–245D)

• The period from filing an application before the Income Tax Settlement Commissionuntil the order is received by the Principal CIT/CIT, including:
  • Time for rejection/non-proceeding of the application.

(E) Advance Ruling Applications (Section 245Q)

• The period from filing an application before the Authority for Advance Rulings (AAR)until the order is received.

(F) Search/Requisition Operations (Sections 132/132A)

• The period from initiating a search (Section 132)or requisition (Section 132A) until the seized documents/valuables are handed over to the jurisdictional AO.

(G) DRP Proceedings (Section 144C)

• The period for Dispute Resolution Panel (DRP)proceedings, including:
  • Time taken for the DRP to issue directions after receiving objections to a draft assessment order.

(H) Withdrawal of Exemption Approvals (Sections 10(21)/(23C))

• The period from intimation of withdrawal of approval (e.g., for charitable institutions) until the AO receives the withdrawal order.