ALMATIS ALUMINA PVT LTD vs ASST/DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 7(1) KOLK AND ORS

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IN THE HIGH COURT AT CALCUTTA
CONSTITUTIONAL WRIT JURISDICTION
ORIGINAL SIDE


Present:
The Hon’ble Justice Kausik Chanda



W.P.O. No. 284 of 2024
ALMATIS ALUMINA PRIVATE LIMITED
-VERSUS-
ASSISTANT/DEPUTY COMMISSIONER OF INCOME TAX,
CIRCLE (7)1, KOLKATA AND OTHERS


For the petitioner : Mr. J.P. Khaitan, Sr. Adv.,
Mr. Akhilesh Gupta, Adv.,
Mr. Pranav Sharma, Adv.

For the respondents : Mr. Soumen Bhattacharya, Adv.
[



Hearing concluded on : 18.03.2026


Judgment on : 19.03.2026

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Kausik Chanda, J.:-
The present writ petition under Article 226 of the Constitution of
India raises an issue concerning the statutory scheme under Section
144C of the Income Tax Act,1961, relating to the Dispute Resolution
Panel. The petitioner challenges the action of the Income Tax Authorities
in seeking to enforce a demand purportedly arising from a notice of
demand dated March 16, 2021 issued under Section 156 of the Act. The
said demand was issued along with a draft assessment order under
Section 144C(1) for the assessment year 2017–18. The grievance of the
petitioner is that although a draft order was issued and objections were
duly filed before the Dispute Resolution Panel, no final assessment order
was ever passed within the statutory time limit prescribed under Section
144C(13). In such circumstances, it is contended that no enforceable
demand exists in law and the attempt of the authorities to recover the
alleged tax liability is wholly without jurisdiction.
2. The petitioner had filed its return of income for the assessment
year 2017–18 declaring its total income under the normal provisions of
the Act as ‘nil’ and reporting a book loss of Rs. 21,34,14,840/- under
Section 115JB. During the relevant financial year, the petitioner had
entered into certain international transactions with its associated
enterprises. Consequently, the Assessing Officer made a reference to the
Transfer Pricing Officer under Section 92CA(1) of the Act for
determination of the arm’s length price in relation to such transactions.
By an order dated January 25, 2021 passed under Section 92CA(3), the

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Transfer Pricing Officer proposed an adjustment of Rs.41,13,22,617/- to
the income of the petitioner. Since the proposed adjustment resulted in
a variation prejudicial to the assessee, the special procedure contained
in Section 144C became applicable.
3. In terms of Section 144C(1), the National e-Assessment Centre
forwarded to the petitioner a draft of the proposed assessment order
dated March 16, 2021 incorporating the variation determined by the
Transfer Pricing Officer. Along with the draft order, a notice of demand
under Section 156 and a notice initiating penalty proceedings under
Section 274 read with Section 270A were also issued. Being aggrieved by
the proposed variation, the petitioner filed objections before the Dispute
Resolution Panel within the time prescribed under Section 144C(2). The
Assessing Officer as well as the National e-Assessment Centre were duly
informed about the filing of such objections.
4. The Dispute Resolution Panel thereafter issued its directions on
August 31, 2021 under Section 144C(5). The directions were received by
the authorities in September 2021. Pursuant thereto, the Transfer
Pricing Officer passed an order dated October 29, 2021 giving effect to
the directions of the Dispute Resolution Panel and reducing the transfer
pricing adjustment from Rs.41,13,22,617/- to Rs.29,94,72,101/-.
However, despite the issuance of such directions, the Assessing Officer
did not pass any final assessment order completing the assessment in
conformity with the directions of the Dispute Resolution Panel.

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5. The statutory scheme governing limitation for completion of
assessment assumes importance in this context. Under Section 153 of
the Act, the time limit for completion of the assessment for the
assessment year 2017–18 was twenty-one months from the end of the
relevant assessment year, that is to say December 31, 2019. Since a
reference had been made to the Transfer Pricing Officer under Section
92CA, the limitation period stood extended by twelve months, thereby
making December 31, 2020 the last date for completion of assessment.
In view of the extraordinary circumstances arising from the COVID-19
pandemic, the Taxation and Other Laws (Relaxation and Amendment of
Certain Provisions) Act, 2020 read with Notification No. 10 of 2021 dated
February 27, 2021 extended the time limit for completion of the
assessment to September 30, 2021.
6. However, once the procedure under Section 144C is invoked, the
completion of assessment is governed by the specific provision contained
in Section 144C(13). The said provision mandates that upon receipt of
the directions of the Dispute Resolution Panel under Section 144C(5),
the Assessing Officer shall complete the assessment in conformity with
such directions within one month from the end of the month in which
the directions are received, notwithstanding anything contained in
Section 153 or Section 153B. The directions of the Dispute Resolution
Panel having been received in September 2021, the Assessing Officer
was statutorily required to pass the final assessment order on or before
October 31, 2021. Admittedly, no such order was passed.

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7. Despite the absence of a final assessment order, the Income Tax
Department proceeded to enforce the demand which had been raised by
the notice dated March 16, 2021 issued along with the draft order. The
petitioner received several communications between February 2022 and
January 2023 calling upon it to make payment of the alleged demand.
Thereafter, further intimations were issued proposing adjustment of the
said demand against refunds due to the petitioner for other assessment
years. The petitioner repeatedly objected to such communications and
also lodged grievance petitions through the online portal. However, no
relief was granted and the demand continued to be reflected as
outstanding, which compelled the petitioner to approach this Court.

8. This Court, by an interim order dated April 18, 2024, granted
protection to the petitioner in respect of the impugned demand and
penalty notices. The said interim order has been extended from time to
time and continues to remain in force. Notwithstanding the subsistence
of the interim order, the respondents adjusted an amount of
Rs.74,970/- against a refund due to the petitioner for the assessment
year 2014–15. Subsequently, another intimation under Section 245
dated August 21, 2024 was issued proposing further adjustment of the
alleged demand against refunds due for other years.

9. The principal contention advanced on behalf of the petitioner is
that in the absence of a final assessment order passed within the period
prescribed under Section 144C(13), the jurisdiction of the Assessing
Officer to complete the assessment stood extinguished. It is submitted

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that the draft assessment order cannot by itself give rise to any
enforceable tax liability and that the notice of demand issued along with
such draft order is a nullity in law. The petitioner has relied upon
several judgments reported at (2023) 459 ITR 413 (Bom) ( Vodafone
Idea Ltd. v. Central Processing Centre ) , (2024) 464 ITR 595 (Delhi)
( Louis Dreyfus Company India Pvt. Ltd. v. Deputy Commissioner of
Income Tax ) , (2025) 473 ITR 485 (Telangana) ( Rapiscan Systems
Pvt. Ltd. v. Additional Director of Income Tax (International
Taxation ) , (2025) 478 ITR 114 (Ker) ( IBS Software Services Pvt. Ltd.
v. Union of India ) , and (2025) 481 ITR 767 (Bom) ( Principal
Commissioner of Income Tax v. Sterling Oil Resources Ltd. ) , wherein
it has been consistently held that the time limit prescribed under
Section 144C(13) is mandatory and that failure to pass the final
assessment order within the prescribed period results in lapse of
jurisdiction.
10. In response, the respondents have sought to explain the failure to
complete the assessment on the ground that certain technical glitches
occurred in the ITBA system. According to the respondents, while
issuing the draft order on March 16, 2021 the functionality meant for
passing the final assessment order was inadvertently used instead of the
functionality meant for passing a draft assessment order. It is stated
that because of this technical error the assessment proceedings were
shown as closed in the system and consequently the final order could
not be passed. On this basis the respondents have prayed that

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reasonable time may be granted to enable them to pass an order giving
effect to the directions of the Dispute Resolution Panel.
11. The explanation furnished by the respondents cannot be accepted.
The statutory provisions governing limitation for completion of
assessment are clear and unambiguous. Section 144C(13) expressly
requires the Assessing Officer to complete the assessment within one
month from the end of the month in which the directions of the Dispute
Resolution Panel are received. The provision further declares that the
said requirement operates notwithstanding anything to the contrary
contained in Section 153 or Section 153B. The legislative intent
underlying this provision is to ensure expeditious completion of
assessment once the Dispute Resolution Panel has issued its directions.
The language employed in the statute is mandatory and leaves no scope
for extension of time on administrative or technical grounds.
12. It is well settled that once the statutory period of limitation
expires, the authority concerned becomes functus officio and loses the
jurisdiction to pass the assessment order. Internal administrative
difficulties or technical issues within the departmental systems cannot
operate to extend a period of limitation prescribed by statute. In the
judgments relied upon by the petitioner, it has been clearly held that
authorities cannot ignore or bypass the period of limitation prescribed in
Section 144C(13) to complete the assessment.
13. The reliance placed by the respondents upon the decision of the
Supreme Court reported at (2025) 177 taxmann.com 262 (SC)

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( Assistant Commissioner of Income-tax (International Taxation) v.
Shelf Drilling Ron Tappmeyer Ltd. ) is misplaced. The controversy in
that case concerns the interplay between the time limit prescribed under
Section 153 and the procedure contained in Section 144C, particularly
whether the entire process under Section 144C must fall within the
overall limitation prescribed in Section 153. That issue has no bearing
upon the present case. The petitioner does not contend that the
procedure under Section 144C must be completed within the time limit
of Section 153. The petitioner’s case is that even within the time
specifically provided under Section 144C(13) the respondents failed to
pass the final assessment order. The issue considered in Shelf Drilling
therefore does not arise in the present proceedings.
14. In the absence of a valid final assessment order passed within the
statutory time frame, the draft assessment order cannot give rise to any
enforceable demand. A notice of demand issued along with the draft
order is without legal basis since the liability to pay tax crystallizes only
upon completion of the assessment. Consequently, the demand sought
to be enforced against the petitioner for the assessment year 2017–18
has no legal foundation. The petitioner’s return of income must therefore
be treated as having been accepted.

15. For the foregoing reasons, the impugned notice of demand dated
March 16, 2021 issued under Section 156 and the penalty notice issued
under Section 274 read with Section 270A in respect of the assessment
year 2017–18 are quashed and set aside. The respondents are directed

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to refund to the petitioner the sum of Rs.74,970/- which was adjusted
against the refund due for the assessment year 2014–15, together with
such statutory interest as may be applicable. The respondents shall also
refrain from taking any further steps to enforce the impugned demand.
16. W.P.O. No.284 of 2024 is accordingly allowed. There shall be no
order as to costs.
17. Urgent certified website copy of this judgment, if applied for, be
supplied to the parties subject to compliance with all the requisite
formalities.
(Kausik Chanda, J.)