In a significant verdict strengthening taxpayer rights, the Bombay High Court on Friday ordered the Income Tax Department to refund over ₹5.26 crore to Archroma International (India) Pvt Ltd, formerly Huntsman International, after finding that the assessment proceedings against the company had lapsed due to delay.
A Division Bench of Justice B.P. Colabawalla and Justice Amit S. Jamsandekar held that the Department had failed to act within the one-month statutory limit prescribed under Section 144C(13) of the Income Tax Act.
"The Assessing Officer cannot act beyond the mandate of law. The delay has rendered the proceedings barred by limitation," the court declared.
Background
The dispute dates back to the assessment year 2010–11. Archroma, headquartered in Andheri East, had filed its income tax return declaring an income of ₹78.58 crore and sought a refund of ₹3.32 crore. During scrutiny, the Deputy Commissioner of Income Tax proposed a transfer pricing adjustment of ₹5.26 crore, linked to "corporate service charges." The company objected, taking the matter to the Dispute Resolution Panel (DRP).
In November 2014, the DRP directed that depreciation on goodwill be allowed, but the final assessment order failed to follow this. Archroma appealed before the Income Tax Appellate Tribunal (ITAT), which partially ruled in its favor in December 2015 and sent the transfer pricing issue back to the DRP for fresh adjudication.
The DRP then issued fresh directions on 19 March 2020, ordering the Assessing Officer to re-examine the issue based on the arm's length principle. However, the department never completed the assessment within the prescribed time frame.
Petitioner's Argument
Senior Advocate J.D. Mistry, representing Archroma, told the Bench that the law is clear - the Assessing Officer must finalize the assessment within one month of receiving DRP’s directions.
"The timeline under Section 144C(13) is mandatory, not advisory," Mistry argued. "If the officer fails to act within the stipulated period, the entire proceeding becomes non est - as if it never existed."
He pointed out that the company had repeatedly written to the tax office between August 2020 and February 2025, urging compliance or a refund. The silence from the Department, he said, had forced the company to approach the court.
Revenue's Stand
Representing the government, advocate Sushma Nagaraj countered that the time limits under Section 144C(13) do not apply when directions are issued in a "second round" following remand.
"The Department is in the process of completing the assessment," she submitted, adding that the issue of timelines was still pending before the Supreme Court in Asst. Commissioner of Income Tax vs. Shelf Drilling Ron Tappmeyer Ltd.
However, the Bench found no merit in this defense. It noted that the law makes "no distinction between ordinary cases and cases on remand," and that the mandatory language of "shall" in the statute leaves no room for administrative discretion.
Court's Observations
Justice Jamsandekar, who authored the judgment, gave a detailed explanation of Section 144C's structure - beginning with the draft order, objections to the DRP, and finally, the duty of the Assessing Officer to comply within one month.
"The language of Section 144C(13) is clear, unambiguous, and mandatory,} the Bench observed. "It provides a mechanism that cannot be deviated from. The Assessing Officer must complete the assessment within the prescribed time, failing which, the proceedings lapse."
Rejecting the Department's plea, the court remarked,
"If the argument of the Revenue is accepted, we would have to omit the mandatory provision itself. Such interpretation is impermissible."
The court also emphasized that the directions of the DRP are binding under Section 144C(10). Any failure to act within the timeframe, it held, "defeats the purpose of legislative certainty."
Decision
Declaring the proceedings "barred by limitation," the Bench held that the transfer pricing addition of ₹5.26 crore "stands extinguished."
It directed the Income Tax Department to recompute Archroma’s total income for AY 2010–11 by excluding the adjustment and to issue the due refund with statutory interest under Section 244A within eight weeks of the order’s upload on the court’s website.
No costs were imposed, the court said, but it fixed December 15, 2025, for compliance reporting.
Case Title:- Archroma International (India) Pvt. Ltd. v. Deputy Commissioner of Income Tax & Ors.
Case Number: Writ Petition (L) No. 11226 of 2025
