ITAT Bangalore Treats Transfer Pricing Reassessment as Time-Barred Under Section 153

Background and Context

In a significant ruling on limitation in transfer pricing reassessments, the Bangalore Bench of the Income Tax Appellate Tribunal (“ITAT”) in the case of Etisalat Software Solutions Pvt. Ltd. Vs ACIT has held that a transfer pricing adjustment of ₹23.36 crore could not survive as the final assessment order itself was passed beyond the permissible time limit under Section 153.

The dispute pertained to Assessment Year 2017-2018, involving an assessee company, Etisalat Software Solutions Private Limited, a subsidiary of Emirates, UAE, engaged in providing software development services to its associated enterprises. The assessee’s income was originally assessed after a transfer pricing adjustment. In the first round of litigation, the ITAT had partly accepted the assessee’s contentions on comparables and remitted limited issues back to the Assessing Officer (“AO”) / Transfer Pricing Officer (“TPO”) for fresh examination.

In the second round, while challenging the final assessment order dated 12 November 2025, the assessee raised an additional jurisdictional ground that the order itself was barred by limitation under the scheme of Section 153. This additional challenge ultimately led to the entire assessment being quashed, rendering the transfer pricing adjustment infructuous.

Procedural History

Original Return and First Round of Assessment

  • The assessee, a captive service provider of software development services to its associated enterprises, filed its return of income for AY 2017-18 on 28 November 2017, declaring total income of approximately ₹22.34 crore.
  • The case was picked up for scrutiny via notice under Section 143(2) dated **24 August 2018`.
  • The AO issued a draft assessment order dated 21 April 2021, proposing a transfer pricing adjustment under Section 92CA of ₹38.26 crore.
  • The assessee approached the Dispute Resolution Panel (“DRP”) with objections. The DRP issued directions under Section 144C(5) on **24 January 2022`.
  • Based on these directions, the AO framed a final assessment order on 10 February 2022, making transfer pricing additions.

The assessee carried this final order in appeal before the ITAT in ITA No. 240/Bangalore/2022.

ITAT’s First Order and Limited Remand

On 20 September 2022, the ITAT passed an order dealing with multiple issues including selection/exclusion of comparables and certain filters. In this order:

  • The Tribunal directed exclusion of some comparables based on a turnover filter.
  • Out of several comparables challenged for exclusion, four were excluded outright.
  • The issue of comparability of R Systems International Limited was restored to the AO/TPO for fresh examination.
  • The question of inclusion of Sasken Technologies Limited as a comparable was also restored to the TPO for reconsideration.

Importantly, the Tribunal did not set aside or cancel the entire assessment. Only certain comparability questions were remitted for limited verification and fresh consideration.

The order of the ITAT was received by the Commissioner of Income Tax (“CIT”/“PCIT”) on 17 October 2022. This date became crucial for computing limitation under Section 153.

Second Round Before AO/TPO and DRP

Pursuant to the ITAT’s first order:

  1. The AO referred the matter to the TPO on **18 July 2023`.
  2. The TPO passed a fresh order under Section 92CA(3) on **30 September 2024`, proposing a revised transfer pricing adjustment of ₹23,36,28,520.
  3. The AO incorporated this adjustment in a draft assessment order under Section 144C(1) dated **27 January 2025`.
  4. The assessee filed objections once again before the DRP.
  5. The DRP issued its directions on **6 October 2025`.