Assessment u/s 153C not Valid for Assessment Years not Covered within 6-Year Period: ITAT [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has held that the assessment under Section 153C of the Income Tax Act, 1961 would not be valid for the assessment year not covered within the period of 6 years.

Pursuant to a search conducted on 10-12-2013 in the case of Ankur Shubham Group, it was found that the assessee, Dinesh Shah was a key person of the said group, and since no search warrant was executed in the name of both the assessees and assessee explained the modus of generation of on-money on sale of flats from its real estate projects which was brought into regular books by availing accommodation entries in the form of unsecured loans from the various entities, the AO initiated proceedings under Section 153C of the Income Tax Act, 1961 after issuing statutory notice in 2016.

Rasesh Shah who appeared on behalf of the assessee raised the legal issue inter-alia against the action of the Assessing Officer to have framed assessment under Section 153C read with Section 143(3) of the Income Tax Act on the ground that relevant AY 2009-10 would not fall in the ken of Section 153C read with Section 153A of the Income Tax Act. He also contended that the assessment frame was bad in law.

Bharat Andhale appeared on behalf of the revenue.

Section 153C Income Tax Act, 1961 permits the revenue department to take legal action against that party rather than the person who was the subject of the search If incriminating items were discovered against the "other person" during the search, on or before May 31 of the calendar year that immediately follows the one in which the organisation receives the donation. at least sixty days prior to the expiration of the limitation period mentioned in Section 153 or Section 153B, depending on the situation, for issuing the order of assessment, reassessment, recomputation, or fresh assessment.

The Division Bench of Aby T. Varkey, (Judicial Member) and Amarjit Singh, (Accountant Member) observed that, “The AO initiated proceedings under Section 153C of the Income Tax Act after issuing statutory notice in 2016; and since, the assessee being not the “searched person” for the purpose under Section 153A of the Income Tax Act, for the purpose of Section 153C of the Income Tax Act, the reference to date of search has to construed as the date of recording satisfaction, which in this case is 15.03.2016 [AY 2016-17].”

Consequently, six (6) assessment years for which assessment/reassessment could be made under Section 153C of the Income Tax Act would also have to be construed with reference to date of handing over of documents to AO of assessee/recording of satisfaction by AO of Assessee that is 15.03.2016.

The Bench allowed the appeal holding that the AO had no jurisdiction to make an assessment of assessee’s income for AY 2009-10 as the relevant assessment year AY 2009-10 was outside the scope of Section 153C of the Income Tax Act.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates