Exclusion of Period taken for Handing Over Seized Material to Assessing Officer u/s 153B Clause (xi) of Income Tax Act Applicable Only after 01.04.2021: Madras HC [Read Order]

The Madras High Court has held that the exclusion of the period taken for handing over seized material to assessing officer under section 153B clause (xi) of the Income Tax Act, 1961 applicable only after 01.04.2021.

The premises of the petitioner M/s.Agni Estates and Foundations Private Limited had been subject to a search under section 132 of the Income Tax Act, 1961 and notices under section 153A had been issued under the same. The petitioner challenged those notices in an earlier round of litigation unsuccessfully, and those writ petitions had come to be dismissed on 17.03.2021.

While disposing of those writ petitions, the court directed the revenue to proceed to complete the assessments and orders had come to be passed on 29.01.2022 impugned now. The challenge to the assessments raises one legal issue which goes to the root of the matter, relating to the bar of limitation.

The main ground challenging orders of assessment for Assessments Years (AYs) 2011-12 to 2019-20 is the bar of limitation and inter alia, the batch of 9 assessment years can be divided into two. The limitation is to be computed in terms of Section 153B, read with the Explanation thereunder and the extension provided by the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 (‘TOLA’).

The limitation for completion of the assessment is 18 months in terms of Section 153B commencing from 01.04.2019, being the end of the financial year when the last of the search authorisations was executed and concluding by 30.09.2021, i.e., 18 months or 549 days. The dates of grant of stay, extension and stay granted in suo motu proceedings are also largely admitted, with minor differences between the parties that would not impact the decision of this Court.

On the date of grant of stay first by this Court, i.e., on 18.12.2019, a limitation of 288 days remained. Post dismissal of the Writ Petitions on 17.03.2021, Writ Appeals were filed in W.A.Nos.1111 of 2022 and batch and a stay was granted for 53 days from 15.04.2021 to 07.06.2021.

 The impugned orders of assessment dated 28.01.2022 rely upon the extension under the TOLA of one year from 30.09.2020 to 30.09.2021. According to the Department, the period for which a stay was granted pending Writ Petitions is 14 months and 28 days and pending Writ Appeals one month and 24 days. Thus, the total period of stay is 16 months and 24 days.

The Department has excluded the period of stay granted pending Writ Petitions and Writ Appeals, (288 + 53 days), as per Explanation (i) of Section 153B and 180 days being the period of handing over of seized materials as per Explanation (xi) to Section 153B of the Act, but after availing the benefit of extension under TOLA.

The statutory date for completion of assessments is 30.09.2020. Thus the benefit under TOLA is available to the revenue and by such application, the period is extended to 30.09.2021. Taking note of the period of stay of 16 months and 24 days thereafter, the date gets extended to 20.04.2023, whereas, the orders in these cases have been passed on 28.01.2022, well within time.

Per contra, the petitioners argued that effect is first to be given to the exclusion under the Explanation to Section 153B and in such an event, the resultant date would fall on 07.05.2021/19.08.2021, both dates falling outside the range stipulated in the TOLA. Thus the benefit of TOLA would be unavailable to the revenue.

Section 3 of the TOLA states ‘Where, any time-limit has been specified in, or prescribed or notified under, the specified Act which falls during the period from the 20th day of March 2020 to the 31st day of December 2020, or such other date after the 31st day of December 2020, as the Central Government may, by notification, specify in this behalf, the period is extended to 30.09.2020.’ Vide subsequent Notifications, the date has been extended to 30.09.2021.

The single judge bench Dr. Justice Anita Sumanth observed that the last date for completion of assessment as prescribed by Section 153B is within twenty-one months from the end of the financial year in which the last of the authorisations for search under section 132 or requisition under section 132A was executed.

The petitioner is permitted to file statutory appeals on merits and such appeals, if filed within four weeks from the date of receipt of this order, shall be entertained by the appellate authority without reference to limitation but ensuring compliance with all other statutory requirements.

“As far as the defence of the revenue based upon Clause (xi) to Explanation to Section 153B is concerned, that clause relates to the exclusion of the period taken for handing over seized material to the assessing officer. The clause has been inserted with effect from 01.04.2021 and hence operates prospectively only, being a substantive provision. The benefit of the exclusion under that clause thus, would not be available to the revenue in the present assessments. The impugned orders of assessment passed on 28.01.2022 in respect of AYs 11-12, 12-13 and 19-20 are hence held to be barred by limitation qua these three assessment years and are set aside. The writ petitions challenging those notices, orders of assessment and penalties are allowed.”, the Court held.

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