ITAT Quashes S. 153C Assessments based on Invalid Notices [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has recently, while considering the appeals filed before it, quashed Section 153C assessments, based on invalid notices.

The same was done by the Delhi ITAT, while taking into account the appeals filed at the instance of the Assessee, as against the respective orders of the Commissioner of Income Tax (Appeals), New Delhi [CIT(A)] ,both dated 31.03.2017, arising from the assessment orders both dated 30.03.2015, passed by the Assessing Officer (AO) under Section 153C of the Income Tax Act, 1961, concerning AYs 2006-07 & 2007-08.

With the assessee inter alia challenging the assessments framed under Section 153C of the Income Tax Act, on the ground that the impugned assessment orders passed by the Assessing Officer were without jurisdiction, thus void ab initio and thereby liable to be quashed, it was pointed out by Ms. Sumangla Saxena and Shri Rajiv Saxena, the counsels for the assessee, that the captioned appeals concerning Assessment Years 2006-07 and 2007-08 are liable to be quashed at the threshold as the Assessing Officer could not have validly initiated notice under Section 153C of the Income Tax Act, for framing assessment owing to embargo of limitation placed under Section 153C of the Income Tax Act.

 It was further submitted by the assessee’s counsesl, that the date of search in the case of the searched person (other than assessee) being 25.08.2011, satisfaction towards escapement in the hands of the assessee herein by the Assessing Officer of the searched person was, however recorded on 05.03.2014, which was thereafter handed over to the Assessing Officer of the assessee on 21.03.2014.

The assessee’s counsels further contended that, with the Assessing Officer of the assessee, in turn, recording satisfaction note on 22.09.2014, there is no reference to the date of receiving document seized by the Assessing Officer having jurisdiction on the assessee, and that the notice under Section 153C was eventually issued on 22.09.2014.

 It was next contended by them that there being no search operation under Section 132 of the Income Tax Act, being carried out in the case of the assessee, as per the proviso to Section 153C of the Income Tax Act, the date of handing over books or recording of the date of satisfaction under Section 153C, should be treated as the date of initiation of search for determination of six assessment years as provided under Section 153A(1)(b). And therefore that, in view of the aforesaid position, if the period of six years is calculated from the date of 21.03.2014, the Assessments Years 2006-07 and 2007-08 are manifestly barred by limitation, which would thus, be out of the purview of Section 153C r.w. Section 153A of the Income Tax Act.

With the counsels for the assessee thus submitting that, the notice issued under Section 153C of the Act for both the assessment years in question are incompetent in law and hence the assessment orders passed under Section 153C of the Income Tax Act, concerning the Assessment Years 2006-07 and 2007-08 are hence, liable to be quashed in limine, Ms. Sarita Kumari, CIT-DR, however, relied upon the orders of the lower authorities.

Hearing the opposing contentions of either sides and perusing the materials available on record, the Delhi ITAT commented:

“We have heard the rival submissions on the issue. One of the controversies in the present case arises towards computation of limitation period under Section 153C of the Act for the purposes of issuance of notice and assessment thereon. As per Section 153A of the Act (in the case of searched persons), the limitation of preceding six years starts from the financial year in which search was conducted. However, in the case of Section 153C of the Act (person other hand searched person), the limitation of preceding six years starts from the date of receipt of seized assets or documents from the Assessing Officer of the person searched as per the erstwhile proviso to Section 153C of the Act”.

“We notice here that the reasons for issue of notice under Section 153C r.w. Section 153A of the Act were recorded by the Assessing Officer of the searched person on 05.03.2014. The satisfaction note was handed over to the Assessing Officer of the assessee on 21.03.2014. As a corollary, the books of accounts, documents seized etc. were handed over to the Assessing Officer of the assessee. Therefore, the limitation for preceding six years starts from the aforesaid date, i.e., 21.03.2014. Consequently, the Assessment Years 2006-07 and 2007-08 are clearly outside the sweep of exercise of jurisdiction under Section 153C of the Act. The jurisdiction of issue notice under Section 153C are ousted insofar as Assessment Year 2006-07 and 2007-08 are concerned when the date of handing over of satisfaction note dated 05.03.2014 to the Assessing Officer of the assessee on 21.03.2014 is reckoned. Similar view has been expressed by the Hon’ble Delhi High Court in the case of Pr.CIT vs. Sarwar Agency P. Ltd.”, the ITAT Bench comprising of Narender Kumar Choudhry, the Judicial Member, along with Pradip Kumar Kedia, the Accountant Member, added.

Thus, allowing the assessee’s appeals, the Delhi ITAT held:

“We thus find merit in the plea of the assessee that respective notices issued to the assessee under Section 153C of the Act for assessment years in question, i.e., Assessment Years 2006-07 and 2007-08 are without jurisdiction as these assessment years are beyond the purview of six assessment years in terms of pre-amended provisions of Section 153C of the Act. As a corollary, the assessments passed under Section 153C of the Act as a sequel to invalid notices are also liable to be quashed. In terms of these observations, the respective assessment years for Assessment Years 2006-07 and 2007-08 are set aside and quashed.”

To Read the full text of the Order CLICK HERE

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