In a landmark ruling, the Income Tax Appellate Tribunal ( ITAT ) New Delhi Bench quashed the assessment orders for Social Realtors Private Limited,the assesee for Assessment Years 2011-12 to 2016-17, arising from a search and seizure operation conducted against the M3M Group on 21 July 2016.
The tribunal’s order, centered on critical procedural and jurisdictional challenges to the reassessment proceedings under Section 153C of the Income Tax Act.
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The primary issue revolved around the timing of the satisfaction note, which was recorded on 25 September 2018 and fell in Assessment Year 2018-19, creating a complex legal scenario regarding the block period calculation.
Given the satisfaction date, the immediately preceding six assessment years would technically be from 2013-14 to 2018-19, while the search was conducted on 21 July 2016, before the amendment to Section 153C of the Income Tax Act with prospective effect from 1 April 2017.
This temporal discrepancy became the central argument for challenging the reassessment proceedings.
The tribunal extensively referenced previous judgments, particularly the case of Marconi Infratech, which involved similar search and seizure proceedings from the same M3M Group operation.
The Bench critically examined the satisfaction note and found several significant deficiencies, including a lack of specific details about the documents relied upon, absence of year-wise satisfaction recording, and failure to establish a direct correlation between seized documents and the assessment years under consideration.
Citing the Supreme Court’s judgment in CIT vs. Singhad Technical Education Society, the tribunal emphasized that incriminating material must establish a clear correlation with the assessment years being reopened, and the satisfaction note must provide logical reasoning for invoking Section 153C.
The Tribunal also noted that the Assessing Officer’s satisfaction note simply referred to seized material (Annexure A-3) without demonstrating how these documents related to the specific assessment years. This lack of precise documentation and clear reasoning became a critical factor in quashing the assessment orders.
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The ruling reinforces important principles of tax law, including the need for strict scrutiny of procedural compliance in reassessment proceedings, the importance of precise documentation in search and seizure operations, and protection against arbitrary reopening of assessments.
Ultimately, Two Member Bench comprised of Yogesh Kumar ( Judicial Member ) and Shamim Yahya ( Accountant Member ) allowed the appeals of the assessee by quashing the assessment orders for Assessment Years 2011-12 to 2016-17. The decision underscores the judiciary’s commitment to ensuring procedural fairness and limiting potential overreach by tax authorities.
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