Assessment Beyond Limitation Period Barred u/s 153(2): ITAT Quashes Reassessment and Penalty Against Non-Resident [Read Order]

The Hyderabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that where reassessment is not completed within the statutory time limit prescribed under section 153(2) of the Income Tax Act, 1961, the order passed is barred by limitation and quashed the reassessment framed under section 147 and the penalty levied under section 271(1)(c) against the assessee.

The assessee, Maliha Syeda, is a non-resident individual who had filed her return of income declaring ₹4,069 for the Assessment Years (AYs) 2013-14 and 2014-15.

During a search under section 132 on Skill Promoters Pvt. Ltd. on 22.10.2019, certain incriminating documents allegedly showed that the assessee agreed to purchase commercial space for ₹37 lakh, including ₹19.50 lakh in cash and it was also noted that ₹8 lakh was paid in cash during AY 2014-15, for which the sources had to be ascertained.

Therefore, the Assessing Officer (AO) issued a notice under section 148 to reopen the assessment and it was completed by the addition of ₹8 lakhs in the absence of verifiable

documentary evidence and assessed the total income of the assessee at ₹8,04,069 under section 147 of the Act and also imposed a penalty.

The assessee carried the matter in appeal before the Commissioner of Income Tax (Appeals) (CIT(A)). The CIT(A) confirmed the action of the AO, both in respect of the reassessment order as well as the penalty imposed.

On further appeal before the Tribunal, the assessee challenged the validity of the reassessment on the ground of limitation.

The assessee submitted that under section 153(2), where a notice under section 148 has been served, then the reassessment shall not be made after the expiry of one year from the end of the financial year in which the notice is served. Since in the present case the notice under section 148 was issued on 29.03.2021, the reassessment should have been completed by 31.03.2022. As the reassessment order was admittedly passed on 25.05.2022, the same was barred by limitation and, therefore, void ab initio.

The revenue argued that since the assessee was an “eligible assessee” under section 144C(15), the AO rightly passed the order and the final order was valid within the time limit of section 153(4).

The Tribunal noted that the assessee is a non-resident individual and the extended time limit under section 153(4) does not apply to non-residents. Since notice under section 148 was issued on 29.03.2021, the reassessment should have been completed within one year as per section 153(2).

The Bench comprising Vijay Pal Rao (Vice President) and G. Manjunatha (Accountant Member) considered the submissions and the material on record and observed that he provision of section 153(2) is clear and categorical, and that once the statutory time prescribed has expired, then the Assessing Officer loses the jurisdiction to pass the reassessment order.

The Tribunal further noted that since the reassessment itself was without jurisdiction, being time-barred, the penalty levied under section 271(1)(c) also could not survive.

Accordingly, the ITAT held that the reassessment order passed by the AO under section 147 was barred by limitation under section 153(2) and quashed the same. The penalty levied under section 271(1)(c) was also deleted.

The assessee was represented by AV Raghuram, while Srinath Sadanala represented the revenue.

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