2016 (2) TMI 980 - AT - Income Tax

Validity of assessment order passed under section 143(3)/158BC - period of limitation - Held that - Undisputedly in the present case of the assessee the search was conducted on March 19 2002 and notice under section 158BC of the Act was issued to the assessee on May 9 2002. Thus both the dates falls well before June 1 2002 when the new Explanation 1 to this section was in existence. Prior to the insertion of the new Explanation 1 with effect from June 1 2002 Explanation 1 as inserted by the Finance (No. 2) Act 1996 with retrospective from July 1 1995 and amended by the Finance (No. 2) Act 1998 with retrospective effect from July 1 1995 in computing the period of limitation for the purposes of this section the period during which the assessment proceedings is stayed by an order or injunction of any court was to be excluded. The order under section 158BC was to be passed within two years from the end of the month in which the last of the authorisation for search under section 132 or for requisition under section 132A as the case may be was executed in cases where a search is initiated or books of account or other documents or any assets are requisitioned on or after the January 1 1997. Keeping all these material facts in totality in its mind the learned Commissioner of Income-tax (Appeals) has rightly held that the new Explanation 1 inserted to section 158BE of the Act with effect from June 1 2002 was not retrospective and thus the assessment order in question passed on July 14 2011 was barred by limitation as the prescribed limitation for passing the order was up to May 30 2011 after exclusion of the stay period. The first appellate order in this regard is thus upheld.

Summary

Issues involved:
1. Questioning the first appellate order on various grounds, including the limitation of assessment order under section 143(3)/158BC.
2. Determining whether the assessment order was barred by limitation as per the proviso to section 158BE, Explanation 1.
3. Deleting additions without examining the merits in different categories like alleged suppression of charges, estimation of income, unexplained investments, disallowance out of interest account, unsecured cash credit, unexplained gifts, and undisclosed investment.
4. Interpreting the retrospective effect of the proviso to Explanation 1 to section 158BE(2) of the Act.
5. Analyzing the impact of court orders on the limitation period for passing the assessment order.

Detailed Analysis:
1. The Revenue challenged the first appellate order on various grounds, including the limitation of the assessment order under section 143(3)/158BC. The primary issue was whether the assessment order was time-barred or not.

2. The main contention revolved around whether the assessment order was barred by limitation as per the proviso to section 158BE, Explanation 1. The argument focused on the retrospective nature of the proviso and its applicability to the specific case.

3. The additions deleted without examining the merits covered a wide range of categories such as alleged suppression of charges, estimation of income, unexplained investments, disallowance out of interest account, unsecured cash credit, unexplained gifts, and undisclosed investment. The decision to delete these additions without thorough examination was a key point of contention.

4. The retrospective effect of the proviso to Explanation 1 to section 158BE(2) was a crucial aspect of the judgment. The interpretation of whether the proviso was procedural and clarificatory in nature, and its impact on the assessment order's limitation, was thoroughly analyzed.

5. The impact of court orders on the limitation period for passing the assessment order was a significant factor in determining the validity of the assessment order. The analysis included the exclusion of the stay period and compliance with court directives in calculating the limitation period.

In conclusion, the judgment upheld the first appellate order, dismissing the appeal and affirming that the assessment order was indeed barred by limitation. The detailed analysis covered the retrospective effect of the proviso, the relevance of court orders on the limitation period, and the deletion of additions without proper examination of merits.