2016 (1) TMI 1336 - AT - Income Tax

Proceedings initiated under Section 153C - assessment barred by limitation - period of six assessment year as computed with reference to the date of satisfaction recorded by the Assessing Officer of the searched person - Held that - The six assessment years for which assessment/re-assessment could be made u/s 153C of the Act would also have to be construed as from the reference date of handing over of assets/documents to the Assessing Officer of the assessee. In the case in hand, it would be the date of recording satisfaction under section 153 of the Act i.e. 2nd November, 2009, and so the six assessment years which would eligible for assessment/re-assessment would be from assessment year 2004-05 to assessment year 2009-10. The assessment/re-assessment in respect of assessment year 2002- 03 and 2003-04 would be beyond the period of six assessment year as computed with reference to the date of satisfaction recorded by the Assessing Officer of the searched person. Accordingly, we, therefore, hold that the assessment for assessment years 2002-03 and 2003-04 are outside the scope of section 153C of the Act and being without jurisdiction, liable to be quashed. - Decided in favour of assessee.

Summary

Issues:
1. Validity of initiation of proceedings under section 153C and assessment order passed by the AO.
2. Time-barred nature of the proceedings initiated under section 153C.
3. Compliance with principles of natural justice in passing the impugned assessment order.
4. Sustaining additions under section 68 for unexplained credit and section 14A for disallowance.
5. Validity of additional ground challenging the reassessment in search cases.

Issue 1: Validity of initiation of proceedings under section 153C and assessment order passed by the AO:
The appellant challenged the initiation of proceedings under section 153C and the assessment order passed by the AO as illegal, bad in law, and wrong on facts. The appellant contended that the proceedings were against the principles of natural justice and lacked a reasonable opportunity to be heard. The CIT(A) upheld the additions made by the AO under section 68 for unexplained credit and section 14A for disallowance. The appellant, dissatisfied with the CIT(A)'s decision, appealed before the ITAT.

Issue 2: Time-barred nature of the proceedings initiated under section 153C:
The appellant argued that the proceedings initiated under section 153C were time-barred. The appellant relied on the provisions of Section 153C and the first proviso to support their contention. The appellant pointed out that the Assessing Officer's satisfaction for issuance of notice under section 153C was recorded on a specific date. Citing recent judgments, the appellant asserted that the assessments for the years under consideration were outside the scope of Section 153C, and the AO lacked jurisdiction to make assessments for those years.

Issue 3: Compliance with principles of natural justice in passing the impugned assessment order:
The appellant raised concerns about the impugned assessment order being passed without affording a reasonable opportunity to be heard, contending that it was against the principles of natural justice. The ITAT examined the arguments presented by both parties and referred to relevant legal precedents to determine the validity of the assessment order.

Issue 4: Sustaining additions under section 68 for unexplained credit and section 14A for disallowance:
The CIT(A) sustained the addition of Rs. 6,00,000 under section 68 for unexplained credit and Rs. 7,521 for disallowance under section 14A. The appellant challenged these additions, leading to a detailed analysis and decision by the ITAT regarding the validity and justification of these additions.

Issue 5: Validity of additional ground challenging the reassessment in search cases:
The appellant introduced an additional ground challenging the reassessment in search cases, arguing that the assessment framed was against the Act's scheme. The ITAT admitted this additional ground, considering it to be legal in nature and going to the root of the matter. The ITAT analyzed this ground along with other issues to arrive at a comprehensive decision.

This judgment by the ITAT Delhi involved multiple issues, including the validity of proceedings under section 153C, time-barred nature of the proceedings, compliance with natural justice principles, sustaining additions under relevant sections, and the validity of additional grounds challenging reassessment in search cases. The ITAT thoroughly analyzed each issue, considered legal arguments and precedents, and ultimately allowed the appeals filed by the assessee for the respective assessment years, quashing the assessments due to lack of jurisdiction and other legal deficiencies.