2015 (8) TMI 214 - AT - Income Tax

Limitation for completion for 153C proceeding - Held that - With the combined reading of proviso to section 153C and section 153A(1)(b), it is clear that in the case of the person in whose case action is required under section 153C, the Assessing Officer is empowered to take action under section 153C for the year in which the seized document is received by him and the preceding six years. In the present case as mentioned by the Assessing Officer in paragraph 2 of his order, the seized material was received on March 12, 2009 from the Assistant Commissioner of Income-tax, Central Circle-17. Thus, the year in which seized material was seized is previous year 2008-09 relevant to the assessment year 2009-10. The preceding six years would be assessment years 2008-09, 2007-08, 2006-07, 2005-06, 2004-05 and 2003-04. Therefore, after considering the facts of the assessee s case and a combined reading of section 153C as well as section 153A, in our opinion, the issue of notice under section 153C for the assessment years 2001-02 and 2002-03 is barred by limitation. Accordingly, we quash the same and consequentially, the assessment order passed in pursuance to the notice issued under section 153C is also quashed. - Decided in favour of assessee.

Issues:
1. Barred by limitation - Assessment years 2001-02 and 2002-03.
2. Validity of notice under section 153C.
3. Penalty under section 271F.
4. Order passed under section 154.

Issue 1 - Barred by limitation - Assessment years 2001-02 and 2002-03:
The appeals by the assessee challenged the completion of assessment for the years 2001-02 and 2002-03 under section 143(3) read with section 153C of the Income-tax Act, 1961. The contention was that the notice under section 153C was issued beyond the limitation period. The seized material was received on March 12, 2009, and the notice was served on March 24, 2009. The proviso to section 153C deems the date of receiving the books of account as the date of search, making the notice under section 153C for the years 2001-02 and 2002-03 time-barred. The Tribunal agreed and quashed the notice and consequentially the assessment order.

Issue 2 - Validity of notice under section 153C:
Section 153C empowers the Assessing Officer to proceed against a person other than the one referred to in section 153A based on seized books of account or documents. The relevant provisions of sections 153C and 153A were analyzed to determine the validity of the notice issued. The Tribunal concluded that the notice under section 153C for the assessment years 2001-02 and 2002-03 was indeed barred by limitation, as the seized material was received beyond the prescribed time frame, rendering the notice and subsequent assessment void ab initio.

Issue 3 - Penalty under section 271F:
The Tribunal addressed the penalty levied under section 271F for failure to furnish returns in response to the notice under section 153C. Since the notice was deemed time-barred, the imposition of penalties for non-compliance was deemed unsustainable and subsequently canceled.

Issue 4 - Order passed under section 154:
The Assessing Officer had modified the order under section 153C for the years 2001-02 and 2002-03, imposing interest under section 234B. However, since the assessment order under section 143(3) read with section 153C was quashed, the Tribunal ruled that rectification under section 154 was unnecessary. Consequently, the order under section 154 for the relevant years was quashed, and the assessee's appeals were allowed.

In conclusion, the Tribunal allowed all the assessee's appeals, emphasizing the importance of adhering to statutory timelines and procedures in tax assessments and penalties. The judgment highlighted the significance of procedural compliance and the consequences of non-compliance, ultimately leading to the cancellation of penalties and quashing of assessment orders due to limitations.

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