2016 (5) TMI 787 - AT - Income Tax

Validity of proceedings under section 163(1) - Held that - The proceedings under section 163(1) were initiated pursuant to search and seizure operation but beyond the time prescribed under section 149(3) of the Act. Therefore we are satisfied that the above decision is applicable to the facts of the case before us. Respectfully following the same we set aside the orders of the A.O. under section 163(1) of the I.T. Act for the A.Ys. 2004-05 to 2008-09. The assessee s ground of appeal No.18 on this issue is treated as allowed and all the other grounds are not adjudicated at this stage as it would only be an academic exercise. As regards the assessee s appeal for the A.Y. 2009-2010 the Ld. Counsel for the assessee submitted that since there has been no demand pursuant to the assessment under section 143(3) read with section 153C of the I.T. Act on the assessee by treating the assessee as a Representative Assessee under section 163(1) of the Act the assessee is not pressing the appeal before the Tribunal against the order passed under section 163(1) of the I.T. Act and may be allowed to withdraw the same. A letter dated 03.05.2016 is filed to this effect. Accordingly the assessee s appeal for the A.Y. 2009-10 is dismissed as withdrawn.

Issues Involved:
1. Validity of the proceedings under section 163(1) read with section 153C of the I.T. Act, 1961.
2. Time limit for issuance of notice under section 148 as per section 149(3) of the I.T. Act.
3. Applicability of section 153B of the I.T. Act.
4. Withdrawal of appeal for A.Y. 2009-10.

Detailed Analysis:

1. Validity of the proceedings under section 163(1) read with section 153C of the I.T. Act, 1961:

The assessee contested the validity of the proceedings initiated under section 163(1) of the I.T. Act, 1961, arguing that the time for issuance of a notice under section 148 had lapsed for the assessment years (A.Ys.) 2004-05 to 2008-09. The assessee was treated as a "Representative Assessee" of a foreign company (SAM) based on seized material indicating unaccounted cash receipts and under-invoicing by SAM. The Assessing Officer (A.O.) issued a show cause notice under section 163(1) on 29.11.2011, which the assessee contested on the grounds of expired time limits for assessment under section 153C. The CIT(A) upheld the A.O.'s order but did not address the specific ground related to the time limit under section 149(3).

2. Time limit for issuance of notice under section 148 as per section 149(3) of the I.T. Act:

The assessee argued that the proceedings under section 163(1) were initiated beyond the two-year period prescribed under section 149(3) for the relevant assessment years. The Ld. Counsel for the assessee referred to the provisions of section 149(3) and the decision of the Hon'ble Bombay High Court in the case of Ingram Micro India Ltd. vs. DCIT (2012) 20 taxmann.com 206 (Bom.), which supported the contention that the proceedings were barred by limitation. The Tribunal found merit in this argument, noting that the provisions of section 149(3) clearly prohibit the issuance of notices under section 148 after the expiry of two years from the end of the relevant assessment year.

3. Applicability of section 153B of the I.T. Act:

The Revenue contended that the time limit prescribed under section 149(3) was not applicable because the case involved a search under section 132, making the provisions of section 153B relevant. However, the Tribunal clarified that section 153B applies to assessments under section 153A, which pertains to the person searched. In this case, the non-resident company (SAM) was not the person searched, and the original assessment proceedings were initiated under section 153C. Therefore, section 153B was not applicable, and the time limit under section 149(3) stood valid.

4. Withdrawal of appeal for A.Y. 2009-10:

For the A.Y. 2009-10, the assessee chose to withdraw the appeal, as there was no demand pursuant to the assessment under section 143(3) read with section 153C by treating the assessee as a "Representative Assessee" under section 163(1). The Tribunal accepted the withdrawal request, and the appeal for A.Y. 2009-10 was dismissed as withdrawn.

Conclusion:

The Tribunal concluded that the proceedings under section 163(1) for A.Ys. 2004-05 to 2008-09 were barred by limitation as per section 149(3) and set aside the orders of the A.O. for these years. Consequently, the assessee's appeals for these years were partly allowed. The appeal for A.Y. 2009-10 was dismissed as withdrawn. The order was pronounced in the open Court on 18.05.2016.

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