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2016 (9) TMI 1151 - AT - Income TaxValidity of proceedings u/s 153A - computing the six assessment years for assessing / reassessing u/s 153C - Held that - The reference to the date of search in cases of other person where warrant of authorization was not issued, the date of receipt of the documents by the AO of the other person constitutes the date of search for the purpose of computing the six assessment years for assessing / reassessing u/s 153C of the Act. In the present case, the date of receipt of the documents is 13.12.2006, which relates to the AY 2007-2008. In view of the provisions of clause (b) of section 153A(1) of the Act, the six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted . Therefore, the assessment year in which the documents are received by the AO of the other person‟ is NOT required to be made u/s 153C of the Act. Thus the assessment for the AY 2006-07, which was made u/s 143(3) of the Act, is required to be quashed on technical grounds.
Issues Involved:
1. Validity of the assessment order under section 153C read with section 143(3) of the Income Tax Act, 1961. 2. Confirmation of disallowance of expenses and addition of commission income. 3. Levy of interest under sections 234A, 234B, and 234C of the Act. 4. Determination of commission income and allowable expenses for the assessment year 2007-08. Issue-wise Detailed Analysis: I. Cross appeals for the AY 2006-07 ITA No.537/M/2014 (Assessee’s appeal) 1. Validity of the Assessment Order: - The assessee contested the validity of the assessment order passed by the Assessing Officer (AO) under section 143(3) instead of section 153C of the Income Tax Act. The assessee argued that the assessment should have been completed under section 153C after complying with statutory requirements, including the recording of satisfaction and issuing notice under section 153C. - The Tribunal noted that the date of receipt of documents by the AO of the other person was 13.12.2006, which falls in the assessment year 2007-08. Therefore, the assessment for AY 2006-07 should have been completed under section 153C, and the assessment made under section 143(3) was invalid. The Tribunal quashed the assessment for AY 2006-07 on technical grounds. 2. Disallowance of Expenses and Addition of Commission Income: - The Tribunal did not adjudicate on the other grounds raised by the assessee regarding the disallowance of expenses and addition of commission income, as the assessment was quashed on technical grounds. 3. Levy of Interest: - Similarly, the Tribunal did not address the issue of levy of interest under sections 234A, 234B, and 234C, as the primary ground of invalid assessment was upheld. ITA No.567/M/2014 (By Revenue) 4. Revenue's Appeal: - Considering the Tribunal's decision to quash the assessment for AY 2006-07 on technical grounds, the appeal filed by the Revenue became infructuous and was dismissed. II. Cross appeals for the AY 2007-08 ITA No.568/M/2014 (By Assessee) and ITA No.538/M/2014 (By Revenue) 5. Determination of Commission Income and Allowable Expenses: - The assessee was engaged in providing accommodation entries for earning commission and claimed commission income at varying rates (2% for long-term capital gains and 0.5% for other transactions) and claimed expenses at a flat rate of 20% of the gross commission. - The AO rejected the assessee's claims and adopted a flat rate of 5% for the entire accommodation entries business. - The CIT (A) partly allowed the appeal, determining the commission rate at 3% and allowing expenses at 20% of the gross commission. - The Tribunal upheld the CIT (A)'s decision, finding it fair and reasonable, and dismissed the appeals filed by both the assessee and the Revenue. Conclusion: - The Tribunal quashed the assessment for AY 2006-07 on technical grounds, rendering other issues academic. - For AY 2007-08, the Tribunal upheld the CIT (A)'s determination of commission income at 3% and allowable expenses at 20% of the gross commission, dismissing the appeals of both the assessee and the Revenue.
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