2017 (9) TMI 1593 - HC - Income Tax

Additions made under Section 153C - tangible material of incriminating nature found in search - Revenue submitted that although the amendment to Section 153C bringing on par the period for which the assessments could be reopened in the case of both the searched person and the other person was effective from 1st April 2017 it should be viewed as clarificatory and therefore applicable even to the case on hand Held that - It is seen that as far as AY 2010-11 in terms of Section 153 C the assessment had to be completed by 31st December 2012. Even the satisfaction note was prepared only on 8th August 2013. The Court is unable to agree with the revenue s submission. It is plain that the amendment to section 153 C of the Act is prospective. In the present case the assessment for AY 2010-11 had abated by the time the satisfaction note was prepared by the AO of the Assessee. The said assessment could not be reopened in the absence of tangible material of incriminating nature relevant for that AY being found. On facts it has been found that there was no tangible material of incriminating nature for the AY in question that could justify the addition made by the AO. See CIT v. RRJ Securities Limited (2015 (11) TMI 19 - DELHI HIGH COURT) - Decided in favour of the Assessee

Summary

Issues:
Appeal under Section 260A of the Income Tax Act, 1961 against ITAT order for AY 2010-11. Interpretation of additions made under Section 153C read with Section 143(3) of the Act. Application of the amendment to Section 153C regarding reopening assessments. Assessment abatement due to time constraints and lack of incriminating material.

Analysis:
The appeal before the Delhi High Court involved challenging the ITAT's order for the Assessment Year (AY) 2010-11 under Section 260A of the Income Tax Act, 1961. The primary issue revolved around the interpretation of additions made under Section 153C read with Section 143(3) of the Act. The central question framed for consideration was whether the ITAT erred in holding that the said additions were not justified and supportable in law.

In a related context, it was noted that for the AYs 2007-08 to 2012-13 (excluding AY 2010-11), the Court had previously dismissed the Revenue's appeals arising from the same impugned order of the ITAT. However, this particular appeal was separated from the batch due to unclear timelines related to the handing over of seized documents, issuance of the satisfaction note, filing of the return, centralizing of assessments, and the final order of assessment. The assessment for AY 2010-11 had to be completed by 31st December 2012, and the satisfaction note was prepared only on 8th August 2013, after the assessment had abated.

Regarding the application of the amendment to Section 153C of the Act, the Court analyzed the retrospective or prospective nature of the amendment. The Court emphasized that the said amendment was prospective and could not be applied retroactively. Citing precedents such as CIT v. RRJ Securities Limited and ARN Infrastructure India Ltd. v. Assistant Commissioner of Income Tax, the Court clarified that the assessment for AY 2010-11 could not be reopened in the absence of tangible material of incriminating nature relevant to that year. It was established that no such material was found to justify the additions made by the Assessing Officer.

Consequently, the Court answered the framed question in the negative, ruling in favor of the Assessee and against the Revenue. The appeal was ultimately dismissed based on the lack of incriminating material and the abatement of the assessment for AY 2010-11 within the specified timeline.