2021 (10) TMI 352 - AT - Income Tax

Revision u/s 263 by CIT - Assessment u/s 153A - period of limitation period for issuance of notice prescribed under Section 263(2) - whether incriminating documents shown to have been found in the course of search? - HELD THAT - As in the absence of incriminating documents shown to have been found in the course of search, the Assessing Officer was precluded from making any additions/disallowances on the issue in the search assessment under Section 153A of the Act where both the assessments in question stood concluded and remained unabated at the time of search. The position of law on this point is well settled and does not require elaboration. Thus, we find merit in the plea of the assessee that limitation period in such case will have to be reckoned from the original assessment and not with reference to the subsequent post search assessment which is sought to be revised. seen with reference to the original assessments for the respective assessment years, apparently the limitation period for issuance of notice prescribed under Section 263(2) of the Act stood expired. The show-cause notice issued under Section 263(1) of the Act is thus, at the threshold, time barred and thus non est. The consequential revisional order under Section 263 for both the assessment years giving directions to the Assessing Officer for revision of the impugned assessment orders passed under Section 153A of the Act thus cannot survive. - Decided in favour of assessee.

Summary

Issues:
1. Challenge to revisional orders passed under Section 263 of the Income Tax Act, 1961 concerning Assessment Years 2012-13 & 2013-14.
2. Legitimacy of Long Term Capital Gain (LTCG) claimed as exempt under Section 10(38) of the Act.
3. Jurisdiction exercised by the revisional authority and time limitation under Section 263(2) of the Act.

Analysis:

Issue 1:
The appeals were filed against revisional orders by the Principal Commissioner of Income Tax (Central) under Section 263 of the Act, seeking to set aside assessment orders passed by the Assessing Officer concerning AYs 2012-13 & 2013-14. The assessee challenged the assumption of jurisdiction by the PCIT, arguing that the assessment orders were not erroneous or prejudicial to the revenue's interest.

Issue 2:
The PCIT alleged that LTCG claimed as exempt under Section 10(38) of the Act, arising from transactions of shares of a penny stock company, was not legitimate. The PCIT directed the AO to conduct further inquiries, which the assessee contested, stating that the LTCG was bona fide after verification of relevant details. The Tribunal found that the AO was precluded from making additions/disallowances post-search assessment when no incriminating documents were found, rendering the revisional order time-barred and non est.

Issue 3:
The additional ground raised by the assessee questioned the time limitation under Section 263(2) of the Act. The Tribunal admitted this ground for adjudication. The assessee argued that the PCIT's jurisdiction was time-barred as the assessments were concluded before the search, and the show-cause notice issued under Section 263(1) was non est in law. Referring to legal precedents, the Tribunal held that the revisional orders based on the time-barred notice were quashed.

In conclusion, the Tribunal allowed the appeals, quashing the revisional orders as the PCIT's jurisdiction was time-barred and the assessments were not erroneous or prejudicial to the revenue's interest. The Tribunal emphasized that the limitation period for issuing notices under Section 263(2) should be reckoned from the original assessments, rendering the revisional orders unsustainable.