2022 (8) TMI 84 - AT - Income Tax

Validity of assessment proceedings initiated u/s 153C - Assessment without jurisdiction and barred by limitation - applicability of amendment to sections 153A and 153C - HELD THAT - As amended provisions of section 153C of the Act would apply where search and seizure is made after the amendment. Considered in the aforesaid perspective, the apprehension of the Revenue that if the amended provisions are not applied with reference to the date of recording of satisfaction there will be different sets of assessment years for the searched person and the person other than the searched person, in our view, is completely misplaced. This is so, because, once the amended provisions of sections 153A and 153C are applicable in respect of search and seizure operation initiated under section 132 or requisition made u/s 132A of the Act post 01.04.2017, the provisions of sections 153A and 153C would be applicable to the same set of assessment years, both in case of the searched person and the person other than the searched person. In case of other person u/s 153C of the Act, the starting point for computation of the block period would be the date from on which based on the seized documents, notice is issued to the other person - As further held that the amendment made in section 153C by Finance Act 2017 w.e.f. 1st April 2017 which states that block period for the searched person as well as the other person would be same six AYs immediately preceding the year of search is only prospective. It makes the things clear that the search that took place in this case is prior to amendment unaffected by the amendment made by way of Finance Act 2017. As respectfully following the decision ARINA AIRLINES INTERNATIONAL LIMITED VERSUS ACIT, CIRCLE-05, NEW DELHI 2022 (2) TMI 1270 - ITAT DELHI we hold that the impugned assessment order passed under section 153C of the Act, is wholly without jurisdiction, hence, invalid. Accordingly, we quash the same. Consequently, the order of learned Commissioner (Appeals) is set aside. - Decided in favour of assessee.

Summary

Issues Involved:
1. Validity of assessment proceedings initiated under Section 153C of the Income Tax Act.
2. Jurisdiction and limitation of the assessment proceedings.
3. Applicability of amendments to Sections 153A and 153C of the Income Tax Act.

Detailed Analysis:

1. Validity of Assessment Proceedings Initiated Under Section 153C:

The primary contention of the assessee was that the assessment proceedings initiated under Section 153C were invalid, without jurisdiction, and barred by limitation. The assessee argued that the issuance of notice under Section 153C and the recording of satisfaction were contrary to the provisions of law. The assessee relied on the ITAT Delhi 'D' Bench's decisions in the cases of Karina Airlines International Ltd. vs. ACIT, asserting that the search conducted on 07.04.2016 meant the assessment year of search would be AY 2020-21, making the block of preceding six assessment years AYs 2014-15 to 2019-20. Consequently, the initiation of assessment proceedings for AY 2012-13 was argued to be invalid.

2. Jurisdiction and Limitation of the Assessment Proceedings:

The Revenue countered by supporting the assessment order and the first appellate order, arguing that post the amendment effective from 01.04.2017, the year of search and the block of six assessment years would be the same for both the searched person and the other person. The assessee's counsel rebutted, emphasizing that the amendment to Sections 153A and 153C applied only to searches initiated post-01.04.2017. Given that the search in this case occurred on 07.04.2016, the amended provisions were inapplicable.

3. Applicability of Amendments to Sections 153A and 153C:

The Tribunal examined the applicability of the amendments to Sections 153A and 153C. It was noted that the amendments, as clarified by the CBDT Circular No. 2/2018, were prospective and applicable from 01.04.2017. The Tribunal referred to several judicial precedents, including the Delhi High Court's decision in PCIT Vs. Sarwar Agency P. Ltd., which held that the amendments to Sections 153A and 153C apply prospectively from AY 2017-18. The Tribunal concluded that since the search in the present case was conducted on 07.04.2016, the amendments did not apply.

Conclusion:

The Tribunal, relying on the ITAT Delhi 'D' Bench's orders in the case of Karina Airlines International Limited and other judicial precedents, concluded that the assessment order dated 31.12.2019 for AY 2012-13 was without jurisdiction and invalid. Consequently, the Tribunal quashed the assessment order along with all consequent proceedings and orders, including the order of the CIT(A). The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, rendering the grounds raised by the Revenue academic.

Final Order:

The appeal of the assessee was allowed, and the appeal filed by the Revenue was dismissed. The Tribunal pronounced the order in the open court on 29.07.2022.