2024 (3) TMI 955 - HC - Income Tax

Validity of assessment u/s 153C - Period of limitation - Assessment of income of any other person - recording of satisfaction about seven years after search - HELD THAT - The question as to whether these proceedings are barred by limitation should be addressed with reference to the judgment in Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT Effectively, the Supreme Court held that the person, other than the searched person, would be gravely prejudiced if the papers were to be handed over to the jurisdictional assessing officer of such person after about four years. In the case at hand, the search in the premises of Mr. Thirumalaivasan was carried out on 11.10.2012, whereas the satisfaction note was recorded only on 27.03.2019. It is also significant to notice that the assessing officer of the searched person and the petitioner were the same and the recording of satisfaction about seven years after search is unjustified. If the limitation period of six years is reckoned from the date on which satisfaction was recorded, which falls within financial year 2018-2019 or assessment year 2019-2020, the respondent could only have reached back up to assessment year 2013-2014. Therefore, the proceedings in respect of both these assessment years are undoubtedly barred by limitation. It should also be noticed that the periods specified in Section 153B for completion of assessment had also lapsed. The impugned assessment orders are quashed as being barred by limitation. Decided in favour of assessee.

Summary

Issues involved:
Challenge to assessment orders for assessment years 2011-2012 and 2012-2013 based on limitation under Section 153C of the Income Tax Act, 1961.

Assessment Year 2011-2012:
The petitioner, a partnership firm engaged in real estate, filed returns of income for the relevant assessment year. A search at a partner's premises led to satisfaction under Section 153C recorded in 2019, followed by assessment orders in 2019. Petitioner argues limitation based on Supreme Court judgment in Commissioner of Income Tax 14 v. Jasjit Singh, emphasizing the calculation of the six-year period from satisfaction date.

Assessment Year 2012-2013:
Similar to the previous year, the petitioner challenges the assessment order on the grounds of limitation under Section 153C. The respondent relies on the judgment in Commissioner of Income Tax III v. Calcutta Knitwears to argue that satisfaction note under Section 153BD can be prepared at various stages, including before assessment proceedings against the searched person are completed.

Interpretation of Section 153C(1) and Section 153B(1):
The proceedings revolve around the interpretation of Section 153C(1) and Section 153B(1) of the Income Tax Act. The Supreme Court's analysis in Jasjit Singh highlights the importance of calculating the limitation period from the date of satisfaction to prevent prejudice to the third party involved. In this case, the delay in recording satisfaction after the search in 2012 renders the assessment proceedings for both years barred by limitation.

Conclusion:
The High Court quashes the assessment orders for both assessment years as they are deemed barred by limitation. The delay in recording satisfaction and the lapse of the specified periods for assessment completion support the decision. The petitioner's petitions are allowed without costs, and connected miscellaneous petitions are closed.