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2024 (3) TMI 1260 - HC - Income TaxAssessment u/s 153C - Proceeding u/s 148 was initiated against the petitioner and was pending - Abatement of ongoing proceedings under Section 148 due to the subsequent notice under Section 153C - Exclusion of time between the initiation of the proceedings u/s 153C till the date of receipt of the certified copy of this order - satisfaction note issued by the AO both in the capacity of the AO of the searched person and in the capacity of the AO of the other person i.e., the petitioner herein HELD THAT - The provisions of Section 153A and 153C are intended and directed against the searched person and the other person like the petitioner respectively. As far as Section 153A is concerned, in case any proceeding for assessment or reassessment is pending on the date of issuance of a notice u/s 153C such proceedings will abate and such assessment has to be completed under Section 153A read with limitation prescribed u/s 153B. The Hon ble Supreme Court in the case of Abhisar Buildwell (P.) Ltd. 2023 (4) TMI 1056 - SUPREME COURT held that in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition u/s 132A of the IT Act, 1961. The completed/unabated assessments can be re-opened by the AO in exercise of powers u/s 147/148 of the IT Act, 1961 subject to fulfilment of the conditions as envisaged/mentioned u/s 147/148 and those powers are saved. Therefore, the proceedings initiated u/s 148 on 30.03.2021 could abate in view of the notice issued u/s 153C on 20.03.2022, if there incriminating material for relevant Assessment Year. Section 153A of the IT Act, 1961 was introduced along with Section 153B and 153C of the IT Act, 1961 and deleted the special procedure for assessment of search cases under Chapter XIV-B of the IT Act, 1961. As far as the other person like the petitioner who was issued a notice under Section 153C of the IT Act, 1961 is concerned, there is no specific provision that would abate pending proceedings. However, as per Sub-clause (2) to Section 153C of the IT Act, 1961, the Assessing Officer has to issue notice and reassess the total income in the manner proceeded in Section 153A of the IT Act, 1961. As per Section 153(C)(1) of the IT Act, 1961, wherever the Assessing Officer of the searched person and the other person (like the petitioner herein) is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of the other person like the petitioner, the Assessing Officer can proceed to issue notices for six assessment years immediately preceding the assessment year relating to the previous year in which the search was conducted or requisition was made for the relevant Assessment Year or years referred to Section 153(A) of IT Act, 1961. As per proviso to section 153C(1) of the IT Act, 1961 limitation is from the date of receiving the books of accounts or documents or assets seized or requisitioned to the Assessing Officer having the jurisdiction over the other person viz., the petitioner. If the limitation prescribed as per the main provision is construed, the Assessing Officer can issue a notice for the Assessment Year from 10.11.2020, herein the date of search at the premises of the searched person . If the proviso is applied, six years is to be construed from the date of receipt of Books of Account, documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over the other person like the petitioner herein, in which case the proceeding under Section 153(C) of the IT Act, 1962 can be initiated only up to the assessment year 2015-2016. Impliedly, all the pending proceedings for the years for which notices under Section 153C of the IT Act, 1961 can be issued will abate. Therefore, the proceedings initiated against the Petitioner u/s 148 on 30.01.2021 would have abated. The date of Satisfaction Note and the Date of Handing over of the document would coincide as the AO of both searched person and other person is one and the same. When the notice was issued on 20.03.2022 u/s 153C the date of satisfaction note of searched person and the other person petitioner herein would be the same date i.e., 19.03.2022. The six preceding AY from that date would be from 2016-2017 to 2021-2022. The Impugned Order passed by the AO u/s 153C r.w.s. 143(3) of the IT Act, 1961 is liable to be quashed. However, the proceedings pending under Section 148 of the IT Act, 1961 which stood abated on account of the notice issued under Section 153Cof the IT Act, 1961 dated 20.03.2022 cannot be said to have abated. It will stand revived. Incorrect trajectory of the proceedings u/s 153C on 20.03.2022 which has culminated in the Impugned Order dated 31.03.2023 obviously could not abate the proceeding which was initiated u/s 148. Therefore, while quashing this impugned order passed u/s 153C read with Section 143(3) dated 31.03.2023, the reassessment proceedings initiated under Section 148 of the IT Act, 1961 has to be completed. The Impugned Order stands quashed. However, there shall be a direction to the respondent to complete the reassessment proceeding initiated under Section 148 strictly in accordance within the timelines provided under Section 153 (2) of the IT Act, 1961 in terms of the decision of Abhisar Buildwell (P.) Ltd, (SUPRA excluding the time between the initiation of the proceedings under Section 153C of the IT Act, 1961 on 20.03.20224 till the date of receipt of the certified copy of this order. The time between the initiation of the proceedings under Section 153C of the IT Act, 1961 shall stand excluded for completing the Assessment under Section 147 read with Section 143(3) of the IT Act, 1961.
Issues Involved:
1. Legality of the Impugned Order under Section 143(3) read with 153C of the Income Tax Act, 1961. 2. Validity of proceedings initiated under Section 148 of the Income Tax Act, 1961. 3. Assessment of "undisclosed income" based on evidence from search proceedings. Summary: 1. Legality of the Impugned Order under Section 143(3) read with 153C of the Income Tax Act, 1961: The petitioner challenged the Impugned Order dated 31.03.2023, which added a sum of Rs. 299,21,80,940/- as "undisclosed income" for the Assessment Year 2015-2016. The court found that the information gathered by the Department pertained to financial years 2015-2016 to 2020-2021, not the financial year 2014-2015 (Assessment Year 2015-2016). There were no documents showing transactions between the petitioner and the "searched person" during the relevant period. Thus, the invocation of Section 153C for the Assessment Year 2015-2016 was not justified. 2. Validity of proceedings initiated under Section 148 of the Income Tax Act, 1961: The court noted that the proceedings initiated under Section 148 on 30.03.2021 could abate due to the notice issued under Section 153C on 20.03.2022, provided there was incriminating material for the relevant Assessment Year. The court held that the proceedings under Section 148, which stood abated due to the incorrect trajectory of Section 153C proceedings, would revive. The reassessment proceedings under Section 148 were directed to be completed in accordance with the law. 3. Assessment of "undisclosed income" based on evidence from search proceedings: The search proceedings against M/s. Mohanlal Jewellers (P) Ltd led to the recording of statements and seizure of documents indicating unaccounted transactions. However, these documents and statements did not pertain to the financial year 2014-2015. The court emphasized that for completed/unabated assessments, no addition could be made without incriminating material found during the search. The reassessment proceedings under Section 148 were to be completed as per the guidelines provided in Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd. Conclusion: The Impugned Order dated 31.03.2023 was quashed. The reassessment proceedings initiated under Section 148 were directed to be completed within the timelines provided under Section 153(2) of the Income Tax Act, 1961, excluding the time between the initiation of proceedings under Section 153C and the receipt of the certified copy of this order. The writ petition was disposed of with these observations and directions.
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