2024 (6) TMI 269 - AT - Income Tax

Validity of assessment proceedings passed u/s 144C - period of limitation - argument of assessee is that as per section 153(4) extended period of 12 months for completion of assessment is available only where a reference under sub section (1) of section 92CA is made during the course of the assessment or re-assessment, but not in a case where there is no reference to the TPO - HELD THAT - We find force in the argument of the learned Counsel for the assessee for the simple reason that, as per section 153(2), the time limit for completion of assessment or re-assessment shall be 12 months from the end of the financial year in which notice u/s 148 was served. However, sub-section (4) of section 153 extends the said time limit by another 12 months notwithstanding anything contained in sub-section (1), (1A), (2), (3) and (3A) where a reference u/s 92CA)(1) is made during the assessment proceedings to the TPO. Except the cases of the reference to the TPO, extended time limit of 12 months for completion of assessment is not available even in a case of Non-Resident assessment, even though the said assessment proceedings is covered u/s 144C of the Act. Since the extended time limit of 12 months is not available in the case of Non-Resident as per section 153(4) of the Act, in our considered view, the Assessing Officer ought to have completed the assessment as per the provisions of section 153(2) of the Act which is one year from the end of the financial year in which notice u/s 148 was served. In the present case, if we go by date of notice issued u/s 148 of the Act i.e. 30.03.2021, the time limit for completing the assessment u/s 147 was available up to 31/03/2022 and thus, the final assessment order passed by the Assessing Officer u/s 144 r.w.s. 144C dated 12.01.2023 is clearly barred by limitation. Thus assessment order passed by the Assessing Officer u/s 144 r.w.s. 144C(13) is barred by limitation - Assessee appeal allowed.

Summary

Issues Involved:
1. Reopening of assessment u/s 147 and issuance of notice u/s 148.
2. Validity of assessment order based on time limits prescribed u/s 153(2).
3. Addition of Rs. 22,00,000/- as unexplained investment u/s 69.
4. Procedural fairness and principles of natural justice.
5. Initiation of penalty proceedings u/s 274 r.w.s. 271AAC(1).

Summary:

Issue 1: Reopening of Assessment u/s 147 and Issuance of Notice u/s 148
The assessee challenged the reopening of the assessment on multiple grounds, including the lack of proper approval and the absence of reasons recorded u/s 148(2). The assessee also contended that the reopening was based on borrowed satisfaction and without independent inquiry by the Assessing Officer (AO).

Issue 2: Validity of Assessment Order Based on Time Limits Prescribed u/s 153(2)
The assessee argued that the final assessment order dated 12.01.2023 was barred by limitation as it was passed beyond the time limit prescribed u/s 153(2). The Tribunal found merit in this argument, noting that the notice u/s 148 was issued on 30.03.2021, and the assessment should have been completed by 31.03.2022. The Tribunal quashed the reassessment proceedings, holding that the final assessment order was indeed barred by limitation.

Issue 3: Addition of Rs. 22,00,000/- as Unexplained Investment u/s 69
The AO made an addition of Rs. 22,00,000/- as unexplained investment based on an excel sheet found during a search operation u/s 132. The assessee contended that the excel sheet was not reliable evidence and that the payment was made through proper banking channels. The Tribunal did not adjudicate on this issue, as the reassessment proceedings were quashed on the ground of being time-barred.

Issue 4: Procedural Fairness and Principles of Natural Justice
The assessee argued that the AO did not provide a proper opportunity to be heard, violating principles of natural justice. The Tribunal did not specifically address this issue, as the reassessment proceedings were quashed on the ground of being time-barred.

Issue 5: Initiation of Penalty Proceedings u/s 274 r.w.s. 271AAC(1)
The assessee challenged the initiation of penalty proceedings. However, the Tribunal did not address this issue, as the reassessment proceedings were quashed on the ground of being time-barred.

Conclusion:
The Tribunal quashed the reassessment proceedings on the ground that the final assessment order was barred by limitation as per the time limits prescribed u/s 153(2). Consequently, the appeal filed by the assessee was allowed.