2024 (8) TMI 1292 - AT - Income Tax

Validity of the initiation of proceedings u/s 153C - Period of limitation - addition u/s 68 - addition in respect of share application money by holding that addition was not based on any incriminating material found during the search - HELD THAT - The law as declared by the Hon ble Supreme Court in the case of Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT is binding and we can t shut our eyes to the fact that the proceeding initiated u/s 153C of the Act in this case was not in accordance with the law as laid down by the Hon ble Court in that case. After carefully examining the facts as available in the assessment order itself, we have already held that the AO had no jurisdiction to initiate proceedings u/s 153C for the A.Y. 2008-09, as it was beyond the permissible period of six years from the date of recording of satisfaction of the common AO and deemed handing over of the seized documents pertaining /belonging to the assessee. Therefore, the assessment order passed u/s 153C of the Act for the A.Y. 2008-09 is quashed due of the lack of jurisdiction of the AO to initiate the proceeding u/s 153C for this year. Since, the assessment order is quashed due to AO s lack of jurisdiction to initiate proceeding u/s 153C of the Act for the A.Y.2008-09, we do not deem it necessary to adjudicate the grounds taken by the Revenue as well as by the assessee.

Summary

Issues Involved:

1. Validity of the initiation of proceedings under Section 153C of the Income Tax Act for Assessment Year (A.Y.) 2008-09.
2. Deletion of addition of Rs. 11 Crores on account of share application money under Section 68 of the Act.
3. Deletion of disallowance of Rs. 6,00,000 on account of bogus loss from the purchase and sale of shares.
4. Jurisdiction of the Tribunal to adjudicate issues not raised by the parties.

Issue-wise Detailed Analysis:

1. Validity of the initiation of proceedings under Section 153C of the Income Tax Act for A.Y. 2008-09:

The core issue addressed was whether the proceedings under Section 153C for A.Y. 2008-09 were validly initiated. The Tribunal noted that the search under Section 132 was conducted on 18.12.2013, and a notice under Section 153C was issued on 11.01.2016. According to the Hon'ble Supreme Court in CIT vs. Jasjit Singh, the block period for proceedings under Section 153C should be computed from the date of receipt of books of accounts or documents by the AO of the non-searched person. The Tribunal found that the permissible period for initiating proceedings under Section 153C was A.Y. 2015-16 to 2010-11, making the proceedings for A.Y. 2008-09 beyond the permissible period. The Tribunal emphasized that the recording of satisfaction by the AO of the searched person is a mandatory requirement for initiating proceedings under Section 153C. Since the Revenue failed to produce the satisfaction note, it was presumed that satisfaction was recorded immediately before issuing the notice on 11.01.2016. Consequently, the Tribunal held that the initiation of proceedings for A.Y. 2008-09 was beyond jurisdiction and quashed the assessment order.

2. Deletion of addition of Rs. 11 Crores on account of share application money under Section 68 of the Act:

The Tribunal did not adjudicate on this ground as it deemed it unnecessary after quashing the assessment order on jurisdictional grounds. The CIT(A) had deleted the addition by holding that it was not based on any incriminating material found during the search.

3. Deletion of disallowance of Rs. 6,00,000 on account of bogus loss from the purchase and sale of shares:

Similar to the second issue, the Tribunal did not find it necessary to adjudicate this ground after quashing the assessment order. The CIT(A) had deleted the disallowance, treating the loss as genuine.

4. Jurisdiction of the Tribunal to adjudicate issues not raised by the parties:

The Tribunal addressed the contention that it could not adjudicate an issue not raised by the parties. It referred to Section 254(1) of the Act and Rule 11 of the ITAT Rules, which confer wide jurisdiction on the Tribunal to pass orders as it thinks fit. The Tribunal cited various judicial precedents, including the Hon'ble Supreme Court's decision in National Thermal Power Co. Ltd. vs. CIT, which held that the Tribunal is empowered to consider questions of law arising from the facts on record, even if not raised by the parties. The Tribunal concluded that it had the jurisdiction to examine the question of law regarding the AO's jurisdiction to initiate proceedings under Section 153C, as it goes to the root of the matter.

Conclusion:

The Tribunal quashed the assessment order for A.Y. 2008-09 due to the lack of jurisdiction of the AO to initiate proceedings under Section 153C for this year, as it was beyond the permissible period. Consequently, the appeal preferred by the Revenue was dismissed. The Tribunal did not find it necessary to adjudicate the grounds taken by the Revenue and the assessee.