2024 (10) TMI 253 - AT - Income Tax

Assessment made u/s 153C - period of limitation - propriety and legality of assessment for the A.Y. 2011-12 in question having regard to the embargo of limitation placed u/s 153C - HELD THAT - It is the case of the assessee that the limitation period of 6 years has to be counted with reference to the date of requisition of books and other documents etc. seized from the custody of searched person. The date of search is not relevant for the purposes of limitation in Section 153C. What is relevant is the date of receipt of seized assets, documents by the AO of the non-searched person i.e. assessee in the instant case. When the limitation is counted from the date of requisition of books, documents by the AO falling in A.Y. 2018-19, the assessment, the A.Y. 2011-12 in question is clearly found to be outside the period of limitation assigned for invocation of section 153C of the Act. Similar view has been taken in Marconi Infratech 2024 (7) TMI 129 - ITAT DELHI in identical set of facts. We thus find potency in the plea of the assessee for holding the assessment for A.Y. 2011-12 in question u/s 153 to be barred by limitation. The assessment order passed under Section 153C of the Act being barred by limitation and thus a non-est order and nullity in the eyes of law. The assessment order giving rise to present proceedings thus, is required to be quashed being barred by limitation. Validity of sanction accorded - The satisfaction note recorded is generic and encompasses several years from A.Y. 2011-12 up to A.Y. 2017-18 in a composite manner. No seized material has been identified qua each assessment year and thus satisfaction drawn by the AO without reference to seized material pertaining to A.Y. 2011-12, is illusory and unsustainable in law. A reference was made to the judgment rendered in the case of Dev Technofab Ltd 2024 (5) TMI 1468 - DELHI HIGH COURT As evident from the satisfaction note that the alleged undisclosed income is not identifiable with any assessment year. In the absence of any particular of incriminating material available, such obscure and vague satisfaction note does not entitle the AO to assume jurisdiction u/s 153C of the Act. Neither the income assessed u/s 153C of the Act appears to relate to any incriminating material nor the so called incriminating material has been shown to be attributable to A.Y. 2011-12.

Summary

Issues:

1. Jurisdictional aspects and limitation period under Section 153C of the Income Tax Act, 1961 for Assessment Year 2011-12.
2. Legality of additions made by the Assessing Officer under Section 153C based on estimations and presumptions without nexus to incriminating material.
3. Validity of the satisfaction note recorded by the Assessing Officer for assuming jurisdiction under Section 153C.

Issue 1: Jurisdictional aspects and limitation period under Section 153C

The appeal filed by the Revenue and cross objection by the assessee pertained to the first appellate order concerning Assessment Year 2011-12 under Section 153A(1)(b) of the Income Tax Act. The cross objection raised by the assessee challenged the assessment for the said year as being time-barred under Section 153C. The contention was that the satisfaction note was drawn outside the limitation period of 6 years preceding the relevant Assessment Year, making the assessment for 2011-12 barred by limitation. The argument was supported by citing the amendment in Section 153C effective from A.Y. 2018-19 and the absence of specific undisclosed income identification for the year in question. The Tribunal found merit in the assessee's plea, holding the assessment for A.Y. 2011-12 under Section 153C as time-barred and thus null and void in the eyes of the law.

Issue 2: Legality of additions made by the Assessing Officer

The additions made by the Assessing Officer on merits were challenged by the assessee as being unsustainable due to lack of nexus with incriminating material. The additions were based on estimations, valuation reports, and disallowances without a direct connection to any incriminating evidence. The Tribunal noted that the additions were not supported by incriminating material as required under Section 153C. The Tribunal found the additions to be in the realm of regular assessment and lacking a basis in seized assets, leading to the dismissal of the Revenue's appeal.

Issue 3: Validity of the satisfaction note under Section 153C

The satisfaction note recorded by the Assessing Officer for invoking jurisdiction under Section 153C was scrutinized for its specificity and relevance to the undisclosed income for A.Y. 2011-12. The note was found to be vague and non-descript, failing to identify the undisclosed income for the specific assessment year in question. The Tribunal emphasized that additions under Section 153C can only be made concerning the incriminating material related to a particular assessment year. The lack of clear identification of incriminating material for A.Y. 2011-12 rendered the satisfaction note illusory and unsustainable in law. The Tribunal referred to case law to support the inadequacy of the satisfaction note, ultimately dismissing the Revenue's appeal.

In conclusion, the Tribunal allowed the assessee's cross objection, holding the assessment for A.Y. 2011-12 under Section 153C as time-barred. Additionally, the Tribunal dismissed the Revenue's appeal due to the lack of nexus between the additions made and incriminating material, as well as the inadequacy of the satisfaction note in specifying undisclosed income for the relevant assessment year.