2025 (2) TMI 511 - AT - Income Tax

Validity of Assessment u/s 153C - limitation date for passing the assessment order - HELD THAT - The period of limitation referred to in clause ( a ) or clause ( b ) of section 153(B)(1) of the Act available to the Assessing Officer for making an order of assessment or reassessment as the case may be is less than sixty days such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. In this regard the case was put up for clarification on 08.07.2024 directing the DR to furnish a report as to whether any valuation report in pursuance to the impugned reference on 23.12.2016 was received by the AO in this case or not and the date on which it was received so as to compute the period of limitation as per the provisions of clause (iii) of the Explanation below section 153B(3) of the Act and as per proviso to this section of the period available to the AO was less than 60 days. Despite giving opportunities no such report was furnished by the DR. In absence of the same it is held that no valuation report was received in this case by the AO in pursuance of the impugned reference u/s 142A of the Act on 23.12.2016. Therefore in this case as no valuation report was received by the AO the AO was not entitled for any extension of limitation period as claimed by him. Limitation date for passing the assessment order expired on 31.12.2016 and consequently the assessment order passed by the AO u/s 153C r.w.s. 143(3) of the Act dated 28.08.2017 is barred by limitation and the same is quashed. Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment were:

1. Whether the issuance of notice under Section 153C of the Income Tax Act was valid, given the absence of incriminating material.

2. Whether the assessment order was barred by limitation due to procedural delays and the absence of a valuation report.

3. The applicability of the decision in the case of M/s. Singad Technical Education Society to the current facts.

ISSUE-WISE DETAILED ANALYSIS

1. Validity of Notice under Section 153C

- Relevant Legal Framework and Precedents: Section 153C of the Income Tax Act pertains to the assessment of income of any other person, other than the searched person, where the Assessing Officer (AO) is satisfied that any money, bullion, jewellery, or other valuable article or thing, seized or requisitioned, belongs to or relates to such other person.

- Court's Interpretation and Reasoning: The Court noted that the CIT(A) quashed the assessment order on the ground that the additions were not based on incriminating material. It emphasized that a direct correlation must exist between incriminating material and the relevant assessment years for reopening assessments under Section 153C.

- Key Evidence and Findings: The CIT(A) found no incriminating documents were mentioned in the satisfaction recorded by the AO, thus deeming the notice under Section 153C void ab initio.

- Application of Law to Facts: The Court agreed with the CIT(A) that the absence of incriminating material made the notice and subsequent assessment unsustainable.

- Treatment of Competing Arguments: The Revenue argued that the AO's satisfaction was based on a prima facie belief, which did not require absolute evidence. However, the Court upheld the CIT(A)'s view that the absence of incriminating material invalidated the notice.

- Conclusions: The Court upheld the CIT(A)'s decision to quash the assessment order due to the lack of incriminating material.

2. Limitation of Assessment Order

- Relevant Legal Framework and Precedents: Section 153B of the Income Tax Act specifies the time limits for completing assessments. The explanation below Section 153B(3) allows for the exclusion of time taken for obtaining a valuation report from the computation of the limitation period.

- Court's Interpretation and Reasoning: The Court examined whether the AO was entitled to an extension of the limitation period due to a reference made to the Valuation Officer (DVO) and whether this reference was valid.

- Key Evidence and Findings: The AO referred the property valuation to the DVO but did not receive a report. The Court noted that without a valuation report, no exclusion of time could be computed.

- Application of Law to Facts: The Court determined that since no valuation report was received, the AO was not entitled to extend the limitation period, rendering the assessment order barred by limitation.

- Treatment of Competing Arguments: The Revenue contended that the assessment was completed within the extended time limit. However, the Court found that the extension was not justified without a valuation report.

- Conclusions: The Court quashed the assessment order as it was barred by limitation, with the AO not entitled to extend the limitation period.

3. Applicability of M/s. Singad Technical Education Society Decision

- Relevant Legal Framework and Precedents: The case of M/s. Singad Technical Education Society was cited by the CIT(A) to support the quashing of the assessment order. The Revenue argued that this case was distinguishable as it pertained to a period before 01.04.2005.

- Court's Interpretation and Reasoning: The Court did not find it necessary to adjudicate on this issue as the assessment order was already quashed on other grounds.

- Conclusions: The issue was deemed academic and not addressed further.

SIGNIFICANT HOLDINGS

- The Court upheld the CIT(A)'s decision that the notice under Section 153C was void ab initio due to the absence of incriminating material.

- The Court quashed the assessment order as it was barred by limitation, emphasizing that the AO was not entitled to an extension without a valuation report.

- The Court did not address the applicability of the M/s. Singad Technical Education Society decision, as the primary issues were resolved on other grounds.

- The appeal of the Revenue was dismissed, and the cross-objection of the assessee was partly allowed.