2015 (8) TMI 758 - AT - Income Tax

Validity of assessment made u/s 153C - Held that - Assessments u/s 153A and 153C have been framed in pursuance to search made. Thereafter no search relating to the assessees was made, only prohibitory orders have been revoked. We also note that in the authorization letter names and address of the assessees in question have not been mentioned but in Panchnama drawn in pursuance to the execution of the said authorization letter names of all these asses sees have been mentioned. Panchnama also shows that search at residential premises nothing related to the assessee s in question was seized. We thus find substance in the contention of the Ld. AR fully concur with him that assessments in question are barred by time limit/and as such are being quashed as invalid. We uphold the contention of assessee and allow this ground of assessee.

Issues Involved:
1. Validity of assessment under Section 153C.
2. Addition under Section 68 regarding share application money.
3. Disallowance under Section 14A read with Rule 8D of IT Rules.
4. Limitation period for completing assessment under Section 153B.

Detailed Analysis:

1. Validity of Assessment under Section 153C:
The assessee challenged the validity of the assessment under Section 153C on the grounds that there was no incriminating material found during the search to initiate proceedings under this section. The Tribunal admitted this additional ground, citing that the issue of limitation is a question of law affecting the very jurisdiction of the AO and can be raised at any point during the pendency of the appeal. The Tribunal referenced the case of ACIT Vs J. H. Finvest Pvt. Ltd., where it was established that the Tribunal has the discretion to allow new grounds if they are legal in nature and go to the root of the matter.

2. Addition under Section 68 Regarding Share Application Money:
The Revenue appealed against the deletion of an addition of Rs. 2.5 crores made under Section 68 by the AO concerning share application money introduced during the year. The CIT(A) had deleted this addition, but the Tribunal did not adjudicate this issue separately as the primary ground of limitation was decided in favor of the assessee, rendering other issues academic in nature.

3. Disallowance under Section 14A Read with Rule 8D of IT Rules:
The assessee's cross-objection included a challenge against the disallowance of Rs. 2,31,295 under Section 14A read with Rule 8D. However, similar to the Section 68 issue, this was not separately adjudicated due to the primary decision on the limitation issue.

4. Limitation Period for Completing Assessment under Section 153B:
The Tribunal found that the assessment under Section 153C was barred by limitation. It was argued that the assessments should have been completed by 31/12/2008, but were instead completed on 24/12/2009. The Tribunal referenced multiple cases, including CIT Vs. Sandhya P Naik and CIT Vs. Deepak Agarwal, establishing that the limitation period for completing assessments in search cases is critical and must be adhered to strictly. The Tribunal concluded that the assessments were made beyond the prescribed time limit, thus quashing the assessments as invalid.

Conclusion:
The Tribunal dismissed the Revenue's appeal and allowed the assessee's cross-objection on the ground of limitation. The assessments made under Section 153C were deemed invalid due to being completed beyond the statutory time limit, and as such, other issues raised became academic and were not separately adjudicated. The order was pronounced in the open court on 14th August 2015.

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