2017 (11) TMI 1372 - AT - Income Tax

Initiation of proceedings u/s 153C - period of six assessment year as reckoned - Held that - In the case in hand, it would be the date of recording satisfaction under section 153 of the Act i.e. 2nd November, 2009, and therefore, six assessment years which would eligible for assessment/re-assessment would commence from assessment year 2004-05 to assessment year 2009-10. The assessment/re-assessment in respect of assessment year 2003-04 would, thus, be beyond the period of six assessment year as reckoned with reference to the date of satisfaction recorded by the Assessing Officer of the searched person. We, therefore, hold that the learned CIT(A) was quite justified in considering the assessment for assessment year 2003-04 as outside the scope of section 153C of the Act, being barred by limitation and without jurisdiction. Accordingly, the impugned assessment order is liable to be quashed. We decide accordingly.

Issues Involved:
1. Validity of proceedings initiated under Section 153C of the Income Tax Act, 1961.
2. Interpretation of the provisions of Section 153C read with Section 153A of the Income Tax Act, 1961.
3. Bar of limitation for initiation of proceedings under Section 153C.
4. Requirement of incriminating material for additions/disallowances under Section 153C.
5. Jurisdiction of the Assessing Officer in making assessments under Section 153C.

Detailed Analysis:

1. Validity of Proceedings Initiated Under Section 153C:
The Revenue contended that the proceedings initiated under Section 153C were valid and not barred by limitation. The CIT(A) had erred in holding that the proceedings were time-barred. The Revenue argued that the date of search should be considered as the date of initiation of proceedings, not the date of handing over of documents. The assessee, however, maintained that the notice issued under Section 153C and the assessment order passed were illegal, bad in law, and without jurisdiction as the documents found during the search did not belong to the assessee.

2. Interpretation of Provisions of Section 153C Read with Section 153A:
The Revenue argued that Section 153C and Section 153A(1)(b) should be read together, and the assessment years falling within the purview of Section 153C would be six assessment years preceding the date of search. The Revenue relied on various judicial precedents to support their interpretation. The assessee contended that the CIT(A) correctly interpreted the provisions, and the initiation of proceedings for the year under consideration was time-barred.

3. Bar of Limitation for Initiation of Proceedings Under Section 153C:
The CIT(A) had allowed the additional ground of the assessee, holding that the initiation of proceedings for assessment year 2003-04 was barred by limitation. The Revenue, however, argued that the date of search should be considered for computing the limitation period, and since the Assessing Officer of the searched party and the assessee was the same, there was no need for physical handing over of documents. The ITAT upheld the CIT(A)'s decision, stating that the date of recording satisfaction (2nd November 2009) should be considered as the date of handing over of documents, and thus, the assessment for assessment year 2003-04 was beyond the period of six assessment years.

4. Requirement of Incriminating Material for Additions/Disallowances Under Section 153C:
The Revenue contended that the assessment under Section 153A/153C need not necessarily be based on incriminating material. They cited various judicial precedents to support their claim that the Assessing Officer is empowered to assess or reassess the total income, including undisclosed income, even if no incriminating material is found. The assessee argued that no incriminating material was found during the search, and thus, the additions/disallowances made were illegal and without jurisdiction. The ITAT did not specifically address this issue as it quashed the assessment on the ground of limitation.

5. Jurisdiction of the Assessing Officer in Making Assessments Under Section 153C:
The Revenue argued that the Assessing Officer had jurisdiction to make assessments under Section 153C based on the satisfaction recorded. The assessee contended that the documents found during the search did not belong to them, and thus, the Assessing Officer did not have jurisdiction. The ITAT upheld the CIT(A)'s decision, quashing the assessment for assessment year 2003-04 as it was beyond the period of six assessment years from the date of recording satisfaction.

Conclusion:
The ITAT dismissed the appeal of the Revenue and upheld the CIT(A)'s decision that the initiation of proceedings under Section 153C for assessment year 2003-04 was barred by limitation. The ITAT also dismissed the cross-objection filed by the assessee as infructuous. The judgment emphasized that the date of recording satisfaction should be considered for computing the limitation period for proceedings under Section 153C.

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