2024 (11) TMI 1026 - AT - Income Tax

Scope of assessment framed u/s 153C - HELD THAT - We noticed that the satisfaction recorded by the Assessing Officer of the assessee was only on 18.01.2021, therefore, the assessment proceedings initiated u/s 153C in AYs 2011-12, 2012-13 2013-14 are outside the jurisdiction. Accordingly, the assessment of these assessment years are set aside as void ab initio. Addition of rental income based on valuation report for AYs 2014-15 to 2016-17 - We observed that a document was found during the search conducted in the case of Harvansh Chawla and valuation report was dated 08.04.2010 seized from the premises of Harvansh Chawla. Since the valuation report was 09.04.2010, the material found in the search pertains to AY 2011-12. Since the valuation report was dated 08.04.2010, we are in agreement with the submission of the ld. AR that it was only a valuation per se and there is no record which shows that the above said property was rented out as per the valuation report found during the search. It is another matter whether the valuation report can be termed as incriminating material without corroborating with the assessee s books of account or return of income. It is settled law that incriminating material found during the course of search is year specific was that addition could be made in the case of unabated assessment. Since the material found/valuation report is dated 08.04.2010 it cannot be considered as an incriminating material. Even the Assessing Officer has not verified and recorded a satisfaction that this valuation report was actual or the same was acted upon by the assessee. Merely because certain documents were found in the premises of third party, the same cannot be utilised to make the addition as incriminating material without there being corroboratory evidence to show that such income was not offered to tax . In this case, we observed that merely based on the availability of valuation report, the Assessing Officer proceeded to make addition without properly giving explanation how it can be treated as incriminating material in the case of the assessee, as held in the case of CIT vs. Sinhgad Technical Education Society 2017 (8) TMI 1298 - SUPREME COURT . Thus, we are inclined to delete the addition made by the AO and sustained by the ld. CIT (A) and the appeal for AY 2014-15.

Summary

Issues Involved:

1. Validity of assessments under Section 153C for AYs 2011-12 to 2013-14.
2. Validity of addition of rental income based on valuation report for AYs 2014-15 to 2016-17.
3. Jurisdictional and procedural propriety concerning the recording of satisfaction and issuance of notices.

Issue-wise Detailed Analysis:

1. Validity of Assessments under Section 153C for AYs 2011-12 to 2013-14:

The primary issue was whether the assessments for AYs 2011-12 to 2013-14 were valid under Section 153C of the Income-tax Act. The assessee contended that the assessments were bad in law, without jurisdiction, and barred by limitation because the satisfaction for initiating proceedings under Section 153C was recorded on 18.01.2021. According to the assessee, assessments could only be validly framed for AYs 2014-15 to 2019-20. The Revenue acknowledged that the satisfaction was recorded on 18.01.2021 but argued that the satisfaction by the AO of the searched person was recorded on 15.05.2019. The Tribunal concluded that since the satisfaction was recorded on 18.01.2021, the assessments for AYs 2011-12 to 2013-14 were outside the jurisdiction and thus void ab initio. Consequently, the appeals for these years were allowed, and the assessments were set aside.

2. Validity of Addition of Rental Income Based on Valuation Report for AYs 2014-15 to 2016-17:

For AYs 2014-15 to 2016-17, the issue revolved around the addition of rental income based on a valuation report dated 08.04.2010. The assessee argued that the valuation report did not constitute incriminating material as it was merely an estimation and not corroborated by any material evidence of actual rental income. The Tribunal observed that the valuation report pertained to AY 2011-12 and was not year-specific for the years under assessment. It held that the valuation report alone, without corroborative evidence, could not be treated as incriminating material. The Tribunal relied on precedents, including the Supreme Court's decision in CIT vs. Sinhgad Technical Education Society, which emphasized that incriminating material must be year-specific. Consequently, the Tribunal deleted the additions made for AYs 2014-15 to 2016-17, allowing the appeals for these years.

3. Jurisdictional and Procedural Propriety Concerning the Recording of Satisfaction and Issuance of Notices:

The procedural aspect involved the timing and propriety of recording satisfaction for initiating proceedings under Section 153C. The Tribunal noted that the satisfaction was recorded by the AO of the assessee on 18.01.2021, which determined the relevant years for reopening assessments. The Tribunal emphasized that the procedural requirements under Section 153C must be strictly adhered to, and any deviation could render the proceedings void. The Tribunal's decision underscores the importance of jurisdictional facts, such as the timing of satisfaction recording, in determining the validity of assessments under Section 153C.

Conclusion:

The Tribunal allowed all six appeals filed by the assessee, setting aside the assessments for AYs 2011-12 to 2013-14 as void ab initio and deleting the additions for AYs 2014-15 to 2016-17 due to the lack of incriminating material. The decision highlights the necessity for strict adherence to procedural requirements and the need for incriminating material to be specific to the assessment years in question.