2024 (12) TMI 1478 - AT - Income Tax

Validity of assessment u/s 153C as barred by limitation - HELD THAT - We are of the considered opinion, that the AO had no jurisdiction to initiate proceeding u/s 153C of the Act for the A.Y. 2011-12. Search was conducted before the amendment and also the satisfaction note for the assessee, being a non-searched party in AY 2018-19. Accordingly, the order of the AO passed u/s 153C r.w.s. 143(3) of the Act was beyond the permissible period of six years. Therefore, the assessment order passed u/s 153C/143(3) of the Act for the AY 2011-12 is quashed.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

Whether the assessment order for the Assessment Year (AY) 2011-12, passed under Section 153C read with Section 143(3) of the Income-tax Act, 1961, is time-barred and thus void ab initio.
Whether the assessment order was validly passed without a satisfaction note as mandated by law.
Whether the addition of Rs. 77,50,000 under Section 69A of the Act as on-money was justified given the evidentiary value of documents found in a third-party premises.
Whether the principles of natural justice were violated by not providing the documents and statements relied upon by the Department and denying an opportunity for cross-examination.
Whether the addition under Section 69A was appropriate considering the assessee's 50% ownership of the property.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Time-barred Assessment

Legal Framework and Precedents: The assessment under Section 153C must be initiated within a specific timeframe, as interpreted by the Supreme Court in the case of Jasjit Singh. The First Proviso to Section 153C determines the commencement date for the computation of the block period.
Court's Interpretation and Reasoning: The court emphasized that the limitation period should be calculated from the date the jurisdictional Assessing Officer (AO) receives the documents. For the AY 2011-12, the period was beyond the permissible six years but within ten years, making the assessment invalid as per the Supreme Court's ruling.
Key Evidence and Findings: The AO received pertinent documents on 31.03.2018, and the notice under Section 153C was issued on 04.04.2018. The assessment was completed on 28.12.2018, which was beyond the permissible period.
Application of Law to Facts: The court applied the Supreme Court's interpretation, determining that the AY 2011-12 did not fall within the permissible block period.
Treatment of Competing Arguments: The Revenue argued that the assessment was within the timeframe, but the court dismissed this, citing the Supreme Court's decision.
Conclusions: The assessment order for AY 2011-12 was quashed as it was time-barred.

Issue 2: Satisfaction Note

Legal Framework and Precedents: A satisfaction note is required to initiate proceedings under Section 153C.
Court's Interpretation and Reasoning: The court did not find it necessary to adjudicate this issue due to the quashing of the assessment order on jurisdictional grounds.
Conclusions: No further analysis was conducted on this issue.

Issue 3: Addition of Rs. 77,50,000 under Section 69A

Legal Framework and Precedents: Section 69A addresses unexplained money, requiring credible evidence for additions.
Court's Interpretation and Reasoning: The court did not address this issue separately due to the quashing of the assessment order.
Conclusions: The issue was rendered moot by the quashing of the assessment order.

Issue 4: Principles of Natural Justice

Legal Framework and Precedents: Natural justice requires that the assessee be given access to documents and an opportunity for cross-examination.
Court's Interpretation and Reasoning: This issue was not adjudicated due to the primary issue of jurisdiction.
Conclusions: The issue was not addressed further.

Issue 5: Ownership of Property

Legal Framework and Precedents: Ownership percentage can affect the applicability of Section 69A.
Court's Interpretation and Reasoning: This issue was not considered due to the quashing of the assessment order.
Conclusions: The issue was not further analyzed.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes: "In view of the Supreme Court decision(supra) assessment completed for the AY 2011-12 u/s 153C read with section 143(3) on 28/12/2018 is invalid and hence this assessment is liable to be cancelled."
Core Principles Established: The limitation period for assessments under Section 153C must be calculated from the date of receipt of documents by the jurisdictional AO, as per the First Proviso to Section 153C.
Final Determinations on Each Issue: The assessment order for AY 2011-12 was quashed as time-barred, rendering other issues moot.

The judgment underscores the importance of adhering to statutory timelines and procedural requirements in tax assessments, particularly under Section 153C, and aligns with the Supreme Court's interpretation in Jasjit Singh.

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