2017 (10) TMI 379 - AT - Income Tax

ITAT annuls assessment under section 158BD for delay and naming issues. Assessee's appeal allowed, revenue's dismissed.

The ITAT annulled the assessment made under section 158BD due to an unreasonable delay in issuing the notice and improper naming of the assessee. The ... Validity of issue of notice u/s 158 BD - issue of notice after 9 years and 9 months of completion of assessments of searched party - Held that:- In this case the Notice under section 158 BD was issued after 9 years and 9 months of completion of Block assessment in the case of searched person. Even if the time limit is considered after the rendering the decision of the Hon’ble ITAT the AO took more than 1 year four months from the date of the order of the tribunal. However the time limit has to be considered not from the date of the orders passed by the ITAT, but time limit starts from block assessment orders passed by the AO in the case of searched person. Hence the facts of the assessee’s case is squarely covered by the order of the Delhi High Court [2015 (1) TMI 705 - DELHI HIGH COURT] as well as the decision of Hon’ble High court of Punjab and Haryana cited (2010 (7) TMI 664 - Punjab and Haryana High Court ). The ld. DR did not bring any other order/ judgement to controvert the decision cited. Therefore we hold that notice issued u/s 158BD is beyond the time limit prescribed under the act and the same cannot be valid. Accordingly we quash the notice issued u/s 158BD of the Act and annul the assessment made u/s 158BD, and allow the appeal of the assessee. Issues Involved:1. Validity of notice issued under section 158BD of the Income Tax Act.2. Assessment in the name of 'Saint Mary’s College of Education' instead of 'Saint Mary’s Educational Society.'Detailed Analysis:Issue 1: Validity of notice issued under section 158BD of the Income Tax ActThe primary issue revolves around the validity of the notice issued under section 158BD of the Income Tax Act. The search and seizure operation was conducted on 29.01.1999 in the premises of 'Saint Mary’s College of Education' and the residential premises of society members. The search revealed undisclosed income, but the assessment was initially made in the name of 'Saint Mary’s College of Education,' which was later annulled by the ITAT.The CIT(A) upheld the notice observing that there is no mandatory time limit fixed for issuing a notice under section 158BD. The CIT(A) stated, 'There is no time limit prescribed for any proceedings being initiated under the provisions of section 158BD of the Act.' The CIT(A) also noted that the notice under section 158BD was issued after the ITAT annulled the initial assessment, which provided sufficient cause for the AO to proceed under section 158BD.However, the ITAT found that the notice under section 158BD was issued after an unreasonable delay of 11 years and 9 months from the date of the search, and more than 1 year and 4 months after the ITAT's order. The ITAT referred to the decision of the Hon’ble Punjab & Haryana High Court, which held that notice under section 158BD must be initiated before the completion of the block assessment. The ITAT concluded that the notice issued after such a long delay could not be considered contemporaneous to the assessment proceedings, making it invalid. The ITAT stated, 'We hold that notice issued u/s 158BD is beyond the time limit prescribed under the act and the same cannot be valid.'Issue 2: Assessment in the name of 'Saint Mary’s College of Education' instead of 'Saint Mary’s Educational Society.'The second issue concerns the assessment being made in the name of 'Saint Mary’s College of Education' instead of 'Saint Mary’s Educational Society.' The assessee argued that 'Saint Mary’s College of Education' is merely a wing of the society and not a separate legal entity. The CIT(A) agreed, stating, 'The appellant college is nothing but a wing/extension of St. Mary’s Educational Society.' The CIT(A) emphasized that the assessment should have been made in the name of the society, not the college.The ITAT upheld this view, noting that the AO was repeatedly informed that 'Saint Mary’s College of Education' is a wing of the society, which holds exemption under section 10(22) of the Act. Despite this, the AO framed the assessment in the name of the college. The ITAT stated, 'Since the assessee is not a legal entity and is merely a wing of the society, who has got exemption u/s 10(22) of the Act, no assessment can be framed in the hands of the wings or a branch of the society.'Conclusion:The ITAT annulled the assessment made under section 158BD due to the unreasonable delay in issuing the notice and the improper naming of the assessee. The appeal filed by the assessee was allowed, and the appeal filed by the revenue was dismissed. The ITAT concluded, 'We quash the notice issued u/s 158BD of the Act and annul the assessment made u/s 158BD, and allow the appeal of the assessee.' The revenue's appeal on merits was dismissed as it was rendered unnecessary after annulling the assessment.