2021 (8) TMI 322 - AT - Income Tax

Assessment for A.Y. 2007-08 Voided as Time-Barred

The Tribunal upheld the CIT(A)'s decision that the assessment for A.Y. 2007-08 was barred by limitation and void ab initio. The Department's appeal was ... Assessment u/s 153A - Assessment barred by limitation - Addition u/s. 68 on account of unexplained cash credits - documents/material belonging to the appellant were found during the course of search on PIL - HELD THAT:-The terminal date for determination of six preceding assessment years that would lay upon under section 153C read with section 153A of the Act would decidedly be the date of handing over of the documents. Here the satisfaction note recorded by the A.O, of M/s Prakash Industries Ltd. is 22.12.2014, as well as by the A.O. of the appellant is on 22.12.2014, which is to be taken as the date of handing over of documents and date. Six preceding assessment years begin with A.Y. 2009-10 and end with A.Y. 2014-15. It would be the date of handing over the documents or date of recording of satisfaction will be the date for determining the date for calculating the preceeding six assessment years is well settled by the judgement of RRJ Securities [2015 (11) TMI 19 - DELHI HIGH COURT] We hold that no assessment under section 153C could have been made in respect of A.Y. 2007-08 as it was clearly barred by limitation. Hence, there is no option but to annul the assessment and all consequent additions made in the assessment also stand deleted. - Decided in favour of assessee. Issues Involved:1. Deletion of addition made under Section 68 of the IT Act on account of unexplained cash credits.2. Deletion of addition of unexplained expenditure on account of brokerage.3. Validity of initiation of action under Section 153C of the Act for A.Y. 2007-08.4. Interpretation of the term 'total income' in Section 153C/153A.5. Restrictive interpretation of the scope of assessment under Section 153C/153A.6. Jurisdictional validity of assessment under Section 153C for A.Y. 2007-08.Detailed Analysis:1. Deletion of Addition under Section 68:The Income-tax Department challenged the deletion of an addition of Rs. 4,88,00,000/- made under Section 68 of the IT Act by the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) had directed the Assessing Officer (AO) to delete the addition on the grounds that the assessment was barred by limitation.2. Deletion of Addition on Account of Brokerage:The Department also contested the deletion of an addition of Rs. 2,49,000/- as unexplained expenditure on account of brokerage by the CIT(A). Similar to the first issue, the CIT(A) directed the AO to delete the addition, citing the assessment's limitation.3. Validity of Initiation of Action under Section 153C:The primary issue was whether the initiation of action under Section 153C for A.Y. 2007-08 was barred by limitation. The search on M/s Prakash Industries Ltd. took place on 30.10.2012, and the satisfaction note was recorded on 22.12.2014. The CIT(A) held that the assessment for A.Y. 2007-08 was beyond the period of six years from the date of recording the satisfaction note, thus barred by limitation. This interpretation was based on the decision in CIT vs. RRJ Securities Ltd. by the jurisdictional High Court.4. Interpretation of 'Total Income' in Section 153C/153A:The Department argued that the CIT(A) erred in interpreting 'total income' in Section 153C/153A as only undisclosed income discovered from seized/incriminating material. The CIT(A) had relied on the decision in the case of Sh. Kabul Chawla, which the Department had not accepted and had filed an SLP against it.5. Restrictive Interpretation of Scope of Assessment:The Department contended that the CIT(A) adopted a restrictive and pedantic interpretation of the scope of assessment under Section 153C/153A. The CIT(A) concluded that the words 'total income' would only mean income unearthed during the search, contrary to the decision of the Hon'ble High Court of Karnataka in Canara Housing Development Company Vs. DCIT, which held that 'total income' includes both the income unearthed during the search and any other income.6. Jurisdictional Validity of Assessment:The CIT(A) concluded that the assessment for A.Y. 2007-08 was void ab initio as the AO had no jurisdiction to make the assessment for A.Y. 2007-08, being beyond the period of six years from the date of recording the satisfaction note. This conclusion was supported by several judgments, including RRJ Securities Ltd., ARN Infrastructure India Ltd., Raj Buildworth Pvt. Ltd., and Sarwar Agency Pvt. Ltd.Conclusion:The Tribunal upheld the CIT(A)'s decision that the assessment for A.Y. 2007-08 was barred by limitation and void ab initio. Consequently, the Tribunal dismissed the Department's appeal, affirming that no assessment under Section 153C could have been made for A.Y. 2007-08. The Tribunal did not address the merits of the case, as the assessment itself was found to be barred by limitation. The order was pronounced in the Open Court on 9th July 2021.