2023 (8) TMI 1019 - AT - Income Tax

Invalid Notice & Time-Barred Assessment: Tribunal Sets Aside Orders Due to Evidence Non-Compliance & Notice Issues.

M/s. Polisetty Somasundaram Versus The Deputy Commissioner of Income Tax, Central Circle-1, Guntur.

The Tribunal allowed all appeals filed by the assessee, setting aside the assessment orders. It ruled the notice issued u/s 153A was invalid as it was ... Validity of assessment u/s 153A - Notice beyond six assessment years immediately preceding the assessment year relevant to the previous year in which search was conducted - period of limitation for removal of Prohibitory Order - HELD THAT:- The Prohibitory Order PO was released on 06/8/2020, which is beyond period of 30 days. The search party has therefore not followed the CBDT instruction dated 3/7/2002 even though it is binding on the department. We, therefore, find force in the argument of the AR that even though section 132(8A) grants a time limit of 60 days for removing the restraint order, the limit specified by the CBDT, Instruction dated 3/7/2002 for a period of one month is binding on the Ld. Revenue Authorities. Accordingly, in the instant case, the period of limitation for removal of Prohibitory Order expires on 1/3/2020. The argument of the DR that it is only an Instruction and not a Circular could not be accepted due to the fact that the Hon’ble jurisdictional High Court have categorically held that the Authorities responsible for administration of the Act shall observe and follow any such orders, Instructions and Directions of the Board. Since the Prohibitory Order has not been removed within the time limit specified by the CBDT Instruction the releasing of the Prohibitory Order on 6/8/2020 and resultant Panchnama on 6/8/2020 becomes invalid in law. On this count also we find that the period of limitation for the purpose of passing the assessment order commences from 31/1/2020 and should have been completed on or before 31/3/2021 which was further extended by Taxation and Other Laws Amendment (TOLA) to 30th September, 2021. But, we find that the assessment order has been passed on 31/3/2022 which is bad in law. Whether Panchnama without any seizure cannot be treated as a valid one for the purpose of computing the period of limitation? - We are of the considered view that the last drawn Panchnama dated 6/8/2020 is only for the purpose of cancellation of the restraint order passed u/s. 132(3) of the Act and it could not be regarded as a Panchnama for the purpose of computation of limitation u/s. 153B - In the present case on hand, admittedly there is no search or seizure on 6/8/2020. Panchnama was drawn only for the purpose of cancellation of restraint order passed u/s. 132(3). Therefore, it cannot be considered as a last Panchnama drawn for conclusion of search in the absence of any material on the said date and the Panchnama which was drawn on 31/1/2020 itself is required to be considered as a last Panchnama as per the ratio laid down by various High Courts and the Hon’ble Apex Court in the case of CIT vs. White and White Mineral (P.) Ltd [2010 (2) TMI 1321 - SC ORDER] Therefore, we have no hesitation to come to the conclusion that the AO passed on 31/3/2022 by the Ld. Assessing Officer is a time barred assessment. AO ought to have been passed the assessment order or before 30/09/2021 whereas it was passed on 31/3/2022. Thus, we hereby allow the Grounds of the assessee’s appeal for the AY 2012-13. Violation of section 65B of the Indian Evidence Act - CBDT has issued an Investigation Manual for the purpose of collecting Digital Evidence in the cases of search and seizure. In para 2.6.3 of the said Manual, the CBDT has advised that the procedure has to be in consonance with the provisions of section 65B of the Indian Evidence Act. We find that section 65B(2) of the Indian Evidence Act clearly specifies the following conditions with respect to obtaining of Digital Evidence both for primary and secondary evidences. We find from the written submissions of the Ld. AR that the provisions of section 65B(2)(d) as extracted above was not followed by the Revenue. The Revenue failed to identify the primary system giving particulars of the device involved in the production of the data was produced by a computer. We are of the considered we that the four conditions stipulated in section 65B(2) ie., (a) to (d) along with section 65B(4) were not followed while obtaining the Certificate u/s. 65B of the Indian Evidence Act 1872 in the case of the assessee which are to be followed mandatorily. Therefore, we have no hesitation to hold that this Certificate is not a valid Certificate as prescribed under the Indian Evidence Act 1872 and hence cannot be enforced. Therefore, the Certificate obtained in the case of the assessee cannot be regarded as a legally valid certificate u/s. 65B of the Indian Evidence Act and the same has no recognition in the eyes of law. The information contained in the seized pendrive is could not be considered as admissible evidence as per the provisions of section 65B of Indian Evidence Act. Therefore, we are of the considered view that such inadmissible seized material is not sustainable in the eyes of law. Thus, the assessment order passed in the case of the assessee on 31/3/2022 is not a valid assessment order in the eyes of law and it deserves to be set aside. Estimation of income - bogus purchases - estimating the profit @ 20% on bogus purchases - HELD THAT:- Since the legal grounds raised by the assessee have been adjudicated in favour of the assessee. hence adjudication of the grounds raised vide Ground No. 5 and 6 on merits needs no separate adjudication. Issues Involved:1. Validity of issuance of notice u/s 153A.2. Period of limitation for passing the assessment order u/s 153B.3. Legal validity of the Certificate obtained u/s 65B of the Indian Evidence Act.4. Estimation of profit on unaccounted purchases.5. Validity of assessment order without issuing notice u/s 143(2).Summary:1. Validity of issuance of notice u/s 153A:The assessee contested the validity of the notice issued u/s 153A, arguing it was beyond six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted. The Tribunal found that the notice u/s 153A was issued beyond the permissible period and thus invalid.2. Period of limitation for passing the assessment order u/s 153B:The assessee argued that the assessment order was beyond the prescribed time limit u/s 153B. The Tribunal noted that the Prohibitory Order placed on 31/1/2020 was lifted on 6/8/2020 without any seizure, making the Panchnama dated 6/8/2020 invalid. Consequently, the period of limitation commenced from 31/1/2020, and the assessment order should have been passed by 30/09/2021. Since the assessment order was passed on 31/3/2022, it was deemed time-barred and invalid.3. Legal validity of the Certificate obtained u/s 65B of the Indian Evidence Act:The Tribunal found that the Certificate obtained u/s 65B did not comply with the mandatory conditions laid down in section 65B(2) and (4) of the Indian Evidence Act. Therefore, the digital evidence was inadmissible, rendering the assessment order invalid.4. Estimation of profit on unaccounted purchases:The Tribunal observed that the CIT(A) estimated a profit of 20% on unaccounted purchases. However, since the legal grounds were adjudicated in favor of the assessee, this issue required no separate adjudication.5. Validity of assessment order without issuing notice u/s 143(2):For AY 2020-21, the assessee contended that the assessment was void ab initio due to the absence of a notice u/s 143(2). The Tribunal did not separately adjudicate this issue as the legal grounds were already decided in favor of the assessee.Conclusion:All appeals filed by the assessee were allowed, and the assessment orders were set aside due to the invalidity of notices, time-barred assessments, and inadmissible digital evidence.