Section 153C assessments declared void ab initio due to jurisdictional errors and timing violations

The ITAT Delhi held that assessments under Section 153C were void ab initio. The search was conducted on 22.03.2012 for A.Y. 2012-13, but satisfaction under Section 153C was recorded on 18.11.2013 for A.Y. 2014-15. Following jurisdictional HC precedents and SC judgment in Jasjit Singh, the tribunal determined that assessments for A.Y. 2007-08 made consequent to the satisfaction note recorded on 18.11.2013 were outside Section 153C's scope. The assessment under Section 143(3) for A.Y. 2012-13 was also treated as void. Decision favored the assessee against revenue.

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Issues Involved:
1. Initiation of proceedings under Section 153C of the Income Tax Act.
2. Determination of the residency status of the assessee company.
3. Ignoring the underlying assets and sources of revenue of overseas companies.
4. Ignoring substantial evidence showing control and management of Indian and overseas companies.
5. Application of provisions under Section 9(1) of the I.T. Act.
6. Deletion of addition made by the Assessing Officer.
7. Jurisdictional issues and procedural lapses in the assessment process.

Summary:

1. Initiation of Proceedings under Section 153C:
The Revenue contended that the CIT(A) erred in holding that there was substantial force in the submission made by the appellant on the issue of initiating proceedings under Section 153C of the Income Tax Act. The Tribunal referred to the judgments of the Hon'ble Delhi High Court in CIT-7 Vs. RRJ Securities Ltd. and the Hon'ble Supreme Court in Commissioner of Income Tax-14 Vs. Jasjit Singh, emphasizing that the first step for initiation of proceedings under Section 153C is the satisfaction of the AO that the assets or documents seized belong to the assessee. The Tribunal concluded that the assessments made for A.Y. 2007-08 under Section 153C, consequent to the satisfaction note recorded on 18.11.2013, are outside the scope of Section 153C and hence, void ab initio.

2. Determination of Residency Status:
The Revenue argued that the CIT(A) erred in holding that the assessee company is not a resident under Section 6(3)(ii) of the I.T. Act, despite evidence showing control and management situated wholly in India. The Tribunal did not specifically address this issue in detail, as the primary focus was on the procedural lapses under Section 153C.

3. Ignoring Underlying Assets and Sources of Revenue:
The Revenue claimed that the CIT(A) ignored the fact that the underlying assets and sources of revenue of all overseas companies are Indian companies. The Tribunal's decision to treat the assessments as void ab initio rendered this issue moot.

4. Ignoring Substantial Evidence:
The Revenue contended that the CIT(A) ignored substantial evidence, including seized material, emails, and shareholding patterns, showing control and management by specific individuals to avoid taxability in India. This issue was also rendered moot by the Tribunal's decision on the procedural lapses.

5. Application of Provisions under Section 9(1):
The Revenue argued that the CIT(A) ignored the provisions of Section 9(1) of the I.T. Act, which pertains to revenue earned from assets situated in India. Again, this issue was not specifically addressed due to the primary focus on the procedural aspects under Section 153C.

6. Deletion of Addition by Assessing Officer:
The Revenue contended that the CIT(A) erred in deleting the addition of Rs. 16,44,40,097/- made by the Assessing Officer. The Tribunal's decision to treat the assessments as void ab initio addressed this issue indirectly.

7. Jurisdictional Issues and Procedural Lapses:
The assessee raised several jurisdictional issues, including the assumption of jurisdiction, proceedings under Section 153C being bad in law, and the assessment order being void ab initio. The Tribunal agreed with the assessee, holding that the assessments made under Section 153C were void ab initio due to procedural lapses, such as the recording of satisfaction and the timing of the assessment.

Conclusion:
The Tribunal allowed the Cross Objections of the assessee and dismissed the appeals of the Revenue, treating the assessments as void ab initio due to procedural lapses under Section 153C. The order was pronounced in the Open Court on 29/12/2023.

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