2024 (1) TMI 1066 - AT - Income Tax

Section 153C assessments void when beyond six-year limitation period from receiving seized documents

DCIT, Central Circle-19, Delhi Versus iServices Investments Ltd., C/o Mr. Sandeep Chilana, Adv., Delhi

ITAT Delhi held that assessments under Section 153C for AY 2013-14, 2006-07, and 2007-08 were invalid and void ab initio as they fell outside the six-year ... Validity of assessment u/s 153C - Relevant Date - Period of limitation - Date of recording of satisfaction - calculation of six assessment years - whether CIT(A) is correct in holding that assessment made for assessment year 2013-14 is invalid as 6 previous assessment years from the year of search has to be reckoned from the date when the books of accounts or seized documents were handed over to the Assessing Officer or when the satisfaction was recorded? HELD THAT:- We are guided by the judgment of RRJ Securities Ltd. [2015 (11) TMI 19 - DELHI HIGH COURT] proviso to Section 153C(1) of the Act expressly indicates that reference to the date of initiation of search for the purposes of second proviso to Section 153A shall be construed as a reference to the date on which valuable assets or documents are received by the AO of an Assessee (other than a searched person). Thus, by virtue of the second proviso to section 153A of the Act, the assessments/reassessments that were pending on the date of receiving such assets, books of accounts or documents would abate - date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for AY 2003-04 and AY 2004-05 were outside the scope of Section 153C and the AO had no jurisdiction to make an assessment of the Assessee's income for that year. Also see Jasjit Singh case [2023 (10) TMI 572 - SUPREME COURT] as held that in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the AO having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date Thus we have no hesitation to hold that the Assessments made for A.Y. 2013-14 u/s. 153C consequent to the satisfaction note Assessments made for A.Y. 2006-07 and A.Y. 2007-08 u/s 153C consequent to the satisfaction note recorded on 18.11.2013 are outside the scope of Section 153C of the Income Tax Act, 1961 and hence, the assessments are treated as void ab initio. Consequently, the assessment made u/s 143(3) for A.Y. 2012-13 shall also be treated as void. Decided in favour of assessee. Issues Involved:1. Initiation of proceedings under Section 153C of the Income Tax Act.2. Determination of the residency status of the assessee company under Section 6(3)(ii) of the Income Tax Act.3. Consideration of underlying assets and sources of revenue from Indian companies.4. Examination of evidence regarding control and management to avoid taxability in India.5. Applicability of Section 9(1) of the Income Tax Act regarding revenue earned from assets situated in India.6. Deletion of additions made by the Assessing Officer.7. Jurisdictional and procedural validity of assessment orders.Summary:1. Initiation of Proceedings under Section 153C:The Tribunal examined the initiation of proceedings under Section 153C of the Income Tax Act. It was argued that based on the date of recording of satisfaction, the assessments for A.Y. 2006-07 and A.Y. 2007-08 were outside the scope of Section 153C. The Tribunal referred to the judgment of the Hon'ble Delhi High Court in CIT-7 Vs. RRJ Securities Ltd., which clarified that the date of recording satisfaction is crucial for initiating proceedings under Section 153C. The Tribunal concluded that the assessments made for A.Y. 2006-07 and A.Y. 2007-08 were void ab initio as they were beyond the scope of Section 153C.2. Residency Status under Section 6(3)(ii):The Revenue contended that the assessee company was a resident in India based on seized documents and statements indicating that control and management were situated wholly in India. However, the Tribunal upheld the CIT(A)'s decision that the assessee company was not a resident under Section 6(3)(ii) for tax liability purposes.3. Underlying Assets and Sources of Revenue:The Revenue argued that the underlying assets and sources of revenue of all overseas companies were Indian companies. The Tribunal noted that the CIT(A) had ignored substantial evidence, including seized material and emails, showing that the ultimate control and management of Indian and overseas companies lay with specific individuals to avoid taxability in India.4. Evidence of Control and Management:The Tribunal addressed the Revenue's argument that the CIT(A) ignored evidence showing control and management of Indian and overseas companies by specific individuals. The Tribunal upheld the CIT(A)'s decision, which found no substantial evidence to support the Revenue's claims.5. Applicability of Section 9(1):The Revenue argued that the CIT(A) ignored the provisions of Section 9(1) of the I.T. Act, as the revenue was earned from assets situated in India. The Tribunal did not find merit in this argument and upheld the CIT(A)'s decision.6. Deletion of Additions:The Tribunal upheld the CIT(A)'s decision to delete the additions made by the Assessing Officer for A.Y. 2006-07, A.Y. 2007-08, and A.Y. 2012-13, as the assessments were void ab initio.7. Jurisdictional and Procedural Validity:The Tribunal addressed the cross objections regarding the jurisdiction and procedural validity of the assessment orders. It was argued that the assessment orders were without jurisdiction and contrary to the provisions of the Income Tax Act. The Tribunal upheld the objections, finding that the initiation of proceedings and service of notices were not in accordance with the law, rendering the assessment orders void.Conclusion:The Tribunal allowed the cross objections of the assessee, resulting in the dismissal of the Revenue's appeals. The assessments for A.Y. 2006-07, A.Y. 2007-08, and A.Y. 2012-13 were declared void ab initio. The order was pronounced in the open court on 28/12/2023.