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

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 limitation period. The tribunal clarified that for persons other than those searched, the relevant date for calculating the six assessment years is when the AO receives seized documents/assets, not the search date. Following SC precedent in Jasjit Singh case and HC judgment in RRJ Securities Ltd., the tribunal ruled that assessments beyond this limitation period lack jurisdiction. The assessment for AY 2012-13 under Section 143(3) was also deemed void. Decision favored the assessee.

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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 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.

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