2024 (2) TMI 102 - AT - Income Tax

ITAT rules Section 153C assessments void when satisfaction note recorded beyond statutory limitation period

ITAT Delhi held that assessments for A.Y. 2006-07 and 2007-08 under Section 153C, based on satisfaction note recorded on 18.11.2013, were beyond the ... Validity of proceedings u/s 153C - period of limitation - HELD THAT:- As guided by RRJ Securities Ltd [2015 (11) TMI 19 - DELHI HIGH COURT] and Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] we have no hesitation to hold that the 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. Decided in favour of assessee. Issues Involved:1. Validity of proceedings initiated u/s 153C of Income Tax Act.2. Determination of the residential status of the assessee company u/s 6(3)(ii) of the I.T. Act.3. Consideration of underlying assets and sources of revenue of overseas companies.4. Examination of control and management of companies to determine taxability.5. Application of provisions of section 9(1) of the I.T. Act.6. Deletion of the addition of Rs. 351,47,45,490/- made by the Assessing Officer.Summary:1. Validity of proceedings initiated u/s 153C of Income Tax Act:The assessee argued that the assessment made u/s 153C for A.Y. 2006-07 and A.Y. 2007-08 are outside the scope of Section 153C of the Act based on the date of recording of satisfaction (18.11.2013). The Tribunal referred to the judgment of Hon'ble Jurisdictional High Court of Delhi in CIT-7 Vs. RRJ Securities Ltd., which emphasized that the first step for initiating proceedings u/s 153C is the satisfaction of the AO that the seized assets/documents belong to a person other than the searched person. The Tribunal also cited the Hon'ble Supreme Court's order in Commissioner of Income Tax-14 Vs. Jasjit Singh, which reinforced that the date of recording satisfaction is crucial for determining the six-year period for assessments. Consequently, the Tribunal held that the assessments for A.Y. 2006-07 and A.Y. 2007-08 are void ab initio.2. Determination of the residential status of the assessee company u/s 6(3)(ii) of the I.T. Act:The Revenue contended that the assessee company is a resident in India based on seized documents, emails, and statements indicating that the control and management of the company is situated wholly in India. However, the Tribunal upheld the CIT(A)'s decision that the assessee company is not a resident in terms of provisions u/s 6(3)(ii) of the I.T. Act.3. Consideration of underlying assets and sources of revenue of overseas companies:The Revenue argued that the underlying assets and sources of revenue of all the overseas companies are the Indian Companies. The Tribunal, however, did not find merit in this argument and upheld the CIT(A)'s decision.4. Examination of control and management of companies to determine taxability:The Revenue presented substantial evidence in the form of seized material, emails, and shareholding patterns showing that the ultimate control and management of Indian and overseas companies lie with certain individuals to avoid taxability in India. The Tribunal, however, did not agree with the Revenue's contention and upheld the CIT(A)'s findings.5. Application of provisions of section 9(1) of the I.T. Act:The Revenue contended that the revenue earned by the assessee is due to underlying assets situated in India and thus taxable u/s 9(1) of the I.T. Act. The Tribunal did not find this argument convincing and upheld the CIT(A)'s decision.6. Deletion of the addition of Rs. 351,47,45,490/- made by the Assessing Officer:The Tribunal upheld the CIT(A)'s decision to delete the addition of Rs. 351,47,45,490/- made by the Assessing Officer against nil income, finding no error in the CIT(A)'s order.Conclusion:The Tribunal allowed the Cross Objections of the assessee and dismissed the appeals of the Revenue, treating the assessments for A.Y. 2006-07 and A.Y. 2007-08 as void ab initio.Order Pronounced in the Open Court on 29/12/2023.