Assessment under Section 153A: notice beyond ten-year relevant assessment period quashed; partial expenditure allowance affirmed.

Assessment under Section 153A was held outside the 'relevant assessment year' where the notice related to an assessment year beyond the ten assessment years defined in Explanation 1, rendering that notice and consequent assessment void ab initio for that year. For unaccounted cash receipts from sale of spent solvents and scrap, the tribunal directed allowance of 60% as expenditure and treated 40% as taxable income, following earlier decisions. The satisfaction note supporting issuance of notice u/s 153A was found to be supported by incriminating material and books/documents showing income represented as assets, validating assumption of jurisdiction for the remaining assessment years.

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Issues: (i) Whether the notice under Section 153A issued for A.Y. 2011-12 was within the "relevant assessment year or years" as defined in Explanation 1 to Section 153A(1) and whether the assessment for A.Y. 2011-12 is void; (ii) Whether the assessee is entitled to deduction of expenditure against unaccounted cash receipts from sale of spent solvents/scrap for A.Ys. 2012-13 to 2014-15 and the correct quantification of such deduction; (iii) Whether the Assessing Officer validly assumed jurisdiction under Section 153A(1) for the assessment years 2012-13 to 2014-15 by satisfying the fourth proviso conditions.

Issue (i): Whether the notice and assessment under Section 153A for A.Y. 2011-12 fall within the "relevant assessment year or years" under Explanation 1 to Section 153A(1).

Analysis: The Court examined computation of the ten-year block as defined by Explanation 1, adopting the approach that the ten-year period is to be reckoned backwards from the end of the assessment year relevant to the previous year in which the search was conducted (the search assessment year terminal date). Applying that method to the search conducted on 24.02.2021 (search assessment year A.Y. 2021-22; terminal date 31.03.2022), the ten relevant assessment years run from A.Y. 2021-22 back to A.Y. 2012-13, thereby excluding A.Y. 2011-12.

Conclusion: The notice and consequent assessment for A.Y. 2011-12 under Section 153A are beyond the ten-year limit and therefore void ab initio; the appeal for A.Y. 2011-12 is allowed in favour of the assessee.

Issue (ii): Whether and to what extent expenditure may be deducted against unaccounted cash receipts from sale of spent solvents/scrap for A.Ys. 2012-13 to 2014-15.

Analysis: The Tribunal considered seized Excel data showing both cash inflows (unaccounted receipts) and cash outflows (payments), sworn statements and affidavits, and prior Tribunal decisions in the group. It held that the seized material must be read as a whole and that some expenditure is necessarily incurred in earning such receipts (handling, wages, transportation, packing). Given absence of direct documentary proof for specific components, the Tribunal followed earlier bench decisions and quantified a reasonable deduction by estimation.

Conclusion: The Assessing Officer must allow deduction of 60% of the unaccounted receipts as expenditure and sustain 40% as income; grounds challenging quantum are partly allowed in favour of the assessee.

Issue (iii): Whether the Assessing Officer validly assumed jurisdiction under Section 153A(1) for A.Ys. 2012-13 to 2014-15 by satisfying the conditions of the fourth proviso.

Analysis: For assessment years falling beyond six and within ten years, the fourth proviso conditions (possession of books/documents/evidence showing income represented in the form of asset amounting to or likely to amount to Rs. 50 lakh or more, escape of assessment, and timing) must be satisfied. The Tribunal found incriminating material, disclosed additional income and affidavits, and further concluded that estimated profits (after allowable expenditure) result in assets/advances reflected in seized material; therefore the proviso conditions were met.

Conclusion: The challenge to the validity of assumption of jurisdiction under Section 153A(1) for A.Ys. 2012-13 to 2014-15 is rejected; this issue is decided against the assessee.

Final Conclusion: The Tribunal quashed the assessment for A.Y. 2011-12 as outside the ten-year limit and allowed the assessee's appeal for that year; for A.Ys. 2012-13 to 2014-15 the Tribunal allowed part relief by directing the Assessing Officer to allow 60% of the unaccounted receipts as deductible expenditure and sustained 40% as income, and upheld the Assessing Officer's jurisdiction under Section 153A(1).

Ratio Decidendi: For computation under Explanation 1 to Section 153A(1), the ten-year block is to be reckoned backwards from the end of the assessment year relevant to the previous year in which the search was conducted; seized material containing both inflows and outflows must be read as a whole and, where direct proof of expenditure is lacking, a reasonable estimation (here 60%) may be applied to quantify deductible expenditure against unaccounted receipts.

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