ITAT quashes Section 153C reassessment for 2011-12 and 2012-13 as years exceeded six-year limitation period from satisfaction recording date

ITAT Delhi held that notice under Section 153C for assessment years 2011-12 and 2012-13 was invalid as these years fell outside the six-year limitation period computed from the financial year preceding the satisfaction recording date of 31.10.2018. The tribunal found the AO's satisfaction note vague and lacking logical reasoning, as seized materials failed to establish direct correlation with the relevant assessment years. The satisfaction note merely referenced seized documents without demonstrating how they belonged to the assessee or related to specific assessment years. Relying on SC precedent, ITAT quashed the entire reassessment proceedings under Section 153C, ruling the assumption of jurisdiction void ab initio. All appeals were allowed.

---

---

Issues Involved:
1. Validity of notice under Section 153C of the Income Tax Act.
2. Applicability of amendments to Section 153C and their prospective effect.
3. Jurisdictional validity of the satisfaction note recorded by the Assessing Officer (AO).
4. Reopening of assessment for specific assessment years.

Issue-wise Detailed Analysis:

1. Validity of Notice under Section 153C of the Income Tax Act:
The primary issue revolves around the validity of the notice issued under Section 153C. The appellant argued that the notice under Section 153C would be valid for a period of six years from the end of the financial year preceding the date on which the satisfaction was recorded. The satisfaction note was recorded on 31.10.2018, and thus, the assessment orders for the A.Ys. 2011-12 and 2012-13 were claimed to be beyond the permissible period, making them illegal, void ab initio, and barred by limitation.

2. Applicability of Amendments to Section 153C and Their Prospective Effect:
The appellant contended that the amendments made to Section 153C by the Finance Act, 2017, effective from 01.04.2017, should be applied prospectively as clarified by CBDT Circular No.2/2018 dated 15.02.2018. Since the search took place on 21.07.2016, prior to the amendment, the assessment years 2011-12 and 2012-13 should not fall within the block period for reopening.

3. Jurisdictional Validity of the Satisfaction Note Recorded by the Assessing Officer:
The satisfaction note recorded by the AO on 31.10.2018 was scrutinized. The note failed to demonstrate the details of the information contained in the seized material (Annexure A-3) that could lead to a logical satisfaction that it had a bearing on the determination of the total income of the assessee. The Tribunal found the satisfaction note to be vague and not in compliance with the requirements of Section 153C.

4. Reopening of Assessment for Specific Assessment Years:
The Tribunal examined whether the reopening of assessments for the A.Ys. 2011-12 and 2012-13 was within jurisdiction. It was concluded that the starting point for computation of the block period under Section 153C should be the date of recording satisfaction by the AO, which in this case was 31.10.2018. Therefore, the immediately preceding six assessment years would be from A.Y. 2013-14 to 2018-19. Consequently, the reopening of assessments for A.Ys. 2011-12 and 2012-13 was beyond jurisdiction and void ab initio.

Conclusion:
The Tribunal allowed the appeals for A.Ys. 2011-12 and 2012-13, quashing the notices issued under Section 153C and the subsequent reassessment proceedings for these years. The Tribunal emphasized that the amendments to Section 153C are prospective, and the satisfaction note recorded by the AO must logically demonstrate the relevance of the seized material to the determination of the assessee's income for the specific assessment years in question. The satisfaction note in this case was found to be vague and insufficient, leading to the conclusion that the reassessment proceedings were not maintainable.

Order Pronouncement:
The order was pronounced in open court on 21/06/2024, concluding that the reassessment proceedings under Section 153C for the A.Ys. 2011-12 and 2012-13 were void ab initio and thus quashed.

---