2024 (7) TMI 129 - AT - Income Tax

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 of limitation to issue notice u/s 153C - computation of period of six years from the end of the financial year preceding the date on which the satisfaction was recorded - HELD THAT:- Since admittedly, the satisfaction was recorded by the Learned AO of the assessee on 31.10.2018, falls in the Assessment year 2018-19, the immediately preceding 6 Assessment Years would be the Assessment Years from 2013- 14 to 2018-2019 . Therefore, the notice under Section 153C of the Act could not have been issued for A.Ys. 2011-12 and 2012-13 as rightly pointed out by Learned Counsel appearing for the assessee. Thus, taking into consideration the entire aspect of the matter and further having regard to the amendment under 2017 Act w.e.f 01.04.2017 with prospective effect as clarified by CBDT Circular No.2/2018 dated 15.02.2018, as the recording of satisfaction was made by the Learned AO of the assessee only on 30.10.2018, the issuance of notice under Section 153C of the Act for A.Ys. 2011-12 & 2012-13 since had not fall in the previous 6 years, the assumption of jurisdiction in reopening of assessment under Section 153C of the Act for A.Ys. 2011-12 and 2012- 13, therefore, found to be not maintainable. The same is void ab initio and thus, quashed. Validity of the satisfaction note recorded by AO - In the case in hand the satisfaction note simply referred the seized material i.e. Annexure A-3 seized during the search and seizure operation carried out, whereas from the plain reading of the language of Section 153C of the Act and judicial pronouncement cited hereinabove it is abundantly clear that in order to reopen assessment of the other person under Section 153C of the Act for the Assessment Year earlier to the year of search, direct co relation must exist between existence of incriminating material and relevant Assessment Year. Therefore, the reasoning should be logical while recorded satisfaction; the same must be valid having regard to the provision of Section 153C of the Act. It is an undisputed fact that these documents did not establish co relation, document wise with these six Assessment Years. The very essential element for invoking the provision of Section 153C is therefore, found to be missing. In that view of the matter, the reason assigned by the Learned AO while recording satisfaction is not found to be logical one rather vague; the material seized does not properly disclosed how the same belongs to be appellant; neither has it established any co relation document wise with these Assessment Years sought to be reopened and finalized upon making addition thereon. We, thus, respectfully relying upon the judgment passed in the case of CIT vs. Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT] do not find any force in such satisfaction note recorded by the Learned AO as the said is recorded not in terms of the provision of Section 153C of the Act and thus, found to be invalid. The entire reassessment proceedings under Section 153C of the Act are, therefore, quashed. Assessee’s all appeals are 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.