2024 (11) TMI 1026 - AT - Income Tax

Assessment proceedings under section 153C void when satisfaction recorded beyond jurisdictional time limit

K.R. Chawla Consulting Pvt. Ltd. Versus DCIT, Central Circle 25, New Delhi.

K.R. Chawla Consulting Pvt. Ltd. Versus DCIT, Central Circle 25, New Delhi. - TMI Issues Involved:1. Validity of assessments under Section 153C for AYs 2011-12 to 2013-14.2. Validity of addition of rental income based on valuation report for AYs 2014-15 to 2016-17.3. Jurisdictional and procedural propriety concerning the recording of satisfaction and issuance of notices.Issue-wise Detailed Analysis:1. Validity of Assessments under Section 153C for AYs 2011-12 to 2013-14:The primary issue was whether the assessments for AYs 2011-12 to 2013-14 were valid under Section 153C of the Income-tax Act. The assessee contended that the assessments were bad in law, without jurisdiction, and barred by limitation because the satisfaction for initiating proceedings under Section 153C was recorded on 18.01.2021. According to the assessee, assessments could only be validly framed for AYs 2014-15 to 2019-20. The Revenue acknowledged that the satisfaction was recorded on 18.01.2021 but argued that the satisfaction by the AO of the searched person was recorded on 15.05.2019. The Tribunal concluded that since the satisfaction was recorded on 18.01.2021, the assessments for AYs 2011-12 to 2013-14 were outside the jurisdiction and thus void ab initio. Consequently, the appeals for these years were allowed, and the assessments were set aside.2. Validity of Addition of Rental Income Based on Valuation Report for AYs 2014-15 to 2016-17:For AYs 2014-15 to 2016-17, the issue revolved around the addition of rental income based on a valuation report dated 08.04.2010. The assessee argued that the valuation report did not constitute incriminating material as it was merely an estimation and not corroborated by any material evidence of actual rental income. The Tribunal observed that the valuation report pertained to AY 2011-12 and was not year-specific for the years under assessment. It held that the valuation report alone, without corroborative evidence, could not be treated as incriminating material. The Tribunal relied on precedents, including the Supreme Court's decision in CIT vs. Sinhgad Technical Education Society, which emphasized that incriminating material must be year-specific. Consequently, the Tribunal deleted the additions made for AYs 2014-15 to 2016-17, allowing the appeals for these years.3. Jurisdictional and Procedural Propriety Concerning the Recording of Satisfaction and Issuance of Notices:The procedural aspect involved the timing and propriety of recording satisfaction for initiating proceedings under Section 153C. The Tribunal noted that the satisfaction was recorded by the AO of the assessee on 18.01.2021, which determined the relevant years for reopening assessments. The Tribunal emphasized that the procedural requirements under Section 153C must be strictly adhered to, and any deviation could render the proceedings void. The Tribunal's decision underscores the importance of jurisdictional facts, such as the timing of satisfaction recording, in determining the validity of assessments under Section 153C.Conclusion:The Tribunal allowed all six appeals filed by the assessee, setting aside the assessments for AYs 2011-12 to 2013-14 as void ab initio and deleting the additions for AYs 2014-15 to 2016-17 due to the lack of incriminating material. The decision highlights the necessity for strict adherence to procedural requirements and the need for incriminating material to be specific to the assessment years in question.