2024 (12) TMI 391 - HC - Income Tax

Assessment notices under section 153C not time-barred when limitation period calculated from material forwarding date

Gujarat HC held that assessment notices u/s 153C were not time-barred. The court determined that the six-year limitation period runs from when material is ... Validity of assessment u/s 153C - Period of limitation - period of six years to be computed - Scope of extended period of 10 years - HELD THAT:- In the facts of the case, the AO of the searched person has recorded the satisfaction note on 31.03.2018 which is on the last date of the assessment proceedings of the searched person to be completed u/s 153B of the Act and as such, it cannot be said that the satisfaction note recorded by the AO of the searched person is contrary to the decision of the CCIT vs. Calcutta Knitwears [2014 (4) TMI 33 - SUPREME COURT] or the Circular No. 24/2015 issued by the CBDT as it was on the same day on which, the assessment proceedings of the searched person ought to have been completed. There is no provision in the Act prescribing the time limit to record the satisfaction by the Jurisdictional Assessing Officer on receipt of the incriminating seized material from the Assessing Officer of the searched person. Hon’ble Supreme Court in case of CIT vs. Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] has considered the aspect of recording the satisfaction by the Jurisdictional Assessing Officer by holding that the period of six years would be reckoned in respect of which the returns were to be filed would be from the date of receipt of material by the Jurisdictional Assessing Officer. In view of the above dictum of law, the period of six years to be computed would be from the date when the material was forwarded to the jurisdictional Assessing Officer which can be either 31.03.2018 or 02.04.2018 or 23.10.2019 and accordingly, the Assessment Years for which, the notices can be issued would be in first scenario from A.Y. 2012-13 to 2017-18, in the second scenario from 2013- 14 to 2018-19 and in third scenario from 2014-15 to 2019-20. The period of 10 years is to be considered on the basis of harmonious interpretation of section 153C and its proviso to the effect that the commencement of initiation of the assessment proceedings is required to be considered from the date when the satisfaction is formed by the AO of the petitioner. Therefore, applying the second proviso to section 153A which has come into effect by the Finance Act,2017 which is held to be clarificatory by the Hon’ble Apex Court in case of Vikram Sujit Kumar Bhatia [2023 (4) TMI 296 - SUPREME COURT] when the escaped assessment is more than Rs. 50 Lakh, the extended period of 10 years would be applicable. As the satisfaction was recorded on 23.10.2019, 1st Assessment Year to be reopened would be Assessment Year 2018-2019 and the 10th Assessment year would be 2009- 10. Therefore, the impugned notice issued from the Assessment Year 2009-10 to 2014-15 would be valid notices applying the provision of section 153A of the Act by extended period of 10 years. We are therefore of the opinion that the impugned notices cannot be said to be time barred considering the extended period of 10 years from the Assessment Year 2018-19 upto Assessment Year 2009-10 considering the previous year in which, considering the date of receiving books of accounts or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction being 24.10.2019 from the end of the Assessment Year relevant to the previous A.Y. 2019-20. We answer the Issue No.1 in the negative that the notices are not time barred. Issues Involved:1. Whether the impugned notices issued under Section 153C of the Income Tax Act are time-barred.2. Whether the Assessing Officer has jurisdiction for the years for which no incriminating material is found.3. Whether the Assessing Officer has validly assumed jurisdiction by recording satisfaction to initiate assessment proceedings under Section 153C of the Act.Issue-wise Detailed Analysis:1. Time-barred Notices:The petitioner contended that the notices under Section 153C were time-barred, relying on the Supreme Court's decision in CCIT vs. Calcutta Knitwears and CBDT Circular No. 24/2015. The argument was that the satisfaction note must be recorded within the stipulated timeline, either during the search, the assessment proceedings, or immediately after the assessment proceedings of the searched person. The petitioner argued that the satisfaction note was recorded much later, making the notices time-barred. However, the court found that the satisfaction note by the Assessing Officer of the searched person was recorded on the last date permissible for completing the assessment, i.e., 31.03.2018. The court also considered the absence of a statutory time limit for recording satisfaction by the jurisdictional Assessing Officer and concluded that the notices were not time-barred, considering the extended period of ten years applicable under amended provisions.2. Jurisdiction for Years Without Incriminating Material:The petitioner argued that notices could not be issued for assessment years where no incriminating material was found. The court noted that this issue could be raised during the assessment proceedings, as the determination of whether incriminating material exists for specific years is a factual matter to be assessed by the Assessing Officer. The court emphasized that the petitioner has the alternative remedy of appealing against the assessment order if aggrieved.3. Validity of Satisfaction for Jurisdiction:The petitioner claimed that the satisfaction recorded was invalid as it did not specify which documents pertained to the petitioner, thus failing to establish unaccounted income. The court held that the satisfaction note, based on incriminating material seized during the search, was sufficient to initiate proceedings under Section 153C. The court referred to the Delhi High Court's decision in Indian National Congress vs. Dy. Commissioner of Income Tax, which held that the satisfaction note forms the foundation for initiating action and must rest on incriminating material relevant to the assessment years in question.Conclusion:The court concluded that the notices were not time-barred, and the petitioner could raise issues regarding incriminating material and satisfaction during the assessment proceedings. The petition was dismissed, with the court ruling that the notices were valid for the assessment years in question, considering the extended period of ten years applicable under the amended provisions of the Income Tax Act.