2024 (12) TMI 634 - AT - Income Tax

Assessment proceedings under Section 153A barred by limitation after ten years from search year without incriminating material found

Deputy Commissioner of Income Tax, Central Circle-32, New Delhi. Versus M/s RNB Leasing and Financial Services And Kishan Kumar Bajaj As Erstwhile Partner of RNB Leasing and Financial Services (now Dissolved) Versus Deputy Commissioner of Income Tax, Central Circle-32, New Delhi

The ITAT Delhi held that assessment proceedings u/s 153A for A.Y. 2008-09 were barred by limitation as they exceeded the ten-year period from the search ... Validity of assessment order u/s 153A - period of limitation - Assessment beyond the period of ten years - HELD THAT:- As per Panchnama placed and also order of the Ld. AO, no any incriminating document/material was found. On the basis of above fact situation, there is material substance in the submissions advanced on behalf of the assessee that in this case the A.Y. in question i.e. 2008-09 is beyond the period of ten years from the end of the assessment year relevant to the year in which search was conducted and proceeding initiated u/s 153A of the Act and the consequent assessment order passed is without jurisdiction and clearly barred by law and the Ld. AO was not authorized by law to initiate proceedings which was barred. Established legal position cannot be ignored but to be followed in strict manner and if proceedings which are knowingly, that it is barred by law, initiated by competent authority, hardly be allowed to be confirmed. Addition on the basis that the assessee is not involved in the business of wool - CIT(A) deleted addition - HELD THAT:- CIT(A) clearly held that on verification of the documentary evidences submitted by the appellant, the AO has acknowledged the purchase and sale of shares and mutual funds being duely recorded in the audited financial statements and said trading activity had also been reported by the tax auditor in from 3CD and the Ld. CIT(A), depending on above fact situation, found that it has been duely substantiated by the appellant that the investment in mutual funds referred by the AO in the assessment order has been recorded in its books of accounts. So far question regarding ground no. 4 is concerned, the Ld. CIT(A) passed detailed findings that the true facts of the case of the appellant have been duely verified by the AO himself in the remand report and not further doubt has been raised by him with report of the genuineness of the business activity / operation of appellant in the year under consideration. Issues Involved:1. Jurisdiction and limitation under Section 153A for Assessment Year 2008-09.2. Legality of the search and assessment proceedings.3. Deletion of additions by CIT(A) based on the nature of business and genuineness of transactions.4. Modus operandi of Bajaj Group and implications for the assessee.5. Validity of proceedings against a non-existent entity.Issue-wise Detailed Analysis:1. Jurisdiction and Limitation under Section 153A for Assessment Year 2008-09:The primary issue was whether the assessment for AY 2008-09 was barred by limitation under Section 153A. The search was conducted on April 20, 2017, and the assessment year under consideration was beyond the ten-year limitation period from the end of the assessment year relevant to the year of search. The Tribunal found that the proceedings initiated under Section 153A were without jurisdiction and barred by limitation, as the assessment year 2008-09 fell outside the permissible ten-year period. The Tribunal emphasized that established legal positions regarding limitation periods must be strictly followed.2. Legality of the Search and Assessment Proceedings:The assessee contended that the search was conducted on a non-existent entity, rendering the assessment proceedings null and void. The Tribunal noted that the assessee had informed the tax authorities about the dissolution of the firm before the search. No incriminating material was found during the search, as confirmed by the Panchnama. Therefore, the Tribunal held that the proceedings were unsustainable and barred by law.3. Deletion of Additions by CIT(A) Based on the Nature of Business and Genuineness of Transactions:The Revenue challenged the deletion of additions by the CIT(A), arguing that the CIT(A) erred in concluding the transactions were duly recorded without verifying their genuineness. The Tribunal upheld the CIT(A)'s decision, noting that the AO had acknowledged the transactions in the remand report and that the assessee had substantiated the investments in mutual funds. The Tribunal found no merit in the Revenue's argument that the business nature was immaterial, as the CIT(A) had thoroughly examined the evidence and found the transactions genuine.4. Modus Operandi of Bajaj Group and Implications for the Assessee:The Revenue argued that the assessee was involved in the modus operandi of purchasing shares at exorbitantly high premiums, as described in the assessment order. The Tribunal found that the CIT(A) had considered the AO's findings and concluded that the assessee's transactions were genuine and duly recorded. The Tribunal held that the CIT(A) had addressed all necessary points and that the AO's lack of jurisdiction rendered further proceedings unsustainable.5. Validity of Proceedings Against a Non-Existent Entity:The assessee argued that the proceedings were invalid as they were initiated against a non-existent entity. The Tribunal agreed, noting that the assessee had dissolved the firm before the search, and no incriminating material was found. The Tribunal emphasized that proceedings against a non-existent entity are null and void and cannot be sustained.Conclusion:The Tribunal concluded that the appeal by the Revenue was dismissed, and the cross-objection by the assessee was allowed. The Tribunal found that the assessment proceedings for AY 2008-09 were barred by limitation and lacked jurisdiction. The CIT(A)'s decision to delete the additions was upheld, as the transactions were genuine and duly recorded. The proceedings against a non-existent entity were declared null and void. The order was pronounced in the open court on November 29, 2024.