2025 (1) TMI 906 - AT - Income Tax

Assessment under Section 153A invalid when initiated beyond 10-year limitation period from relevant assessment year

ITAT Delhi held that assessment under section 153A initiated beyond 10 years from the relevant assessment year was invalid, following Ojjus Medicare ... Validity of Assessment u/s 153A beyond period of limitation - assessment initiated beyond the period of 10 years from the end of the relevant AY in which search had been carried out - HELD THAT:- This case is squarely covered by the decision of Ojjus Medicare [2024 (4) TMI 268 - DELHI HIGH COURT] We therefore, following the reasoning given, hold that the AY 2008-09 is beyond the ten-year outer ceiling limit prescribed by the section 153A of the Act. Hence, the AO has erred in assuming the jurisdiction. Consequentially, the assessment order passed u/s 153A of the Act is held invalid in the eyes of law. Assessee appeal allowed. Addition u/s 153A - Addition of share capital and share premium - incriminating materials were seized during the said search operations or not? - as per revenue appellant/assessee was a paper company and it never existed at its registered place - HELD THAT:- We, in view of the decision of Goldstone Cements Ltd. [2023 (10) TMI 278 - GAUHATI HIGH COURT] and reasoning therein emphasized by the Ld. CIT-DR, are of the considered view that there was incriminating material and information on the record before the AO. Accordingly, we decline to interfere in the finding of the Ld. CIT(A). Hence, the assessment order completed in pursuance of section 153A of the Act, notice is held valid in the eyes of law. Nothing has been brought on the record by the Ld. Counsel to contradict the finding of the Ld. CIT(A). Decided against assessee. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions addressed in this judgment include:Whether the assessment orders for AY 2008-09 and AY 2009-10 were validly issued under Section 153A of the Income Tax Act, 1961.Whether the assessment for AY 2008-09 was barred by the limitation period prescribed under Section 153A of the Act.Whether the additions made under Section 153A for AY 2009-10 were based on incriminating material found during the search.Whether the principles established in prior judgments regarding the requirement of incriminating material for assessments under Section 153A apply to the present case.Whether the denial of an opportunity to cross-examine witnesses and reliance on statements made at the back of the assessee invalidated the assessment orders.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Validity of Assessment Orders under Section 153A for AY 2008-09Legal Framework and Precedents: Section 153A of the Income Tax Act allows for assessment or reassessment of income for six assessment years preceding the year of search. The Delhi High Court in Ojjus Medicare Pvt. Ltd. clarified the limitation period for such assessments.Court's Interpretation and Reasoning: The court held that the assessment for AY 2008-09 was beyond the ten-year limit prescribed by Section 153A, as the search was conducted in AY 2018-19.Key Evidence and Findings: The search took place on 22.01.2018, making AY 2008-09 beyond the permissible period for assessment under Section 153A.Application of Law to Facts: The court applied the statutory limitation period and found the assessment order for AY 2008-09 invalid.Treatment of Competing Arguments: The court rejected the CIT-DR's argument that the assessment was valid, citing the clear statutory limitation.Conclusions: The assessment order for AY 2008-09 was quashed as it was issued beyond the statutory period.Issue 2: Validity of Additions under Section 153A for AY 2009-10Legal Framework and Precedents: The requirement for incriminating material for additions under Section 153A was discussed in Abhisar Buildwell and other Supreme Court judgments.Court's Interpretation and Reasoning: The court found that incriminating material existed, as the appellant was a paper company not found at its registered address, which justified the additions.Key Evidence and Findings: The absence of the company at its registered address and statements recorded during the search were considered incriminating.Application of Law to Facts: The court upheld the additions based on the incriminating nature of the findings during the search.Treatment of Competing Arguments: The court dismissed the appellant's reliance on the absence of incriminating material, citing the findings of the CIT(A) and the Gauhati High Court's reasoning.Conclusions: The court upheld the assessment order for AY 2009-10, finding it valid and based on incriminating evidence.3. SIGNIFICANT HOLDINGSVerbatim Quotes of Crucial Legal Reasoning: 'The case on hand pertains to AY 2009-10. It is obviously beyond the ten-year outer ceiling limit prescribed by the statute.' This emphasizes the strict interpretation of statutory limits.Core Principles Established: The court reaffirmed the necessity of incriminating material for assessments under Section 153A and the strict adherence to statutory limitation periods.Final Determinations on Each Issue: The assessment order for AY 2008-09 was quashed due to being time-barred, while the order for AY 2009-10 was upheld based on the presence of incriminating material.The judgment underscores the importance of adhering to statutory limits and the requirement of incriminating material for assessments under Section 153A, providing clarity on the application of these principles in tax proceedings.