2025 (12) TMI 1585 - HC - Income Tax

Search-related assessment time limits u/s153C: only 60-day extension allowed; assessment issued a year later quashed

The dominant issue was whether an assessment made pursuant to search-related proceedings could be sustained as within limitation. The HC held that, after ... Time limit for completion of assessment u/s 153A - sixty days period of limitation after the judgement of Supreme Court - Extension of period - respondent authority in order to justify their action and passing of the Assessment Order within a period of limitation has placed reliance on provisions of Section 153 (6)(i) of the I T Act HELD THAT:- The period of limitation is required to be extended for sixty days as there were only eleven days left for passing Assessment Order, when the interim order dated 20.12.2018 was passed by this Court in the writ petition challenging the notice u/s 153C of the Act, in the case of present petitioner. Accordingly, if the necessary calculation is done and if the sixty days period of limitation is added the limitation would stand extended to 05.06.2023 reckoned from 06.04.2023 i.e. the decision of the Supreme Court. Admittedly, the impugned Assessment Order was passed on 30.04.2024. Even if, the date of receipt of the order of the Supreme Court by the jurisdictional Assessing Officer on 16.04.2023 is considered, then also the Assessment Order passed on 30.04.2024 would still cross the limitation period. The provisions of Section 153 (6) (i) of the Act cannot be read into isolation, but has to be read in conjunction with the main provision of Section 153 of the Act which stipulates as under:- “(1) No order of assessment shall be made under Section 143 or Section 144 at any time after the expiry of twenty-one months from the end of the assessment year in which the income was first assessable:” Therefore, reliance placed by the respondent on the provisions of Section 153(6)(i) of the Act to encompass the Assessment Order dated 30.04.2024 within a limitation period of 12 months as per the said provisions is misconceived. The same would be only applicable to the general assessment proceedings under Section 143 or Section 144 of the IT Act and not to the provision of Section 153C of the IT Act, as they are explicit provisions governing the search proceedings emanating from the provision of Section 132 of the IT Act. These provisions are distinct and the legislature has prescribed specific limitations period for undertaking assessment. WP allowed. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether the assessment/reassessment made under Section 153C, arising from a third-party search, was barred by limitation under the time-limit scheme applicable to Section 153C (read with Section 153B and the statutory extension where the remaining limitation is less than sixty days) and therefore without jurisdiction. (ii) Whether the revenue could validly invoke Section 153(6)(i) to claim a fresh twelve-month limitation period from the end of the month of receipt of the Supreme Court order, to justify completion of the assessment beyond the time-limit otherwise applicable to Section 153C proceedings. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i): Limitation for completing assessment under Section 153C (with Section 153B proviso and sixty-day extension) Legal framework (as discussed by the Court): The Court treated the limitation for an 'other person' covered by Section 153C as governed by the proviso to Section 153B(1), which prescribes that the limitation for making the assessment/reassessment is the period under Section 153B(1)(a)/(b) or nine months from the end of the financial year in which the seized/requisitioned material is handed over to the Assessing Officer having jurisdiction over such other person, whichever is later. The Court also applied the proviso to the explanation under Section 153(9), providing that where, after exclusion of the period covered by a stay, the remaining limitation is less than sixty days, it stands extended to sixty days. Interpretation and reasoning: The Court found the material facts undisputed: the third-party search occurred on 04.09.2013; the satisfaction note was drawn on 18.08.2017; and the relevant material was received by the jurisdictional Assessing Officer on 28.08.2017. On that basis, the Court accepted that the last date for framing the assessment, under the first proviso to Section 153B(1), was 31.12.2018. Since interim relief was granted on 20.12.2018 in proceedings challenging the Section 153C notice, only eleven days remained. After the Supreme Court decision dated 06.04.2023 (which resolved the challenge), the Court held that, because the remaining limitation was less than sixty days, the statutory mechanism extended the remaining period to sixty days. On this computation, the Court concluded the assessment ought to have been completed within sixty days reckoned from the Supreme Court decision, i.e., by 05.06.2023. The impugned assessment was passed on 30.04.2024, far beyond this extended period; even taking the departmental date of receipt of the Supreme Court order, the assessment still exceeded limitation. Conclusion: The assessment order and consequential demand were held to be barred by limitation under the time-limit regime applicable to Section 153C proceedings, rendering the assessment without jurisdiction. Issue (ii): Applicability of Section 153(6)(i) (twelve months from receipt of court order) to a Section 153C search assessment Legal framework (as discussed by the Court): The revenue relied on Section 153(6)(i), which permits specified assessments/reassessments 'in consequence of' or 'to give effect to' findings/directions in certain appellate or court orders to be completed within twelve months from the end of the month in which such order is received/passed by the competent authority. Interpretation and reasoning: The Court rejected reliance on Section 153(6)(i), holding it could not be read in isolation and must be read with the main provision of Section 153. The Court reasoned that Section 153(6)(i), in context, pertains to the general assessment scheme (including assessments under Sections 143/144), whereas proceedings under Section 153C are explicit and distinct provisions governing search-related assessments emanating from Section 132, with specific limitation periods prescribed by the legislature. Therefore, Section 153(6)(i) could not be used to supplant the specific limitation framework applicable to Section 153C and thereby validate an otherwise time-barred order. Conclusion: Section 153(6)(i) was held inapplicable to extend limitation for the impugned Section 153C assessment; the revenue's attempt to justify the assessment within a twelve-month window from receipt of the Supreme Court order was misconceived. Final dispositive holding: The Court quashed and set aside the assessment order and the demand notice dated 30.04.2024 for the relevant assessment year as time-barred and therefore unsustainable.