THE ACIT, CENTRAL CIRCLE-1(3), AHMEDABAD vs. ASHISH P PATEL, AHMEDABAD

ITSSA 471/AHD/2019Status: DisposedITAT Ahmedabad01 August 2025AY 2005-0628 pages
AI SummaryAllowed

What were the facts?

The assessee, Ashish Prafulbhai Patel, engaged in real estate and financing, was subject to a search under Section 132 on August 4, 2006. A settlement application was filed for AYs 2001-02 to 2007-08, disclosing additional income. This application was rejected by the Settlement Commission on October 4, 2007. The Gujarat High Court stayed the assessment proceedings on May 12, 2008. A second search was conducted on October 7, 2009. The Assessing Officer (AO) issued fresh notices under Section 153A on March 8, 2011, for AYs 2004-05 to 2007-08, following the second search. The High Court, on December 19, 2011, restrained the AO from proceeding with assessments for AYs 2004-05 to 2007-08. Subsequently, the High Court set aside the Settlement Commission's order to a limited extent, reviving proceedings for certain AYs. The AO passed assessment orders for AYs 2004-05 and 2006-07 on November 3, 2017. The Settlement Commission declared the assessee's application invalid on November 16, 2017, reviving assessment proceedings for AYs 2001-02, 2002-03, 2003-04, 2005-06, and 2007-08. The appeals before the ITAT pertain to AYs 2005-06 and 2007-08.

What did the Tribunal hold?

The Tribunal held that the assessment orders for AYs 2005-06 and 2007-08 were passed beyond the statutory time limit and were therefore invalid. The Tribunal reasoned that the second search conducted by the department caused all pending proceedings, including those stayed by the High Court, to abate under Section 153A. Consequently, the limitation period for completing these assessments should be reckoned from the date of the second search. The Tribunal found that the AO issued a fresh notice under Section 153A for AYs 2004-05 to 2007-08 after the second search, acknowledging the abatement of earlier proceedings. The Tribunal also noted that the third proviso to Explanation to Section 153B, inserted by the Finance Act, 2017, was not applicable to the assessment proceedings in question. The Tribunal concluded that the time limit for making the assessment under Section 143(3) read with Section 153A for AYs 2005-06 and 2007-08 expired on May 9, 2017, whereas the assessment orders were made on March 9, 2018, and November 30, 2018, respectively, making them beyond the statutory time limit. The Tribunal quashed the assessment orders as being passed without jurisdiction and therefore null and void. As a consequence, the other grounds of appeal and cross-objections were dismissed as infructuous. The ratio decidendi is that assessments made beyond the prescribed time limit under Section 153A, especially after abatement due to a subsequent search, are invalid and liable to be quashed.

What were the issues?

1. Whether the assessment orders for AYs 2005-06 and 2007-08 are void and illegal due to being passed beyond the prescribed time limit under the Act, as argued by the assessee. 2. Whether the AO was entitled to proceed with assessment proceedings for the years under consideration following the second search, despite the stay granted by the Hon'ble High Court on the first search assessment proceedings, as contended by the revenue. Assessee's contentions: The assessment proceedings for AYs 2005-06 and 2007-08 have become void and without jurisdiction as the assessment orders were passed beyond the prescribed time limit. The assessee relies on the fact that the second search led to abatement of pending proceedings under Section 153A, and the limitation period for completing these assessments should be reckoned from the date of the second search. The assessee argues that the AO issued a fresh notice under Section 153A for AYs 2004-05 to 2007-08 after the second search, acknowledging the abatement of earlier proceedings. The assessee also contends that the third proviso below Explanation to Section 153B, inserted by the Finance Act, 2017, is not applicable as the proceedings predate the amendment. Revenue's contentions: The revenue argued that the AO availed of the time available for completing the assessment pursuant to the second search. The revenue's argument, as reflected in the CIT(A)'s reasoning, suggests a cumulative period for completing the assessment, including periods before and after the High Court's clarification order.

Which sections of the Income-tax Act were involved?

Section 132,Section 153A,Section 143(3),Section 250,Section 263,Section 245HA,Section 245D(2C),Section 153B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “A” BENCH, AHMEDABAD

For Appellant: Shri Vartik Chokshi & Shri Biren Shah, ARs
Hearing: 06.05.2025Pronounced: 01.08.2025

PER DR. B.R.R. KUMAR, VICE-PRESIDENT

The order continues below.

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