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Facts
A search action under Section 132 was conducted on a third party, and incriminating material related to the assessee was found on 25th May, 2013. The AO made several additions to the assessee's income, including suppressed sales and unexplained investments under Section 69C. The CIT(A) allowed the assessee's additional ground, holding the assessment was barred by limitation, prompting the Revenue's appeal.
Held
The Tribunal found that no return of income was pending on the date of search, nor was one filed before the notice under Section 142(1). Therefore, the question of recording satisfaction under Section 153C did not arise. The Tribunal allowed the Revenue's appeal and the assessee's cross-objection for statistical purposes, remanding the matter back to the CIT(A) to examine the issue of Section 153D, which was not adjudicated previously.
Key Issues
Whether the assessment was barred by limitation; applicability of Section 143(3) versus Section 153C for search assessments when no return of income was pending; requirement for recording satisfaction under Section 153C.
Sections Cited
132, 127, 142(1), 143(2), 143(3), 69C, 153A(b), 153B, 153C, 153D, 153(1)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri Inturi Rama Rao & Shri Prakash Chand Yadav
Asst.Year 2013-2014 The Deputy Commissioner of K K Leisures & Tourism Income-tax, Central Cir.2 v. International Pvt. Ltd. Kozhikode. K K Plaza Building Peravoor Kannur – 670 673. PAN : AADCK3339E. (Appellant) (Respondent) CO No.7/Coch/2024 : Asst.Year 2013-2014 K K Leisures & Tourism The Deputy International Pvt. Ltd. v. Commissioner of Income- K K Plaza Building tax, Central Cir.2 Kozhikode. Peravoor Kannur – 670 673. (Cross objector) (Respondent) Revenue by : Smt.Veni Raj, CIT-DR Respondent by : Sri.Arun Raj S, Advocate Date of Pronouncement : 21.05.2025 Date of Hearing : 20.05.2025. O R D E R
Per Prakash Chand Yadav, JM :
The present appeal of the Revenue as well as cross objection of the assessee are arising from the order of the learned Commissioner of Income-tax (Appeals)-3, Kochi [“CIT(A)” for short] dated 16th June, 2023, having DIN & Order No.ITBA/NFAC/S/250/2023-24/1053771372(1) and relates to the assessment year 2013-2014.
“1. The Ld. CIT(A)-3, Kochi has erred in allowing the assessee's additional ground of appeal and thereby holding that the assessment is barred by limitation.
2. The Ld. CIT(A)-3, Kochi has erred in allowing the assessee's additional ground of appeal on the legality of the impugned assessment while not adjudicating on the merits of various additions made by the AO.
3. The Ld. CIT(A)-3, Kochi has erred in admitting the additional ground of appeal as filed by the assessee after a lapse of more than 5 years without adducing any reason that omission of such ground from the original form of appeal was not willful or unreasonable.
4. The Ld. CIT(A)-3, Kochi has erred in allowing the assessee's additional ground of appeal by holding that assessment had to be completed on or before 31.03.2015 as per 153B(b) while simultaneously holding in para 12 of its order that the AO has completed the assessment well within the time barring date before 31.03.2016 as per Section 153(1).
5. The Ld. CIT(A)-3, Kochi has erred in allowing the assessee's additional ground of appeal when the assessment has been completed as per law and after according due opportunity to the assessee.
6. The Ld. CIT(A)-3, Kochi has erred in allowing the assessee's additional ground of appeal ignoring the fundamental legal principle that the assessee is estopped from raising such additional ground after a lapse of more than 5 years when he has appeared in the assessment proceedings and duly cooperated during assessment proceedings without raising any objection during assessment.
7. For the above and other grounds that may be urged at the time of hearing, it is appealed that the order of the ld.CIT(A)-3, Kochi may be set aside and that of the Assessing Officer is restored.”
3. The brief facts of the case as coming out from the orders of the lower authorities are that a search and seizure action u/s.132 of the Act was conducted at the business premises of CO 7/C/24. K K Leisures and Tourism International P Ltd. Hotel Broad Beans on 26th September, 2012. During the course of search, certain incriminating materials related to the present assessee, alleged to have been found and hence the documents pertaining to the assessee have been handed over to the AO of the present assessee. It is relevant to mention here that the AO of the assessee as well as the AO of the searched person are the same. The case of the assessee has been centralized by the concerned authority u/s.127 on 29th January, 2013. Thereafter documents related to the assessee have been taken into cognizance by the AO on 25th May, 2013 (this is the date of search in the case of the present assessee). Thereafter, the AO issued notice u/s.142(1) to the assessee asking for the return of income. In response to this notice, the assessee filed its return of income declaring Nil income on 24th July, 2014. Thereafter statutory notices u/s.143(2) and 142(1) [detailed questionnaire] were issued to the present assessee and additions on account of suppression in the sale of liquor have been made by the ld.AO to the tune of Rs.44,55,627. Similarly, the AO has also made addition on account of suppressed sale of soda and other items to the tune of Rs.6,05,846. At last, the AO has made an addition of Rs.2,21,64,171 u/s.69C of the I.T.Act on the ground that the assessee has made investments over and above the declared value of the building in various areas outside the books of account.
4. Aggrieved with the order of AO, the assessee preferred an appeal before the ld.CIT(A) and inter alia argued that the CO 7/C/24. K K Leisures and Tourism International P Ltd. present assessment is barred by limitation inasmuch as the AO has wrongly invoked the provisions of sec.143(3) instead of sec.153C of the Act. The ld.CIT(A) ignoring that it is a case where no return of income has been filed by the assessee, pleased to hold that the present assessment is barred by limitation inasmuch as the assessment ought to have been framed before 31st March, 2015 instead of 29th March, 2016.
5. Aggrieved with the order of the ld.CIT (A), the Revenue has come up in appeal and has raised various grounds as extracted above. However, the solitary issue which is canvassed before us by the learned CIT-DR is that the CIT(A) has erred in declaring the present assessment as barred by limitation because in this case it is an admitted position of fact that no return of income has been filed by the assessee prior to the date of search (as applicable in the case of present assessee) and only the return of income has been filed after the issuance of notice u/s.142(1) of the Act, and hence, the AO is correct in framing the assessment u/s.143(3).The learned CIT- DR further argued that if we apply sec.143(3) of the Act, then the time limit for completion of assessment would be expiring on 31st March, 2016 and not 31st March, 2015, as held by the ld.CIT(A).
The Counsel for the assessee appearing on behalf of the assessee argued that in this case the document pertaining to the assessee have been received on 25th May, 2013 and hence the search year for the present assessment year is A.Y.2014- 2015 and hence the AO would have completed the assessment CO 7/C/24. K K Leisures and Tourism International P Ltd. in terms of the provisions of sec.153C considering the impugned year as previous year within the meaning of sec.153A(b) of the Act, and hence the time limit for completing the impugned order would be governed by the provisions of sec.153B.
We have heard the rival submissions and perused the material available on record. The arguments advanced by the assessee that the date of search in the case of other person would be the date of handing over the documents is absolutely correct and there is no quarrel on this proposition. However, this is a case where no return of income was pending on the date of search, i.e., 25th May, 2013, meaning thereby it is not a case where the return of income filed by the assessee was already on record of the department and the same was not pending on the date of search. Admittedly, in this case the return of income was filed for the first time on 27th July, 2014 after the issuance of notice under section 142(1).
It is settled position of law that for the assessments of other persons governed by the provisions of section 153C, the Provisions of sec.153A(b) of the Act, are applicable in respect of those years which are not pending on the date of search. However, if there is no return of income, then in our humble opinion that there is no question of resorting to the provisions of section 153A(b) and also there is no need for recording of any satisfaction because the satisfaction as envisaged in sec.153C is to be recorded having regard to the return of income filed by the assessee. Admittedly in the present case no CO 7/C/24. K K Leisures and Tourism International P Ltd. return of income was filed therefore the question of recording satisfaction would not arise at all. Therefore, we allow this appeal of the Revenue and restore the matter back to the file of the CIT(A) for examining the issue of sec.153D, as raised by the assessee but not adjudicated by the CIT(A).
Before parting, we would like to observe that insofar as the cross objection of the assessee is concerned, the assessee is at liberty to raise any legal ground before the ld.CIT(A) in the set- aside proceedings. With these observations, we restore the matter to the file of the ld.CIT (A).
In the result, the appeal filed by the Revenue as well as the cross objection filed by the assessee are allowed for statistical purposes.
Order pronounced on this 21st day of May, 2025.