Loading judgment…
Facts
The assessee, Shri Samiudedin Aslam, filed appeals against assessment orders for AY 2016-17 to 2019-20. The assessment proceedings were initiated under Section 153C following a search operation in the case of M/s. Skill Promoters (P) Ltd, which revealed information pertaining to the assessee. The Assessing Officer (AO) made additions based on alleged unexplained investments in commercial properties.
Held
The Tribunal held that the assessment orders passed by the AO were barred by limitation as per Section 153B of the Income Tax Act, 1961. The AO failed to complete the assessment within the prescribed time limits following the search operation and the issuance of notice under Section 153C. The contention regarding extended time limits under Section 144C and its provisos was also rejected.
Key Issues
Whether the assessment orders passed under Section 153C r.w.s. 144C(13) were barred by limitation as per Section 153B of the Income Tax Act, 1961.
Sections Cited
153C, 144C(13), 153B, 69, 115BBE, 144C, 153(4), 92CA, 153(2), 148, 132, 153A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, Hyderabad ‘B‘ Bench, Hyderabad
Before: Shri Vijay Pal Rao, Vice-Shri Manjunatha G.
ORDER Per. MANJUNATHA, G. A.M. These four appeals filed by the assessee are directed against the separate assessment orders passed by the A. O under section 153C r.w.s. 144C(13) of the Income Tax Act, 1961, all dated 17/01/2025, for the Assessment. Years 2016-17 to 2019- 20 respectively. The assessee has raised similar grounds for all the four Assessment Years. Therefore, for the sake of convenience, Page 1 of 18 these appeals were heard together and are being disposed off, by this common consolidated order. A.Y 2016-17.
The assessee has raised the following grounds of appeal:
The brief facts of the case are that the assessee, an individual, did not file his original return of income for the A.Y 2016-17. A search & seizure operation under section 132 of the I.T. Act, 1961 was conducted in the case of M/s. Skill Promoters (P) Ltd on 22/10/2019. During the course of assessment proceedings of Skill Promoters (P) Ltd, the A.O of the searched person, on analysis of the seized material vide Annexure No. A/SPPL/OFF/01 was satisfied that the information contained in the seized material pertains to Shri Samiuddin Aslam and information contained therein, has a bearing on the determination of total income of Shri Samiuddin Aslam, for A.Ys from 2014-15 to 2020-21.Thereafter, the A.O of the other person (i.e. the assessee Shri Samiuddin Aslam) recorded satisfaction note for initiation of proceedings under section 153C of the Act on 2/8/2022 and issued notice under section 153C of the Act on 03/08/2022. In Page 3 of 18 response, the assessee has filed his return of income on 07/07/2023 declaring ‘nil’ income.
The case of the assessee was selected for scrutiny and during the course of assessment proceedings, the A.O on the basis of material found and seized during the course of search in the case of Skill Promoters (P) Ltd observed that the assessee has purchased commercial spaces at Sarath City Capital Mall, Kondapur, vide agreement dated 19th August, 2015 and 20th December, 2025 and also paid cash consideration for purchase of property. Therefore, called upon the assessee to explain as to why the addition should not be made in respect of investment made in the purchase of commercial space under section 69 of the I.T. Act, 1961. In response, the assessee furnished reply on 11/03/2024 and submitted that he has purchased commercial space from Skill Promoters (P) Ltd and paid consideration through legitimate banking channels only. The A.O after considering the relevant submissions of the assessee and also taking note of the seized material during the course of search, observed that, on analysis of excel sheets pertaining to the assessee, it was found that the name of the assessee is clearly mentioned. Further, the details of property as well as unit no. as mentioned in the seized material exactly match with the details of the property purchased by the assessee. The cheque number and the dates of cheque/banking channels payments mentioned in the seized material match the dates mentioned in the registered sale deed furnished by the assessee. Although, the assessee has denied having paid any cash Page 4 of 18 consideration, but going by the evidences on record, it is very clear that the assessee has paid cash over and above the payments made through legitimate banking channels. Therefore, taking note of relevant details made an addition of Rs. 4,26,80,000/- under section 69 of the I.T. Act, 1961 as unexplained investment and brought to tax under section 115BBE of the Act and issued a draft assessment order dated 28/03/2024.
Aggrieved by the draft assessment order, the assessee has filed objections before the DRP-1, Bengaluru and challenged the adjustments proposed by the A.O, towards the consideration paid for purchase of commercial property under section 69A of the Act. The Ld. DRP-1 Bengaluru, vide its directions issued under section 144C(5) of the I. T., Act,1961 dated 30/12/2024 rejected the explanation of the assessee and upheld the addition proposed by the A.O. Consequent to the DRP directions, the A.O has passed the final assessment order under section 153C r.w.s. 144C(13) of the Act dated 17/01/2025 and determined the total income of the assessee at 4,26,80,000/- by making addition under section 69 of the I.T. Act, 1961 towards investments made for purchase of property.
Aggrieved by the assessment order passed by the A.O, the assessee is in appeal before the Tribunal.
The learned Counsel for the assessee Shri P. Murali Mohan Rao, C.A submitted that the final assessment order passed by the A.O under section 153C r.w.s. 144C(13) of the Act, dated Page 5 of 18 17/01/2025 is barred by limitation going by the provisions of section 153B of the Act, where one year time limit from the end of the financial year in which the books of account or other documents or assets are handed over under section 153C of the Act to the A.O having jurisdiction over such other person has been provided. In the present, the A.O issued notice under section 153C of the Act dated 03/08/2022 and as per the provisions of section 153B of the Act, the A.O ought to have passed the final assessment order on or before 31/03/2024, whereas the A.O has passed the final assessment order on 17/01/2025 which is clearly beyond the limitation provided under the Act. Therefore, he submitted that the order passed by the A.O is invalid and same needs to be quashed. In this regard, he relied upon the decision of the Coordinate Bench of the ITAT Hyderabad in the case of Syed Ahmed Zeeshanuddin vs. ADIT (International Taxation) in dated 29/10/2024.
The Ld. CIT-(DR, Dr. Narendra Kumar Naik present for the Revenue, on the other hand, supporting the order of the Ld. CIT (A) submitted that there is no merit in the argument of the learned Counsel for the assessee in light of provisions of section 153B of the Act, because once the assessee is an eligible assessee then as per the provisions of section 144C of the Act, the A.O will get one month time from the end of the month in which the directions of the DRP was received and in the present case, the Ld. DRP has issued directions dated 30/12/2024 and the A.O has passed the final assessment order on 17/01/2025 which is well Page 6 of 18 within the limitation provided under section 144C of the Act. Therefore, he submitted that there is no merit in the argument of the learned Counsel for the assessee and thus, the legal ground taken by the assessee should be rejected.
We have heard both the parties, perused the material available on record and had gone through the orders of the authorities below. There is no dispute with regard to the fact that the assessee is an ‘eligible assessee’ in terms of section 144C(15) of the Act and in case of an eligible assessee, the assessment should be framed under section 144C of the Act, and as per section 153, the AO will get 12 months additional time for completion of assessment or reassessment. In the present case, the assessments have been completed under section 153C of the Act, in pursuant to the search operations conducted under section 132 of the Act, in the case of Skill Promoters (P) Ltd. Further, during the course of search proceedings, certain incriminating material found reveals or pertaining to the assessee and therefore, the A.O of the searched person, has recorded satisfaction under section 153C of the Act, in light of incriminating material and found that the information contained therein has a bearing on the determination of total income of the assessee for the A.Ys 2014-15 to 2020-21. Thereafter, the A.O of the other person, the assessee recorded satisfaction note for initiating proceedings under section 153C of the Act, on 02/08/2022 and issued notice under section 153C of the Act dated 3/8/2022. In case of search assessment under section 153A or 153C of the Act, time limit for completion of Page 7 of 18 the assessment has been provided under section 153B of the Act and as per section 153B of the Act, notwithstanding anything contained in any other provisions of the Act, the A.O shall make an order of assessment or re-assessment in respect of each assessment year falling within six assessment years referred to in clause (b) of sub-section (1) of section 153A within a period of 21 months from the end of the financial year in which the last of the authorizations for search under section 132 or requisition under section 132A was executed. Further, third proviso to section 153B, where a search is conducted or last of authorization was executed on after 1st April 2019, for the words “twenty-one” months the words “twelve months” had been substituted. In other words, if search is conducted on or after 1st April 2019, the time limit for completion of assessment is 12 months from the end of financial year in which last authorization was executed or 12 months from the end of financial year in which books of accounts or other documents received by the Assessing Officer having jurisdiction over other such person. Therefore, as per section 153B and third proviso, time limit for making the assessment or re-assessment in the case of the person referred to in section 153C, shall be 12 months from the end of the financial year in which the books of account or documents or assets seized are handed to the A.O having jurisdiction over such other person whichever is later. Since the provision of section 153B of the Act is a separate code and time limit provided thereunder is applicable, notwithstanding anything contained in section 153, in our Page 8 of 18 considered view, the assessment shall be completed as per the time limit prescribed under section 153B of the Act. If we go by the time limit provided under section 153B of the Act, in the present case, search was conducted on 22/10/2019, in the case of M/s. Skill Promoters (P) Ltd and if you consider 12 months from the end of the financial year in which the last of authorization was executed, then the AO ought to have completed on 31/03/2021. Further, the A.O recorded satisfaction note on 2/8/2022 and issued notice under section 153C of the act on 3/8/2022 and if you consider 12 months from the end of the financial year in which notice under section 153C of the Act dated 3/8/2022 was issued, then the AO shall complete the assessment on or before 31/03/2024. In the present case, the A.O passed the final assessment order on 17/01/2025, which is clearly barred by limitation as per section 153B of the Act. Therefore, in our considered view, the final assessment order passed by the A.O is clearly barred by limitation and liable to be quashed.
10. In so far as the argument of the Ld. CIT-DR, in light of provisions of section 144C of the act, that if an assessee is an eligible assessee and as per the provisions of section 153B of the Act and 4th proviso provided therein, where a reference 92CA of the Act is made, the period available for making the assessment order or re-assessment shall be extended by another 12 months and if we consider the extended period of 12 months, then the order passed by the A.O on 17/01/2025 is within the time limit provided under section 153B of the Act. In our considered view, Page 9 of 18 although the assessee is an eligible assessee, as per section 144C(15) of the Act, but the fact remains that as per 4th proviso to section 153B of the Act, the extended period of 12 months is available to the A.O for making an order of assessment or re- assessment only in a case where a reference under section 92CA of the Act is made for determining the Arms’ Length Price of the assessee, but said extended time limit of 12 months is not available to an eligible assessee, which is evident from wordings of section 153B and fourth proviso provided thereon. Therefore, in our considered view, the arguments of the ld. CIT-DR does not hold good and thus, the A.O ought to have completed the assessment within 12 months from the end of the financial year in which the books of account and other documents were received from the A.O of the searched person without considering the 4th proviso to section 153B of the Act. Further, this issue is also, now covered in favour of the assessee by the decision of the ITAT Hyderabad Benches in the case of Syed Ahmed Zeeshanuddin vs. ADIT in dated 29th October, 2024, where the Tribunal after considering the relevant provisions of sections 148, 144C and 153C of the Act, have held that the extended period of 12 months in terms of section 153(4) of the Act is available only where a reference under section 153CA of the Act is made to the TPO, but not in the case of the assessment of a non- resident under section 148 r.w.s. 144C of the I.T. Act, 1961. Therefore, in our considered view, the argument of the Ld. CIT-DR does not hold good and thus, rejected.
11. The assessee has relied upon the decision of the ITAT, Hyderabad Benches, in the case of Shri Syed Ahmed Zeeshanuddin vs. ADIT in dated 29th October 2024. The Coordinate Bench of the ITAT, on identical set of facts and in light of an assessment framed under section 153C of the Act and consequent time limit provided under section 153B of the Act, held as under: “8. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. There is no dispute with regard to the fact that the appellant is an eligible assessee in terms of section 144C(15) of the Act and in case of an eligible assessee, the assessment shall be framed in terms of provision to section 144C of the Act. But fact remains that, the present assessments have been completed u/s 153C of the Act in consequent to search conducted u/s 132 of the Act. In the case of search assessments u/s 153A or 153C, the time limit for completion of assessment has been provided u/s 153B of the Act. As per section 153B, notwithstanding anything contained in any other provisions of this Act, the Ld.AO shall make an order of assessment or reassessment in respect of each assessment year falling within six assessment years referred to in Clause (b) sub section (1) of section 153A within a period of 21 months from the end of the financial year in which the last of the authorizations for search u/s 132 or for requisition u/s 132A was executed. Second proviso to section 153B prescribed time limit for making the assessment or reassessment in the case of the person referred to in section 153C and as per said proviso, the assessment shall be completed within 18 months from the end of the financial year in which the last of the authorizations for search u/s 132 or 12 months from the end of the financial year in which the books of accounts or documents or assets seized are handed over Page 11 of 18 to the Assessing Officer having jurisdiction over such other person whichever is later. Since the provisions of section 153B itself is a separate code and time limit provided thereunder is applicable, notwithstanding anything contained in section 153, in our considered view, the assessment shall be completed on or before time limit prescribed u/s 153B of the Act. If we go by time-limit provided u/s 153B of the Act, in the present case, search was taken place on 22.10.2019 in the case of M/s Skill Promoters Pvt Ltd. and 18 months from the end of the financial year in which last of authorizations was executed is 31.12.2022. Further the Ld.AO received information on 19.01.2022 and 12 months from the end of the financial year in which the information received by the Ld.AO is on 31.03.2023. Therefore, in our considered view, the Ld.AO ought to have completed the assessment on or before 31.03.2023 irrespective of the fact that the assessee is an eligible assessee in terms of section 144C and 153B of the Act. Since, the Ld.AO has passed the final assessment order on 19.01.2024, in our considered view, the assessment order passed by the Ld.AO is beyond limitation provided u/s 153B and thus, void ab-initio and liable to be quashed.
9. The assessee had relied upon the decision of ITAT Hyderabad in the case of Shri Syed Gulam Mohiuddin Vs. ITO in dated 03.06.2024. We find that the coordinate Bench had considered an identical issue of non-resident in terms of section 148 of the Act and after considering the relevant facts including the status of the assessee as non- resident and also the provisions of section 144C(15) and 153 of the Act, held that the extended time of 12 months in terms of section 153(4) of the Act is available only in case, where reference u/s 92CA is made to Transfer Pricing Officer, but not in a case of an assessment of non-resident u/s 148 r.w.s. 144C of the Act. Relevant findings of the Tribunal are as under:
Page 12 of 18 “8. We have heard both the parties, perused the material available on record and gone through the orders of the authorities below. The assessee is a non-resident individual for the A.Y 2017- 18 and is an eligible assessee as per section 144C(15) of the I.T. Act, 1961. As per section 144C of the Act, the assessment of an eligible assessee shall be dealt with in accordance with the said provision. As per the provision of section 144C, in case of an eligible assessee, the Assessing Officer shall pass a draft assessment order and served on the assessee, if he propose to make any variation in his total income. The assessee, after receipt of draft assessment order shall have two options. As per subsection (2) of section 144C, on receipt of draft assessment order, the eligible assessee shall within 30 days file its acceptance of the variations to the Assessing Officer or file his objection, if any, to such variation with the DRP. If the eligible assessee file his acceptance to the Assessing Officer, then the Assessing Officer shall complete the assessment within one month from the end of the month in which the acceptance is received. In case an eligible assessee files objection before the DRP, then the DRP shall issue its direction within 9 months from the end of the month in which the draft order is forwarded to the assessee. Thereafter, the Assessing Officer shall pass his final assessment order within one month from the end of the month in which such direction is received.
9. In the present case, there is no dispute with regard to the fact that the appellant has filed his objection against the draft assessment order passed by the Assessing Officer before the DRP. Therefore, in ordinary course, the extended time limit for completion of the assessment should be available to the Assessing Officer as per section 144C r.w.s. 153C of the I.T. Act, 1961. But, the argument of the learned Counsel for the assessee is that as per section 153(4) of the Act, the extended period of 12 months for completion of assessment is available only where a reference under sub section (1) of section 92CA is made during the course of the assessment or re- assessment, but not in a case where there is no reference to the TPO. We find force in the argument of the learned Counsel for the assessee for the simple reason that, as per section 153(2), the time limit for completion of assessment or re- assessment shall be 12 months from the end of the financial year in which notice u/s 148 was served. However, sub-section (4) of section 153 extends the said time limit by another 12 months notwithstanding anything contained in sub-section (1), Page 13 of 18 (1A), (2), (3) and (3A) where a reference u/s 92CA)(1) is made during the assessment proceedings to the TPO. In other words, except the cases of the reference to the TPO, extended time limit of 12 months for completion of assessment is not available even in a case of Non-Resident assessment, even though the said assessment proceedings is covered u/s 144C of the Act. Since the extended time limit of 12 months is not available in the case of Non-Resident as per section 153(4) of the Act, in our considered view, the Assessing Officer ought to have completed the assessment as per the provisions of section 153(2) of the Act, which is one year from the end of the financial year in which notice u/s 148 was served. In the present case, if we go by date of notice issued u/s 148 of the Act i.e. 30.03.2021, the time limit for completing the assessment u/s 147 was available up to 31/03/2022 and thus, the final assessment order passed by the Assessing Officer u/s 144 r.w.s. 144C dated 12.01.2023 is clearly barred by limitation.
This proposition is covered by the decision of the Hyderabad Bench of the Tribunal in the case of Shri Farooq Ali vs. Income Tax Officer in order dated 10/04/2024. The relevant findings of the Tribunal are as under: “23. We have heard the rival arguments made by both the sides, perused the orders of the AO and the learned DRP and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us by both sides. We find the AO in the instant case made addition of Rs.2,55,75,000/- u/s 69 of the I.T. Act on the ground that as per the sale deed, the assessee had paid total sale consideration of Rs.2,55,75,000/- on 5.10.2016 to the vendors by way of cash, that the vendors have admitted and acknowledged the same and the assessee could not explain the source of such payment made for purchase of the immovable property. While doing so, he further held that the sale deed in itself is conclusive evidence and the contents of the same could not be proved further and a civil suit filed by the 3rd party claiming the title to the said property after the registration of sale deed between the assessee and the vendors will not negate the contents of the sale deed. 23.1 It is the submission of the learned Counsel for the assessee that the assessment order passed by the Assessing Officer is barred by limitation. It is also his submission that the Page 14 of 18 assessee being an NRI and settled in UAE does not have any economic activities in India, therefore, there cannot be any addition of unexplained investment in the hands of the assessee as these falls under article 22 of Indo-UAE DTAA which makes such income taxable in the country of residence i.e. UAE unless these investments are proved to be made out of income generated in India.
We find some merit in the above argument of the learned Counsel for the assessee. A perusal of the record shows that the notice u/s 148 was issued on 24.2.2021, a fact not disputed by the Revenue. There is no reference made to the TPO for making any adjustment of arm’s length price of the international taxation. We find the provisions of section 153(2) read as under: “153. Time limit for completion of assessment, reassessment and re-computation. (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: Provided that in respect of an order of assessment relating to the assessment year commencing on the 1st day of April, 2018, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: [Provided further that in respect of an order of assessment relating to the assessment year commencing on the— (i) 1st day of April, 2019, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted; (ii) 1st day of April, 2020, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "eighteen months" had been substituted: Provided also that in respect of an order of assessment relating to the assessment year commencing on or after the 1st day of April, 2021, the provisions of this sub-section shall Page 15 of 18 have effect, as if for the words "twenty-one months", the words "nine months" had been substituted. (1A) Notwithstanding anything contained in sub-section (1), where a return under sub-section (8A) of section 139 is furnished, an order of assessment under section 143 or section 144 may be made at any time before the expiry of nine months from the end of the financial year in which such return was furnished. (2) No order of assessment, reassessment or re-computation shall be made under section 147 after the expiry of nine months from the end of the financial year in which the notice under section 148 was served: Provided that where the notice under section 148 is served on or after the 1st day of April, 2019, the provisions of this sub- section shall have effect, as if for the words "nine months", the words "twelve months" had been substituted.”
Thus, a perusal of the above provision clearly shows that the time limit for completion of the assessment in the present case lapses on 31.3.2022. However, the final assessment order u/s 144 r.w.s. 144C has been passed on 30.01.2023 which is beyond the time limit prescribed u/s 153(2). Since the assessment order has been passed on 30.01.2023 as against 31.03.2022, therefore, the same, in our opinion, is barred by limitation and accordingly, the assessment order is liable to be quashed. We, therefore, quash the re-assessment proceedings being barred by limitation. Since the assessee succeeds on this preliminary legal issue, the other grounds become academic in nature and therefore, are not being adjudicated.
In this view of the matter and considering the facts and circumstances and also by following the decision of the Hyderabad Bench of the Tribunal in the case of Farooq Ali vs. Income Tax Officer (Supra), we are of the considered view that the assessment order passed by the Assessing Officer u/s 144 r.w.s. 144C(13) dated 12.01.2023 is barred by limitation and thus we quash the re-assessment order passed by the Assessing Officer.”
10. In view of this matter and by respectfully following the decision of Hon'ble High Court of Rajasthan and also the Page 16 of 18 decision of the coordinate Bench of Hyderabad in the case of Shri Syed Gulam Mohiuddin (supra), we are of the considered view that the final assessment order passed u/s 153C r.w.s.144C(13) dated 19.01.2024 is barred by limitation and liable to be quashed. Thus, we quash the assessment order passed by the Ld.AO dated 19.01.2024. “ 12. In this view of the matter and considering the facts and circumstances of the case and also by following the decision of ITAT Hyderabad Benches, in the case of Syed Ahmed Zeeshanuddin vs. ADIT (Supra), we are of the considered view that the final assessment order passed by the AO under section 153C r.w.s. 144C(13) of the Act dated 17/01/2025 is barred by limitation and liable to be quashed. Thus, we quash the final assessment order passed by the A.O under section 153C r.w.s. 144C(13) of the Act, dated 17/01/2025 for the A.Y 2016-17.
1. , 1224 and 1225/Hyd/2025 A.Ys 2017-18 to 2019-20 13. The facts and issues involved in these three appeals filed by the assessee for Assessment. Years 2017-18, 2018-19 and 2019-20 are identical to the facts and issues, which we had considered in assessee’s own case for the A.Y 2016-17 in . The reasons given by us, in preceding para- Nos. 9 to 12, shall mutatis mutandis apply to these three appeals, as well. Therefore, for similar reasons, we quash the final assessment order passed by the A.O under section 153C r.w.s. 144C(13) dated 17/01/2025 for the A.Ys 2017-18 to 2019- 20.