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Facts
The appeals for Assessment Year 2017-18 arose after a search was initiated on 16.12.2016 in the case of Sh. Purushottam Lal Soni. The Assessing Officer initially initiated proceedings against the assessee under Section 153C, which were subsequently withdrawn, and the assessment was then completed under Section 143(3). The assessee challenged this assessment, arguing it was barred by limitation due to procedural irregularities.
Held
The Tribunal, guided by Supreme Court judgments in Jasjit Singh and SSP Aviation, held that once proceedings were initiated under Section 153C and then withdrawn, the Assessing Officer could not revert to completing the assessment under Section 143(3) for the same assessment year. Consequently, the assessments made under Section 143(3) were deemed outside its scope and declared void ab initio.
Key Issues
Whether an assessment completed under Section 143(3) is legally valid for an assessment year where search-initiated proceedings under Section 153C were first started and then withdrawn, and if such an assessment is barred by limitation.
Sections Cited
153, 153A, 153C, 143, 143(3), 144, 132, 132A, 139, 147, 148, 149, 151, 92CA, 254, 263, 264, 250, 260, 262, 245C, 245D, 245Q, 245R, 144BA, 10, 12AB, 142, 142A, 158A, 90, 90A, 245HA, 245M, 154, 155, 158BE, 244A, 150, 129, 153B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: Dr. B. R. R. KumarSh. Sudhir Kumar
Asstt. Year : 2017-18 Bijay Kumar Soni, Vs DCIT, C/o Anil Jain DD & Co., Central Circle-14, 611, Surya Kiran Building, 19, New Delhi-110055 K. G. Marg, New Delhi-110001 (APPELLANT) (RESPONDENT) PAN No. AOLPS5917H : Asstt. Year : 2017-18 DCIT, Vs Bijay Kumar Soni, Central Circle-14, 61/14, Block No. 61, Ram Jas, New Delhi-110055 Karol Bagh, New Delhi-110005 (APPELLANT) (RESPONDENT) PAN No. AOLPS5917H Assessee by : Sh. Anil Jain, CA Revenue by : Ms. Monika Dhami, CIT-DR Date of Hearing: 01.08.2023 Date of Pronouncement: 06.09.2023 ORDER Per Dr. B. R. R. Kumar, Accountant Member:
The present appeals have been filed by the assessee and the Revenue against the order of ld. CIT(A)-26, New Delhi dated 30.05.2023.
At the outset, the assessee submitted that the case of the assessee for the assessment year before us is barred by limitation.
& 2144/Del/2023 2 Vijay Kumar Soni 3. The facts are as under:
Date of search in the case of Sh. Purushottam Lal Soni – 16.12.2016 Date of recording of satisfaction – 26.03.2019 The assessment year involved – 2017-18 Assessment has been completed u/s 143(3) Date of issue of notice u/s 153C – 27.03.2019 Date of withdrawal of the said notice – 31.03.2019 (page no. 2 of CIT(A) order)
From the above, it is found that the Assessing Officer though initiated proceedings u/s 153C and subsequently withdrawn the proceedings and the notice issued u/s 153C and initiated proceedings u/s 143(3) and completed the assessment u/s 143(3).
In this regard, the provisions of Section 153C are as under:
“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— & 2144/Del/2023 3 Vijay Kumar Soni (i) the 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) the 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 38[***] the 1st day of April, 2021, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "nine 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, 2022, the provisions of this sub-section shall have effect, as if for the words "twenty-one months", the words "twelve months" had been substituted.] 40[(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 41[twelve] months from the end of the financial year in which such return was furnished.] (2) No order of assessment, reassessment or recomputation 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.
(3) Notwithstanding anything contained in sub-sections (1) 42[, (1A)] and (2), an order of fresh assessment 43[or fresh order & 2144/Del/2023 4 Vijay Kumar Soni under section 92CA, as the case may be,] in pursuance of an order under section 254 or section 263 or section 264, setting aside or cancelling an assessment, 43[or an order under section 92CA, as the case may be], may be made at any time before the expiry of nine months from the end of the financial year in which the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the 44[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be] :
Provided that where the order under section 254 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner or, as the case may be, the order under section 263 or section 264 is passed by the 44[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be,] 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.
45[(3A) Notwithstanding anything contained in sub-sections (1), (1A), (2) and (3), where an assessment or reassessment is pending on the date of initiation of search under section 132 or making of requisition under section 132A, the period available for completion of assessment or reassessment, as the case may be, under the said sub-sections shall,— (a) in a case where such search is initiated under section 132 or such requisition is made under section 132A; (b) in the case of an assessee, to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to; & 2144/Del/2023 5 Vijay Kumar Soni (c) in the case of an assessee, to whom any books of account or documents seized or requisitioned pertains or pertain to, or any information contained therein, relates to, be extended by twelve months.] (4) Notwithstanding anything contained in 46[sub-sections (1), (1A), (2), (3) and (3A)], where a reference under sub-section (1) of section 92CA is made during the course of the proceeding for the assessment or reassessment, the period available for completion of assessment or reassessment, as the case may be, under the said 46[sub-sections (1), (1A), (2), (3) and (3A)], shall be extended by twelve months.
(5) Where effect to an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 is to be given by the Assessing Officer 47[or the Transfer Pricing Officer, as the case may be,] wholly or partly, otherwise than by making a fresh assessment or reassessment 47[or fresh order under section 92CA, as the case may be], such effect shall be given within a period of three months from the end of the month in which order under section 250 or section 254 or section 260 or section 262 is received by the Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be, the order under section 263 or section 264 is passed by the 48[Principal Chief Commissioner or Chief Commissioner or Principal Commissioner or Commissioner, as the case may be] :
Provided that where it is not possible for the Assessing Officer 47[or the Transfer Pricing Officer, as the case may be,] to give effect to such order within the aforesaid period, for reasons beyond his control, the Principal Commissioner or Commissioner on receipt of such request in writing from the Assessing Officer 47[or the Transfer Pricing Officer, as the case may be], if satisfied, may allow an additional period of six months to give effect to the order:
& 2144/Del/2023 6 Vijay Kumar Soni Provided further that where an order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 requires verification of any issue by way of submission of any document by the assessee or any other person or where an opportunity of being heard is to be provided to the assessee, the order giving effect to the said order under section 250 or section 254 or section 260 or section 262 or section 263 or section 264 shall be made within the time specified in sub-section (3).
49[(5A) Where the Transfer Pricing Officer gives effect to an order or direction under section 263 by an order under section 92CA and forwards such order to the Assessing Officer, the Assessing Officer shall proceed to modify the order of assessment or reassessment or recomputation, in conformity with such order of the Transfer Pricing Officer, within two months from the end of the month in which such order of the Transfer Pricing Officer is received by him.] (6) Nothing contained in sub-sections (1) 50[, (1A)] and (2) shall apply to the following classes of assessments, reassessments and recomputation which may, subject to the provisions of 51[sub-sections (3), (5) and (5A)], be completed— (i) where the assessment, reassessment or recomputation is made on the assessee or any person in consequence of or to give effect to any finding or direction contained in an order under section 250, section 254, section 260, section 262, section 263, or section 264 or in an order of any court in a proceeding otherwise than by way of appeal or reference under this Act, on or before the expiry of twelve months from the end of the month in which such order is received or passed by the 52[Principal Chief Commissioner or Chief Commissioner or] Principal Commissioner or Commissioner, as the case may be; or (ii) where, in the case of a firm, an assessment is made on a partner of the firm in consequence of an assessment made on the firm under section 147, on or before the expiry of twelve & 2144/Del/2023 7 Vijay Kumar Soni months from the end of the month in which the assessment order in the case of the firm is passed.
(7) Where effect to any order, finding or direction referred to in sub-section (5) or sub-section (6) is to be given by the Assessing Officer, within the time specified in the said sub- sections, and such order has been received or passed, as the case may be, by the income-tax authority specified therein before the 1st day of June, 2016, the Assessing Officer shall give effect to such order, finding or direction, or assess, reassess or recompute the income of the assessee, on or before the 31st day of March, 2017.
(8) Notwithstanding anything contained in the foregoing provisions of this section, sub-section (2) of section 153A or sub-section (1) of section 153B, the order of assessment or reassessment, relating to any assessment year, which stands revived under sub-section (2) of section 153A, shall be made within a period of one year from the end of the month of such revival or within the period specified in this section or sub- section (1) of section 153B, whichever is later.
(9) The provisions of this section as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment, reassessment or recomputation made before the 1st day of June, 2016:
Provided that where a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 has been issued prior to the 1st day of June, 2016 and the assessment or reassessment has not been completed by such date due to exclusion of time referred to in Explanation 1, such assessment or reassessment shall be completed in accordance with the provisions of this section as it stood immediately before its substitution by the Finance Act, 2016 (28 of 2016).
Explanation 1.—For the purposes of this section, in computing the period of limitation— & 2144/Del/2023 8 Vijay Kumar Soni (i) the time taken in reopening the whole or any part of the proceeding or in giving an opportunity to the assessee to be re- heard under the proviso to section 129; or (ii) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (iii) the period commencing from the date on which the Assessing Officer intimates the Central Government or the prescribed authority, the contravention of the provisions of clause (21) or clause (22B) or clause (23A) or clause (23B) 53[, under clause (i) of the first proviso] to sub-section (3) of section 143 and ending with the date on which the copy of the order withdrawing the approval or rescinding the notification, as the case may be, under those clauses is received by the Assessing Officer; or (iv) the period commencing from the date on which the Assessing Officer directs the assessee to get his accounts audited 54[or inventory valued] under sub-section (2A) of section 142 and— (a) ending with the last date on which the assessee is required to furnish a report of such audit 54[or inventory valuation] under that sub-section; or (b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or (v) the period commencing from the date on which the Assessing Officer makes a reference to the Valuation Officer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Officer is received by the Assessing Officer; or (vi) the period (not exceeding sixty days) commencing from the date on which the Assessing Officer received the declaration & 2144/Del/2023 9 Vijay Kumar Soni under sub-section (1) of section 158A and ending with the date on which the order under sub-section (3) of that section is made by him; or (vii) in a case where an application made before the Income-tax Settlement Commission is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which an application is made before the Settlement Commission under section 245C and ending with the date on which the order under sub-section (1) of section 245D is received by the Principal Commissioner or Commissioner under sub-section (2) of that section; or (viii) the period commencing from the date on which an application is made before the Authority for Advance Rulings 55[or before the Board for Advance Rulings] under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Principal Commissioner or Commissioner under sub-section (3) of section 245R; or (ix) the period commencing from the date on which an application is made before the Authority for Advance Rulings 56[or before the Board for Advance Rulings] under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under sub-section (7) of section 245R; or (x) the period commencing from the date on which a reference or first of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; or & 2144/Del/2023 10 Vijay Kumar Soni (xi) the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner or Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction under sub- section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the 57[Assessing Officer; or (xii) the period (not exceeding one hundred and eighty days) commencing from the date on which a search is initiated under section 132 or a requisition is made under section 132A and ending on the date on which the books of account or other documents, or any money, bullion, jewellery or other valuable article or thing seized under section 132 or requisitioned under section 132A, as the case may be, are handed over to the Assessing Officer having jurisdiction over the assessee,— (a) in whose case such search is initiated under section 132 or such requisition is made under section 132A; or (b) to whom any money, bullion, jewellery or other valuable article or thing seized or requisitioned belongs to; or (c) to whom any books of account or documents seized or requisitioned pertains or pertain to, or any information contained therein, relates to; or] 58[(xiii) the period commencing from the date on which the Assessing Officer makes a reference to the Principal Commissioner or Commissioner under the second proviso to sub- section (3) of section 143 and ending with the date on which the copy of the order under clause (ii) or clause (iii) of the fifteenth proviso to clause (23C) of section 10 or clause (ii) or clause (iii) of sub-section (4) of section 12AB, as the case may be, is received by the Assessing Officer,] shall be excluded:
& 2144/Del/2023 11 Vijay Kumar Soni Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in sub- sections (1), 59[(1A),] (2), (3) and sub-section (8) available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:
Provided further that where the period available to the Transfer Pricing Officer is extended to sixty days in accordance with the proviso to sub-section (3A) of section 92CA and the period of limitation available to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly:
Provided also that where a proceeding before the Settlement Commission abates under section 245HA, the period of limitation available under this section to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, shall, after the exclusion of the period under sub- section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year; and for the purposes of determining the period of limitation under sections 149, 154, 155 and 158BE and for the purposes of payment of interest under section 244A, this proviso shall also apply accordingly:
60[Provided also that where the assessee exercises the option to withdraw the application under sub-section (1) of section 245M, the period of limitation available under this section to the Assessing Officer for making an order of assessment, reassessment or recomputation, as the case may be, shall, after the exclusion of the period under sub-section (5) of the said section, be not less than one year; and where such period of & 2144/Del/2023 12 Vijay Kumar Soni limitation is less than one year, it shall be deemed to have been extended to one year:
Provided also that for the purposes of determining the period of limitation under sections 149, 154 and 155, and for the purposes of payment of interest under section 244A, the provisions of the fourth proviso shall apply accordingly.] Explanation 2.—For the purposes of this section, where, by an order referred to in clause (i) of sub-section (6),— (a) any income is excluded from the total income of the assessee for an assessment year, then, an assessment of such income for another assessment year shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order; or (b) any income is excluded from the total income of one person and held to be the income of another person, then, an assessment of such income on such other person shall, for the purposes of section 150 and this section, be deemed to be one made in consequence of or to give effect to any finding or direction contained in the said order, if such other person was given an opportunity of being heard before the said order was passed.”
On the issue of limitation, we are guided by the judgment of Hon’ble Supreme Court in the case of Commissioner of Income Tax-14 Vs. Jasjit Singh in CA No. 6566 of 2023 dated 26.09.2023.
The Hon’ble Apex Court enunciated as under:
“7. Sections 153A and Section 153C of the Income Tax Act, 1961 to the extent they are relevant are extracted below:
& 2144/Del/2023 13 Vijay Kumar Soni ”153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 61[but on or before the 31st day of March, 2021], the Assessing Officer shall—
(a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139;
(b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is 3made and for the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate:….”
“153C.(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or & 2144/Del/2023 14 Vijay Kumar Soni (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A:
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub- section 4(1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person :
Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated.”
8. In SSP Aviation (supra) the High Court inter alia reasoned as follows:
& 2144/Del/2023 15 Vijay Kumar Soni “14. Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date.”
It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the & 2144/Del/2023 16 Vijay Kumar Soni date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement.
This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials – of the search party, under Section 132 – would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually “relate back” as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee’s prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts.
For the foregoing reasons, the Court finds no merit in these appeals; they are accordingly dismissed, without order on costs.”
Thus, on going through the judgments of Hon’ble jurisdictional High Court and Hon’ble Apex Court, we have no hesitation to hold that the Assessments made for A.Y. 2017-18 u/s 143(3) consequent to the satisfaction note recorded on 26.03.2019 are outside the scope of Section 143(3) of the Income Tax Act, 1961 and hence, the assessments are treated as void ab initio. Consequently, the assessment made u/s 143(3) for A.Y. 2017-18 shall also be treated as void.
& 2144/Del/2023 17 Vijay Kumar Soni 9. Since, the assessee succeeds in Cross Appeal on jurisdictional issue, the appeal of the Revenue is dismissed as infructuous. Order Pronounced in the Open Court on 06/09/2024.