Srinivasa Reddy Yeturu Vs DCIT (ITAT Hyderabad)
Assessment Quashed as Time-Barred Because Only 144 Days Excludable Under Section 153 – Tribunal Clarifies Search Limitation Rule; Unsigned Sale Agreement and Alleged On-Money Addition Fail as Assessment Held Barred by Limitation; Search-to-Handover Period Cannot Automatically Extend Assessment Time – Order Quashed for Exceeding Statutory Deadline; Section 153 Explained: Only Period Within Limitation Year Excludable, Not Entire 180 Days – Tribunal Sets Aside Assessment; On-Money Addition Under Section 69A Fails as Assessment Order Found Beyond Limitation Period.
The appeal before the Tribunal arose from an order of the Commissioner of Income Tax (Appeals), Hyderabad, for Assessment Year (AY) 2022-23. The assessee had filed his return declaring total income of Rs. 58,23,078. A search and seizure operation under Section 132 was conducted on 4 January 2023 in the case of a group of entities, during which the assessee’s case was also covered.
During the search, an agreement of sale dated 31 October 2021 was found and seized from the assessee’s residence. The agreement recorded that the assessee agreed to purchase agricultural land measuring 5 acres and 1 gunta at Rs. 1.51 crore per acre, totaling Rs. 7,58,77,500. It also recorded payment of Rs. 2 crore in cash to the agreement holder.
During assessment proceedings, the Assessing Officer (AO) proposed addition of Rs. 2 crore as unexplained investment under Section 69A, treating it as on-money payment. The assessee contended that although there was an agreement, he ultimately purchased only 2 acres and 20 guntas at a significantly lower rate. He also argued that the agreement found during search was unsigned by him, and therefore could not form the basis of addition.
The AO rejected the explanation, observing that the agreement and attached cash receipts were found in the assessee’s possession and indicated payment of Rs. 2 crore. The AO held that the claim of renegotiated price was contrary to the record and improbable. Accordingly, an addition of Rs. 2 crore was made under Section 69A. Further, Rs. 60,000 was disallowed for want of evidence: Rs. 10,000 under Section 80D and Rs. 50,000 under Section 80EE.
The CIT(A) sustained the additions. It held that evidence found during search showed agreement at Rs. 1.51 crore per acre and cash payment of Rs. 2 crore. The explanation of lower purchase price was rejected as not supported by record. Disallowances under Sections 80D and 80EE were also upheld due to insufficient evidence.
Before the Tribunal, the assessee primarily challenged the validity of the assessment on limitation grounds under Section 153. It was argued that for AY 2022-23, the time limit for completion of assessment was 12 months from the end of the assessment year, i.e., up to 31 March 2024, in view of the fourth proviso to Section 153 inserted by the Finance Act, 2021.
The Revenue contended that under clause (xii) of Explanation (1) to Section 153, up to 180 days could be excluded from the limitation period, being the period between initiation of search and handing over of seized material to the jurisdictional AO. In this case, search was conducted on 4 January 2023 and seized material was handed over on 22 August 2023.
The Tribunal examined the scope of clause (xii) of Explanation (1) to Section 153. It held that this provision is an exclusion clause and not an extension provision. Only the period actually falling within the limitation period can be excluded. The search-to-handover period (4 January 2023 to 22 August 2023) spanned two financial years. Since limitation for AY 2022-23 commenced from 1 April 2023, only the period from 1 April 2023 to 22 August 2023 (144 days) fell within the limitation period and could be excluded.
Adding 144 days to 31 March 2024, the Tribunal held that the last date for passing the assessment order was 22 August 2024. The assessment order was passed on 27 September 2024. Accordingly, the Tribunal held that the order was barred by limitation under Section 153.
The assessment order dated 27 September 2024 was quashed. The appeal was allowed.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
