Assessment u/s 153C beyond six assessment year is without jurisdiction

Dinesh Shah (HUF) Vs DCIT (ITAT Mumbai)

ITAT Mumbai held that the assessment made u/s 153C of the Income Tax Act beyond the six assessment year is without jurisdiction and liable to be quashed.

Facts- Pursuant to a search conducted on 10-12-2013 in the case of Ankur Shubham Group, it was found that the assessee was a key person of the said group, and since no search warrant was executed in the name of both the assessee’s, AO initiated proceedings u/s 153C after issuing notice in 2016, and since, the assessee being not the “searched person” for the purpose u/s 153A of the Act, for the purpose of section 153C of the Act, the reference to date of search has to construed as the date of recording satisfaction, which in this case is 15.03.2016 [AY 2016-17]. Consequently, six (6) assessment years for which assessment/re-assessment could be made u/s 153C of the Act would also have to be construed with reference to date of handing over of documents to AO of assessee/recording of satisfaction by AO of Assessee i.e, 15.03.2016. In this view, the assessment made u/s 153C of the Act for AY 2009-10 would be beyond the six assessment years as reckoned with reference to the date of recording of satisfaction viz 15.3.2016.

Conclusion- We therefore, accept the contention that the relevant assessment year i.e, AY 2009-10 were outside the scope of section 153C of the Act; and the AO had no jurisdiction to make an assessment of assessee’s income for AY 2009-10. For this preposition we rely on the decision of the Hon’ble Delhi High Court in the case of Ld. CIT(A) v/s RRJ Security Ltd. (2013) 62 taxmann. com391 (Delhi), M/s Pavitra Relater Pvt. Ltd. v/s ACIT (87) taxmann.com 142.

FULL TEXT OF THE ORDER OF ITAT MUMBAI

These are appeals filed by the assessee (HUF) and assessee (individual) against the order of the Commissioner of Income Tax(Appeals)-51, Mumbai [hereinafter the CIT(A)] dated 28.11.2019 for AY 2009-10.

2. Both sides agree that issue raised by both the assessees and the facts in both appeals are similar; and that the additions have been made in the hands of both assesses based inter–alia on initial search and seizure action u/s 132 of the Income Tax Act, 1961 [hereinafter the Act] carried out in the premises of Pravin Kumar Jain (3^rd party) on 01.10.2023, wherein it was admitted by him (Pravin Kumar Jain) that his concerns were engaged in providing accommodation entries in the nature of bogus unsecured loans, bogus purchases etc; and that the assessee’s group including both the assessees are its beneficiary and had obtained bogus unsecured loans from Pravin Kumar Jain. Based on the aforesaid information, further searches were carried out in other entry operator’s premises like Shri Bangvari Lal Jain and Shri Ratan Jain. And subsequently, search u/s 132 of the Act took place in Ankur Shubham Group/assessee group on 10-12-2013 and it was found that assessee was the key person of the said group who had purportedly admitted in his statement dated 24.03.2014 that accommodation entries have been availed in the nature of unsecured loan by payment of commission @3% to entry-operators; and assessee explained the modus of generation of on–money on sale of flats from its real estate projects which was brought into regular books by availing accommodation entries in the form of unsecured loans from the various entities. Pursuant to the search in assessee’s group companies, AO initiated proceeding under section 153C of the Act, against both the assessee’s by issue of notice dated 15.03.2016. The assessee has raised the legal ground against the assessment framed u/s 153C r.w.s 143(3) for the AY 2009-10 in both the cases.

3. Since, assessee has raised the legal issue inter–alia against the action of the Assessing Officer to have framed assessment u/s 153C r.w.s 143(3) of the Act on the ground that relevant AY 2009-10 would not fall in the ken of section 153C r.w.s 153A of the Act, so the assessment framed is bad in law.

4. Since, the facts and the law are the same in the both the appeals, we take the appeal of individual assessee as lead case and the result of which will be followed in the other appeal of Assessee/HUF. Brief facts pertaining to the legal issue is that the pursuant to a search on 10-12-2013 in the case of Ankur Shubham Group, it was found that the assessee was key person of the said group, and since no search warrant was executed in the name of both the assessee’s, the AO initiated proceedings u/s 153C of the Act after issuing statutory notice in 2016; and since, the assessee being not the “searched person” for the purpose u/s 153A of the Act, for the purpose of section 153C of the Act, the reference to date of search has to construed as the date of recording satisfaction, which in this case is 15.03.2016 [AY 2016-17]. Consequently, six (6) assessment years for which assessment/re-assessment could be made u/s 153C of the Act would also have to be construed with reference to date of handing over of documents to AO of assessee/recording of satisfaction by AO of Assessee i.e, 15.03.2016. In this view, the assessment made u/s 153C of the Act for AY 2009-10 would be beyond the six assessment years as reckoned with reference to the date of recording of satisfaction viz 15.3.2016. We therefore, accept the contention that the relevant assessment year i.e, AY 2009-10 were outside the scope of section 153C of the Act; and the AO had no jurisdiction to make an assessment of assessee’s income for AY 2009-10. For this preposition we rely on the decision of the Hon’ble Delhi High Court in the case of Ld. CIT(A) v/s RRJ Security Ltd. (2013) 62 taxmann.com 391 (Delhi), M/s Pavitra Relater Pvt. Ltd. v/s ACIT (87) taxmann.com 142,

5. In the result, the appeals of the assessee are allowed.

Order pronounced in the open court on this 26/04/2023.