Ushaben Jayantilal Patel Vs ITO (ITAT Ahmedabad)
Block period for the proceeding under Section 153C of the Act has to be computed from the date of receipt of books of accounts or documents by the AO of the non-searched person
The case of Ushaben Jayantilal Patel vs. ITO (ITAT Ahmedabad) revolves around the legal interpretation and application of Section 153C of the Income Tax Act, 1961. The central issue in this appeal was the validity of the assessment initiated under Section 153C, following a search conducted on a third party, where documents relating to the assessee were found.
Background:
- A search under Section 132 was conducted on Shri Anil Hiralal Shah on 04.12.2014, during which a hard disk containing an MS Excel sheet named ‘CCCCC.xls’ was found. Some entries in this sheet pertained to the assessee, Ushaben Jayantilal Patel.
- Based on this discovery, the Deputy Commissioner of Income Tax (DCIT), Central Circle-1(2), Ahmedabad forwarded the information to the Assessing Officer (AO) of the assessee, initiating proceedings under Section 153C r.w.s. 153A for the assessment year (A.Y.) 2011-12.
Legal Grounds Raised by the Assessee:
- The assessee challenged the addition of INR 22,56,000 under Section 69 for alleged cash payment for property purchase, arguing that no corroborative evidence existed apart from the Excel sheet.
- The assessee contended that the AO failed to furnish the “satisfaction note” of the searched person, as required by the Supreme Court’s direction in the Calcutta Knitwears case and CBDT Circular No. 24/2015.
- The assessee also argued that the AO did not provide copies of statements recorded or an opportunity for cross-examination, violating legal rights.
Additional Legal Grounds:
- The assessee argued that the assessment proceedings under Section 153C were initiated improperly, as the satisfaction note was recorded on 31.03.2018. According to the assessee, this meant the block period for which proceedings could be initiated should have been A.Y. 2012-13 to A.Y. 2017-18, not 2011-12.
- This argument was based on the first proviso to Section 153C, which stipulates that the block period should be computed from the date of receipt of books or documents by the AO, not the date of search.
ITAT’s Ruling:
- The ITAT agreed with the assessee’s argument regarding the block period. It held that the block period for proceedings under Section 153C must be computed from the date the AO of the non-searched person (the assessee in this case) received the relevant documents, not the date of the original search.
- The ITAT referenced the Supreme Court’s decision in CIT vs. Jasjit Singh and the Delhi High Court’s ruling in PCIT vs. Ojjus Medicare (P.) Ltd. to support its decision, confirming that the AO had exceeded his jurisdiction by initiating proceedings for A.Y. 2011-12, which was outside the permissible block period.
Conclusion: The ITAT Ahmedabad ruled in favor of the assessee, Ushaben Jayantilal Patel, by concluding that the assessment under Section 153C for A.Y. 2011-12 was invalid. The key takeaway from this case is the importance of correctly interpreting the starting point of the block period under Section 153C, which should be based on the date of receipt of relevant documents by the AO, not the date of the original search
