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2024 (7) TMI 1634 - AT - Income TaxAssumption of jurisdiction u/s 153C as barred by limitation - identifying the relevant assessment year for the purpose of computing the ten year block - HELD THAT - Admittedly in the case of assessee books of account were handed over to the AO of Assessee Company in AY 2022-23 hence ten years period would not cover the year under consideration. In case of Ojjus Medicare Pvt. Ltd. 2024 (4) TMI 268 - DELHI HIGH COURT has specifically dealt with the cases where accounts were handed over in FY 2022- 23 and 2023-24 and held that so far AY 2010-11 2011-12 and 2012-13 are concerned they fall beyond the relevant assessment year . Same squarely applies to the case of assessee. In the light of the aforesaid we allow the additional ground. Appeal of the assessee is allowed.
The core legal questions considered in this appeal are:
Issue-wise Detailed Analysis: 1. Validity and Limitation of Jurisdiction under Section 153C Legal Framework and Precedents: Section 153C empowers the AO of a person other than the searched person to initiate assessment proceedings based on seized documents found during a search of another person. The jurisdiction must be assumed within six months from the date of the assessment order of the searched person under section 153A. The Supreme Court's decision in CIT-3 vs. Calcutta Knitwares (2014) clarified the limitation period applicable for assumption of jurisdiction under section 153C. Court's Reasoning: The AO of the searched person recorded satisfaction on 29.06.2021 and handed over the seized material to the AO of the assessee. The AO of the assessee assumed jurisdiction on 30.06.2021 and issued notice under section 153C on 29.08.2021. The assessee challenged this assumption of jurisdiction as barred by limitation since the assessment of the searched person was completed on 30.12.2019, and the six-month period for assuming jurisdiction under section 153C had expired. Application of Law to Facts: The Tribunal found that the initial ground challenging limitation under section 153C was not sustained by the CIT(A). However, the assessee raised an additional ground based on a recent High Court judgment, which necessitated reconsideration of the limitation period in light of the ten-year block period under sections 153A and 153C. 2. Computation of the Ten-Year Block Period for Reopening Assessments Legal Framework and Precedents: Explanation 1 to Section 153A prescribes the manner for computing the ten-year block period for reopening assessments. The relevant assessment year (AY) for this computation is tied to the financial year (FY) in which the search was conducted or requisition made. The recent judgment of the Hon'ble Delhi High Court in Pr. CIT vs. Ojjus Medicare Pvt. Ltd. & Ors. (dated 03.04.2024) clarified this aspect. Court's Interpretation and Reasoning: The High Court held that the ten-year period must be computed from the end of the AY relevant to the FY in which the search was conducted, not from the preceding year as in the case of the six-year period. The Court illustrated this with a table showing the ten-year block period starting from AY 2022-23 (relevant to FY 2021-22, the year of search). Key Findings: Since the assessee's books of account were handed over to the AO in AY 2022-23, the ten-year block period would run from the end of AY 2022-23, i.e., 31 March 2023. Consequently, years prior to AY 2013-14 fall outside the permissible block period for reopening. Application of Law to Facts: The Tribunal admitted the additional ground raised by the assessee based on this legal position. It found that the assessment year under consideration fell outside the ten-year block period computed as per the High Court's ruling. Thus, the reopening of assessment was barred by limitation. 3. Treatment of Competing Arguments The Revenue contended that the assumption of jurisdiction under section 153C was within limitation and that the seized documents justified reopening. However, the Tribunal gave precedence to the recent authoritative pronouncement of the High Court, which clarified the computation of the ten-year block period. The assessee's argument that the reopening was barred by limitation was accepted as it was purely a question of law based on admitted facts, and no fresh facts needed investigation. 4. Conclusion on Issues The Tribunal concluded that the reopening of the assessment under section 153C was barred by limitation as the relevant assessment year was not covered within the ten-year block period computed from the end of the AY relevant to the FY of search. Accordingly, the appeal was allowed in favor of the assessee. Significant Holdings: "Explanation 1 to Section 153A specifies the manner in which the entire ten AY period is to be computed. While the computation of six AYs follows the position as enunciated and identified above, Explanation 1 prescribes that the ten AYs would have to be computed from the end of the AY relevant to the FY in which the search was conducted or requisition made." "Viewed in light of the above, the block period of 10 AYs would be as follows: AY 2022-23 to AY 2013-14." "Since the additional ground is purely based on question of law and admitted facts, the same is admitted." "Admittedly in the case of assessee books of account were handed over to the AO of Assessee Company in AY 2022-23, hence ten years period would not cover the year under consideration." These principles establish that for reopening assessments under sections 153A and 153C, the ten-year limitation period must be computed from the end of the AY relevant to the FY in which the search was conducted, not from the date of handing over of seized material or the date of assessment order of the searched person alone. The final determination was that the assessment order dated 27.12.2022 was barred by limitation and thus invalid, resulting in the allowance of the assessee's appeal.
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