2025 (5) TMI 1248 - HC - Income Tax

Assessment u/s 153C as barred by limitation - HELD THAT - Documents and information relating to the Petitioner were handed over to the AO having jurisdiction over the case of the Petitioner is correct. Thus the documents in question were received by the AO of the Petitioner on 22.06.2022. In the given facts the period of limitation as stipulated u/s 153B of the Act for passing an assessment order is to be reckoned from the said date. As in terms of Section 153B of the Act the AO was required to pass an assessment order within a period of twelve months from the end of the financial year in which the documents were received that is from the end of the financial year 2022-23. Therefore the last date for completion of the assessment was 31.03.2024 which has since passed. The present petition was listed on 26.03.2025 and admittedly no order of assessment has been passed as of the date of filing of the petition. The present petition is allowed and the proceedings commenced pursuant to the impugned notice are set aside.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Court in this matter are:

(a) Whether the proceedings initiated under Section 153C of the Income Tax Act, 1961 (the Act) in respect of Assessment Year (AY) 2015-16 are barred by limitation;

(b) The interpretation and applicability of the limitation period prescribed under Section 153B of the Act for passing assessment orders consequent to notices issued under Section 153C;

(c) The correct date from which the limitation period under Section 153B is to be reckoned, specifically whether it is from the date of issuance of the Section 153C notice or from the date on which documents/information were received by the Assessing Officer (AO) of the person other than the person searched;

(d) Whether the Revenue can proceed with assessment proceedings after the expiry of the prescribed limitation period under Section 153B;

(e) The effect of non-filing of reply or counter affidavit by the Revenue on the limitation issue.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a) and (b): Limitation on proceedings under Section 153C and interpretation of Section 153B

The legal framework governing the limitation for assessment proceedings initiated under Section 153C of the Act is Section 153B. Section 153B mandates that when information or documents relating to a person other than the person searched are received by the AO of the other person pursuant to a search under Section 132, the AO must pass an assessment order within twelve months from the end of the financial year in which such information or documents were received.

The Court examined the timeline: the search and seizure operation was conducted on 18.10.2019 in respect of entities belonging to the Alankit Group. Subsequently, on 22.06.2022, the AO of the searched person recorded a satisfaction note under Section 153C, identifying documents and assets seized that belonged to the Petitioner (the other person). These documents were handed over to the AO of the Petitioner on the same date.

The Court emphasized that the limitation period under Section 153B commences from the end of the financial year in which the AO of the other person receives the seized documents or information. Here, since the documents were received on 22.06.2022, the relevant financial year is 2022-23, ending on 31.03.2023. Therefore, the AO was required to complete the assessment proceedings within twelve months from 31.03.2023, i.e., by 31.03.2024.

The Petitioner contended that the impugned notice under Section 153C was issued on 19.12.2023, which is after the limitation period expired, and no assessment order has been passed within the prescribed time frame. The Court agreed with this contention, holding that the proceedings are time-barred.

Issue (c): Date from which limitation is to be reckoned

The Court carefully analyzed the satisfaction note dated 22.06.2022, which explicitly states that the documents seized during the search in the case of the searched entities belong to the Petitioner and have been handed over to the AO of the Petitioner for necessary action under Section 153C. This note is critical as it marks the date when the AO of the other person came into possession of the relevant documents.

Accordingly, the Court held that the limitation period under Section 153B is to be reckoned from the end of the financial year in which the AO receives the documents, not from the date of issuance of the Section 153C notice. This interpretation aligns with the statutory scheme and the purpose of the limitation provision to ensure timely completion of assessments.

Issue (d): Effect of expiry of limitation period on the validity of proceedings

The Court found that since the last date for passing the assessment order was 31.03.2024, and the impugned notice was issued on 19.12.2023 but no assessment order was passed within the prescribed period, any further proceedings pursuant to the impugned notice are barred by limitation.

The Court further clarified that if any assessment order has been passed after the filing of the petition, such order would stand quashed as it would be beyond the statutory time limit.

Issue (e): Non-filing of reply or counter affidavit by Revenue

The Revenue was granted multiple opportunities to file a reply or counter affidavit but failed to do so. While the Court noted this procedural non-compliance, the decision on limitation was primarily based on the undisputed facts and statutory provisions. The absence of a reply did not affect the Court's determination of limitation but underscored the lack of contest on the factual matrix from the Revenue's side.

3. SIGNIFICANT HOLDINGS

The Court held:

"In terms of Section 153B of the Act, the AO was required to pass an assessment order within a period of twelve months from the end of the financial year in which the documents were received, that is, from the end of the financial year 2022-23. Therefore, the last date for completion of the assessment was 31.03.2024, which has since passed."

"The proceedings commenced pursuant to the impugned notice are set aside. It is also clarified that, in the event, any assessment order has been passed after filing of this petition in respect of AY 2015-16 pursuant to the impugned notice, the same would also stand quashed."

Core principles established include:

(i) The limitation period under Section 153B for assessments pursuant to Section 153C notices begins from the end of the financial year in which the AO of the other person receives the seized documents or information.

(ii) Any assessment order passed beyond the prescribed limitation period under Section 153B is invalid and liable to be quashed.

(iii) The date of issuance of the Section 153C notice is not the starting point for limitation; rather, the receipt of documents by the AO of the other person governs the limitation timeline.

Final determinations:

The Court allowed the petition, set aside the proceedings initiated under the impugned Section 153C notice dated 19.12.2023 for AY 2015-16, and quashed any assessment orders passed beyond the limitation period prescribed under Section 153B.

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