By TIOL News Service

NEW DELHI, SEPT 29, 2018: THE issue before the Bench is - Whether the year of search is to be considered within the block period of six AYs and assessment should be framed u/s 153C only after issuing proper notice. And the verdict is YES.

Facts of the case

The assessee-company earned income from business and other sources and filed its original return declaring total income of around Rs 2.08 cr. A search and seizure operation was conducted on one M/s Krrish Group of cases and also a survey was also carried out on the business premises of the assessee. Thereafter, the assessee in response to notice u/s 153A(1) (a) r.w.s 153C filed revised return declaring total income of around Rs. 2.22 cr. Thereafter, the assessment was framed at around Rs. 5.22 cr by making addition of Rs.3 cr as surrendered amount not incorporated in the return of income. On assessee's appeal, the CIT(A) upheld the decision of the AO. Therefore, the assessee filed present appeal before the Tribunal and also moved an application for admission of additional grounds contending that the jurisdiction for framing the assessment in question was wrongly assumed and the same was without jurisdiction, illegal and unsustainable in law.

On appeal, the Tribunal held that,

++ search was conducted on Krrish Group of cases on 09.11.2011. The impounded documents have been received by the A.O. on 29.08.2013. The satisfaction under section 153C have been recorded on 03.10.2013. The A.O. passed the assessment order under section 153B(1)(b) of the I.T. Act, considering the assessment year under appeal i.e., A.Y. 2012-2013 to be the year of search. However, the First Proviso to Section 153C of the I.T. Act provides that the 6 assessment years for which assessments or re-assessments could be made under section 153C of the I.T. Act, would also have to be construed with reference to the date of handing-over of the assets or documents to the A.O. of the assessee. Therefore, the 6 assessment years under section 153C of I.T. Act in the case of assessee would be A.Y. 2008-2009 to 2013-2014. The A.O, therefore, shall have to pass the assessment order under section 153C of the I.T. Act. However, A.O. has not issued any notice under section 153C of the I.T. Act before initiating the proceedings against the assessee which is also admitted by the A.O. in reply to the assessee under RTI Act. The Amendment in Section 153C of the I.T. Act by the Finance Act, 2017, w.e.f. 01.04.2017 to the effect that block period for the person in respect of whom the search was conducted as well as the "other person" would be the same six assessment year immediately preceding the year of search is prospective in nature. The issue have been dealt in detail by the jurisdictional Delhi High Court in the case of Pr. CIT vs. Sarwar Agency P. Ltd. and by ITAT, Delhi, B-Bench, in the case of Empire Casting Pvt. Ltd., New Delhi vs. ACIT, C.C.2, New Delhi and Pavitra Realcon Pvt. Ltd., New Delhi vs. ACIT. The A.O, therefore, should have framed the assessment under section 153C of the I.T. Act in the case of the assessee and at the time of initiating the proceeding against the assessee, should have issued notice under section 153C of the I.T. Act which have not been done in this case. The issue of notice under section 153C is mandatory and a condition precedent for taking action against the assessee under section 153C of the I.T. Act. The assessment order, therefore, vitiate, void, illegal and bad in law and cannot be sustained.

(See 2018-TIOL-1669-ITAT-DEL)