Section 153 of the Income Tax Act outlines the time limit for completing assessments, reassessments, and re-computations. This section is important for both taxpayers and tax authorities, as it ensures that assessments are completed within a reasonable time frame and helps to prevent unnecessary delays and disputes.
In this article, we will provide an overview of Section 153 and its various provisions.
Section 153(1) of the Income Tax Act states that an assessment or reassessment order must be made within a period of three years from the end of the relevant assessment year, unless the case falls under certain specified exceptions.
The specified exceptions include cases where:
In such cases, the assessing officer may make an assessment or reassessment order within a period of six years from the end of the relevant assessment year.
However, if the income in question relates to assets located outside India, the time limit for reassessment is extended to sixteen years from the end of the relevant assessment year.
In addition to assessments and reassessments, Section 153 also deals with recomputations. A recomputation is essentially a correction of an arithmetical or clerical error in an assessment order. Under Section 153(3), a recomputation may be made within a period of four years from the end of the relevant assessment year.
The period to be excluded while computing the time limit under section 153 includes:
This case digest covers complete cases relating to Section 153 of the Income Tax Act, 1961.
The Delhi High Court dismissed the writ petition as there was the recording of satisfaction by the Assessing Officer (AO) before initiating Section 153C of the Income Tax Act, 1961 proceedings.
A Division Bench of Justices Purushaindra Kumar Kaurav and Yashwant Varma observed that âIt is crystal clear that the present is not the case where the principles of natural justice have not been met or the AO has not duly applied his mind before passing the impugned order. Therefore, there is no occasion for this Court to exercise the extraordinary powers enshrined under Article 226 of the Constitution as none of the exigencies noted above have been met in the instant case.â
The Delhi High Court in a recent decision observed that the abatement under Section 153C of the Income Tax Act, 1963 should be triggered by the formation of opinion.
A Division Bench of Justices Yashwant Varma and Purushaindra Kumar Kaurav observed that âBoth the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. Therefore, and in our opinion, abatement of the six AYsâ or the ârelevant assessment yearâ would follow the formation of that opinion and satisfaction in that respect being reached.â âThe mere existence of a power to assess or reassess the six AYsâ immediately preceding the AY corresponding to the year of search or the ârelevant assessment yearâ would not justify a sweeping or indiscriminate invocation of Section 153Câ the Court noted.
The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) deleted addition under Section 153A of the Income Tax Act, 1961 as material uncovered during search raises no doubt or suspicion against taxpayer.
The bench of B.R. Baskaran (Accountant member) and Sandeep Singh Karhail (Judicial member) found that in certain cases proceedings under the Act were initiated against the members on the basis of material/documents found during the course of the search and survey at assesseeâs premises. Thus, it is established that the material/documents found during the course of search are not incriminating in nature. Therefore, the AO could not have made any addition under Section 153A of the Income Tax Act, in respect of concluded/unabated assessments for the assessment years 2012-13 to 2015-16.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) quashed the assessment order without recording valid satisfaction before issuing notice under Section 153C of the Income Tax Act, 1961.
The tribunal observed that the AO before issuing notice under Section 153C of the Income Tax Act had not successfully usurped the jurisdiction vested under Section 153C of the Income Tax Act by not recording his âsatisfactionâ as required under Section 153C of the Income Tax Act.Although in this case assessee has not been searched under Section 132 Income Tax Act or requisitioned under Section 132A of the Income Tax Act. Hence the AO without fulfilled valid satisfaction initiated the proceedings .He has not referred to any incriminating material belonging/pertaining/relating to the assessee which was seized/ unearthed from the premises of the searched person.
A Division Bench of the Delhi High Court ruled that the period prescribed under Section 153(3) of the Income Tax Act, 1961 is to be computed from the date of receipt of the order from the Income Tax Appellate Tribunal (ITAT).
The Court of Justices Yashwant Varma and Purushaindra Kumar Kaurav observed that âThe period prescribed under Section 153(3) of the Act would thus have to necessarily be computed from the date when the order of the ITAT was received by the respondents. Even if the benefits of TOLA were extended to the respondents, undisputedly, the order of assessment was liable to be framed lastly by 30 September 2021.â
âWe accordingly allow both the writ petitions and quash the impugned order dated 13 February 2023. The respondents are hereby directed to re-compute the refund payable to the writ petitioner along with statutory interest which shall run up to the date of remittance in accordance with law. The order of refund shall also bear in consideration our decision having annuled the adjustments that were made with respect to AYs 2008-09, 2009-10 and 2010-11 against a perceived outstanding demand for AY 2011-12â the Bench ordered.
The Mumbai Bench of the Income Tax Appellate Tribunal ( ITAT ) deleted addition under Section 153A of the Income Tax Act and held that discrepancies in maintaining KYC Documentation does not constitute incriminating material.
The bench of Sandeep Singh Karhail ( Judicial Member ) and B.R. Baskaran ( Accountant Member ) observed that âFor discrepancies in maintaining KYC documentation, account opening form, and violation of society byelaws, action can be taken against the assessee under the relevant statute or by the concerned authority, such as RBI, however, the same cannot lead to an addition in the hands of the assessee under the Act. Therefore, in view of the aforesaid findings, we are of the considered view that the material/documents found during the course of the search are not of such a nature which incriminates or militates against the assessee.â
The Gujarat High Court dismissed a writ petition as on failure to prove no satisfaction note recorded by the Assessing Officer ( AO ) prior to issuance of notice under Section 153C of the Income Tax Act, 1961.
A Division Bench of Justices Sunita Agarwal and Aniruddha P Mayee observed that âHaving noted the above submissions, we may record that it is not the case of the petitioner herein that no satisfaction note has been recorded independently by the Assessing Officer of the petitioner before proceeding under Section 153C of the Income Tax Act on receipt of the satisfaction note of the Assessing Officer of the searched person. The copy of the satisfaction note though was not provided initially to the petitioner and the Assessing Officer has committed an error in forwarding the objection disposal order dated 02.12.2023 to the petitioner treating the communication dated 19.10.2023 as the communication of objection against the satisfaction note.â
The Bangalore bench of the Income Tax Appellate Tribunal ( ITAT ) observed that failure to make a note in file of person searched does not vitiate proceedings under Section 153C of Income Tax Act, 1961.
The two member bench of the tribunal comprising Madhumitha Roy ( Judicial member ) and Chandra Poojari ( Accountant member ) observed that Failure by the Assessing Officer of the searched individual to document this transmission in the searched individualâs file, despite sending the satisfaction note and documents to the Assessing Officer of the other person, will not invalidate the proceedings under Section 153C of Income Tax Act, 1961, against the other person. However, itâs mandatory for the satisfaction note to affirm that the seized documents from the searched individual pertain to the other person and to transmit such materials to the Assessing Officer of the other person.
The Income Tax Appellate Tribunal (ITAT), Mumbai bench, directed readjudication in respect of condonation of delay in filing the return of income under Section 153A of the Income Tax Act, 1961.
The tribunal observed that the AO submitted that no return of income was filed by the assessee. However, the assessee demonstrated that the return under Section 153A of the Income Tax Act was filed just before the completion of assessment. After reviewing the facts and records, the two-member bench of Om Prakash Kant (Accountant Member) and Rahul Chaudhary (Judicial Member) held that for ascertaining whether the AO has access to the return of income filed electronically by the assessee, it should be verified by the Directorate of the computer system. Hence, the bench restored the issue to the file of CIT(A) for adjudication.
The Delhi High Court proceedings under section 153 C of the Income Tax Act, 1961 are not valid in the absence of incriminating material. The appellant/revenue is the order dated 24.03.2017 passed by the Income Tax Appellate Tribunal [âTribunalâ] in favour of respondents M/S Victory Apartments Pvt Ltd And M/S Victory Dwellings Pvt Ltd.
A division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia held that the question of law as framed in the above-captioned appeals will have to be answered against the appellant/revenue and in favour of the respondents/assesses having regard to the finding returned by the Tribunal on the second issue.
The Income Tax Appellate Tribunal (ITAT), Bangalore bench, deleted the assessment order passed under Section 153A of the Income Tax Act, 1961, against a non-existent partnership firm. The assessee, Trishul Buildtech Infrastructure Pvt. Ltd., was initially a partnership firm. A search and seizure operation under section 132 of the Income-tax Act, 1961, uncovered diaries in the possession of the assesseeâs partnerâs companies, marked as A/UB/2 of the seized material, detailing cash and cheque transactions.
It was observed by the tribunal that assessment orders are framed by the ld. AO against the non-existing entity despite having knowledge of the fact that the partnership firm is fully taken over by M/s. Trishul Buildtech Infrastructure Pvt. Ltd. Therefore complete failure by the AO to bring on record the successor in interest, so as to pass assessment orders in the name of new entity i.e. Trishul Buildtech Infrastructure Pvt. Ltd. The two-member bench, consisting of Chandra Poojari (Accountant Member) and Madhumita Roy (Judicial Member), reviewed the facts and records and deleted the assessment order against the non-existent partnership firm under Section 153A of the Income Tax Act, 1961, thereby allowing the appeal of the assessee.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the issuance of notice under Section 153C of the Income Tax Act, 1961 shall be invalid ab-initio when there is no incriminating material found during the search.
The Two-member bench comprising of BRR Kumar (Accountant member) and Astha Chandra (Judicial member) held that the addition was not based on any incriminating document found as a result of the search. Therefore, the order of the CIT(a) was upheld and the appeal of the revenue was dismissed.Â
The Income Tax Appellate Tribunal (ITAT), Chandigarh bench, held that no addition could be made under Section 153A of the Income Tax Act, 1961, in the absence of incriminating material found during the course of a search conducted under Section 132 of the Income Tax Act.
After reviewing the facts and records, the two-member bench of Vikram Singh Yadav (Accountant member) and Aakash Deep Jain (Vice President) observed that unquestionably, the addition made by the AO during the reassessment proceedings completed under Section 153A is based on other material/documentation available with the AO and is a case of completed/unabated assessment rather than any incriminating material found or seized during the course of search and seizure action under Section 132 of the Act.
In a significant case, the Delhi High Court has held that an addition under section 153C of the Income Tax Act without incriminating material is invalid.
In the order, it was observed that the additions made by the AO are beyond the scope of section 153C of the Income Tax Act, 1961 because no incriminating material or evidence had been found during the course of the search to doubt the transactions. It was noted that in the entire assessment order, the AO has not referred to any seized material or other material for the year under consideration having been found during the course of the search in the case of the assessee, let alone the question of any incriminating material for the year under appeal. Since there was no substantial question of law arose for consideration, the division bench of Justice Rajiv Shakdher and Justice Girish Kathpalia closed the appeal.
The Income Tax Appellate Tribunal (ITAT), Mumbai Bench, held that entries in the books of account prior to amalgamation could not be part of additions made under Section 153A of the Income Tax Act, 1961, in the hands of the assessee. Therefore, the bench deleted the addition.
After reviewing the facts and records, the two-member bench of Padmavathy S. (Accountant member) and Kuldip Singh (Judicial Member) held that additions made under section 37(1) and section 50C based on the transactions in the books of Citygold Farming Pvt Ltd and Headland Farming P Ltd in the assesseeâs hands shall not be sustained. Vijay Mehta, Counsel, appeared for the assessee, and Madhu Malati Ghosh, Counsel, appeared for the revenue.
The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the additions made by the Assessing Officer in both the years under consideration are not based upon any incriminating material found during the course of search operations.
After hearing both the parties, the tribunal noted that , it has to be held that the additions made by the Assessing Officer in both the years under consideration are not based upon any incriminating material found during the course of search operations. Since both the years under consideration fall under the category of âunabated assessment yearsâ, the Assessing Officer could not have made addition in both years in the absence of any incriminating material relating to the same. The above said decision of ours is based upon the decision rendered by Honâble Supreme Court in the case of Abhishir Buildwell P Ltd (Civil Appeal No.6580 of 2021 dated 24th April, 2023).
A Two-judge bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan of Supreme Court have restricted the ruling of Bombay High Court on the prevailing time limit of Rs. 153 over Section 144C of the Income Tax Act as the precedent until further orders.
A Division Bench of Justices Firdosh P Pooniwalla and KR Shriram of Bombay High Court observed that âIn our view, the assessment has to be concluded within twelve months as provided in Section 153(3) of the Income Tax Act when there has been remand to the AO by the ITAT under Section 254 of the Income Tax Act. Within this twelve-month prescribed, the AO has to ensure that the entire procedure prescribed under Section 144C of the Income Tax Act is completed and pass a final assessment order.â
The Supreme Court stated that âWe have heard learned Additional Solicitor General for the petitioners and learned Senior Counsel Shri J.D. Mistri for the respondent-assessee. Having heard the respective senior counsel for the parties, we observe that the impugned judgment shall not be cited as a precedent in any other subsequent matter until further orders.â
The Bombay High Court recently ruled that write-off of bad debt is not asset and clause â (a) of 4th proviso to Section 153A(1) of Income Tax Act, 1961 bars assessment.
A Division Bench of Justices Firdosh P Pooniwalla and K Shriram observed that âIn the instant case, the satisfaction note refers to two items. First, the loan account between petitioner and Hubtown Limited and the alleged escapement is only in respect of the part thereof which is written off during the year. That clearly, i.e., the writing-off of a bad debt cannot fall within the ambit of income, represented in the form of an asset.â It was further observed that the other item referred to in the satisfaction note, that is to say, trading in shares of Hubtown Limited has been undertaken on the stock exchange, recorded in the books of account of petitioner, and the resulting gain offered for tax and the amounts taxed in the hands of petitioner.
The Income Tax Appellate Tribunal (ITAT) Delhi bench held that no assessment order should be passed under Section 153C of the Income Tax Act, 1961 when seized documents did not establish any correlation with that assessment year.
After considering the facts submitted by both parties, the two member bench of N.K. Billaiya (Accountant Member) and Kul Bharat (Judicial Member) held that no assessment order should be passed under Section 153C of the Income Tax Act. When seized documents did not establish any correlation with that assessment year. Therefore the bench allowed the appeal filed by the assessee.
The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has held that the satisfaction note has been a mandatory requirement in case of a searched person before acquiring jurisdiction under Section 153C of the Income Tax Act 1961.
The two-member Bench of V. Durga Rao, (Judicial Member) and Manoj Kumar Aggarwal, (Accountant Member) observed that no satisfaction note had been recorded by AO of the searched person Madanlal D. Chawla but the same had been recorded only in case of assessee for whom an assessment had been framed under Section 153C of the Income Tax Act.
The Bench further observed that, âThe primary requirement is that AO of the searched person should record satisfaction before transmitting the record to another person having jurisdiction over such other person under Section158BD. This requirement would apply even if the AO of the searched person as well as the other person is one and the same. It is quite clear that such a satisfaction note could be prepared by AO of the person searched at various stages of framing of assessment under Section 158BC. Therefore, in our considered opinion, in the absence of a satisfactory note in the case of a searched person, the proceedings under Section 153C would be vitiated by law.â
The Income Tax Appellate Tribunal (ITAT) Amritsar Bench held that reassessment should not be framed under Section 153C of Income Tax Act, 1961 if notice for search proceedings was issued under Section 153A of the Income Tax Act. Therefore the bench deleted the penalty imposed by the assessing officer.
After considering the facts and circumstances of the case and also explanation of the assessee two member bench of Anikesh Banerjee, (Judicial Member) and Dr. M. L. Meena, (Accountant Member) held that reassessment should not be framed under Section 153C of Income Tax Act, if notice for search proceedings was issued under Section 153A of the Income Tax Act. Therefore the bench deleted the penalty order passed under section271(l)(c)/270A of Income Tax Act.
The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that the statutory approval given by quasi-judicial authority under Section 153D of the Income Tax Act, 1961 without due application of mind results in the fatal of the entire search assessment.
In the case of PCIT vs. Anju Bansal in ITA 368/2023 order dated 13.07.2023 the jurisdictional High Court held that statutory approval given by a quasi-judicial authority without due application of mind as contemplated in section 153D of the Income Tax Act would be fatal to the entire search assessment proceedings.
The Two-member bench comprising of Saktijit Dey (Vice-President) and M. Balaganesh (Accountant member) held that there is no hesitation in holding that the approval under Section 153D of the Income Tax Act has been granted by the Additional CIT in a mechanical manner without due application of mind, thereby making the approval proceedings by a high ranking authority, an empty ritual.
In a major decision the Bombay High Court observed that the time limit under Section 153 of the Income Tax Act, 1961 prevails over assessment time limit prescribed under Section 144C of the Income Tax Act, 1961.
A Division Bench of Justices Firdosh P Pooniwalla and KR Shriram observed that âIn our view, the assessment has to be concluded within twelve months as provided in Section 153(3) of the Income Tax Act when there has been remand to the AO by the ITAT under Section 254 of the Income Tax Act. Within this twelve-month prescribed, the AO has to ensure that the entire procedure prescribed under Section 144C of the Income Tax Act is completed and pass a final assessment order.â
The Bench also noted that a similar non-obstante clause is also used in Section 144C(4) of the Income Tax Act with the same limited purpose to imply, even though there might be a larger time limit under Section 153 of the Income Tax Act, once the matter is remanded to AO by the ITAT under Section 254 of the Income Tax Act, the process to pass final order under Section 144C of the Income Tax Act has to be taken immediately.
The Income Tax Appellate Tribunal (ITAT) Chennai Bench upheld that approval granted under Section 153D of Income Tax Act,1961 is in light of seized material and appraisal report submitted by investigation wing.
It was observed by the tribunal that the provisions of section 153D of the Act, deals with prior approval necessary for assessment in cases of search under Section 132 or requisition under Section 132A of the Income Tax Act . Thus, there was enough proof to conclude that the Addl. CIT has given approval under Section 153D of the Income Tax Act after great deliberations with draft assessment order passed by the Assessing Officer in light of seized material and appraisal report submitted by DDIT(Inv).
After reviewing the facts and submissions of the both parties, the two member bench of V. Durga Rao, (Judicial Member)and Manjunatha. G, (Accountant Member)dismissed the appeal and upheld approval granted under Section 153D of Income Tax Act,1961 ine e light of seized material and appraisal report submitted by investigation wing.
The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that no addition can be made under section 153A of the Income Tax Act,1961 in the absence of seizure of any incriminating materials during search and seizure proceedings.
The bench observed that there was no incriminating material unearthed in the search proceeding to substantiate the addition as made in the assessment order. It was also observed that in the search no incriminating materials were found by the assessing officer who was not empowered to make any addition to the total income of the assessee.
The two-member bench comprising Dr. S. Seethalakshmi (Judicial) and Rathod Kamleh Jayantbhai (Accountant) held that in the absence of any incriminating material found or seized during search and seizure proceedings, the additions made by the assessing officer during reassessment under section 153A of the Income Tax Act are without jurisdiction and liable to be deleted while allowing the cross objections filed by the assessee.
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench held that Proceedings under Section 153C of the Income Tax Act, 1961 in absence of any incriminating material is bad in law.
A Bench comprising Chandra Poojari, Accountant Member and Beena Pillai, Judicial Member observed that âIn the present search and impugned assessment proceedings no new or hidden fact has come to light. The learned assessing officer has only changed the opinion and has now sought to tax the receipts in the year of receipt as against the year of registration. Thus, the additions in the order are purely based on a change in legal opinion and not on any âincriminating materialâ.â The Tribunal further added that âThe predominant condition for satisfaction under 153C of the Income Tax Act is the incriminating nature of evidence found. Though there has been change in the wordings of the section, the intention behind the section is not changed and the presence of document or evidence with incriminating nature is necessary before a notice u/s. 153C of the Income Tax Act is issued.â
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