AI Insights
The case involves multiple appeals and cross-objections filed by the Revenue and the Assessee, Ashish Prafulbhai Patel, against the orders of the Commissioner of Income Tax (Appeals), Ahmedabad, concerning the assessment years 2005-06 and 2007-08. The primary legal contention revolved around the validity of the assessment orders passed following two search operations conducted by the Income Tax Department on the Assessee's premises. The Tribunal examined whether the assessments were completed within the statutory time limits and the implications of the second search on the ongoing assessment proceedings from the first search.
Appeal Details
Counselvise Citation
[2025] 140 COUNSELVISE.COM (IT) 712838 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Appellant
Respondent
Appeal Type
Income Tax (Search & Seizure) Appeal
Pronouncement Date
01-08-2025
Appeal Filed By
Department
Order Result
Dismissed
Assessment Year
2007-2008
Judgement Text
"आयकर अपील य अ धकरण, अहमदाबाद \u0014यायपीठ ‘A’ अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE DR. B.R.R. KUMAR, VICE-PRESIDENT Ms. SUCHITRA KAMBLE, JUDICIAL MEMBER Assessee represented by : Shri Vartik Chokshi & Shri Biren Shah, ARs Revenue represented by : Shri Alpesh Parmar, CIT-DR सुनवाई क तार ख/Date of Hearing : 06.05.2025 घोषणा क तार ख /Date of Pronouncement: 01.08.2025 आदेश/O R D E R PER DR. B.R.R. KUMAR, VICE-PRESIDENT: The above captioned appeals have been filed by the Revenue and the Assessee against the orders of the Ld. Commissioner of Income Tax (Appeals), Ahmedabad (hereinafter referred to as \"CIT(A)\" for short) passed u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as \"The Act\" for short) for the Assessment Years 2005- 06 and 2007-08. Additionally, the assessee has also filed cross-objections for both the assessment years mentioned above. Since the issues involved in the cross appeals filed by both parties and objection raised by assessee in the C.Os. are arising from the search action carried out by the Department on 04.08.2006, all these Appeals are taken together and decided through common order. SN IT(SS)A/CO No. AY Appellant Respondent 1 IT(SS)A No. 430/Ahd/2019 2005-06 Ashish Prafulbhai Patel, 1 s t Floor, Chinubhai Chambers, B/h. City Gold Cinema, Off Ashram Road, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad 2 IT(SS)A No. 471/Ahd/2019 2005-06 ACIT, Central Circle-1(3), Ahmedabad Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] 3 CO No. 6/Ahd/2020 2005-06 Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad 4 IT(SS)A No. 549/Ahd/2019 2007-08 ACIT, Central Circle-1(3), Ahmedabad Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] 5 CO No. 41/Ahd/2020 2007-08 Ashish Prafulbhai Patel, Ahmedabad [PAN : ACTPP 0045 R] DCIT, Central Circle-1(3), Ahmedabad Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 2 Grounds of Appeal:- IT(SS)A No. 430/Ahd/2019 – AY 2005-06 - Assessee’s Appeal 2. Grounds of appeal raised by the assessee are as follows :- “1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have appreciated that the Order passed by AO is void and illegal and is required to be quashed. ….. …..” 3. The brief facts of the case are that the assessee is engaged in the business of real estate dealings and ?inancing activities. The assessee belongs to Radhe Group, Ahmedabad. During the A.Y. under consideration, assessee was running three proprietary concerns in his name which were (i) Abhyudaya Finance, (ii) Radhe Finance and (iii) Radhe Organiser. A search under Section 132 of the Act was carried out in case of assessee/Radhe Group on 4th August, 2006. The search was ?inally concluded by drawing ?inal panchnama in the name of Assessee on 29th September, 2006. The Assessee had ?iled return of income for the year under consideration on 24th May, 2007 in response to notice under Section 153A of the Act, dated 4th May, 2007. The Assessee had ?iled Settlement Application before Hon'ble Settlement Commission on 28th May, 2007 for A.Y. 2001-02 to 2007-08 but such settlement application was rejected by passing an order under Section 245HA on 4th October, 2007 on the ground that Assessee had not paid taxes for A.Y. 2004-05 and 2006-07. In the settlement application the assessee has disclosed additional income of Rs. 12,25,50,000/- for the year A.Y. 2003-04 to 2007-08. The assessee has challenged the order of Hon'ble Settlement Commission before Hon'ble Gujarat High Court. The Hon'ble High Court stayed operation of the Settlement Commission's order vide order dated 12.05.2008 and directed the Assessing Of?icer not to proceed with framing of the assessment. Against this order of the Hon'ble High Court, the Revenue ?iled SCA praying for vacating the stay granted. The assessee meanwhile ?iled another SCA before the Hon'ble High Court and the Hon'ble High Court passed the order on 07.12.2009 disposing both the SCA i.e. ?iled by the Revenue & the Assessee. 4. The Hon'ble High Court directed the Assessee to pay the admitted dues for Α.Υ. 2004-05 & 2006-07 within period of 8 weeks. Subsequent to this, the assessee paid Rs. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 3 24.20 lacs for A.Y. 2004-05 and Rs. 4,84,65,000/- for A.Y. 2006-07 on 02.02.2010. But the stay granted vide order dated 12.05.2008 by the Hon'ble High Court for A.Y. 2001- 02 & 2007-08 continued. Meanwhile another search was conducted upon the assessee by the department on 07.10.2009 and ?inal Panchnama was drawn on 01.12 2009. In view of this second search upon the assessee, the pending assessment proceedings (stayed by HC) for A.Y. 2004-05 to 2007-08 were affected in view of the second provision to Sec. 153A(1) of the Act and were therefore abated. The Assessing Of?icer issued fresh notice u/s 153A on 08.03.2011 for A.Y. 2004-05 to 2007-08 (in respect of second search assessment of which was also over lapping with the ?irst search) which was served upon the Assessee on 10.03.2011. 5. In response to second search, the Revenue ?iled SCA no. 10395 of 2011 before the Hon'ble High Court, which was disposed of by the court vide order dated 19 12.2011 restraining the Assessing Of?icer from further assessment proceedings for A.Y. 2004-05 to 2007-08 initiated u/s 153A of the Act. The Hon'ble High Court clari?ied that this order would be subject to ?inal decision. On 07.09.2017, the Hon'ble High Court disposed of main SCA of the Assessee. 6. The Hon'ble High Court set aside the order passed by the Settlement Commission u/s 245HA dated 04.10.2007 to a limited extent. As per the above order of the Hon'ble High Court, proceedings before the Settlement Commission revived for A.Y. 2001-02, 2002-03, 2003-04, 2005-06 and 2007-08 in ITSC, hence proceedings for A.Y. 2004-05 & 2006-07 were affected. Hence, assessment for AYs 2004-05 & 2006-07 have been completed by the Assessing Of?icer vide order dated 03.11.2017 u/s 153A(1)(b) r.ws. 143(3). Further, the Settlement Commission passed order dated 16.11.2017 vide which application dated 28.05.2007 ?iled by the assessee was declared invalid u/s 245D(2C), hence assessment proceedings for A.Y. 2001-02, 2002-03, 2003-04, 2005- 06 & 2007-08 got revived before the Assessing Of?icer. 7. During the course of the hearing, the Ld. AR submitted that the assessment proceedings for A.Y. 2005-06 & 2007-08 have become void and without jurisdiction since the assessment orders have been passed beyond the prescribed time limit as available in the Act. The AR of the assessee took us Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 4 through the facts of the case starting from the search action carried out by the department, Giling of the settlement application, Giling of writ petition, second search carried out by the department etc. The ground challenging the assessment was barred and rejected by CIT(A) by observing as under. It is observed that in present case second search was carried out on 7th October, 2009 and at that time assessment proceedings for year under consideration pursuant to irst search was stayed by Hon'ble Gujarat High Court vide order dated 12th May 2008. When assessment proceedings are stayed by Hon’ble High Court, AO cannot proceed with assessment proceedings for same year only on the ground that second search was carried out subsequently which entitles the AO to pass fresh assessment order pursuant to such search. Though AO has sought clari ication for assessment proceedings to be carried out or not from Hon'ble Gujarat High Court and Hon'ble Gujarat High Court disposed of the application on 19th December, 2011 holding not to proceed with assessment does not mean that Assessing Of icer has availed of the time available for completion of assessment pursuant to second search. As per tabular chart submitted by appellant, as reproduced at para -11 of submission, AO has availed of time period for completing assessment as per second search from 1st April, 201 Oto 18th December, 2011 i.e. date prior to order of Hon'ble High Court passed with reference to clari ication sought by AO. However, this contention cannot be accepted for the reason that when search has taken place for second time, assessment proceedings for year under consideration was in abeyance by order of Hon'ble High Court referred supra. Till the order of High Court is received it cannot be ascertained whether AO was entitled to complete assessment proceedings pursuant to irst search or not hence appellant was incorrect in computing number of days availed of by AO pursuant to second search at 617 days. In fact AO has not carried out any assessment proceedings for year under consideration pursuant to second search from 1st April, 2010. On this basis time available with AO is not 13 days as considered by appellant but it is 630 days and present assessment order is passed by AO within such period from the order under Section 245HA of the Act. On this basis, contention raised by appellant that present order is time barred is incorrect and the same is dismissed. 8. We have carefully gone through the facts of the case relevant explanation and, details listed out in the course of assessment proceedings as well as ?irst appellate stage. 9. Upon adjudicating the issue under consideration, it is observed that the assessee has not raised any speci?ic ground alleging that the assessment is barred by limitation. Instead, the assessee has taken a general ground stating that the assessment Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 5 order is void and required to be quashed. In support of his contention the Ld. AR invoked the Rule 27 of the ITAT Rules 1963. 10. The ground raised which challenges the validity of the jurisdiction assumed by the A.O. which strikes the very root of the assessment proceedings. It is relevant to note that the adjudication challenging the jurisdiction does not require any fresh material as all the relevant details is already available on record in the assessment / appellate orders. Accordingly, the ground raised by the AR is allowed within the scope of the present appeal. Reliance in this regard is placed on the following decisions: (i) Income Tax Of?icer Vs. Shri Pranav Prafulchandra Vora, ITA No.183/Ahd/2021 for A.Y. 2011-12 ITAT Ahmedabad: ………… 7. During the course of hearing, the Id. counsel for the assessee invoked Rule 27 of the ITAT Rules, 1963, for raising a legal ground before us in support of the order of the Ld.CIT(A). The ground raised challenged the validity of the jurisdiction assumed by the Assessing Of0icer in the present case u/s. 153C of the Act. His contention being that the satisfaction recorded by the Assessing Of0icer of the searched person was not within reasonable time and therefore the jurisdiction assumed u/s 153C of the Act to frame assessment u/s 153A of the Act was not valid. In this regard, he drew our attention to the facts relating to the issue and referred to various judicial decisions in support of his contention, as also to CBDT Circular. Before us, the Id. D.R. however vehemently objected to the entertainment of the grounds raised by the assessee as also to the merits of the contentions raised by the assessee. 8. We shall 0irst deal with this issue. 9. Since the assessee has invoked Rule 27 of the ITAT Rules, 1963 (in short “Rules”) for raising grounds in Department’s appeal, it is pertinent to reproduce Rule 27 of the Rules which reads as under:- “27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. ” 10. As is evident from a bare perusal of the above, if a respondent has not 0iled an appeal or cross-examination, he is entitled to raise grounds in support of the order appealed against, on any of the grounds which are decided against him. Clearly there is no bar on a respondent to an appeal raising grounds without 0iling an appeal or cross objection. As per Rule 27 of the ITAT Rules, the only condition is that the ground raised should be: • in support of order of Id. CIT(A), • on an issue decided against him. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 6 11. In the present case, the grounds raised by the Id. counsel for the assessee as a respondent, is vis a vis challenging the validity of the jurisdiction assumed by the AO of the assessee u/s. 153C of the Act on the ground that satisfaction recorded by the Assessing Of0icer of the searched person was beyond limitation. Admittedly this ground was never raised before the CIT(A) and therefore this issue was not decided against the assessee. Therefore, strictly reading rule 27 of the ITAT rules, the assessee apparently is not entitled to raise this ground. 12. We have however noted that the ITAT Delhi Bench in the case of ITO vs. Gurinder Kaur (2007) 288 ITR 207 (Delhi), had an occasion to deal with an identical situation and held that even dehors Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, it is open to the respondent in an appeal before the Tribunal to raise new grounds in defense of the order appealed against, noting that the Tribunal has inherent powers u/s. 254(1) of the Act to entertain the argument of the respondent which amounted to a new ground. In the facts of the said case, the Id. CIT(A) had held the order passed by the Assessing Of0icer u/s. 147 of the Act to be invalid noting that the reasons recorded by the Assessing Of0icer for reopening the case of the assessee was based merely on suspicion and did not ful0il the parameter laid down u/s. 147 of the Act to form a belief of escapement of income. Before the ITAT, the Department come up in appeal against the order of the Id. CIT(A), where the assessee raised grounds in defense of the order of the Id. CIT(A), which were not dealt with by the Id. CIT(A). The assessee raised the ground of the notice u/s. 148 of the Act not being served on the assessee, the approval of the Joint CIT not being taken by the Assessing Of0icer before issuing notice u/s. 148 of the Act as required by section 151 of the Act and jurisdiction for reopening being invoked for making only 0ishing or roving inquiries, which as per the assessee were not permitted in law. The ITAT noted that these issues were not adjudicated against the assessee by the Id. CIT(A) and therefore held that strictly speaking the assessee could not raise these grounds in terms of rule 27 of the ITAT Rules, 1963. However, it went on to note that the Hon’ble Apex Court in the case of Hukum Chand Mills Ltd. vs. CIT held that even assuming that Rule 27 of the ITAT Rules, is not strictly applicable, the Tribunal had inherent powers u/s. 254(2) to entertain arguments of the respondent subject to the condition that no new facts are required to be brought on record. Applying the said ratio laid down by the Hon’ble apex court, the ITAT held that the grounds raised by the assessee as respondent in the Department’s appeal, though not permitted to be entertained as per section 27 of the ITAT Rules, could be admitted for adjudication considering the inherent powers of ITAT: “10. Before we proceed further, it is necessary to clear this point, namely, whether the assessee can raise these points before the Tribunal for the 0irst time as a respondent defending the order of the CIT(A) which was based on the only question whether the reasons recorded by the Assessing Of0icer amounted to reason to believe or reason to suspect. The matter is not res integra. Rule 27 of the Appellate Tribunal Rules, says that the respondent in an appeal can support the order appealed against on any of the grounds decided against him even though he may not have 0iled an independent appeal or cross-objection. This Rule clearly supports the assessee. In the Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 7 present case, the assessee has raised the point of non-recording of reason in ground No. 2 before the CIT(A) though this ground is not so categorical as the Ld. Counsel for the assessee wants us to read. Even so, such ground can be inferred from the fact that the assessee has been repeatedly asking for the reasons recorded which were not supplied to her. Even before the Tribunal right from September, 2004, the assessee has been requesting for production of the department's records obviously calling upon the department to show that reasons for reopening have been recorded, but due to some dif0iculty or the other, the department has not been able to produce the records. The CIT(A) has not recorded any 0inding on the question whether the reasons were recorded or not, but having regard to the judgment of the Hon’ble Delhi High Court in Rohtak and Hissar Districts Electric Supply Co. (P.) Ltd, v. CIT, it is possible to hold that he found against the assessee on this point. On this reasoning, it is open to the assessee to raise the question of non-recording of reasons for reopening the assessment before the Tribunal for the 0irst time and seek to support the ultimate decision of the CIT(A). Even the non-disclosure of the reasons can be said to be covered by ground No. 2 taken before the CIT(A) and in the absence of anu de0inite decision by the CIT(A), the same conclusion would follow namely, that it is open to the assessee to invoke Rule 27 even in respect of this point. As regards the approval of the JCIT under Section 151(1), it is fairly admitted on behalf of the assessee that this was not speci0ically taken either before the Assessing Of0icer or before the C1T(A) and, therefore, we hold that Rule 27 may not be strictly speaking available to the assessee. 11. Even de hors Rule 27 of the Appellate Tribunal Rules, it is open to the respondent in an appeal before the Tribunal to raise a new ground in defence of the order appealed against. It has been so held by the Supreme Court in Hukam Chand Mills Ltd. v. CIT of the report it was held that even assuming that Rule 27 is not strictly applicable, the Tribunal has inherent powers under Section 254(1) to entertain the argument of the respondent which amounted to a new ground. It was further held by the Supreme Court as follows: It is necessary to state that Rules 12 and 27 are not exhaustive and the powers of the Appellate Tribunal. The rules are merely procedural in character and do not, in any way, circumscribe or control the power of the Tribunal under Section 33(4) of the Act. It is signi0icant to note that in the case before the Supreme Court, the department which was the respondent sought to raise a new plea in defence of the order appealed against. Earlier, in New India Life Assurance Co. Ltd. v. CIT , the Bombay High Court while pointing out the difference between an appellant and respondent before the appellate court, observed at page 55 that the respondent may support the decision of the trial court, not only on the ground contained in the judgment of the trial court, but on any other ground\". Later, in the case of B.R. Bamasi v. CIT, the Bombay High Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 8 Court which was dealing with the case of right of the respondent to defend the order appealed against held that the respondent to defend the order appealed against held that the respondent would be entitled to raise a new ground in defence of. It is signi0icant to note that in the case before the Supreme Court, the department which was the respondent sought to raise a new plea in defence of the order appealed against. Earlier, in New India Life Assurance Co. Ltd. V. CIT, the Bombay High Court while pointing out the difference between an appellant and respondent before the appellate court, observed at page 55 that the respondent “may support the decision of the trial court, not only on the ground contained in the judgment of the trial court, but on any other ground”. Later, in the case of B.R. Bamasi V. CIT, the Bombay High Court which was dealing with the case of right of the respondent to defend the order appealed against held that the respondent would be entitled to raise a new ground in defence of the order appealed against, provided it is a ground of law and does not necessitate any other evidence to be recorded, the nature of which would not only be a defence to the appeal itself but may also affect the validity of the entire assessment proceedings. It was further held that the ground served as a weapon of defence against the appeal and, if accepted should not place the appellant in a worse than he would have been, had he not appealed. In CIT v. Gilbert and Barkar Mfg. Co. , the Bombay High Court made no distinction between the appellant and respondent in an appeal before the Tribunal and held that both were entitled to raise new points or contentions subject only to the condition 0irstly that no new facts are required to be brought on record is capable of being disposed of on the facts on record and secondly that an opportunity is given to the other side to meet that point which is allowed to be raised for the 0irst time in the appeal. This was also a case of the respondent. To the same effect are the decisions of the Allahabad, Gauhati, Kerala and Gujarat High Courts cited on behalf of the assessee. Therefore, whether it is the appellant or the respondent before the Tribunal, new points or contentions can be raised provided they did not involve investigation into facts (as contrasted with the record) and that an opportunity is given to the other side to meet the contentions. Applying these principles to the present case, we overrule the preliminary objection of the Ld. Sr. DR and permit the assessee to raise the new points before us as a respondent. ” 13. Following the said decision, we hold that the grounds raised by the assessee, challenging the validity of jurisdiction assumed u/ s. 153C of the Act is maintainable. 14. We shall now proceed to adjudicate the ground raised by the Id. counsel for the assessee. (ii) Hon’ble Supreme Court in the case of NATIONAL THERMAL POWER CO. LTD. V. COMMISSIONER OF INCOME-TAX, [1998] 229 ITR 383: “Under section 254 of the Income-tax Act, 1961, the Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 9 heard, pass such orders thereon as it thinks 0it. The power of the Tribunal in dealing with appeals is thus expressed in the widest possible terms. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. If, for example, as a result of a judicial decision given while the appeal is pending before the Tribunal, it is found that a non-taxable item is taxed or a permissible deduction is denied, there is no reason why the assessee should be prevented from raising that question before the Tribunal for the 0irst time, so long as the relevant facts are on record in respect of the item. There is no reason to restrict the power of the Tribunal under section 254 only to decide the grounds which arise from the order of the Commissioner of Income-tax (Appeals). Both the assessee as well as the Department have a right to 0ile an appeal/ cross-objections before the Tribunal. The Tribunal should not be prevented from considering questions of law arising in assessment proceedings, although not raised earlier. The view that the Tribunal is con0ined only to issues arising out of the appeal before the Commissioner (Appeals) is too narrow a view to take of the powers of the Tribunal. Undoubtedly, the Tribunal has the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider the question of law arising from facts which are on record in the assessment proceedings, there is no reason why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an assessee.” (iii) COMMISSIONER OF INCOME-TAX, BOMBAY CITY - I v. GILBERT AND BARKER MANUFACTURING CO., USA [1978] 111 ITR 529 (Bom) From the Head Noes: “The Appellate Tribunal has the discretion to allow any party to an appeal, may be the appellant or the respondent, to raise a new point or new contention provided two conditions are satis0ied:—(1) No new facts are required to be brought on record for disposing of such new point, and (2) An opportunity is given to the other side to meet the point. The assessee, a foreign company, entered into an agreement with an Indian company under which licence was granted to the Indian company to manufacture, sell and service, gasoline pumps of the type made by the assessee. There was a further provision in the agreement that improvements or developments in relation to the pumps made by the assessee would be made available to the assessee. The Indian company paid the assessee 5% of the sale price of the pumps and parts in accordance with the agreement. In the assessment for the year 1962-63, the assessee claimed research and development expenditure attributable to the licence. The Income-tax Of0icer assessed the amount received by the assessee as \"income from other sources\" and disallowed the expenditure which in his opinion was not actually incurred for the purpose of earning the income. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 10 On appeal, the Appellate Assistant Commissioner allowed the expenditure. Aggrieved by this order the department preferred a second appeal to the Tribunal. At that stage the assessee contended for the 0irst time that the income was assessable as business income. The Tribunal upheld the contention of the assessee and allowed the expenditure. On a reference, the department raised the preliminary objection that the Tribunal was not justi0ied in permitting the assessee to raise a new plea especially when it had not made the appeal itself: Held, that in the instant case all the facts that were required for determination of the points as to whether the income returned should be assessed under the head \"income from business\" or not, were already on record. No other investigation of any other fact was necessary. The question whether a particular income should be brought to tax under one or other head cannot be considered to be an entirely new point. The department was given full opportunity to meet the contention that was raised by the assessee for the 0irst time in appeal. The Tribunal was, therefore, justi0ied in permitting the assessee to the raise the plea that its income was assessable under the head \"business\". 11. Thus, having regard to facts and circumstances of the case, there is no bar on the ground being adjudicated challenging the jurisdiction of the A.O. particularly more so when such legal ground was raised before the CIT(A), Furthermore, the required facts for adjudication is available on record and accordingly the ground is allowed for adjudication. 12. After going through the facts of the case and the issues arising from the contentions raised during the hearing is summarised as under: 12.1 The facts of the case are that search and seizure action u/s. 132 of the Act was carried out by the Department in the case of the Ashish Patel and it's Group on 04.08.2006. As a result of search action, notice u/s.153A of the Act was issued on - for Assessment Year 2001 02 to 2007-08. The time limit for completion of the assessment proceedings for these assessment years was 31.12.2008 i.e. 21 months from the end of the ?inancial year from the date of search. Meanwhile, before the completion of the assessment proceedings, the assessee ?iled settlement application u/s.245C on 28.05.2007 for Assessment Year 2001-02 to 2007-08. The Assessee could not pay tax for Assessment Year 2004-05 and 2006-07 within the prescribed time limit, Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 11 accordingly settlement application was abated by Settlement Commission on account of non-payment of taxes for Assessment Year 2001-02 to 2007-08 on 04.10.2007. 12.2 The Assessee ?iled a writ petition before the Hon'ble Gujarat High Court against the order of the Settlement Commission. The Court on 12.05.2008 stayed the order of the Settlement Commission. Further, on 07.12.2009, the Hon’ble High Court passed an interim order directing the Assessee to pay the admitted taxes for continuation of stay, and simultaneously directed the Department not to proceed further till the disposal of this application. The assessee paid the taxes as directed by the Court. 12.3 On 07.09.2017, the Court passed the ?inal order in which, it was held that the assessment years for which admitted taxes were paid would go back to the Settlement Commission and the assessment years for which admitted taxes were not paid would abate and therefore, would go back to the Assessing Of?icer. Accordingly, assessment years, i.e. 2001-02, 2002-03, 2003-04, 2005¬06 and 2007-08 would go to Settlement Commission for further adjudication and 2004-05 and 2006-07 would go back to the Assessing Of?icer for making assessment as per provisions of the Act. 12.4 The Settlement Commission rejected the application u/s. 245D(2C) and accordingly by virtue of the rejection A.Y. 2001-02, 2002-03, 2003-04, 2005-06 and 2007-08 were restored back to Assessing Of?icer on 24.11.2017. 12.5 In-between, the Income Tax Department carried out another search on 07.10.2009 at the business and residential premises of the assessee. As a result of 2nd search, A.Ys. 2004-05 to 2010-11 were covered in 2nd search. Notice u/s. 153A for A.Y. 2004-05 to 2009-10 was issued on 08.03.2011. The time limit for completing the Assessment Proceedings, for Assessment Years covered in the 2nd search was 31.12.2011. Thus, Assessment Year 2004-05 to 2007-08 got overlapped between the 1st and the 2nd search. 12.6 It is crucial to note that as on the date of 2nd search i.e. 07.10.2009, the Assessment Proceedings for overlapping Assessment Years 2004-05 to 2007-08 were pending and accordingly the assessment for these assessment years got abated vis-a- vis 1st search, under 2nd proviso to section 153A. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 12 12.7 The provision relating to abatement of proceedings as provided in Section 153A reads as under: ……….Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate : 12.8 The important dates is summarised as under:- Sr. No. Particulars Details FIRST SEARCH 1. Date of 1st search 04.08.2006 2. A.Y. involved 2001-02 to 2007-08 3. End of Financial year in which search is conducted ends on 31.03.2007 4. Time limit for completion of assessment in respect of ?irst search as per section 153B 21 months from the end of the ?inancial year 5. Last Date for completion of Assessment in terms of S.153B 31.12.2008 6. Date of ?iling application before the Hon'ble ITSC 28.05.2007 7. Date of order passed by the Hon'ble ITSC u/s 245HA 04.10.2007 8. Period from (iv) to (v) [28.05.2007 to 04.10.2007] 4 months 9. Date of admission of Writ Petition by High Court against the order of the Hon'ble ITSC and the date on which direction was given to A.O. not to proceed with assessment Proceedings 12.05.2008 10. Date of order of High Court con?irming abatement of assessment proceedings for A.Y. 2004-05 and 2006- 07 07.09.2017 11. Date of order of High Court con?irming abatement of assessment proceedings for assessment year 2001- 02, 02-03, 03-04, 05-06 and 07-08. 07.09.2017 12. Order of the ITSC rejecting the Settlement Application u/s 245HA 24.11.2017 SECOND SEARCH 1. Date of 2nd search 07.10.2009 2. A.Y. involved 2004-05 to 2010-11 3. End of Financial year in which search is conducted ends on 31.03.2010 4. Time limit for completion of assessment in respect of 2nd search in terms of S.153B. 21 months from the end of the ?inancial year 5. Last Date for completion of Assessment 31.12.2011 6. Overlapping Assessment years 2004-05 to 2007-08 Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 13 13. The Ld. AR submitted that so far as Assessment Year 2005-06 and 2007- 08 is concerned, they were covered by 2nd search. As and when the 2nd search was conducted, the Assessment Proceedings for these assessment years were pending. Accordingly, once the Settlement Commission abated the proceedings u/s.245D(2C) the law that, governed the framing of the assessment was to be considered from 2nd search (and this is what exactly the Department had done for Assessment Year 2004-05 and 2006- 07.) Since, only 13 days were remaining for framing the assessment, the assessment for Assessment Year 2005-06 & 2007-08 was to be framed by 23.01.2018 as under:- Sr. No. Particulars Assessment Years 2005-06 & 2007-08 1 Time available to Assessing Of?icer for making assessment 2 01.04.2010 to 18.12.2011 617 days 3 Total Time available (21 Months0 630 days 4 Total days availed by Assessing Of?icer 617 days 5 Further Time Available 13 days 6 Extended to (as per 1st Proviso to Explanation 153B) from the passing of the High Court order 60 days 7 High Court Order dated 24.11.2017 8 Last Date for passing of assessment order 23.01.2018 9 Date of passing of assessment order 30.11.2018 14. In view of the above, the issue which requires to be addressed is whether the assessment proceedings for AY 2005-06 & 2007-08 have become barred by limitation or were within time limit as observed by the A.O. The same requires to be analysed considering the following scenarios: (A) Assuming 2nd search action dated 7th October 2009 was not carried out by the department and it was case of only Girst search. 1. Pursuant to the order passed by the High Court on 07.09.2017, the High Court directed; a. That A.Y. 2004-05 and A.Y. 2006-07 would go back to the A.O. since taxes were not paid. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 14 b. That A.Y. 2005-06 and A.Y. 2007-08 would go back to the Settlement Commission since taxes were paid. c. Settlement Commission again sent back the cases for A.Y. 2005-06 and A.Y. 2007-08 back to the A.O. for framing Assessment on the ground full and true disclosure was not made. 2. The assessee had ?iled Settlement Application on 12.05.2008 when the time barring of the assessment in terms of section 153B for A.Y. 2004-05 to 2007-08 was 31.12.2008. Accordingly, the jurisdiction which was withdrawn from the A.O. was from 12.05.2008 to 31.12.2008 i.e. 233 days. Accordingly, when the jurisdiction was restored back to the A.O., the period available to the A.O. would be of 233 days (if it was less than 60 days it would have been treated as 60 days). 3. So far as, A.Y. 2004-05 & 2006-07 was restored back to the A.O. pursuant to the order of the High Court on 07.09.2017. If the jurisdiction of 233 days is added, the last date for making assessment for A.Y. 2004-05 and 2006- 07 would be 28.04.2018. The A.O. had passed the order on 24.01.2018 and accordingly the assessment was within the prescribed time limit. 4. So far as, A.Y. 2005-06 8s 2007-08 were restored back to the A.O. pursuant to the order of the Settlement Commission on 24.11.2017. If the jurisdiction of 233 days is added, the last date for making assessment for A.Y. 2005-06 and 2007-08 would be 15.07.2018. Since the A.O. had passed the order on 30.11.2018 (delay of 138 days) and accordingly the assessment was barred by limitation. (B) Time Barring Limit as a result of second Search conduced on 7th Oct 2009: 1. As a result of 2nd search carried out by the Department on 07.10.2009 all pending assessments in terms of section 153A shall abate. The assessment years which shall abate are A.Y.2004-05 to 2007-08. The department itself had issued notice for A.Y. 2004-05 to 2007-08 as a result of 2nd search on 08.03.2011, accepting the abatement of proceedings covered of A.Y. for 1st search. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 15 2. In terms section 153B, the last date for ?inalisation of the assessment in terms of 2nd search carried out by the department was 31.12.2011. However, as stated in the assessment order the Department in order to gain clarity regarding the framing of the assessment for A.Y. 2004-05 to 2007-08 Revenue ?iled Civil Application No. 10395 of 2011 wherein High Court vide order on 19.12.2011 restrained the A.O. from ?inalisation of assessment. 3. It is relevant to highlight the observation of the A.O. with respect to time barring of the assessment as mentioned in the assessment orders as under: A.Y. 2004-05 (Para 5 of the Assessment Order) …….. 5. On 07.10.2009 another search (hereinafter referred to as second search) took place on the assessee (in Saumya Construction Group search) by executing warrant u/s 132 of the IT Act which was 0inally concluded by drawing the panchnama on 01.12.2009. In view of this second search happened on the assessee, the pending (and stayed by Hon. HC) assessment proceedings for A.Y. 2004-05 and 2006-07 abated in view of the second proviso to section 153A(1) of the Act and got merged with the fresh assessment proceedings to be initiated u/s,153A in pursuance to the second search. In pursuance to the second search, the AO issued fresh notice u/s. 153A of the IT Act on 08/03/2011 for A. Y. 2004-05 which was served on the assessee on 10/03/2011. In response to the said notice assessee did not 0ile the return of income for A.Y. 2004-05. A.Y. 2006-07 (Para 5, 6,8,9 of the Assessment Order) ……. 5. On 07/10/2009 another search (hereinafter referred to as second search) took place on the assessee (in Saumya Construction Group search) by executing warrant u/s.132 of the IT Act which was 0inally concluded by drawing the panchnama on 01/12/2009. In view of this second search happened on the assessee, the pending (and stayed by Hon. HC) assessment proceedings for A.Y. 2004-05 and 2006-07 abated in view of the second proviso to section 153A(1) of the Act and got merged with the fresh assessment proceedings to be initiated u/s,153A in pursuance to the second search. In pursuance to the second search, the AO issued fresh notice u/ s. 153A of the IT Act on 08/03/2011 for A. Y. 2006-07 which was served on the assessee on 10/03/2011. In response to the said notice assessee did not 0ile the return of income for A.Y. 2006-07. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 16 6. Further to gain clarity regarding framing of the assessment for A.Y. 2004-05 to 2007-08 in pursuance to second search, revenue 0iled another civil application No. 10395 of 2011 in Hon. HC. The said civil application was disposed off by Hon/HC. By passing an order on 19.12.2011 whereby Hon. HC restrained the AO again from further proceedings with the 0inalisation of assessment for A.Y. 2004¬05 to 2007-08 u/s.153A of the IT Act. Hon. HC., also stated that this order would be subject to the 0inal decision that may be taken in the main application (i.e. SCA no. 6379 of 2008). In view of the said order of Hon. HC, the AO did not 0inalise the assessment of the assessee for A.Y. 2004-05 to 2007-08. 7. …… 8. In pursuance to the order of Hon. HC dated 07.09/2017 in SCA no. 6379 of 2008, the assessment proceedings of the assessee for A.Y. 2006-07 were taken up and notice u/s. 142(1) was issued to the assessee on 19/09/2017 asking him to 0ile his return of income for A.Y. 2006-07 by 25/09/2017 which was supposed to 0ile in response to the notice u/s.153A dated 08/03/2011. The notice was served on the assessee on 19/09/2017 itself. However, assessee did not 0ile his return of income by the due date. On 29/09/2017 a letter was received by this of0ice through Dak with the sender mentioned as Ashish Patel but signed by some Mr. Pranav Patel regrading the assessment proceedings for A.Y. 2004-05 and 2006-07. Here it is important to mention that no letter of authority had been submitted by the assessee thus far in favour of Mr. Pranav Patel. In the said letter it was mentioned that the assessment for A.Y. 2004-05 and 2006-07 will time bar (hereinafter referred to as TB) on 08/06/2019 and the same will be in pursuance to the 0irst search and the initial notice u/s. 153A dated 04/05/2007. It was also mentioned in the letter that the assessment for A.Y. 2004-05 and 2006-07 in pursuance to the 0irst search and the initial notice u/s. 153A dated 04/05/2007. It was also mentioned in the letter that the assessment for A. Y. 2004-05 and 2006-07 in pursuance to the second search conducted on Ashish Patel on 07/10/2009 has already become Time Barred. It was also requested in the letter to communicate how the AO had determined the time barring date for the assessment of AY 2004-05 and 2006-07 as 05/11/2017. 9. In response to the above mentioned letter, the following reply dated 3.10.2017 was sent to the assessee- In this respect it is submitted that this of0ice has received a letter signed on your behalf by someone (appears some Mr Pranav Patel as per signature prima facie), since this of0ice is not in possession of any letter of authority in favour of the signatory to the letter, the objections raised by you in the said letter stands null and void. 3. Still, this of0ice again wants to communicate to you that your assessments for AY 2004-05 and 2006-07 will TB on 05.11.2017. This is because the same are being framed in pursuance to the notice u/s 153A Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 17 issued to you for both the AY on 08.03.2011 and served on 10.03.2011. Further Hon’ble HC stayed the assessment on 19.12.2011 thereby leaving only 13 days before TB. Hence, after the vacation of stay Hon’ble HC on 07.09.2017, the time period available to the AO is 60 days in view of the 0irst proviso to Section 153B(3). 4. You are therefore required to co-operate with the assessment proceedings without any further delay in view of the short period remaining for the TB. Further subsequent communication from your side should be either under your signature or with proper authority else this of0ice will not be able to take the same on record. 4. The High Court disposed off the petitions on 07.09.2017 wherein 2004-05 and 2006-07 would go back to A.O. Since taxes were not paid and 2005-06 and 2007-08 would go back to ITSC which again was rejected and restored back to A.O. vide order dated 24.11.2017. 15. Since the jurisdiction of the AO was ceased due to the order of the Hon’ble High Court dated 19.12.2011 was of 13 days (19.12.2011 - 31.12.2011) the same was extendable to 60 days in terms of the provision of Section 153B as they stood immediately before the commencement of the Finance Act, 2016 as under:- Section 153B (3) .... Explanation.—In computing the period of limitation under this section— (i) the period during which the assessment proceeding is stayed by an order or injunction of any court; or (ii) the period commencing from the date on which the Assessing Of0icer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and— (a) ending with the last date on which the assessee is required to furnish a report of such audit under that sub-section; or (b) where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Principal Commissioner or Commissioner; or (iii) the period commencing from the date on which the Assessing Of0icer makes a reference to the Valuation Of0icer under sub-section (1) of section 142A and ending with the date on which the report of the Valuation Of0icer is received by the Assessing Of0icer; or Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 18 (iv) the time taken in re-opening the whole or any part of the proceeding or in giving an opportunity to the assessee of being re-heard under the proviso to section 129; or (v) in a case where an application made before the Income-tax Settlement Commission is rejected by it or is not allowed to be proceeded with by it, the period commencing from the date on which an application is made before the Settlement Commission under section 245C and ending with the date on which the order under sub-section (1) of section 245D is received by the Principal Commissioner or Commissioner under sub-section (2) of that section; or (vi) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the order rejecting the application is received by the Principal Commissioner or Commissioner under sub-section (3) of section 245R; or (vii) the period commencing from the date on which an application is made before the Authority for Advance Rulings under sub-section (1) of section 245Q and ending with the date on which the advance ruling pronounced by it is received by the Principal Commissioner or Commissioner under sub-section (7) of section 245R; or (viii) the period commencing from the date of annulment of a proceeding or order of assessment or reassessment referred to in sub-section (2) of section 153A, till the date of the receipt of the order setting aside the order of such annulment, by the Principal Commissioner or Commissioner; or (ix) the period commencing from the date on which a reference or 0irst of the references for exchange of information is made by an authority competent under an agreement referred to in section Q0 or section 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; or (x) the period commencing from the date on which a reference for declaration of an arrangement to be an impermissible avoidance arrangement is received by the Principal Commissioner or Commissioner under sub-section (1) of section 144BA and ending on the date on which a direction under sub-section (3) or sub-section (6) or an order under sub-section (5) of the said section is received by the Assessing Of0icer, shall be excluded: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this sub- section available to the Assessing Of0icer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 19 16. Reliance is also placed on the decision of Shri Atul Hiralal Shah vs. The DCIT, Central Circle-1(2), ITA No. 200/AHD/2021 (Ahmedabad ITAT): …… 7. The assessee through written submissions running pages 1 to 12 contended that the assessment order under section 143(3) r.w.s. 153A of the Act which was subject to revision under section 263 of the Act is invalid as the same was passed beyond the time limit provided under section 153B of the Act. The assessee before us contented that the time limit of completing the assessment u/s 153B of the Act was reduced from 1st June 2016 from two years to 21 months only, as the order was passed by the AO after 01-06-2016. Therefore, the time limit for completion of assessment is 21 months and not 24 months from the end of the 0inancial year in which the last of the authorizations for search under section 132 of the Act has been executed. As the last of the authorization for search under section 132 of the Act has been executed dated 3-2-2015 i.e. 0inancial year ending as on 31st March 2015, meaning thereby, the period of 21 months expires on 31 December 2016 for passing the assessment order under the provisions of section 153A read with section 143(3) of the Act. As the reference has been made for the exchange of information under the provisions of section 90/90A of the Act and therefore the maximum period of 1 year has to be excluded while framing the assessment from 0irst of the reference made for exchange of information. As per, the assessee, the Ist reference was made by the AO dated 30-01-2015 and maximum time to be excluded i.e. one year expires 29-01-2016 yet the time was available for framing the assessment for 11 months which is more than 60 days as provided in the proviso to explanation under section 153B of the Act. Therefore, even after making reference for exchange of information with FT & TR, the time limit to pass assessment order section 153A r.w.s. 143(3) of the Act expires on 31st December 2016. 8. However, the assessee has 0iled an application under section 245C of the Act before the settlement commission dated 20-12-2016 which was rejected under section 245D(1) of the Act vide order dated 02-01-2017. As per the provision of explanation (v) to section 153B of the Act, the period from 20-12-2016 to 02-01- 2017 shall be excluded from limitation and after the exclusion of said period the time available for the AO under normal circumstances to 0inalize assessment after 0irst application before settlement commission was expiring on 04-03-2017 i.e. after the extension of 60 days. The assessee made a second application before settlement commissioner dated 27-02-2017 which was rejected on 10-03-2017 i.e. second application rejected in 12 days. Therefore, after exclusion 12 days taken in second application, the time limit to frame assessment was expiring on 17-03- 2017 whereas the order was passed as on 9th March 2018 which is far beyond the time limit prescribed. Hence, the order passed beyond the speci0ied time limit is not a valid order and once the assessment order itself is invalid, the same cannot be revised under section 263 of the Act. It was also contended that order passed in the group member of the assessee namely Shri Jignesh Hiralal Shah was also held time barred by the ITAT in ITA No. 106/Ahd/2021. It was further submitted that Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 20 third proviso below the explanation to section 153B of the Act was introduced vide Bill Act 2017 and at the time when the second application under section 245C of the Act was rejected by the learned settlement commissioner, third proviso was not even in the statute book and also the same is effective only from 1st April 2017 meaning thereby, the provisions contained under third proviso are only applicable in case of search proceedings carried out after 1st April 2017. In this regard reference was also made to the judgment of Hon'ble Gujarat High Court in case of Anil Kumar Gopikishan Aggarwal vs. ACIT in special civil appeal no. 12825 of 2018. 9. On the other hand, the learned DR before us 0iled a paper book running from pages 1 to 12 and contended that the issue on the validity of the assessment under section 153A r.w.s. 143(3) of the Act is pending before the Id. CIT-A, so such should not be taken in the proceedings under section 263 of the Act. The Id. DR also referred the remand report submitted by the AO during the proceeding before the CIT(A) in connection with issue of time baring and vehemently submitted that the order has been framed within the statutory time limit. 10. We have heard the Id. DR and perused/ considered the materials available on record including the written submission 0iled by the assessee. Admittedly, the assessee was subject to search proceedings under section 132 of the Act dated 4th December 2014 and accordingly the assessment under section 143(3) read with section 153A of the Act was made vide order dated 9th March 2018 making huge addition to the total income of the assessee. The assessee against the assessment order 0iled an appeal before the commissioner appeal being 0irst appellate authority challenging t e merit of the addition as well the validity of the assessment order on account of limitation which is pending. In the meantime, the learned PCIT revised the assessment order under section 263 of the Act by holding that the assessing of0icer failed to consider an addition on account of cash investment in property for Rs. 2.5 crores. Against the order under section 263 of the Act, the assessee is appeal before us and challenged the validity of the assessment being time barred while the appeal 0iled before the learned CIT(A) on the same is still pending. Now the 0irst controversy arises before us whether the assessee can raise the legal contention before the tribunal against the order passed under section 263 of the Act while the same is raised by the assessee before the 0irst appellate authority which is still pending. In this regard, we note the issue of time barring of assessment is directly linked to valid jurisdiction of framing assessment and consequently the same is linked with legality/sustainability of the assessment order. Therefore, the legal ground which goes to the very root/validity of the any proceeding can be raised by the assessee at any stage or before the higher authority for the 0irst time. Further, the facts regarding the issue of limitation for 0inalizing assessment under section 153B of the Act was on record and assessee even has raised such issue before the learned CIT(A) in the appeal 0iled against the original assessment order. Meanwhile, the assessment order was revised by the learned PCIT for limited issue by exercising the power conferred under section 263 of the Act and the assessee in the appeal 0iled before us against the order under section 263 of the Act and raised the same issue before us while the appeal before learned CIT(A) is still pending. It is also not the case where the issue raised requires production of new material or evidence. Therefore, in our Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 21 considered opinion the present assessee cannot be prohibited to raise legal ground challenging the validity of the assessment order which was subject to revision under section 263 of the Act in the given facts and circumstances. In holding so we draw support and guidance from the order of Kolkata ITAT in case of PILCOM vs. ITO reported in [2001] 77 ITD 218 (Calcutta) where it was held as under: ' An additional ground on a legal issue can be taken up by either party at any stage of the appellate proceeding provided it does not require production of new material or evidence. Hence, the additional ground was to be admitted. 11. We also draw support and guidance from the judgement of Hon'ble Bombay High Court in the case of Peter Vaz vs. CIT reported in 128 taxmann.com 180 where an assessment order under section 153C of the Act was made against the assessee. The appeal was 0iled appeal before the Id. CIT(A) and succeeded. Subsequently, the revenue 0iled appeal before the tribunal and the assessee during proceedings before the tribunal in revenue appeal without 0iling cross objection or separate appeal raised the issue of legality and validity of jurisdiction acquired under section 153C of the Act. The Tribunal rejected the contention of the assessee regarding validity of jurisdiction assumed under section 153C of the Act. On further appeal by the assessee, the Hon'ble Bench of Bombay High Court after referring to various judicial pronouncement held that legal ground raised by the assessee on the ful0ilment of jurisdictional parameters even without 0iling cross objection should have been allowed. The relevant 0inding of the bench reads as under: 38. In the present case, it is not as if the issue of non-ful0ilment of jurisdictional parameters of Section 153C was raised but rejected by the CIT (Appeals). Such an issue was not raised before the CIT (Appeals). Having regard to the provisions of Rule 27 of the Appellate tribunal Rules, 1963 as also the provisions of section 260A(7) read with Order XLI Rule 22 of CPC as interpreted by the Hon’ble Supreme Court in S. Nazeer Ahmed (supra) we think, that the ITAT should not have precluded the assessee from raising the issue in the appeals instituted by the Revenue, even without the necessity of 0iling any cross-objections. Accordingly, the additional substantial question of law is required to be answered in favor of the Appellants/assessees and against the Revenue. 11.1 In view of the above, we hold that the assessee is within his rights challenging the validity of the assessment order passed under section 153A r.w.s. 143(3) of the Act in the proceedings carried out under section 263 of the Act. 11.2 Now coming to question before us whether the assessment order under section 143(3) r.w.s. 153A of the Act dated 9th March 2018 was passed within the time limit speci0ied under the provision of section 153B of the Act. The provision of section 153B(1) of the Act as amended by Finance Act 2016 provides that the assessment under section 153A of the shall be made within a period of 21 month from the end of the 0inancial year in which the last of the authorization of the search was executed. In this case a search was conducted on 4th December 2014 and the last authorizations of search was also executed on 3rd February 2015. Hence, the search was conducted and concluded in 0inancial year ending on 31st Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 22 March 2015. At the time of hearing, the contention was raised by the learned DR that the search was conducted before the amendment brought by the Finance Act 2016 reducing the assessment period from 24 months to 21 months, therefore in the case of present assessee, time limit available to the AO under section 153B(1) ITA no.200/AHD/2021 Asstt. Year (3) The provisions of this section, as they stood immediately before the commencement of the Finance Act, 2016, shall apply to and in relation to any order of assessment or reassessment made before the 1st day of June, 2016: [Provided that where a notice under section 153A or section 153C has been issued prior to the 1st day of June, 2016 and the assessment has not been completed by such date due to exclusion of time referred to in the Explanation, such assessment shall be completed in accordance with the provisions of this section as it stood immediately before its substitution by the Finance Act, 2016 (28 of 2016).] 11.3 In the case on hand, the notice under section 153A of the Act was issued on 22nd July 2015 and assessment order was passed on 9th March 2018 i.e. notice under section 153A of the Act was issued before the commencement of amendment brought in by the Finance Act and here also a case of exclusion of time as referred in explanation was involved. Therefore, in our considered the limitation period provided under section 153B(1) of the Act before the amendment will be applicable i.e. 24 months from the end of 0inancial year in which last of authorization of search was executed and accordingly the last date to 0inalize the assessment order was expiring on 31st March 2017 without exclusion of time as provided under different clauses in the explanation to section 153B of the Act. 11.4 Moving ahead, we note that in the case of the assessee, multiple references were made for exchange of information in different countries through FT & TR. The provision of clause (ix) of the explanation to section 153B of the Act reads as under: Explanation.-In computing the period of limitation under this section— ******** (ix) the period commencing from the date on which a reference or 0irst of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Principal Commissioner or Commissioner or a period of one year, whichever is less; or ***** shall be excluded: Provided that where immediately after the exclusion of the aforesaid period, the period of limitation referred to in clause (a) or clause (b) of this sub-section available to the Assessing Of0icer for making an order of assessment or reassessment, as the case may be, is less than sixty days, such remaining period shall be extended to sixty days and the aforesaid period of limitation shall be deemed to be extended accordingly: 11.5 From the above provision, it is transpired that period commencing from the reference or 0irst of the reference made to the date on which last Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 23 of information received or 12 month whichever is less shall be excluded. As per the list provided in the case of the present assessee, the 0irst reference for exchange of information under section 90 or 90A of the Act was made on 12th January 2015 to UAE authority whereas last reference was made on 16th May 2017 with competent authority of Bermuda. Now the question arises from which date the period of exclusion for making reference for exchange of information shall be computed. In this regard, we 0ind the provision for exclusion of time on account of reference for exchange information through FT&TR was 0irst brought through Finance Act 2011 w.e.f. 1st June 2011 where it was provided that the period commencing from the date of reference to the date on which last information received shall be excluded. Subsequently, the dispute arose for calculating the period where there were multiple references made in different countries. In this regard, the legislator vide Finance Act 2013, amended the said clause of the explanation by adding the phrase \"reference or 0irst of the refences\" and clari0ied that the exclusion period shall be calculated form the date on which 0irst reference was made. In this regard the memorandum explaining the provision to Finance Act 2013 reads as under: EXCLUSION OF TIME IN COMPUTING THE PERIOD OF LIMITATION FOR COMPLETION OF ASSESSMENTS AND REASSESSMENTS The existing provisions of section 153, inter alia, provide the time limit for completion of assessment and reassessment of income by the Assessing Of0icer. Explanation to section 153 provides that certain periods speci0ied therein shall be excluded while computing the period of limitation for the purposes of the said section. Under the existing provisions of clause (m) of Explanation 1 to section 153, the period commencing from the date on which the Assessing Of0icer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assessee is required to furnish a report of such audit, is excluded in computing the period of limitation for the purposes of assessment or reassessment. However, the existing provision does not provide for exclusion of time in case the direction of the Assessing Of0icer is set aside by the court. It is proposed to amend clause (iii) of Explanation 1 to section 153 so as to provide that the period commencing from the date on which the Assessing Of0icer directs the assessee to get his accounts audited under sub-section (2A) of section 142 and ending with the last date on which the assessee is required to furnish a report of such audit under that sub- section; or where such direction is challenged before a court, ending with the date on which the order setting aside such direction is received by the Commissioner, shall be excluded in computing the period of limitation for the purposes of section 153. At times more than one reference for exchange of information is made in one case and the replies from the foreign Competent Authorities are also received in parts. In such cases, there will always be a dispute for counting Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 24 the period of exclusion i.e. whether it should be from the date of 0irst reference for exchange of information made or from the date of last reference. Similar dispute may also arise with regard to the date on which the information so requested is received. With a view to clarify the above situation, it is proposed to amend the aforesaid clause (viii) so as to provide that the period commencing from the date on which a reference or 0irst of the references for exchange of information is made by an authority competent under an agreement referred to in section 90 or section 90A and ending with the date on which the information requested is last received by the Commissioner or a period of one year, whichever is less, shall be excluded in computing the period of limitation for the purposes of section 153. Similar amendments are also proposed in the Explanation to section 153B of the Income-tax Act relating to time limit for completion of search assessment. These amendments will take effect from 1st June, 2013. 11.6 Thus, from the above memorandum explaining the provision, it is clear that in the case of the assessee, the exclusion period on account of reference made through FT &TR shall be computed from 12th January 2015 and even taking maximum period of 12 month the exclusion period ends on 11th January 2016. The 0irst proviso to explanation provides that in case where after exclusion of the period as per explanation the time available with the AO for making assessment as per clause (a) or (b) of the section 153B(1) is less than 60 days then such period shall be extended by 60 days and it should be deemed that exclusion period has been extended. In the case of the assessee even after excluding 1 year on account of reference made to FT& TR the assessing of0icer was having more than a year to 0inalize the assessment within the time limit prescribed under clause (a) or (b) of section 153A of the Act i.e. 31st March 2017. Hence, in our considered opinion the AO will not get any bene0it of time on account of reference to FT& TR in the given facts and circumstances. 11.7 Now coming to the exclusion of time on account of the application made by the assessee before the settlement commissioner under section 245C of the Act. The clause of (v) of the explanation of section 153B of the Act provides that the period beginning with the date on application made under section and ending with the date on which order under section 245D(1) of the Act rejecting the application was received by the by PCIT or CIT subject to 60 days as provided under 0irst proviso below to the explanation shall be excluded. In the case of the assessee there were two applications made by the assessee under section 245C of the Act and both came to be rejected by the settlement commission under section 245D(1) of the Act. The last application was made by the assessee on 27th February 2017 which came to be rejected by the settlement commissioner as on 10th March 2017. Assuming that the order under section 245D(1) of the Act was received by the PCIT or CIT on same day, the 12 days starting from 27th February 2017 to 10th March 2017 shall be excluded. Ater excluding the said period the time limit expiring under normal circumstances as per subsection (1) of section 153B of the Act is less than 60 days hence the same will extended for 60 days as per 0irst Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 25 proviso and accordingly the time limit expires on 9th May 2017 whereas the assessment has been framed under section 153A r.w.s. 143(3) of the Act dated 9.3.2018 beyond the statutory time. 11.8 The learned DR before us has contended that as per the 3rd Proviso below to explanation to section 153B of the Act provides that if proceeding before settlement commissioner abate under section 245HA of the Act and period of exclusion for computation of limitation as provided under section 4 of section 245HA is less than 1 year then same shall be deemed to have extended for 1 year. In the case of the assessee, the proceeding before the settlement commission has been abated on 1 Oth March 2017 and the exclusion period is less than one year hence the same shall deemed to be extended for one year i.e. 31st March 2018. Accordingly, the learned DR contended the assessment order dated 9th March 2018 is well within the time limit prescribed under section 153B of the Act. In this regard, we note that the impugned proviso in relation to abatement of proceeding before settlement commission was brought under section 153B of the Act vide Finance Act 2017 and made applicable w.e.f. 1st April 2017 whereas in the case of the present assessee search under section 132 of the Act and consequent proceeding under section 153A of the Act was initiated long before the impugned proviso inserted and made applicable. Hence, the same will not be made applicable in the present case before us. In holding so, we draw support and guidance from the judgment of Hon'ble Delhi High Court in case of Rohit Kumar Gupta vs. PCIT reported in [2019] 109 taxmann.com 257 (Delhi) where it was held as under: 61. It must be noted here that by the Finance Act 2017, with effect from 1st April 2017, the following further proviso was added to Section 153 B: \"Provided also that where a proceeding before the Settlement Commission abates under section 245HA, the period of limitation available under this section to the Assessing Of0icer for making an order of assessment or reassessment, as the case may be, shall, after the exclusion of the period under sub-section (4) of section 245HA, be not less than one year; and where such period of limitation is less than one year, it shall be deemed to have been extended to one year.\" 62. Correspondingly with effect from the same date, Clause (v) to Explanation 1 to Section 153 of the Act got amended to delete the reference therein to Section 153 B of the Act. Till this change was made, the provision that was required to be referred to for determining the limitation for completing the assessment under Section 153 A, where there had been an abatement of the proceedings before the ITSC, was Clause (v) to Explanation 1 to Section 153 of the Act and not Section 153 B of the Act which made no reference to abatement of the proceedings before the ITSC by virtue of an order passed under Section 245 D (4) of the Act. The change brought about by the Finance Act 2017 does not apply to the case on hand where the proceedings under Section 153 A of the Act commenced long prior to the said amendment. 11.9 Thus, in view of the above detailed discussion, we 0ind that the time limit for making assessment under section 143(3) r.w.s. 153A of the Act in the given facts Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 26 and circumstances was expiring as on 9th May 2017 whereas the assessment order was made as on 9th March 2018. Hence the same was done beyond the statutory time limit. Therefore, the assessment in the case on hand is invalid due to limitation. It is settled position of law that an assessment order which is not valid/ maintainable under the provisions of the Act, cannot be revised by the CIT/PCIT under the provision of section 263 of the Act. Therefore, we hereby quash the order passed under section 263 of the Act as not maintainable. Accordingly, we also refrain ourselves from adjudicating the issue raised in the appeal against the order passed under section 263 of the Act. Hence, the grounds of appeal raised by the assessee are hereby allowed. 12. In the result, the appeal of the assessee is hereby allowed. 17. Thus, a combined reading of section 153A and 153B, we are in complete agreement with the argument of the AR that the limitation for completing the assessment of A.Y. 2004-05 to 2007-08 which were initiated because of 1st search but overlapped by assessment years out of six prior years counted for 2nd search will be governed by last panchnama drawn for 2nd search. Accordingly, the assessment of A.Y. 2004-05 to 2007-08 which are initiated as a result of ?irst search and pending on the date of 2nd search will abate in terms of section 153A and the limitation for completing those assessments will be reckoned from the date of 2nd search. This position is further substantiated from the fact that the A.O. himself issued a fresh notice pursuant to the 2nd search u/s.153A for A.Y. 2004-05 to 2007-08 on 08.03.2011 thereby acknowledging the abatement of earlier proceedings. Moreover, the third proviso below the explanation to section 153B was inserted by the Finance Act, 2017 w.e.f. 01.04.2017 was not applicable to the assessment proceedings as the assessment and the petition relates to A.Y. 2005-06 & 2007-08 i.e. preceding the insertion of proviso by the Finance Act, 2017. 18. Moreover, the reasoning given by the Ld. CIT(A) in holding that the assessment was not barred is also unacceptable since it presumes that the department had cumulative period of 1247 days comprising of original 617 days and another 630 days on account of ?inal order of the Court for completing the assessment which is completely contrary to the legal provisions which prescribes a maximum period of 630 days for completing the assessment subject to the exception that if after excluding the period of stay the remaining time is less than 60 days limitation be extended to 60 days. Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 27 Once the second search was carried out by the Department and by virtue of the provision of section 153A all pending proceedings abate as there is no exception that any proceedings which are stayed or otherwise shall not abate and accordingly all pending proceedings abate as a result of second search carried out by the department. Therefore, the proceedings completed by the A.O. beyond to statutory permissible period is barred by limitation and accordingly assessment was to be quashed. 19. In view of the above we ?ind that so far as A.Y. 2005-06 and 2007-08 is concerned the last date for passing the order was 23.01.2018 in terms of 153A r.w. 153B of the Act whereas the A.O. passed the order for A.Y. 2005-06 & 2007-08 on 30.11.2018 i.e. after the available time of 311 days. Thus, the assessment order passed was beyond the available time limit. 20. Accordingly, the Assessment orders passed for A.Y. 2005-06 and 2007-08 are quashed ?inding it to have been passed vide an invalid jurisdiction. As the order passed is without jurisdiction, we hold the assessment order dated 30.11.2018 for A.Y. 2005- 06 is held to be null and void. 21. We may also like to add that during the course of hearing the ground of cross appeals were heard at length and observe that the Ld. CIT(A) has comprehensively dealt with the additions made by the A.O. in his appellate order. However, since the assessment order for A.Y. 2005-06 and AY 2007-08 is quashed as held to be null and void, the other grounds of cross appeals of Revenue and Assessee are dismissed as infructuous. 22. In the result, all the appeals filed by the assessee and Revenue and Cross- objections filed by the assessee are dismissed. Order pronounced in the Court on 1st August, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (DR.B.R.R. KUMAR) VICE-PRESIDENT Ahmedabad, dated 01/08/2025 Printed from counselvise.com ITSSA Nos. 430, 471 & 549 of 2019 & CO Nos. 6 & 41 of 2020 AYs : 2005-06 & 2007-08 Shri Ashish P. Patel 28 आदेश क\u001a \u001b त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ\u0018 / The Appellant 2. \u0019\u001aयथ\u0018 / The Respondent. 3. संबं धत आयकर आयु!त / Concerned CIT 4. आयकर आयु!त(अपील) / The CIT(A) 5. $वभागीय \u0019'त'न ध, आयकर अपील य अ धकरण / DR, ITAT, 6. गाड* फाईल / Guard file. आदेशानुसार/BY ORDER, TRUE COPY उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation- 18,28,29,30.07.2025 2. Date on which the typed draft is placed before the Dictating Member 3`.07.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S. - 31.07.2025 4. Date on which the fair order is placed before the Dictating Member for Pronouncement …01.08.2025…………….. 5. Date on which the file goes to the Bench Clerk : 01.08.2025 6. Date on which the file goes to the Head Clerk……………………………. 7. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. Date of Despatch of the Order……………… Printed from counselvise.com "
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