Assessment Reassessed Beyond Permissible Limitation Period Reconsidered Under Section 153C Reckoned Backwards Remains Time Barred

Issue

1. Whether the limitation period for initiating assessment or reassessment proceedings under Section 153C read with Section 153A must be calculated backwards from the assessment year in which the satisfaction note is recorded.
2. Whether the assessment order passed on March 30, 2023 for Assessment Year 2011-12, where the satisfaction note was recorded in Assessment Year 2022-23, is barred by limitation.

Facts

• The case pertains to Assessment Year (AY) 2011-12 under the Income-tax Act, 1961.
• The proceedings were initiated against the assessee pursuant to search and seizure action under Section 153C read with Section 153A.
• The satisfaction note for initiating proceedings against the assessee under Section 153C was recorded in Assessment Year (AY) 2022-23.
• The Assessing Officer passed the assessment order for AY 2011-12 on March 30, 2023.

Decision

• Computation of Limitation: For the purpose of Section 153C read with Section 153A, the limitation period of block assessment years must be reckoned backwards from the date/assessment year in which the satisfaction note is recorded by the Assessing Officer.
• Assessment Order Time-Barred: Since the satisfaction note was recorded in AY 2022-23, counting backwards places Assessment Year 2011-12 beyond the statutory limitation period permissible under Section 153C read with Section 153A.
• Outcome: The assessment order passed on March 30, 2023 for AY 2011-12 was held to be barred by limitation and decided in favor of the assessee.

Key Takeaways

• Satisfaction Note Date Controls Period: In Section 153C proceedings, the date on which the satisfaction note is recorded forms the baseline for computing the 6-year/10-year block period, not the date of search on the searched person.
• Backward Reckoning Is Mandatory: Statutory block periods must be calculated backwards from the financial/assessment year in which the books/documents are received or satisfaction is recorded.
• Strict Limitation Bar: Any assessment order passed for an assessment year falling outside the legally computable block period is void ab initio as barred by limitation.