Completed assessments cannot be reopened without incriminating material found during a search, as per Section 153A of the Income Tax Act.

JUDGMENT :

AVNEESH JHINGAN, J.

1. This is an application (I.A. No.1/2024) filed for framing additional substantial question of law.

2. After arguing the application at length, learned counsel for the applicant submits that instead of proposed substantial question of law in the application following additional substantial question of law be admitted:

(i) Whether in the facts of the case to determine the pendency of the proceedings as per Section 153A, the date of issuance of notice would be relevant or date of search?

3. Learned counsel for the non-applicant could not raise any serious objection to the acceptance of the prayer.

4. The substantial question of law framed here in above shall be considered while deciding the appeal.

5. The application is allowed.

6. This appeal is filed against the order of the Income Tax Appellate Tribunal, Jaipur (for short ‘the tribunal’) dated 11.03.2020 relating to assessment year (for brevity ‘AY’) 2010-11.

7. In this appeal, following substantial questions of law have been formulated:-

“(i) Whether in the facts of the case to determine the pendency of the proceedings as per Section 153A’ the date of issuance of notice would be relevant or date of search?

(ii) Whether on the facts and circumstances of the case the assessment order of the Appellant, for Assessment year 2010-11, framed on 10.03.2016, one year beyond the normal time-limit, in view of Explanation of Section 153B, was not barred by time limitation, hence invalid, since the reference allegedly made under section 90 of the Income-Tax Act was illegal, without jurisdiction, without statutory authority, and void ab initio?

(iii) Whether on the facts and circumstances of the case the ITAT erred in law in holding that the expenses on education of the Appellant were personal expenses, having been incurred prior to setting up on business, totally ignoring evidence on record that the business of the Appellant had commenced in the financial year 2008-09 and return showing substantial turnover, gross profit and taxable income had been filed right from Assessment year 2009-10 onwards?”

8. The brief facts are that appellant is an income tax assessee. On 05.09.2011 search was conducted at the residence and business premises of the appellant. On 10.10.2010, appellant filed income tax returns for AY 2010-11. Notice dated 14.09.2012 was issued under Section 153-A of the Income Tax Act, 1961 (for short ‘the Act’) and the assessment was finalised on 10.03.2015, disallowing the education expenses to the tune of Rs.1,11,35,190/-. The first appeal was dismissed on 26.05.2017. The appellant being unsuccessful in the tribunal is before this court.

Substantial question of law No.1

9. Learned counsel for the appellant submits that assessment proceedings for AY 2010-11 were complete as no notice was issued under section 143(2) of the Act. Addition under section 153-A in completed assessment was wrongly made without there being incriminating material seized during the search.

10. Learned counsel for the revenue submits that before expiry of time to issue notice under section 143(2), the search was conducted on 05.09.2011 when the proceedings were pending.

11. From Section 143(2) and the proviso thereto, the position merges that the Assessing Officer (A.O.), if considers expedient to verify that there is no understated income or excess loss computed or that there is underpayment of tax, shall serve a notice on the assessee to produce the evidence to support the return.

The proviso prescribes that notice cannot be issued after expiry of six months from the end of the financial year in which return is furnished.

12. The relevant provisions of Section 153-A of the Act is quoted below:-

“Assessment in case of search or requisition.

153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are req