Facts of the Case

A search and seizure action under Section 132 of the Income Tax Act was conducted on 22.03.2012. During the search proceedings, certain documents were allegedly found relating to Wickwood Development Ltd, which was not the searched person.

Based on the seized material, the Assessing Officer recorded satisfaction under Section 153C on 18.11.2013 and initiated assessment proceedings against the assessee for Assessment Years 2006-07 and 2007-08.

The Assessing Officer completed the assessment and made additions amounting to ₹21.58 crore, alleging that the company’s control and management was situated in India and income had arisen from underlying Indian assets.

The Commissioner of Income Tax (Appeals) deleted the additions and held that the proceedings initiated under Section 153C were not valid. The Revenue filed appeals before the ITAT, while the assessee filed cross-objections challenging the jurisdiction of the Assessing Officer. 

Issues Involved

  1. Whether the Assessing Officer validly assumed jurisdiction under Section 153C against the assessee.
  2. Whether the assessments for AY 2006-07 and AY 2007-08 fell within the six-year limitation period prescribed under Section 153C read with Section 153A.
  3. Whether the assessment order was invalid due to non-compliance with statutory procedures such as issuance of notice under Section 143(2) and draft order under Section 144C. 

Petitioner’s Arguments (Revenue)

  • The Revenue contended that seized documents, emails, and statements established that control and management of the assessee company was effectively located in India.
  • It was argued that income was derived from underlying Indian assets, attracting taxation in India under Section 9(1).
  • The Revenue also claimed that the assessee had created multiple overseas corporate structures to avoid tax liability in India.
  • According to the Revenue, the Assessing Officer had correctly invoked Section 153C based on seized materials.

Respondent’s Arguments (Assessee)

  • The assessee argued that the Assessing Officer lacked jurisdiction to initiate proceedings under Section 153C.
  • It was contended that the satisfaction note was recorded on 18.11.2013, and therefore the relevant six-year period must be computed with reference to this date.
  • Based on this computation, Assessment Years 2006-07 and 2007-08 fell outside the permissible six-year period under Section 153C.
  • The assessee further argued that:
    • Mandatory notice under Section 143(2) was not issued.
    • The procedure under Section 144C for eligible foreign companies was not followed.
    • Therefore, the assessment order was void ab initio. 

Court Findings / Order

The ITAT held that recording of satisfaction under Section 153C is the foundational requirement for initiating proceedings against a person other than the searched person.

The Tribunal observed that:

  • The satisfaction under Section 153C was recorded on 18.11.2013.
  • The six-year period must be computed from the date of receipt/recording of satisfaction, not from the date of search.
  • When the six-year period was calculated from the satisfaction date, Assessment Years 2006-07 and 2007-08 were outside the permissible scope of Section 153C.

Accordingly:

  • The assessment proceedings were held to be beyond jurisdiction and void ab initio.
  • The cross-objections of the assessee were allowed.
  • Consequently, the Revenue’s appeals were dismissed. 

Important Clarification

The Tribunal reiterated that for proceedings under Section 153C:

  • The date of recording of satisfaction or receipt of seized documents by the Assessing Officer of the “other person” is the crucial date.
  • The six assessment years must be computed with reference to this date.
  • If the relevant assessment years fall beyond this period, the Assessing Officer lacks jurisdiction to initiate proceedings.

Link to download the order - https://itat.gov.in/public/files/upload/1703831471-3354,%203355%20&%20CO%20358,%20359%20Wickwood%20Development%20Ltd..pdf

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