ITAT Surat: Section 263 Revision Set Aside Where Section 153C Assessment Was Beyond Limitation

Background and Context

These appeals before the ITAT Surat revolve around the interplay between Section 153C and Section 263 of the Income Tax Act 1961, particularly in the case of an “other person” covered by Section 153C. The core issue is whether a revisionary order under Section 263 can be sustained when the very assessment sought to be revised (framed under Section 143(3) read with Section 153C) itself is barred by limitation and therefore void.

The assessee, Popatbhai Talashibhai Savani, challenged the revisionary orders passed by the Principal Commissioner of Income-tax (Central), Surat (PCIT) for Assessment Years (AYs) 2013-14 and 2014-15. The Tribunal’s decision turned heavily on the interpretation of the block period under Section 153C, as settled by the Supreme Court in CIT vs. Jasjit Singh.

Appeals and Procedural History

Appeals and Orders in Dispute

  • Two separate revisionary orders under Section 263 were passed by the PCIT, Central, Surat:
    • Dated 29.03.2025 (for AY 2013-14)
    • Dated 30.03.2025 (for AY 2014-15)
  • These orders sought to revise assessments framed under Section 143(3) read with Section 153C.
  • The assessee filed appeals against both revisionary orders before the ITAT Surat.

As the facts and legal issues in both years were materially identical, the Tribunal combined the matters and delivered a common order, taking the appeal for AY 2013-14 as the lead case.

Grounds of Appeal (Substance)

The assessee primarily contended that:

  1. The assessment order under Section 143(3) read with Section 153C was neither erroneous nor prejudicial to the interest of the Revenue, and hence the assumption of jurisdiction under Section 263 by the PCIT was invalid.
  2. The PCIT exceeded jurisdiction by setting aside the entire assessment and directing a fresh assessment on a wide canvas, instead of confining the revision only to the specific issues raised in the show cause notice.
  3. The direction to re-examine and verify alleged undisclosed income of Rs. 1,30,62,500/- was unwarranted and the consequent setting aside of the assessment was unjustified.

However, the Tribunal focused its adjudication on a more fundamental legal question: whether the assessment under Section 153C itself was within limitation and legally sustainable.

Facts Relevant to Limitation Under Section 153C

Assessment Proceedings

  • A search under Section 132 was carried out in the case of Janani Group on 28.06.2018.
  • Based on material seized during this search, proceedings under Section 153C were initiated against the assessee (an “other person”).
  • Notice under Section 153C was issued to the assessee on 30.03.2022.
  • The assessment order under Section 153C read with Section 143(3) for AY 2013-14 was passed on 26.03.2023, accepting the returned income of Rs. 6,54,330/-.

Revisionary Proceedings Under Section 263

  • The PCIT examined the record and formed the view that the Assessing Officer (AO) had not conducted adequate enquiries in relation to alleged undisclosed income.
  • Consequently, an order under Section 263 was passed on 29.03.2025, setting aside the original assessment and directing the AO to frame a fresh assessment after making proper verification and enquiries, including in respect of the alleged undisclosed income of Rs. 1,30,62,500/-.

The Tribunal noted that there was no serious dispute on the factual finding of the PCIT that the AO had not carried out comprehensive enquiry on merits. The real dispute was whether any valid assessment existed at all in the eyes of law, in view of the limitation framework under Section 153C as interpreted by the Supreme Court.