ACIT, Central Circle 25, Delhi vs Bansal Iron & Sheet Traders

"Additional Ground No.1 That on the facts and circumstances of the case the approval accorded under section 153D of the Act (if any) is a mechanical, arbitrary and a common/ single approval for various assessment years, without there being any application of mind and also without satisfying the statutory preconditions of the Act and as such, the assessment so framed is null and void and deserves to be quashed.

Additional Ground No.2 That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in sustaining the initiation of proceedings under section 153C of the riel and, further completion of assessment under section 153C/143(3) of the Act without satisfying the statutory pre-conditions for initiation of the proceedings and, completion of assessment under the Act, as no document pertaining to assessee for impugned assessment year was recorded in the satisfaction note.

Additional Ground No.3 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the fact that the allegation leveled in the satisfaction note with regards to "documents belonging to assessee" is contrary to statutory provisions (as documents can only pertain to assessee) and is also contrary to judgment of Hon'ble Third Member in IT(SS)A Nos. 119 & 120/Pune/2022, Prashant Premchand Bafana Vs. ACIT, dated 28.02.2025 and as such, the assessment so framed is null and void and deserves to be quashed.

Additional Ground No.4 That on the facts and circumstances of the case the impugned assessment order so passed is null and void, and is also in complete violation of CBDT Circular No. 19/2019, since no DIN is mentioned in the entire body of assessment order."

"1. Non-raising of Additional Grounds before CIT(A)

1.1

It is most respectfully submitted that the assessee-respondent, in its Application under Rule 27, has sought to raise four additional grounds challenging the very jurisdiction and validity of the assessment proceedings under Section 153C of the Income Tax Act, 1961. The assessee claims that these grounds were raised before the learned CIT(A), however, a bare perusal of the impugned order of the learned CIT(A) would clearly demonstrate that no such grounds were ever raised, argued, or decided by the learned CIT(A).

1.2

The learned CIT(A) decided the appeal purely on merits and deleted the additions made by the Assessing Officer on substantive grounds. There is absolutely no discussion, finding, or decision in the CIT(A)'s order regarding: (i) the validity of approval under Section 153D; (ii) the time-bar for proceedings under Section 153C; (iii) the alleged defect in the satisfaction note regarding use of words "belonging to" versus "pertaining to"; or (iv) the absence of DIN in the assessment order.

1.3

The assessee itself admits in paragraph 1 of its application that it "did not prefer an appeal" as it had "succeeded in the appeal fully on merits." This admission is fatal to the assessee's case. Having succeeded on merits and having consciously chosen not to file an appeal, the assessee cannot now be permitted to raise entirely new grounds which were never part of the proceedings before the learned CIT(A).

1.4

It is submitted that the assessee's claim that these grounds were raised before the CIT(A) is factually incorrect and contrary to the record. The assessee has not produced any evidence, written submissions, or any portion of the CIT(A)'s order to substantiate its claim that these grounds were raised and decided below.

2. Abuse of Rule 27 of the IT AT Rules

2.1

It is submitted that Rule 27 of the Income Tax Appellate Tribunal Rules, 1963, provides that a respondent may support the order appealed against on any of the grounds decided against him by the lower authority. The plain language of Rule 27 makes it clear that the respondent can only support the order on grounds that were "decided against him" by the lower authority.

2.2

In the present case, none of the four additional grounds sought to be raised were ever decided by the learned CIT(A), either in favor of or against the assessee. The learned CIT(A) .decided the appeal entirely on merits by deleting the additions. Therefore, there is no question of the assessee supporting the CIT(A)'s order on grounds that were never raised or decided.

2.3

The assessee is attempting to misuse and abuse the provisions of Rule 27 by introducing entirely fresh grounds of challenge which require detailed factual investigation, examination of records, and verification of documents. This is not the purpose or intent of Rule 27.

2.4

It is well-settled that Rule 27 cannot be used as a tool to introduce new grounds which were never part of the proceedings before the lower authorities. The respondent can only support the order on grounds already decided, not introduce new battles that were never fought before the CIT(A).

3. Estoppel, Waiver, and Acquiescence

3.1

It is submitted that the assessee, having succeeded fully on merits before the learned CIT(A) and having consciously chosen not to file an appeal or cross-objections, has waived its right to challenge the assessment on jurisdictional or procedural grounds. The assessee cannot be permitted to approbate and reprobate.

3.2

The assessee accepted the order of the learned CIT(A) in its entirety and did not seek to challenge any aspect of it. Now, only because the Revenue has filed an appeal, the assessee seeks to introduce new grounds as an afterthought. This amounts to taking contradictory stands and is against the principles of estoppel and waiver.

3.3

The assessee is estopped from raising grounds which it could have and should have raised before the learned CIT(A) but chose not to raise. The doctrine of estoppel by conduct applies squarely to the present case.

Legal Principles Governing Rule 27

8.1

It is submitted that the assessee has relied on several judgments to support its contention that a respondent can raise legal grounds at any stage of proceedings even if not raised earlier. However, all these judgments are distinguishable on facts and are not applicable to the present case.

8.2

The judgment in B.R. Bamsi vs CIT (83 ITR 223 Born) dealt with a pure legal ground going to the root of jurisdiction. The Bombay High Court held that such grounds can be raised at any stage. However, the present case does not involve any pure legal ground going to the root of jurisdiction.

8.3

The judgment in Moralia & Sons vs CIT (129 ITR 475 All) held that a respondent can support the order on any ground. However, this principle applies only to grounds which were part of the proceedings before the lower authority. It does not permit introduction of entirely new grounds which were never raised or decided.

8.4

The judgment in CIT vs Cochin Refineries Ltd (220 ITR 398 Ker) dealt with a legal plea which could be raised at any stage. However, that case involved a pure question of law which did not require any fresh evidence or factual investigation. The present case is different.

8.5

The judgment in CIT vs Varas International P. Ltd (284 ITR 80 SC) is a landmark judgment of the Hon'ble Supreme Court. However, even in that case, the Supreme Court permitted only pure legal grounds to be raised at the appellate stage. The Supreme Court did not permit factual grounds or mixed questions of fact and law to be raised for the first time.

8.6

The judgment in CIT vs Jindal Polyester Ltd (397 ITR 282 All) held that additional grounds can be raised if they emerge from the facts already on record. However, in the present case, the grounds sought to be raised do not emerge from the facts on record. They require fresh evidence and investigation.

8.7

It is submitted that the legal principles governing the raising of additional grounds can be summarized as follows:

(i)

A pure legal ground going to the root of jurisdiction can be raised at any stage of proceedings.

(ii)

A respondent can support the order on any ground which was decided against him by the lower authority.

(iii)

A ground which requires fresh evidence or factual investigation cannot be raised for the first time at the appellate stage.•

(iv)

A ground which causes prejudice to the other party cannot be permitted to be raised if that party had no opportunity to meet that ground before the lower authority.

(v)

The power to permit additional grounds is discretionary and should be exercised judiciously keeping in mind the principles of natural justice and fair play.

8.8

Applying these principles to the present case, it is clear that none of the four additional grounds sought to be raised by the assessee can be permitted. All these grounds require factual investigation, examination of documents, and fresh evidence.

None of these grounds were raised before the CIT(A). The Revenue had no opportunity to meet these grounds before the CIT(A). Allowing these grounds would cause serious prejudice to the Revenue.

PREJUDICE TO REVENUE

9.1

It is submitted that if the assessee is permitted to raise these additional grounds at this stage, it would cause serious and irreparable prejudice to the Revenue. The Revenue had no opportunity to lead evidence or make submissions on these grounds before the learned CIT(A).

9.2

The ground regarding approval under Section 153D requires examination of the approval order and the material placed before the approving authority. The Revenue would need to produce the approval file and lead evidence to show that proper approval was granted. The Revenue had no opportunity to do this before the CIT(A).

9.3

The ground regarding time-bar under Section 153C requires examination of various dates and documents including the date of search, date of satisfaction note, date of notice, etc. The Revenue would need to produce these documents and make detailed submissions on the computation of limitation. The Revenue had no opportunity to do this before the CIT(A).

9.4

The ground regarding the satisfaction note requires examination of the actual satisfaction note and the documents found during search. The Revenue would need to produce these documents and explain the satisfaction recorded. The Revenue had no opportunity to do this before the CIT(A).

9.5

The ground regarding DIN requires examination of the assessment order and explanation of the circumstances in which DIN was not mentioned. The Revenue would need to make submissions on the legal effect of non-mention of DIN. The Revenue had no opportunity to do this before the CIT(A).

9.6

It is a fundamental principle of natural justice that no party should be condemned unheard. If these grounds are permitted to be raised at this stage, the Revenue would be condemned without being given an opportunity to meet these grounds before the first appellate authority.

9.7

It is submitted that the assessee has deliberately chosen not to raise these grounds before the CIT(A) because it succeeded on merits. Now that the Revenue has filed an appeal, the assessee is trying to introduce new grounds as a defensive strategy. This is not permissible and amounts to abuse of process.

“2.

The learned Assessing officer failed to consider that issuance of notice u/s 153C as well as the proceedings conducted there under are against the provisions contained in the Income Tax Act, 1961, and is bad in law, barred by limitation and is without jurisdiction and hence liable to be quashed.

8.

That on the facts and circumstances of the case and in law the order passed by the learned Assessing officer u/s l53C/143(3) of the Income Tax Act without taking prior approval u/s 153D of the Income Tax Act is bad in law and hence liable to be quashed.”

“6.

Ground No. 2 The appellant has challenged the issuance of notice u/s 153C and that the proceedings conducted there under are against the provisions contained in the Income Tax Act, 1961, and is bad in law. 6.1 The appellant gets relief in respect of the additions made in the present case following the order of erstwhile CIT(A)-29, in the case of M/s Jay Bharat Maruti ltd. for AY 2008-09 as dealt at the above para, this legal/technical ground, therefore, is not being adjudicated.

7.

Ground No. 8 The appellant has taken the plea that the assessment order passed by the AO was completed without taking prior approval u/s 153D of the Act, and was therefore, bad in law. At para 16 of the order, it has been clearly stated that the above order is passed with the prior approval of the Addl. Commissioner of Income Tax, Central Rage 7, New Delhi as accorded vide letter no. Addl. CIT/CR-7/2021-22/35 dated 07.04.2021. Thus, it is seen that the AO had taken the prior approval u/s 153D of the Act. It is also to be appreciated that the Appraisal Report is provided to the Range-head much in advance and he is actively involved in monitoring timely completion of the cases by the AO. Therefore, the contention of the appellant is not correct. Accordingly, this ground of appeal is dismissed.”

“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 first 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 Officer 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 filed an independent appeal or cross-objection. This Rule clearly supports the assessee. In the 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 difficulty or the other, the department has not been able to produce the records. The CIT(A) has not recorded any finding 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 & Hissar Districts Electric Supply Co. (P.) Ltd. v. CIT [1981] 128 ITR 521, 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 first 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 any definite 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 specifically taken either before the Assessing Officer or before the CIT(A) and, therefore, we hold that Rule 27 may not be strictly speaking available to the assessee.

"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."

"We are therefore not in favour of granting such a primacy to the rules of procedure so as to wipe off a substantial right otherwise available to the assessee in law. We find this view of ours also reinforced by the language of Rule 11 which does not require the Tribunal to be confined to the grounds set forth in the memorandum of appeal or taken by leave of the Tribunal provided the party who may be affected thereby had sufficient opportunity of being heard on that ground. In taking this view, we are conscious about the observations of the Madras High Court and the Calcutta High Court made in the decisions relied upon by learned counsel for the Revenue but we are, in the facts and circumstances of the case, persuaded to accept the observations of the apex court made in this regard in the case of National Thermal Power Co. Ltd. [1998] 229 ITR 383. We are therefore of the view that it is permissible on the part of the Tribunal to entertain a ground beyond those incorporated in the memorandum of appeal though the party urging the said ground had neither appealed before it nor had filed a cross-objection in the appeal filed by the other party. We must however hasten to add that in order to enable either the assessee or the Department to urge a ground in the appeal filed by the other side, the relevant facts on which such ground is to be founded should be available on record. In the absence of such primary facts, in our opinion, neither the assessee nor the Department can be permitted to urge any ground other than those which are incorporated in the memorandum of appeal filed by the other party. In other words, if the assessee or the Department, without filing any appeal or a cross-objection seeks to urge a ground other than the grounds incorporated in the memorandum of appeal filed by the other side, the evidentiary facts in support of new ground must be available on record. "

"14.

It emerges that Rule 27 ought not to be applied narrowly and therefore we cannot agree with Mr. Hossain, that by permitting the Appellant- Assessee (respondent before the Tribunal) to invoke Rule 27 before the Tribunal, to challenge the ground decided against him, scope of the subject matter of appeal would get expanded. We must also bear in mind that jurisdictional issue sought to be urged by the appellant under Rule 27 is interlinked with the other grounds of appeal, and its adjudication would have a direct impact on the outcome of the appeal. The validity of the proceedings goes into the root of the matter and for this reason, the assessee should not be precluded from raising a challenge to that part of the order which was decided against him by the CIT(A). In this regard, it would be profitable to refer the following extract from the judgment of Sundaram & Co. (supra), where the court had also examined as to what constituted 'subject-matter of an appeal' and held as follows:-

21.

Therefore, arguably Rule 27 has a limited sphere of operation, but this cannot be whittled or narrowed down to the extent, the Revenue would like us to hold. We cannot read Rule 27 in a restrictive manner to hold that the said provision can only be invoked to support the order in appeal and while doing so, the subject matter of the appeal before the ITAT should be confined only to the extent of the grounds urged by the Appellant. To read Rule 27 in this manner would render the said rule redundant as the respondent before the Tribunal would, even otherwise be entitled to oppose the appeal and raise submissions in answer to the grounds raised in the appeal that are pressed at the hearing of the appeal. With this clarity, we do not find any merit in the submissions of the Revenue that the assessee had accepted order of CIT (A), or that the issue of maintainability had attained finality. We also do not find that by such an interpretation, the scope of Rule 27 is expanded or that it would be contrary to section 253 (4), or that it would render the provision relating to cross objections redundant and otiose. In Sundaram & Co. (supra), the High Court observed that the reason for such a rule [Rule 27J was that when a decision is favorable to a person and comes to be challenged by his adversary, the person must be in a position to support the decision on every ground urged before the deciding authority whether or not it found favor, else such a person would be a victim of wrong reasons if no such freedom was given. Infact, the court has further held that even if Rule 27 as under the 1946 Rules had not been enacted, scope for invocation of the principle underlying the rule would still be possible based on principles of natural justice. This is the essence of the proceedings in appeal before the ITAT which unfortunately has been completely ignored and, instead, the Tribunal has engaged itself in a totally irrelevant issue of the form and structure of the application."

“Re : Proceedings under Section 153C - Time Bar and Satisfaction Note

5.1

The assessee has sought to raise Additional Ground No.2 challenging the initiation and completion of proceedings under Section 153C on multiple grounds: (i) statutory pre-conditions not satisfied; (ii) no document pertaining to assessee for impugned assessment year recorded in satisfaction note; and (iii) proceedings time-barred being beyond ten years from date of recording satisfaction note.

5.2

It is submitted that this ground was never raised before the learned CIT(A). The CIT(A)'s order does not contain any discussion or finding on the validity of proceedings under Section 153C, time-bar, or defects in the satisfaction note. This clearly establishes that no such ground was raised before the CIT(A).

5.3

It is submitted that the challenge to the validity of proceedings under Section 153C on the ground of time-bar is not a pure legal ground but involves mixed questions of fact and law. It requires examination of: (i) the date of search under Section 132; (ii) the date of recording of satisfaction note under Section 153C; (iii) the date of issuance of notice under Section 153C; (iv) the assessment years covered by the search; (v) the applicability of the fourth proviso to Section 153A; (vi) the applicability of Explanation 1 and Explanation 2 to Section 153A; and (vii) the computation of the period of limitation.

5.4

All these are factual aspects which require examination of documents and records. The Revenue had no opportunity to place these facts before the learned CIT(A) or make submissions on the issue of limitation. Allowing this ground at this stage would cause serious prejudice to the Revenue.

5.5

It is submitted that the assessee has produced a tabular statement in its synopsis claiming that the assessment for A Y 2008-09 to 2010-11 falls beyond the period of ten years and for AY 2011-12 to 2013-14 beyond the period of six assessment years. This computation is factually incorrect and legally untenable.

5.6

The assessee has incorrectly computed the period of limitation by counting backwards from the date of notice under Section 153C (26.09.2019). This is not the correct method of computation. The limitation period under Section 153C read with Section 153A has to be computed from the end of the assessment year in which the search was conducted, not from the date of the satisfaction note or the date of notice.

5.7

It is submitted that the search under Section 132 was conducted on 05/10/2017. The satisfaction note under Section 153C was recorded on 26/09/2019. The notice under Section 153C was issued on 26.09.2019. The proceedings under Section 153C were well within the period of limitation prescribed under the Act.

5.8

The assessee has relied on the judgment of the Hon'ble Delhi High Court in PCIT vs Ojjus Medicare (P.) Ltd. [2024] 161 taxmann.com 160. It is submitted that the said judgment is distinguishable on facts. Moreover, the said judgment is subject matter of appeal and does not lay down the correct law on the issue of limitation under Section 153C.

5.9

Regarding the assessee's contention that no document pertaining to the assessee for the impugned assessment year was recorded in the satisfaction note, it is submitted that this is a factual allegation which requires examination of the satisfaction note and the documents found during search. This ground was never raised before the CIT(A) and cannot be permitted to be raised at this stage.

5.10

It is submitted that the satisfaction note recorded under Section 153C clearly identifies the documents found during the search which belong to or pertain to the assessee. The satisfaction note specifically mentions the nature of documents, the assessment years to which they relate, and the reasons for believing that they belong to the assessee.

5.11

The assessee has relied on the judgment of the Hon'ble Supreme Court in CIT vs Sinhgad Technical Education Society [397 ITR 344). It is submitted that the said judgment is not applicable to the facts of the present case. In that case, the Supreme Court held that the satisfaction note must specifically mention the documents found and the assessment years to which they pertain. In the present case, the satisfaction note satisfies all these requirements.

5.12

It is submitted that the proceedings under Section 153C were validly initiated after recording proper satisfaction as required under the Act. The satisfaction note is neither mechanical nor arbitrary. The Assessing Officer applied his mind to the documents found during search and recorded his satisfaction that they belong to the assessee.

5.13

Without prejudice to the above, it is submitted that even if there are any minor defects or irregularities in the satisfaction note, they do not go to the root of jurisdiction and do not render the proceedings void. The substance of the satisfaction note is in accordance with law.”

“CIT vs Jasjit Singh-[2023| 155 taxmann.com 155 (SC)

“9.

It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement.

10.

This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials – of the search party, under Section 132 – would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually “relate back” as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee’s prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts.”

PCIT Vs Ojjus Medicare (P.) Ltd- [2024] 161 taxmann.com 160 (Delhi)

F. IDENTIFICATION OF THE COMMENCEMENT POINT FOR THE PURPOSES OFCOMPUTATION OF THE SIX AND TEN YEAR BLOCK

75.

The First Proviso to Section 153C significantly shifts the reference point which is spoken of in Section 153A(1) while defining the point from which the period of six AYs' is to be calculated, and which stipulates it to be the date of search or requisition, to the date of receipt of books of accounts, documents or assets seized or requisitioned by the jurisdictional AO of the non-searched person. The Proviso, thus by virtue of a deeming legal fiction, shifts the commencement point from the date of initiation of search or making of requisition to the date of receipt of books, documents or assets by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person thus being governed and regulated by the First Proviso of Section 153C(1) is, however, an issue which is no longer res integra. This aspect came to be duly noticed and lucidly explained by our Court in the matter of SSP Aviation Ltd. v. Deputy CIT22. The relevant extracts of SSP Aviation Ltd are set out hereinunder:

"14.

Now, there can be a situation when during the search conducted on one person under section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of section 153A. Now, a question may arise as to the applicability of the second proviso to section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under section 132 or the requisition under section 132A. For instance, in the present case, with reference to the Puri group of companies, such date will be January 5, 2009. 2012 SCC Online Del 1898 However, in the case of the other person, which, in the present case, is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date."

76.

Following SSP Aviation, our Court in Commissioner of Income Tax -14 v. Shree Jasjit Singh23 held:-

"3.

The question raised before the ITAT was with reference to the first proviso to Section l 53C (1). The ITAT has relied upon the judgment of this Court in SSP Aviation Ltd. v. Deputy Commissioner of Income Tax (2012) 252 CTR (Del) 291, which in para 14 held that while in the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate shall be the date of initiation of the search under Section 132 or the requisition under Section 132A, in the case of the other person (like the Assessee in the present case) "such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date".

4.

Although, the ITAT has also referred to its own decision in the case of DSL Properties Pvt. Ltd., which decision is pending consideration in ITA No. 585 of 2013 in this Court, in which a question of law has been framed, the decision in SSP Aviation Ltd. (supra) puts the matter beyond all doubt. In addition, the Court has been shown by learned counsel for the Respondent a circular dated 31^st March 2014 issued by the CBDT, containing the guidelines regarding Section 153C of the Act. Para 2.5 of the said circular clarifies as under:

"The AO of the other person assumes jurisdiction under Section 153C with the receipt of the relevant seized material from the AO of the searched person. Also, a copy of the satisfaction received from the AO of the searched person in this regard would enable him to proceed further in the case of the other person under Section 153C. Delhi High Court order dated 11.08.2015 in ITA 337/2015 Though there is no statutory requirement for the AO of such other person to record any satisfaction/reason before issuing notice under Section 153C and proceeding further, considering the above aspects, it is advisable for maintaining institutional memory that the AO records receipt of the seized material and the satisfaction from the AO of the searched person and such recording/noting may be kept in the assessment folder of such other person. In case, the AO of the searched person exercises jurisdiction over the other person also, appropriate referencing should be made in the relevant assessment records of such other person."

5.

It may be noted that in the present case satisfaction note was prepared by the AO on 25^th February 2010. Consequently, the finding of the ITAT in the present case that the assessment made under Section 143(1) of the Act for the AY 2009-10 was not valid, calls for no interference. No substantial question of law arises in the facts and circumstances of the present case.

6.

Accordingly, the appeal is dismissed."

77.

A more elaborate discussion with respect to the significance of the Proviso is found in RRJ Securities. We deem it apposite to extract the following passages from that decision:-

"13.

The first and foremost step for initiation of proceedings under section 153C of the Act is for the Assessing Officer of the searched person to be satisfied that the assets or documents seized belong to the assessee (being a person other than the searched person). The Assessing Officer of the assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under section 153C of the Act. The Assessing Officer of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. All that is required for him is to satisfy himself that the assets or documents do not belong to the searched person but to another person. Thereafter, the Assessing Officer has to transfer the seized assets/documents to the Assessing Officer having jurisdiction of the assessee to whom such assets/ documents belong. Section 153C(1) of the Act clearly postulates that once the Assessing Officer of a person--other than the one searched, has received the assets or the documents, he is to issue a notice to assess/ reassess the income of such person, that is, the assessee other than the person searched in accordance with the provisions of section 153A of the Act. xxxx xxxx xxxx

15.

The controversy in this regard is no longer res integra. A co- ordinate Bench of this court in SSP Aviation Ltd. v. Deputy CIT (2012) 346 ITR 177 (Delhi) has held that (page 188): "In the case of the searched person, the date with reference to which proceedings for assessment or reassessment of any assessment year within a period of six assessment years shall abate, is the date of initiation of the search under section 132 or requisition under section 132A. .. However, in the case of other person. .. such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date" xxxx xxxx xxxx

17.

In Pepsi Foods Pvt. Ltd. v. Asst. CIT (2014) 367 ITR 112 (Delhi), this court had explained that on a plain reading of section 153C of the Act, a notice under that section could be issued only after two preceding conditions had been met. First of all, the Assessing Officer of the searched person would have to arrive at a satisfaction that document or asset seized does not belong to the person searched but to some other person and, secondly, the seized documents/assets are handed over to the Assessing Officer having jurisdiction over that person, that is, the person other than the one searched and to whom the seized documents/assets are said to belong. The relevant extract of the said decision is quoted below (page 117):

"On a plain reading of section 153C, it is evident that the Assessing Officer of the searched person must be 'satisfied' that, inter alia, any document seized or requisitioned 'belongs to' a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having jurisdiction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of section 153A. Therefore, before a notice under section 153C can be issued two steps have to be taken. The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is--after such satisfaction is arrived at--that the document is handed over to the Assessing Officer of the person to whom the said document 'belongs'. In the present cases, it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose, it would be necessary to examine the provisions of presumptions as indicated above. Section 132(4A)(i) clearly stipulates that when, inter alia, any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in section 292C(1)(i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or 'satisfaction' that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of 'satisfaction'.. .. It is evident from the above satisfaction note that apart from saying that the documents belonged to the petitioner and that the Assessing Officer is satisfied that it is a fit case for issuance of a notice under section 153C, there is nothing which would indicate as to how the presumptions which are to be normally raised as indicated above, have been rebutted by the Assessing Officer. Mere use or mention of the word 'satisfaction' or the words 'I am satisfied' in the order or the note would not meet the requirement of the concept of satisfaction as used in section 153C of the said Act. The satisfaction note itself must display the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person. We are afraid that going through the contents of the satisfaction note, we are unable to discern any 'satisfaction' of the kind required under section 153C of the said Act." xxxx xxxx xxxx

19.

The Allahabad High Court in the case of CIT v. Gopi Apartment (2014) 365 ITR 411 (All) has expressed a similar view in the following words (page 419):

"A bare perusal of the provision contained in section 153C of the Income-tax Act leaves no doubt that, as is provided under section 158BD, where the Assessing Officer, while proceeding under section 153A against a person who has been subjected to search and seizure under section 132(1) or has been proceeded under section 132A, is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A.

Thus, there are two stages:

The first stage comprises of a search and seizure operation under section 132 or proceeding under section 132A against a person, who may be referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document, etc., belongs to a person other than the searched person, then such money, documents, etc., are to be handed over to the Assessing Officer having jurisdiction over 'such other person'.

The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents, etc., to the Assessing Officer of such 'other person', thereafter followed by issuance of the notice of the proceedings under section 153C read with section 153A against such 'other person'.

The initiation of proceedings against 'such other person' are dependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the 'searched person', or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the 'such other person' under section 153C.

Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of 'satisfaction' is a must, as, that is the foundation, upon which the subsequent proceedings against the 'other person' are initiated. The handing over of documents, etc., in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory."

"8.

In SSP Aviation (supra) the High Court inter alia reasoned as follows:-

"14.

Now there can be a situation when during the search conducted on one person under Section 132, some documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under Section 132 or the requisition under Section 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date."

9.

It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement.

10.

This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Section 132 - would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts."

"41.

Thus, as per the proviso to Section 153C as inserted vide Finance Act, 2005, and the effect of the said proviso is that it creates a deeming fiction wherein any reference made to the date of initiation of search is deemed to be a reference made to the date when the Assessing Officer of the non-searched person receives the books of account or documents or assets seized etc. Thus, in the present case, even though the search under Section 132 was initiated prior to the amendment to Section 153C w.e.f. 01.06.2015, the books of account or documents or assets were seized by the Assessing Officer of the non-searched person only on 25.04.2017, which is subsequent to the amendment, therefore, when the notice under Section 153C was issued on 04.05.2018, the provision of the law existing as on that date, i.e., the amended Section 153C shall be applicable."

"6.

The case of the Revenue is that the first proviso to section 153C refers only to the second proviso to section 153A(1) of the Act, which only indicates that any assessment relating to any assessment year falling within the period of six assessment years which is pending as of the initiation of search shall abate. Therefore, the second proviso to section 153C is also concerned only with the aspect of abatement of pending assessments. According to the Revenue, this makes no difference to the computation of the block of six years preceding the assessment year relevant to the previous year in which the search was conducted. In other words, according to the Revenue, the block period for both the searched person and the "other person" would remain the same notwithstanding that there may be some delay in transmitting the documents recovered during the search which belong or pertain to the "other person" to the Assessing Officer of such other person."

"11.

Mr. Ashok Manchanda, learned Senior Standing counsel for the Appellant, sought to pursue this Court to reconsider its view in RRJ Securities (supra). The Court declines to do so for more than one reason. First, for reasons best known to it, the Revenue has not challenged the decision of this Court in RRJ Securities (supra) in the Supreme Court. The said decision has been consistently followed by the authorities under this Court as well as by this court. Thirdly, the recent amendment to Section 153 C(1) of the Act states for the first time that for both the searched person and the other person the period of reassessment would be six AYs preceding the year of search. The said amendment is prospective.

12.

Consequently, no substantial question of law arises from the impugned order of the ITAT. The appeal is, accordingly, dismissed." We thus fail to either fathom or discern any observation rendered in that decision which may be read as lending strength or credence to the contention of the respondents.

"2.

The grounds that have been argued and my conclusions thereupon are as follows:

(i)

The bar of limitation: both limbs of this ground have been considered and rejected by me as per orders dated 12-7-2022, 15.07.22 and 26-7-2022, extracted below:

11.

Reliance is also placed upon two decisions of the Delhi High Court in the case of CIT v. RRJ Securities Ltd. and Pr. CIT v. Sarwar Agency (P.) Ltd. In both cases the view that the block of six years must be construed as commencing from the date of handing over of the documents seized by the officer of the searched entity to the officer of the third party, that is, petitioner in this case.

12.

I am of the considered view that the proviso has no application in the construction of the block period. Section 153C deals with the assessment of income of any other person in relation to the searched person and section 153C(1) reads as under:

Assessment of income of any other person.

153C. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,--

(a)

any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or

(b)

any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person [for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1)of section 153A]

13.

There is thus an in-built mechanism in 153C(1) as to how the block period is to be formulated. No doubt, the portion within parenthesis has been inserted only with effect from 1- 4-2017 and has no application in the case of the petitioner seeing as the date of search in its case ranges between 21-3-2015 to 11-1-2016. However, one hardly need to refer this portion, since the construction of the block is detailed in the last portion of section 153C(1) that states 'for the relevant assessment year or years referred to in sub-section (1) of section 153(1).

15.

Thus, the block is to comprise of the those assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made. Seen in this context, the inclusion of assessment year 2010-11 and 2011-12 in the case of RKM Powergen Limited and 2010-11 in the case of RK Powergen Private Limited is seen to be in order.

16.

The first proviso to section 153C only deals with the date of initiation of search for the purpose of the second proviso to section 153A(1) to determine the abatement for the sake of completion...."

G. COMPUTATION OF THE SIX AND TEN YEAR BLOCK IN THE PRESENT BATCH OF WRIT PETITIONS

Computation of the ten-year block No. of years period as provided under Section 153C read with Section 153A of the Act

"9.

Explanation-I is clear as to the manner of computation of the ten assessment years. It clearly and firmly fixes the starting point. It is the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. There cannot be any doubt that since search was made in this case on 10.04.2018, the assessment year is 2019-20. The end of the assessment year 2019-20 is 31.03.2020. The computation of ten years has to run backwards from the said date i.e., 31.03.2020. The first year will of course be the search assessment year itself. In that event, the ten assessment years will be as follows :

1st Year 2019-20

2nd Year 2018-19

3rd Year 2017-18

4th Year 2016-17

5th Year 2015-16

6th Year 2014-15

7th Year 2013-14

8th Year 2012-13

9th Year 2011-12

10th Year 2010-11

The case on hand pertains to AY 2009-10. It is obviously beyond the ten year outer ceiling limit prescribed by the statute. The terminal point is the tenth year calculated from the end of the assessment year relevant to the previous year in which search is conducted. The long arm of the law can go up to this terminal point and not one day beyond. When the statute is clear and admits of no ambiguity, it has to be strictly construed and there is no scope for looking to the explanatory notes appended to statute or circular issued by the department.

10.

In the case on hand, the statute has prescribed one mode of computing the six years and another mode for computing the ten years. Section 153A(1)(b) states that the assessing officer shall assess or reassess the total income of six years immediately preceding the assessment year relevant to the previous year in which search is conducted. Applying this yardstick, the six years would go up to 2013-14. The search assessment year, namely, 2019-20 has to be excluded. This is because, the statute talks of the six years preceding the search assessment year. But, while computing the ten assessment years, the starting point has to be the end of the search assessment year. In other words, search assessment year has to be including in the latter case. It is not for me to fathom the wisdom of the parliament. I cannot assume that the amendment introduced by the Finance Act, 2017 intended to bring in four more years over and above the six years already provided within the scope of the provision. When the law has prescribed a particular length, it is not for the court to stretch it. Plasticity is the new mantra in neuroscience, thanks to the teachings of Norman Doidge. It implies that contrary to settled wisdom, even brain structure can be changed. But not so when it comes to a provision in a taxing statute that is free of ambiguity. Such a provision cannot be elastically construed.

11.

One other contention urged by the standing counsel has to be dealt with. It is pointed out that the petitioner has invoked the writ jurisdiction at the notice stage. Since the petitioner has demonstrated that the subject assessment year lies beyond the ambit of the provision, the respondent has no jurisdiction to issue the impugned notice. Once lack of jurisdiction has been established, the maintainability of the writ petition cannot be in doubt."

Computation of the six-year block No. of years period as provided under Section 153C of the Act

Computation of the six-year block No. of years period as provided under Section 153C of the Act

Computation of the ten-year block No. of years period as provided under Section 153C read with Section 153A of the Act

Computation of the ten-year block No. of years period as provided under Section 153C read with Section 153A of the Act.

“Section 153C of the Income-tax Act, 1961 - Search and seizure - Assessment of income of any other person (Validity of notice) - Assessment years 2000-01 to 2003-04 - Whether as per provisions of section 153C, incriminating material which was seized had to pertain to assessment years in question -Held, yes - Whether where loose papers found and seized from residence of President of assessee, an educational institution, indicating capitation fees received by various institutions run by assessee did not establish co-relation document-wise with assessment years in question, notice issued under section 153C had rightly been quashed and set aside - Held, yes [Paras 16, 18 & 19][In favour of assessee]”

“8.9

It is now a well settled proposition of law that documents seized as a result of search must be incriminating and must relate to relevant assessment year whose assessments are sought to be reopened u/s 153A of the Act and the assessing officer cannot refer to any post search investigation or any other outside material to tinker with the assessments which are already final. It is also an accepted position now that unless the statements recorded during search are backed by corroborative materials/ documentary evidences, the said statements cannot be relied or made as a basis to make any addition. The aforesaid principle has been settled by the Hon’ble jurisdictional high court in the case of PCIT vs Best Infrastructure India (P) Ltd. reported in 397 ITR 82 and also in Kabul Chawla (supra) and Abhisar Buildwell (P) Ltd. (supra).

8.10

Thus we find nothing erroneous in the following conclusion drawn by learned CIT (A) at page 112 and 113 of his order:-

“In view of the above there is no material ground for enhancement of quantity of scrap sale as per books of accounts by 12%. As such, there is no evidence to support the statement of Shri Prashesh Arya that 10% to 12% of scrap quantity have not been recorded in the books of accounts which have been retracted. The above documents found during search are not related to AY 2008-09 to AY 2017-18 and the statements recorded are not related to evidence or material found during search. As such, the AO has wrongly enhanced the quantity of scrap by 12% for AY 2008-09 to 2017-18 and enhanced the rate of scrap sale by 20% and made the addition on account of unaccounted scrap sale”.”