DCIT, CC-1, New Delhi vs M/s. Belrus Agro Fert Private Limited

1.

The Ld. CIT(A) is not correct in law and on facts.

2.

The Ld. CIT (A)has erred in holding that block periods for assessment u/s 153C of the Income-tax Act, 1961, by calculating the same from the date of receipt of the books of accounts, documents or assets seized, by the jurisdictional AO of the non-searched person and not from the date of initiation of search by relying on First Proviso to Section 153C, even when this Proviso specifically deals only with the abatement of proceedings (as referred to second proviso of Section I53A) and does not deal with the calculation of block periods?

3.

The Ld. CIT (A) has erred in holding that block periods for assessment u/s 153C of the Income- tax Act, 1961, have to be calculated from the date of receipt of the books of accounts, documents or assets seized, by the jurisdictional AO of the non-searchcd person, even when the position of law is clarified after the amendment introduced by Finance Act, 2017, that the block period of 6AYs and 10 AYs as mentioned in Section 153C and Section 153A have same meaning and have to be calculated from the “assessment year relevant to the previous year in which search is conducted”

4.

The Ld. CIT (A) has erred in quashing the impugned notice issued under Section 153C of the Act and all consequential proceedings arising there from by holding that block periods for assessment u/s 153C of the Income-tax Act, 1961, have to be calculated from the date of receipt of the books of accounts, documents or assets seized, by the jurisdictional AO of the non-searched person and not from the date of initiation of search by relying on First Proviso to Section 153C, even when this Proviso specifically deals only with the abatement of proceedings (as referred to second proviso of Section 153 A) and does not deal with the calculation of block periods.

5.

The Ld. CIT (A) has erred on facts and in law by holding that the assumption of jurisdiction under Section 153C of the Act in the case of assessee is invalid.

6.

The Ld. CIT (A) has erred in law and on facts in disregarding the incriminating seized material recovered during the search on the Alankit Group, including parallel books of account, digital ledgers, excel sheets and hand-written diaries, which clearly establish the modus operand! of routing unaccounted cash through shell and entry-providing entities such as M/s Atoll Vyaapar Private Limited and M/s Alankit Finsec Limited tor the benefit of the assessee.

7.

The Ld. CIT (A) has erred in law and on facts in ignoring the consolidated digital data and seized ledgers extracted from the laptop of Shri Sunil Kumar Gupta, duly corroborated by his statement recorded under section 132(4) of the Act, which conclusively establish that the impugned receipts in the hands of the assessee represent non-genuine accommodation entries, and in quashing the assessment without rebutting or discrediting such cogent and corroborative evidence brought on record by the AO.

“…10. I have gone through the provisions of section 153C of the I.T. Act 1961 and ratio laid down by the Hon’ble Apex court in case of CIT vs Jasjit Singh (Supra). In this case, the Hon’ble Supreme Court has held as under:-

“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. [Para 9]

It is opined that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation v. Dy. CIT [2012] 20 taxmann.com 214 (Delhi) adopted, the Assessing Officer 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 Assessing Officer. 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 153C supports the interpretation which this Court adopts. [Para 10]

^11. The identical issue decided by the Hon’ble Jurisdictional High Court in decision dated 03.04.2024 in the case of PCIT, Centiral-1 Vs Ojjus Medicare Pvt. Ltd. ITA No. 52/2024.

^12. Hon’ble “D” Bench of ITAT, Delhi in ITA no. 1342 to 1348/Del/2024 in the case of Amol Awasthi, appeals for the A.Y. 2011-12 & 2012-13 were allowed by the Hon’ble ITAT by applying the decision of Hon’ble Delhi High Court in the case PCIT vs Ojjus Medicare Pvt. Ltd & Ors. [2024] 161 taxmann.com 160 (Delhi) considering that assessment years 2011- 12 & 2012-13 fall outside the net of relevant assessment year, being the block of 10 years whereas date of search was taken as 29.01.2021 i.e. date of recording of satisfaction note by the AO of the assessee i.e. Amol Awasthi. The relevant para of observations of the ITAT are reproduces as under:

^18. Admittedly, in the facts of the present appeals, the search and seizure operation was carried out on a date posterior to the amendment brought to section 153A read with section 153C of the Act by virtue of Finance Act, 2017. Therefore, the amended provisions of section 153C read with section 153A would be applicable. Hence, the relevant assessment year would constitute a block of 10 assessment years comprising of the assessment year, wherein, the search and seizure operation has taken place and preceding 9 assessment years. However, in case of a person other than the searched person, the date of search would be reckoned to be the date on which the Assessing Officer received seized material and recorded satisfaction in terms with section 153C of the Act. Since, the assessee is not the searched person but the other, person, the date of search would be reckoned to be the date on which the Assessing Officer of the assessee received the seized material and recorded satisfaction.

^19. Undisputedly, the materials placed on record clearly demonstrate that the Assessing Officer of the assessee has recorded the satisfaction note under section 1530 of the Act on 29.09.2021 falling in Financial Year 2021-22 corresponding to assessment year 2022-23. Therefore, the relevant assessment year for the purpose of computing 10 year block has to be reckoned from assessment year 2022-23 till assessment year 2013-14. In other words, the block of 10 assessment years for the purpose of section 153C would be assessment years 2013-14 to 2022-23. Hence, the Assessing Officer could have assumed jurisdiction under section 153C of the Act for the aforesaid block of 10 assessment years and not beyond that. Whereas, in the facts of the present appeals, the Assessing Officer has gone beyond the block of 10 assessment years and instituted proceedings under section 153C of the Act in respect of assessment years 2011-12 and 2012-13, as well. This, in our view, is against the statutory mandate.

^20. While considering identical issue in case of PCIT vs. Ojjus Medicare Pvt. Ltd. & Ors. [2024] 161 taxmann.com 160 (Delhi), the Hon’ble Jurisdictional High Court has held as under:

“G. COMPUTATION OF THE SIX AND TEN YEAR BLOCK IN THE PRESENT BATCH OF WRIT PETITIONS 86. In the present batch, List I pertains to writ

petitions which have Satisfaction Notes recorded or Section 153C notices issued between the period 01 April 2021 to 31 March 2022. Undisputedly, the First Proviso to Section 153C, and which has been consistently recognized to also embody the commencement point for reckoning the six or the ten AYs', shifts the relevant date from the date of initiation of search or a requisition made to the date of receipt of books of account or documents and assets seized by the jurisdictional AO of the non-searched person. Consequently, the block of six or ten AYs' would have to be reckoned bearing the aforesaid date in mind. Although in the present batch of writ petitions, the date of actual handing over has not been explicitly mentioned in a majority of the writ petitions, learned counsels for respective sides had addressed submissions based on the assumption that it would be the date of issuance of the Satisfaction Note by the AO of the non-searched person and in the case of non-availability of such a note, the date of issuance of the Section 153C notices which would be pertinent for the purposes of the First Proviso to Section 153C. Xxxxx

^98. We are therefore of the opinion that the Section 153C notices issued against the writ petitioners placed in List I and insofar as they pertain to AYs' 2010-11, 2011-12 and 2012-13 would not sustain being beyond the "relevant assessment year" which could have possibly formed the basis for initiation of action under that provision. Similarly, the Section 153C notices impugned by the writ petitioners placed in List II and insofar as they pertain to AYs' 2010-11, 2011-12, 2012-13 and 2013-14 and which have been found to fall outside the net of "relevant assessment year", being the ten year block, would be liable to be set aside on this score alone. ”

^21. Thus, keeping in view the ratio laid down by Hon’ble Jurisdictional High Court reproduced above, since, assessment years 2011-12 and 2012-13 fall outside the net of relevant assessment year, being the block of 10 years, the assumption of jurisdiction under section 153C of the Act is unsustainable. Hence, the assessment orders passed in consequence thereof have to be declared as void. That being the legal position, we hold that the assessment orders passed under section 153C of the Act for assessment years 2011-12 and 2012-13 are legally unsustainable, hence, quashed.”

^13. Thus, it is settled proposition that the date of handling over of the seized material by the AO of the searched person/recording of satisfaction note shall be the reference date for the issuance of notice u/s 153C and to assess or reassess the total income of the other person for the 6 previous years preceding the previous year or 10 A.Ys from the end of the AY relevant to the F.Y. in which the such seized material is handed over to the AO of the such other person (“appellant” in the present case).

^14. Now coming back to the present case of the appellant, the following dates are relevant for the reference:

S. No	Particulars	Date
1.	Date search and seizure operation conducted in the case of Alankit Group (Searched person)	18.10.2019
2.	Date of handling over the seized material by the AO of Searched person (As per satisfaction note of searched person’s AO)	15.09.2022

^15. Considering the above stated factual matrix, the reference date of search and seizure operation in case of appellant being other person as per 1^st proviso to the sub section 1 to the Section 153C of the I.T. Act 1961 shall be 15.09.2022 and hence previous year of search and seizure operation shall be 2022-23(AY 2023-24). Considering the Assessment Year 2023-24 as a search year the block period of 10 AYs’ would be as follows:-

Computation of ten-years block period as provided u/s. 153Cr.w.s. 153A of the Act.	Number of Years
A.Y. 2023-24	1
A.Y. 2022-23	2
A.Y. 2021-22	3
A.Y. 2020-21	4
A.Y. 2019-20	5
A.Y. 2018-19	6
A.Y. 2017-18	7
A.Y. 2016-17	8
A.Y. 2015-16	9
A.Y. 2014-15	10

^16. Thus, it is held that the AO of the appellant had jurisdiction to serve upon the appellant notice u/s 153C of the I T Act 1961 only up to the AY 2014-15 and not prior to that AY. Therefore, the assessment proceeding-initiated u/s 153C of the I.T. Act 1961 by the AO for the AY 2010-11 and 2013-14, based on the search and seizure operation conducted on Alankit Group is against the clear mandate of legislature and against the ratio laid down by the Hon’ble Apex Court In the case of ^{CIT V Jasjit Singh (Supra) and of Hon’ble Delhi High Court in the case of Ojjus Medicare Pvt. Ltd (supra).} Hence, the proceedings u/s 153C of the I. T. Act for the AY 2010-11 & 2013-14 initiated and completed under the instant cases of the appellant are found without jurisdiction and time barred.

^17. Therefore, the assessment order passed u/s 153C of the I. T. Act 1961 dated 27.03.2024 & 29.03.2024 by the AO in the case of appellant for the AY. 2010-11 & 2013-14 are bad in law, without jurisdiction, time barred and void ab initio. Thus, grounds of appeal no . 2 & 4 (for the AY 2010-11) and grounds of appeal no. 2 & 4 (for the AY 2013-14) are allowed.”