Deputy Commissioner Of Income Tax vs Mohinder Kumar Malik

1.

On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in delivering internally inconsistent and contradictory findings, having accepted the Revenue’s position that the block under sections 153A and 153C is to be computed from the date of search, but nevertheless allowing the assessee’s claim by relying on judgement of Hon’ble Supreme Court’s in the case of Jasjit Singh and order of Hon’ble Delhi High court in the case of PCIT Vs Ojjus Medicare Private Limited and thereby rendering the order unsustainable.

2.

On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in failing to appreciate that even if the assessee’s interpretation is adopted and the date of handover of seized documents (i.e., 13.05.2021) is taken as the commencement point, AY 2012-13 clearly falls within the ten-year block prescribed in the first proviso to section 153C; hence, the finding that the assessment is time- barred is factually incorrect and legally untenable.

3.

On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in mechanically applying the decisionof Hon’ble Delhi High court in the case of PCIT vs. Ojjus Medicare Pvt. Ltd. without noting that the said judgment has been challenged by the Revenue before the Hon’ble Supreme Court and is pending for adjudication, and without reconciling it with her own observation that the limitationfor the purpose of computation of the six-and ten-year block for assessment under section 153C has to be reckoned from the “date of search” and not from “when documents are either handed over to a jurisdictional AO” or “when the satisfaction note in respect of a nonsearched person is drawn.

4.

On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in failing to give due effect to the clarificatory amendment brought by the Finance Act, 2017 and CBDT Circular No. 2/2018 dated 15.02.2018, both of which reinforce the position that the block period under section 153C is required to be computed from the date of search and not from the date of handover of documents.

5.

On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in ignoring the statutory parity intended between proceedings under sections 153A and 153C, wherein the block period of six years or ten years is common for both searched and non-searched persons, and must uniformly commence from the date on which the search is initiated.

5.1.2

The core issue raised to these additional grounds of appeal is whether the assessment undertaken by AO for AY-2012-13 under the provisions of Section 153C of the IT Act, 1961 is barred by limitation as per the provisions of Income tax Act, 1961.

5.1.3

In this case, the proceeding u/s 153C of the IT Act, 1961 has emanated from search conducted on Navneet Dawar Group on 03/01/2018. wherein certain incriminating documents pertaining to the appellant were found and seized. Later, the ‘AO of the searched person’ recorded his due satisfaction and transferred the seized documents to the ‘AO of other person.’ Accordingly, the AO of other person having jurisdiction over the appellant issued notices under Section 153C of the IT Act,1961 for the AY-2012-13 which, as per provisions of the Income tax Act,1961, was duly covered within the relevant assessment years prior to the year of search, he,, FY-2018-19, i.e., AY-2019-20. On this issue, the appellant has presently contended, before me that as per the latest judicial interpretation, of 1^st Proviso to Section 153C of the IT Act. 196.1, the commencement point of proceeding under Section 153C, stands shifted from, the date of initiation of search to the date of receipt of books, documents, or assets by the jurisdictional AO of the non-searched person. Accordingly, the appellant is of the view that since in the instant case the seized records were handed over to the AO of non-searched person in FY-2021-22, i.e., AY-2022-23, the block period for proceeding under Section 153C. Consequently, it is argued by the appellant that the proceeding- initiated u/s 153C of the IT Act, 1961 for AY-2012-13 is barred by limitation.

5.1.4

In this context, an examination of bare provisions of section 153C of the IT Act, 1961 read with Section 153A of the income tax Act, 1961 clearly demonstrates that the commencement point for the purpose of computation of the six- and ten-year block for assessment u/s 153C has to be reckoned from the “date of search” and not from “when documents are either handed over to a jurisdictional AO” or “when the Satisfaction Note in respect of a non-searched person is drawn”. It has been the consistent and unaltered stand of the Revenue that computation of the block for proceeding u/'s 153C should be reckoned from date of search, and, that the block of six-years for proceeding u/s 153A and u/s 153C are intended to be one and the same. In fact, it is imperative that both Sections 153A and 153C be read harmoniously for the purposes of calculation of six AYs¹ so that the basic object and purpose of search assessment is not frustrated; In this context, it is thus, the unmistakable stand of the Revenue that the significance of First Proviso to Section 153C is restricted to the purpose of abatement of pending assessment and reassessment, and is supposed to be read only in conjunction with reference to 2^nd Proviso to Section 153 A of the Income tax Act, 1961.

5.1.5

As per the provisions of Income tax Act, 1961 , the focal point for invocation of Sections 153A and 153C are predicated upon the previous year in which search is conducted or a requisition made. It is , therefore, with, an intent to further rationalize the provisions of search assessment that the curative and clarificatory amendments to Section 153A and Section 153C were introduced vide Finance Act2017 which sought to further align and harmonize the provisions of Section 153C with Section 153A and thus construct a holistic scheme of assessment pertaining to searches. It is significantly noteworthy that in the absence of Section 153C independently defining the "relevant assessment year" introduced vide the 2017 amendment, the expression needed to be necessarily understood in reference to its definition as appearing in Section 153A of the Income tax Act, 1961. This position, is also manifest from para 80 of the CBDT Circular No. 2/2018 dated 15 February 2018 which is reproduced below, which bears testimony to the intent of the legislature while introducing the 2017 Amending Act:-

“80. Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential amendment to section 153A and I53C.

80.1

The provisions of clause (c) of the section 197 of the Finance Act, 2016 provide that where any income has accrued, arisen or been received or any asset has been acquired out of such income prior to commencement of the Income Declaration Scheme, 2016 (the Scheme), and no declaration in respect of such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 1.48 or section 153.A or section 15 3C of the Income-tax Act is issued by the Assessing Officer, and provisions of the said Act shall apply accordingly,

80.2

In view of the various representations received from stakeholders, section 197 of the Finance Act, 2016 has been amended so as to omit clause (c) of the said section,

80.3

Applicability: This amendment takes effect retrospectively from 1st June, 2016.

80.4

However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (deluding section 132A cases) and the same is represented in the farm of undisclosed investment in any asset, section 153A of the Income-tax Act relating to search assessments has been amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided up to the tenth assessment year if—

(i)

the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years (falling beyond the sixth year);

(ii)

such income escaping assessment is represented in the form, of asset;

(iii)

the income escaping assessment or part thereof relates to such year or years.

80.5

Applicability: The amended provisions of section 153A of the Income-tax Act shall apply where search under section 132 of the Income-tax Act is initiated or requisition under section 132A of the Income Tax Act is made on or after the 1st day of April, 2017.

80.6

Section 153C of the. Income-tax Act has also been amended to provide a reference to the relevant assessment year or years as referred to in section 153A of the Income- tax Act.

80.7

Applicability: These amendments take effect from 1st April, 2017.”

5.16

Thus, an examination of bare provisions of Income tax Act, 1961, the legislative intent decipherable from subsequent clarificatory amendment vide Finance Act, 2017 and CBDT Circular no2/2018, leave no scope of ambiguity that the commencement point of block period for proceeding u/s 153C has always been intended to be reckoned from the year of search, and not the year of transfer of seized record to the AO of other person.

5.1.7

Thus, an examination of bare provisions of Income tax Act,1961, the legislative intent decipherable from subsequent clarificatory amendment vide Finance Act, 2017 and CBDT Circular no2/2018, leave no scope of ambiguity that the commencement points of block period for proceeding u/s 153C must be reckoned from the year of search, and not the year of transfer of seized record to the AO of other person. Since in this case, the proceeding u/s 153 C of the IT Act, 1961 was in consequence to search conducted on Navneet Pawar Group on 03/01/2018, the amended provisions of Section 153A and Section 153C after the Finance Act, 2017 would be applicable.

5.1.8

In view of the amendments to Section 153A and Section 153C introduced vide Finance Act, 2017 which explicitly demonstrates the intent of legislature to harmonize the provisions of 153C with 153A, I am of the view that the earlier judgements of Hon’ble Supreme Court in the cases of RRJ Securities and Jasjit Singh, which had been rendered in the context of pre-2017 amendment, are distinguishable and inapplicable to the factual matrix of the instant case.

5.1.9

However, I am still under the constraints of judicial discipline to take cognizance of the binding judgement of jurisdictional High Court delivered in the cases of PCIT v. Ojjus Medicare Pvt Ltd & Ors (Delhi)(HC). Commissioner of Income Tax rendered after the contextual examination of amendments introduced vide Finance Act, 2017 wherein it’s been held that the commencement point for initiation of proceeding- under Section 153C of the ITAct,1961 is to be taken from the date on which seized records are actually handed over to the AO of non-searched person. The relevant extract of Hon’ble Delhi High Court’s latest judgement dated 03.04.2024 in the case of PCIT Vs Ojjus Medicare Private Limited is also reproduced below for ready reference:

"C. Section 153C. on the other hand, pertains to the non-searched entity and in respect of whom any material, books of accounts or documents may have been seized and were found to belong to or pertain to a person other than the searched person. As in the case of Section 153 A, Section 153C was also to apply to all searches that may have been undertaken between the period 01 June 2003 to 31 March 2021. In terms of that provision, the. AO stands similarly empowered to undertake and initiate an assessment in respect of a non-searched entity for the six AYs' as well as for "the relevant assessment year". The AYs', which would consequently be thrown open for assessment or reassessment under Section 153C follows lines parimateria with Section 153A.

D. The First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of hooks of accounts by the jurisdictional. AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1) while defining the point from which the period of the "relevant assessment year" is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non- searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153CH) is an issue which is no longer res Integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court, in Vikram. Sujitkumar Bhatia. The submission of the respondents, therefore, that the. block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted.

E. The reckoning of the six AYs' would require one to firstly identify the FY in which the search was undertaken and. which would lead to the ascertainment of the A Y relevant to the previous year of search. The block of six AYs' would consequently be those which immediately precede the A Y relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized, are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153 A.

5.1.10

Therefore, considering the factual and legal matrix of the case in its entirety, I agree with the legal contention, put forth by the appellant. Hence, respectfully following the binding judicial precedents of ratio decided vide Hon’ble Supreme Court’s order dated 26.09.2023 in the case of Jasjit Singh, and Hon’ble Delhi High Court’s judgement dated 03.04.2024 in the ease of PCIT Vs Ojjus Medicare Private Limited, I am constrained to allow the said legal ground raised by the appellant. Consequently, the Additional legal Ground stands allowed.”