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Judgment
PER S.RIFAUR RAHMAN,AM:
These appeals are filed by the assessee against the order passed by the ld. Commissioner of Income-tax (Appeals)-24, New Delhi [for short ‘ld. CIT (A)] dated 20.12.2024 for the Assessment Years 2015-16 and 2016-17.
Since the issues are common and the appeals are connected, hence the same are heard together and are being disposed off by this common order.
First we take up the assessee’s appeal being ITA No.8280/Del/2026 for AY 2015-16.
At the time of hearing, ld. AR of the assessee submitted that various grounds of appeal are taken by the assessee, however, he proceeded to argue the legal issue raised vide Ground No.3 as under :-
“3.That the learned Commissioner of Income Tax (Appeals) has failed to appreciate that assessment framed u/s 153C/143(3) of the Act is barred by limitation and therefore deserves to be quashed.”
He submitted that initiation of proceedings initiated vide notice dated 10.2.2022 issued u/s 153C of the Income-tax Act, 1961 (for short ‘the Act’) is barred by limitation and, therefore, both the initiation of proceedings and assumption of jurisdiction under section 153C of the Act and completion of assessment framed u/s 153C/143(3) of the Act is required to be quashed.
He submitted the chronological sequence of events leading to the assumption of jurisdiction u/s 153C of the Act as under :-
| Sr. No. | Particulars | Date |
| i) | Date of search on Ashish Begwani group. A copy of panchnama is placed at pages 48-50 of Paper Book for Assessment year 2016-17 in ITA No. 8281/D/2025 | 22.10.2016 |
| ii) | Satisfaction note recorded by the learned Deputy Commissioner of Income Tax, Central Circle-6 New Delhi i.e. AO of the searched person namely Sh. Ashish Begwani (page 7 of this synopsis) | 10.02.2022 |
| iii) | Satisfaction note was recorded by the learned Deputy Commissioner of Income Tax, Central Circle-6 New Delhi i.e. AO of the assessee (page 8 of this synopsis) | 10.2.2022 |
| iv) | Notice u/s 153C of the Act (page 10 of Paper Book) | 10.2.2022 |
| v) | Date of order of assessment u/s 153C of the Act | 30.12.2022 |
He further submitted that as per proviso to section 153C of the Act, for taking action u/s 153C, the date of search would be substituted by the date of receiving the books of account or documents or the assets allegedly belonging to the assessee and seized in the course of search of the searched person.
It is submitted that separate satisfaction note was recorded on 10.02.2022 by the Deputy Commissioner of Income Tax, Central Circle-6, New Delhi i.e. AO of the searched person, namely, Sh. Ashish Begwani and subsequently, the Assessing Officer of the assessee i.e. Deputy Commissioner of Income Tax, Central Circle-6, New Delhi i.e. AO of the assessee. He submitted that based on the foregoing, notice was issued on 10.02.2022 u/s 153C of the Act.
Having regard to the foregoing, he submitted that the handover of alleged material gathered in the course of search and alleged to be belonging to the non-searched person occurred on 10.02.2022, the same would essentially constitute financial year 2021-22 as being the previous year of search for the purposes of the assessee. As a necessary corollary, the relevant Assessment year would become Assessment Year 2022-23. Assessment year 2022-23 would thus constitute the starting point for the purposes of identifying the six years which are spoken of in section 153C of the Act. The six Assessment years are envisaged to be those which immediately preceded the Assessment year so identified with reference to the previous year of handing over of seized material. It would thus lead to conclude that it would be the six Assessment years immediately preceding Assessment year 2021-22 which could have formed the basis for initiation of action under section 153C of the Act. Consequently, and reckoned backward, the six relevant Assessment years would be:
| Sr. No. | Computation of the six-year block period as provided under section 153C of the Act | No. of years |
| i) | A.Y. 2021-22 | 1 |
| ii) | A.Y. 2020-21 | 2 |
| iii) | A.Y. 2019-20 | 3 |
| iv) | A.Y. 2018-19 | 4 |
| v) | A.Y. 2017-18 | 5 |
| vi) | A.Y. 2016-17 | 6 |
Consequently, he submitted that Assessment year 2021-22 would become the first of the six preceding Assessment years and would as per the table set out hereinabove terminate at Assessment year 2016-17. It is thus submitted that notice under section 153C for Assessment year 2015-16 is clearly barred by limitation. In this regard, reliance is placed on the following judgments:
CIT vs. Jasjit Singh - 458 ITR 437 (SC)
PCIT vs. Ojjus Medicare (P) Ltd. 465 ITR 101 (Del)
In light of the above, he submitted that apparently the assumption of jurisdiction for Assessment Year 2015-16 is barred by limitation and without jurisdiction and, therefore, deserves to be quashed as such. He, therefore, prayed, that the assessment made by the Assessing officer and sustained by the learned CIT (A) be quashed and appeal of the assessee be allowed.
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material available on record. We observe that the assessment year 2015-16 under consideration clearly falls outside the scope of application of section 153C of the Act, for the reason that the date of search for the unsearched parties are the date on which the documents were handed over to the Assessing Officer of such other person or from the date on which the satisfaction was recorded. Therefore, the contention of the assessee is found to be correct on this count. Further we observe that the impugned assessment order is beyond the limitation prescribed under section 153C of the Act, and therefore, the jurisdiction assumed by the Assessing Officer is not tenable in the light of aforesaid legal positions in view of the decision of Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh (supra) and Hon’ble Delhi High Court in the case of PCIT vs. Ojjus Medicare (P.) Ltd. For the sake of brevity, we reproduce the relevant findings of the aforesaid decisions :-
“458 ITR 437 (SC) CIT vs. Jasjit Singh
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.
11.For the foregoing reasons, the Court finds no merit in these appeals; they are accordingly dismissed, without order on costs.”
465 ITR 101 (Del) PCIT vs. Ojjus Medicare (P) Ltd.
“30.According to Mr. Kapoor, notwithstanding the expansion of the assessment period to ten years, the Legislature consciously did not amend the commencement point for the purposes of computation and which stood embodied in the Proviso to section 153C(1). This, according to Mr. Kapoor, is unassailable evidence of the position with respect to computation of the block period remaining unaltered. Mr. Kapoor then submitted that the calculation of the six and ten year block is governed by distinct principles. It was submitted that for the purposes of identification of the six AYs' the statute uses the expression ". . . . . . . . . . . . . . . . . . . immediately preceding the assessment year relevant to the previous year in which search is conducted. . . . . . . . . . . . . . . ".
Mr. Kapoor pointed that in contradistinction to the above, the commencement point for calculating ten AYs' is ordained by the statute to be "from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made". Viewed in light of the above, according to Mr. Kapoor, while the AO stands empowered to re-open the year of search and nine immediately preceding AYs', it cannot legally travel beyond that period. Mr. Kapoor submitted that the computation of ten years has to be made by way of a backward calculation beginning from the end of the AY relevant to the previous year in which the search is conducted. This, since the statute itself commands that period to be reckoned "from the end of the assessment year" as opposed to the expression 'immediately preceding' which governs the identification of six AYs'. According to learned counsel, the statute while laying down the principles for computation of six AYs' mandates that the search year be excluded and consequently liable to be treated as the 'zero' year. In support of his submission with respect to the computation of the six and ten year block, Mr. Kapoor placed strong reliance on the following observations as appearing in the decision of the Madras High Court in A.R. Safiullah v. ACIT [WP(MD) No. 4327 of 2021, dated 24-3-2021].
"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 1n this case on 10.04.2018, the assessment year is 2019-…..
G. COMPUTATION OF THE SIX AND TEN YEAR BLOCK IN THE PRESENT BATCH OF WRITPETITIONS ……
87.Assuming, therefore, that the handover of material gathered in the course of the search and pertaining to the non-searched person occurred between 01 April 2021 to 31 March 2022, the same would essentially constitute FY 2021-22 as being the previous year of search for the purposes of the non-searched entity. As a necessary corollary, the relevant AY would become AY 2022-23. AY 2022-23 would thus constitute the starting point for the purposes of identifying the six years which are spoken of in section 153C. The six AYs' are envisaged to be those which immediately precede the AY so identified with reference to the previous year of search. It would thus lead us to conclude that it would be the six AYs' immediately preceding AY 2022-23 which could have formed the basis for initiation of action under section 153C. Consequently, and reckoned backward, the six relevant AYs' would be:-
Computation of the six-year block period as provided under section 153C of the Act No. of years AY 2021-22 1 AY 2020-21 2 AY 2019-20 3 AY 2018-19 4 AY 2017-18 5 AY 2016-17 6 Consequently, AY 2021-22 would become the first of the six preceding AYs' and would as per the table set out hereinabove terminate at AY 2016-17. …..
92.List II, forming part of this batch pertains to cases where Satisfaction Notes of the AO of the non-searched person were drawn between the period 01 April 2022 to 31 March 2023 and 01 April 2023 to 31 March 2024. Tested on the principles enunciated by us in the preceding passages of this judgment, we come to the conclusion that the relevant six AYs' would comprise the following years, when computed for the period 01 April 2022 to 31 March 2023:-
| Computation of the six-year block period as provided under section 153C of the Act | No. of years |
| AY 2022-23 | 1 |
| AY 2021-22 | 2 |
| AY 2020-21 | 3 |
| AY 2019-20 | 4 |
| AY 2018-19 | 5 |
| AY 2017-18 | 6 |
Accordingly, respectfully following the aforesaid decisions, we are of the considered view that the assumption of jurisdiction is barred by limitation for the AY 2015-16, hence the assessment order for AY 2015-16 is quashed and the appeal for AY 2015-16 being ITA No.8280/Del/2025 filed by the assessee is allowed.
Now we take up ITA No.8281/Del/2026 for AY 2016-17.
At the time of hearing, ld. AR for the assessee brought to our notice that the ld. CIT (A) disposed off the appeal ex-parte without granting any fair opportunity of being heard to the assessee. He further submitted that ld. CIT (A) failed to appreciate that there was reasonable cause for the assessee for not causing appearance on the dates fixed for hearing and as such disposal of the appeal without granting fair, meaningful and proper opportunity is untenable Further, he submitted that ld. CIT (A) failed to appreciate that non-appearance of the assessee on the date of hearing was neither intentional nor deliberate and is not a case where assessee is not interested in prosecuting its appeal, particularly when assessee had appeared during assessment proceedings. Accordingly, he pleaded that this issue may be remitted back to the ld. CIT(A) with the prayer to give an opportunity of being heard to the assessee.
On the other hand, ld. DR for the Revenue objected to the submissions of the ld. counsel for the assessee and submitted that assessee has not utilised several opportunities granted by ld. CIT (A).
Considered the rival submissions and material placed on record. We observed that there was reasonable cause for the assessee for not appearing on the dates of hearing before the ld. CIT (A). Further, we observed that non-appearance of the assessee on the date of hearing was neither intentional nor deliberate and is not a case where assessee is not interested in prospecting its appeal, particularly when assessee had appeared during assessment proceedings. Therefore, in our considered view and in the interest of justice, we restore the matter to the file of ld. CIT (A) and direct ld. CIT (A) to give an opportunity of being heard to the assessee and decide the issues on merit as per law. We also direct assessee through its counsel to make proper submissions and appear before the ld.CIT (A) on the date of hearing and cooperate with the tax authorities. Accordingly, the appeal being ITA No.8281/Del/2025 filed by the assessee is allowed for statistical purposes.
To sum up : In the result, the appeal being ITA No.8280/Del/2025 for AY 2015-16 is allowed and appeal being ITA No.8281/Del/2025 for AY 2016-17 filed by the assessee is allowed for statistical purposes.