Full Text
HIGH COURT OF DELHI
Date of Decision: 14.01.2025
MAHENDER KUMAR JAIN .....Petitioner
Through: Mr DeepanshuJain and Mr Shaantanu Jain, Advocates.
Through: Mr Sunil Aggarwal, SSC, Mr Shivansh B Pandya, Mr Viplav
Acharya, JSCs and Mr Utkarsh Tiwari, Advocate for the Revenue.
Mr AtulKumar Pandey, Advocatefor R2.
HON'BLE MR. JUSTICE TUSHAR RAO GEDELA VIBHU BAKHRU, ACJ. (ORAL)
JUDGMENT
1. The petitioner hasfiled thepresent petition, inter alia, impugning a notice dated 30.08.2024 (hereafter the impugned notice) issued under Section 148 of theIncome Tax Act, 1961 (hereafter theAct) in respect ofthe assessment year (AY) 2015-16. The petitioner also challenges the constitutional validity of Explanation 2 to Section 148 of the Act.
2. Mr Jain, thelearned counselappearingfor thepetitioner has confined thepresentpetitionto assailingtheimpugnednoticeon the ground that it is barred by limitation. Hesubmitsthatthecontroversyinvolvedin the present petitionis covered in favour of the petitioner by the earlier decision of this court in Dinesh Jindal v. Assistant Commissioner of Income Tax, Central Circle 20, Delhi & Others: Neutral Citation: 2024: DHC:4554-DB.
3. Undisputedly theinitiationofthe reassessmentproceedings pursuant to the search carried out on or after 01.04.2021 necessarily requires to be initiated within thetimeframe as specified under Section 153A of the Act, which was in force at the material time. The reassessments covered under Section 153C ofthe Act are required to bereckoned from the date on which theAssessingOfficer (AO) of the searched person records the satisfaction that the books of account, or documents or the material belongs to the assessee (person other than the searched person) or contains information relating to such other person.
4. In terms of Section 153A of the Act, the maximum of ten years is required to becomputed from theend of the assessmentyear relevant to the financial year in which such satisfaction note was recorded. This issue is also covered by an earlier decision of this court in ThePr. Commissioner of Income Tax - Central-1 v. Ojjus Medicare Pvt. Ltd: Neutral Citation: 2024:DHC: 2629-DB.
5. Admittedly, in thepresentcase, there is no material on record which indicates thatsatisfaction note, as required under Section 153 C of the Act, as in force at thematerialtime, had been preparedby theAO of thesearched person andtherelevant materialbelongingto or containing the information pertainingto thepetitioner hadbeen handed over by theAO of the searched person to the AO of the assessee.
6. In view of the above, thedateofthe issuanceof the notice is required to be considered for the purpose of computing the period of limitation as would be applicable to the notice under Section 153C of the Act.
7. We also consider to refer to thefollowingextract from thedecision of this court in Dinesh Jindal v. Assistant Commissioner of Income Tax, Central Circle 20, Delhi & Others: (supra): -
8. Undisputedly, and in terms of Section 153C(3) of the Act, any search if conducted after 01 April 2021, would cease to be regulated by that provision.Sub-section(3), in that sense, embodies a sunset clause insofar as the applicability of Section 153C is concerned. The First Proviso to Section 149(1), however, bids us to go back in a pointoftime, and to examinewhether a reopening would sustain bearing in mind the timeframes as they stood embodied in Section 149(1)(b) or Section 153A and 153C, as the case may be. The First Proviso essentially requires us to undertake that considerationbearing in mind the timeframes which stood specified in Sections 149, 153A and 153C as they stood prior to the commencement of Finance Act, 2021.
9. Thus, an actionofreassessment which comes to be initiated in relation to a search undertaken on or after 01 April 2021 would have to meet the foundationaltestsas specified in the First Proviso to Section 149(1). A reassessment action would thus have to not only satisfy the time frames constructed in terms of Section 149, but in a relevant case and which is concerned with a search, also those which would be applicable by virtueofthe provisions ofSection 153A and153C.
10. Undisputedly, and if the validity of the reassessment were to be tested on the anvil of Section 153C, the petitioner would be entitled to succeed for the following reasons. It is an undisputed fact thattheproceedings under Section 148 commenced on the basis of the impugned noticedated 30 March 2023.This datewouldbe of seminalimportancesincethe period ofsix AYs’ or the “relevant assessment year” would have to be reckoned from the date when action was initiated to reopen the assessment pertaining to AY 2013-
14.
11. The computationof the six or the block of ten AYs’ was explained by us in Ojjus Medicare Private Limited in the following terms:
12. Viewed in that light, it is manifest that AY 2013-14would fallbeyond theblock period of ten years. It becomes pertinent to note that the First Proviso to Section 149(1) compels us to test the validity of initiation of action for reassessment commenced pursuant to a search, based upon it being found that the proceedings would have sustained bearingin mind the timelines prescribed in Sections 149, 153A and 153C, as they existed priorto thecommencement of Finance Act, 2021. This necessarily requires us to advert to the timeframes comprisedin both Section 149(1)(b)as well as Section 153C as it existed on the statute book prior to 01 April 2021, which undisputedly was the date from when Finance Act, 2021 came into effect.
13. While it is true that Section 153C and the procedure prescribed therein had ceased to be applicablepost 31 March2021, theFirstProvisoto Section 149(1)does not appear to suggest that the First Proviso to Section 153C(1) would either become inapplicable or be liable to be ignored. Undisputedly, the First Proviso to Section 153C(1), by virtue of a legal fiction enshrined therein requires oneto treatthedateofinitiation of search, and which otherwise constitutes the commencement point for a search assessment in thecase of a non-searched party, to beconstrued as thedatewhen books ofaccountsor documentsand assets seized or requisitionedaretransmittedto the AO of such “other person”. Resultantly, the computation of the six preceding AYs’ or the “relevant assessment year” in the case of the nonsearched entity has to be reckoned from the time when the material unearthed in the search is handed over to the jurisdictional AO. The import of this legal fiction is no longer res integra bearing in mind the judgment ofthe SupremeCourt in CIT v. Jasjit Singh & Ors.:2023 SCC OnLine SC 1265 and the whole line of precedents rendered by our High Court which were noticed in Ojjus Medicare Private Limited. Thosedecisions haveconsistently held that in the case of a non-searched entity, it is the date of hand over of material, as opposed to that oftheactualsearch which would constitutethe startingpointfor reckoningthe block of six or ten AY’s.
14. However, Section 149(1), as it came to be placed and introduced in thestatutebookby virtue of FinanceAct, 2021, neither effaces nor removes from contemplation the First Proviso to Section 153C(1). Consequently, in cases where a search is conducted after 31 March 2021, the said Proviso would have to be construed and tested with reference to the date when the AO decides to initiate action against the non-searched entity. While in the case of a search initiated after 31 March 2021 therewould beno actualhand over of material to the and the whole line of precedents rendered by our High Courtwhich were noticed in Ojjus Medicare Private Limited. Those decisions have consistently held that in the case of a nonsearched entity, it is the date of hand over of material, as opposed to that of the actual search which would constitute the starting point for reckoningtheblock of six or ten jurisdictionalAO, that does notconvinceus to revert to Section 153A and hold that the block period is liable to be computed from the date of search. That, in our considered opinion, would amount to rewriting Section 153C which would clearly be impermissible.” [emphasis added]
8. In ATS Township PvtLtd v. Assistant Commissioner of Income Tax Circle 1(1) Delhi & Others: Neutral Citation: 2024:DHC:9978-DB, this court had notedthedecision in Dinesh Jindalv. Assistant Commissioner of Income Tax, Central Circle 20, Delhi & Others: (supra) in regard to the aspect ofcomputationoftheperiod, which could be covered under Section 153C ofthe Act in thecontext ofsearch conductedunderSection 132 of the Act or requisition madeunderSection 132A oftheAct, and had observed as under:- “10. The learned counselfor theRevenue had also contended thatthe date of placing the material on theinsight portal ought to be considered the date of search for the purposes ofcomputing limitation under Section 153C of the Act. However, prima facie, the same is contrary to the decision in Dinesh Jindal v. Assistant Commissioner of Income Tax, Central Circle 20, Delhi & Others: (supra). It is to be noted that in said case, this court had reasoned that in case of a search after 31.03.2021, therewould be no actual handover of materialto thejurisdictionalAssessingOfficer and therefore it would not be permissible to revert to Section 153A of the Act for the purposes of computingtheperiod oflimitationfrom thedateof thesearch. Prima facie, this reasoning would also hold good in case of assuming the date of placing informationon insight portal as the date of search for the purposesofthe proviso to Section 153C of the Act.
11. Uploadingofinformation by the investigation wing of the IncomeTax departmentwouldnot bea substitute for recording of a satisfaction note by theAO of a searched personand handing over the assets,books of accounts or other material to the AO of the person other than the searched person for the purpose of initiation of proceedings under Section 153C of the Act.”
9. It is apparent from the above, that in cases the search is conducted after 31.03.2021, the period of limitation under Section 153C of the Act would have to be construed with reference to the date on which the AO decides to initiate action against a non-searched person.
10. It is relevant to note that in the present case, the AO exercising jurisdictionin respect ofthepetitioner hadpreparedthesatisfaction note (in terms ofClause(iv) of Explanation[2] to proviso to Section 148 of the Act). However, thatcannot be construed as a satisfaction note by the AO of the searched person.Thedateof thesaid satisfactionnotecannot be considered as the startpointto considerthelimitation periodunderSection 153C of the Act.
11. It is also material to note the satisfaction note was prepared on 23.08.2024and wasapproved on 29.08.2024 by theChief Commissioner of Income Tax. Thus, even if the limitation is computed on the basis of the aforesaidapproval, thesamewould berequired to becomputed from theend of the assessment year relevant to the financial year in which such satisfaction note was prepared.
12. The petitioner has set out a tabular statement in support of his contention that theAY 2015-16 is beyondthe period of ten years. The said tabular statement is reproduced below: - Analysis of time-period to issue reassessment notice. Date of impugned notice under section 148 is 30.08.2024 This chart is prepared in light of the first proviso of Section 149 of the Act as amended by Finance Act, 2021 Relevant Assessment Year for initiating proceedings under Section 148 of the Act Without prejudice, computation of 10 years in light of first proviso to Section 149 2025-26 1 2024-25 2 2023-24 3 2022-23 4 2021-22 5 2020-21 6 2019-20 7 2018-19 8 2017-18 9 2016-15 10 2015-16 11 (Beyond terminal point of 10 years)
13. The learned counselfor theRevenueconcurs with theaforesaid view.
14. In view of the above, the present petition is allowed. The impugned notice and the proceedings pursuant thereto are set aside.
15. Pending applications are also disposed of.