Gujarat High Court
Bhavin Kishorebhai Zinzuwadia vs Assistant Commissioner Of Income Tax … on 2 December, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/SCA/22170/2019 CAV JUDGMENT DATED: 02/12/2024
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Reserved On : 22/10/2024
Pronounced On : 02/12/2024
IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/SPECIAL CIVIL APPLICATION NO. 22170 of 2019
FOR APPROVAL AND SIGNATURE:
HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
==========================================================
Approved for Reporting Yes No
==========================================================
BHAVIN KISHOREBHAI ZINZUWADIA
Versus
ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 2(3),
AHMEDABAD
==========================================================
Appearance:
MR B S SOPARKAR(6851) for the Petitioner(s) No. 1
MR.VARUN K.PATEL(3802) for the Respondent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
CAV JUDGMENT
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned advocate Mr. B.S.Soparkar for
the petitioner. Learned Senior Standing
Counsel Mr. Varun Patel for the respondent.
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2. The petitioner has challenged the notice
dated 06.11.2019 issued under section 153C of
the Income Tax Act,1961 [for short ‘the Act’]
for the Assessment Years 2009-10 to 2014-15.
3. The notice under section 153C of the Act was
originally issued on 05.08.2019 for A.Y.
2011-12 to 2017-18. However, on 23.10.2019,
the respondent withdrew the same and issued
fresh notices for A.Y. 2009-10 to 2014-15 on
06.11.2019.
4.The petitioner, on receipt of the notices,
vide letter dated 18.11.2019 requested the
respondent assessing officer for documents
relied upon by the respondent along with
satisfaction recorded under section 153C of
the Act. The respondents supplied
satisfaction recorded by the Assessing
Officer of the searched person on 31.03.2018
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as well as the satisfaction recorded by the
respondent vide letter dated 25.11.2019. As
per the satisfaction note, for initiation of
the assessment proceedings under section 153C
of the Act, it is revealed that during the
course of search at the office premises of
M/s. Venus Infrastructure and Developers Pvt
Ltd and Shri Ashok S. Vasvani for Venus Group
on 10.03.2015, various loose papers,
documents and digital data were seized and 11
documents pertaining to the petitioner were
identified.
5. The respondent who is Assessing Officer of
the petitioner, recorded satisfaction note on
23.10.2019 for initiation of the assessment
proceedings under section 153C of the Act for
the Assessment Years 2009-10 to 2014-15 in
respect of each of the Assessment Year
falling within six Assessment Years
immediately preceding the Assessment Year
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relevant to previous year in which the search
was conducted.
6. The respondent in the satisfaction note dated
23.10.2019 has recorded that from analysis of
seized material and digital evidence it was
gathered that the petitioner is one of the
purchasers of the property in the project as
stated in the registered deed which has been
developed by Venus Group in which, cash has
been paid to Venus Group in various financial
years. The respondent analyzed the
incriminating seized material at page No. 127
of the Annexure A-69 seized from the terrace
of Crystal Arcade where the search was
conducted and recorded that date mentioned on
this page was in coded form. It was further
recorded that there is clear mention of
payment received in respect of the properties
purchased by the petitioner and his family
members reflecting the unaccounted cash
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receipts in the summary sheet of the
unaccounted cash receipts from the project
Venus Amadeus over and above the document
price of Rs. 3,43,25,000/- paid during
Financial Year 2010-11 for property bearing
premises Nos. 5 & 6 of Ground Floor and
during Financial Year 2011-12, an amount of
Rs. 2 Crore was paid in cash. The respondent-
Assessing Officer therefore, has arrived at a
satisfaction on the basis of the
incriminating seized material where it was
noticed that the date and amount mentioned on
the pages were coded which were related to
the cash for Venus Amandeus Project and unit
number was also mentioned on the same as well
as cash vouchers were duly signed by the
initials of Rajesh S. Vaswani and Narendra
Panjwani. The respondent-Assessing Officer
has therefore arrived at satisfaction that
the information contained in the
incriminating seized material relates to the
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petitioner which has bearing on the
determination of the total income relevant to
the Assessment Years 2009-10 to 2014-15.
7. Learned advocate Mr. B.S. Soparkar for the
petitioner submitted that the impugned
notices under section 153C of the Act are
time barred in view of the decision of the
Hon’ble Supreme Court in case of CCIT vs.
Calcutta Knitwears reported in 362 ITR 673
(SC) read with CBDT Circular No. 24/2015. It
was submitted that as per the decision of the
Supreme Court as well as the Circular of the
CBDT, satisfaction note must be recorded
within the timeline stipulated therein viz.
at the time of search or during the
assessment proceedings or at the end of the
assessment proceedings of the searched
person.
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8. It was submitted that in the facts of the
case, the search was conducted on 10.03.2015
whereas, the satisfaction note of Assessing
Officer of the searched person was recorded
on 31.03.2018 i.e. almost after three years
whereas, the satisfaction note dated
23.10.2019 recorded by the respondent-
Assessing Officer of the petitioner was even
later i.e. after more than four years from
the date of the search and one and half years
from the date of the satisfaction note
recorded by the Assessing Officer of the
searched person.
9. It was therefore submitted that as the
satisfaction note ought to have been recorded
at the time of search along with initiation
of the proceedings against the searched
person and in view of the facts of the case,
as the same is recorded only after more than
three years from the date of search, such
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satisfaction note is therefore, time barred.
Reliance was placed on the decision of CIT
vs. Jitendra H. Modi vs. reported in 403 ITR
110 (Guj.) and in case of Commissioner of
Income Tax vs. Bharat Bhushan Jain reported
in 370 ITR 695 (Delhi).
10. It was further contended that the impugned
notices are also time barred for the reason
that six years must be computed from the date
when the materials were forwarded to the
jurisdictional Assessing Officer. Reliance
was placed on the decision of the Hon’ble
Supreme Court in case of CIT vs. Jasjit Singh
reported in 458 ITR 437 (SC). It was
submitted that as per the decision of the
Hon’ble Apex Court, three situations would
arise as under:
(a) If the date of receiving the books of
accounts, documents or asset seized or
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having jurisdiction over such person is
to be taken as 31.03.2018, then the
jurisdiction to issue notice is only for
Assessment Years 2012-13 to Assessment
Year 2017-18.
(b) If the date of receiving the books of
account or documents or assets seized or
requisitioned by the Assessing Officer
having jurisdiction over the petitioner
is to be taken as 01.04.2018 i.e. after
the date of recording of the satisfaction
on 31.03.2018 by the Assessing Officer of
the searched person, then jurisdiction to
issue notice would be only for Assessment
Years 2013-14 to 18-2019.
(c) If the date of receiving books of account
or documents or assets seized or
requisitioned by the Assessing Officer
having jurisdiction over the petitioner
is to be taken as 23.10.2019, then
jurisdiction to issue notice would be
from Assessment Year 2014-15 to
Assessment Year 2019-20.
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11. Reference was also made to the decision of
this Court in case of Anilkumar Gopalkishan
Agarwal vs. Assistant Commissioner of Income
Tax reported in 418 ITR 25 (Guj) to submit
that in Para 21 thereof this Court has
considered as to how the computation of six
assessment years in respect of which notice
is required to be issued under section 153C
of the Act.
12. It was further submitted that on perusal of
the satisfaction notice of the Assessing
Officer of the searched person as well as
that of the respondent-Jurisdictional
Assessing Officer on the bare perusal of the
same that incriminating material found during
the course of the search is only for
Assessment Years 2011-12 and 2012-13 and
therefore, notices could not have been issued
for those years for which no incriminating
material is found during the course of search
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relating to the petitioner. Reliance was
placed on the decisions of the Apex Court in
case of CIT vs. Singhad Technical Education
Society vs. reported in 397 ITR 344 SC and
the decision of Delhi High Court in case of
Principal Commissioner of Income Tax
(Central)-2 vs Index Securities (P.) Ltd
reported in [2017] 86 Taxman.com 84 (Delhi).
13. It was also submitted that no valid
satisfaction is recorded by both the
Assessing Officers to assume jurisdiction to
issue notice as in view of the fact that
incriminating material referred to in the
satisfaction note does not disclose which
document relates to the petitioner leading to
the belief that there is unaccounted income.
It was submitted that the satisfaction note
only refers to the documents found during the
course of the search from the Venus Group and
it only says that in case of the petitioner
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Rs. 4.8 Crore on-money was paid without
referring to any incriminating material
against the petitioner. Reliance was placed
on the following decisions:
a.Principal Commissioner of Income Tax vs.
Abhisar Buildwell (P.) Ltd reported in 454
ITR 212(SC)
b.Sri Sai Cashews reported in [2021] 131
taxmann.com 177 (Orissa)
c.Principal Commissioner of Income Tax vs.
Vikas Telecom Ltd reported in [2022] 135
taxmann.com 362 (Delhi)
d.Sunway Realtech (P.) Ltd reported in
[2022] 142 taxmann.com 477 (Delhi)
14. Per contra, learned Senior Standing Counsel
Mr. Varun Patel for the petitioner submitted
that separate satisfaction notes are recorded
by the Assessing Officers. It was pointed out
that search was conducted on 10.03.2015 at 17
premises of Venus Group of Ahmedabad and the
last warrant of authorization was excluded
during the month of May,2015 relevant to
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Financial Year 2015-16 and therefore, time
limit to pass the Assessment Order under
section 153A of the Act in the cases related
with the Venus Group was upto 31.03.2018 i.e.
after 24 months from the end of the Financial
year in which the last warrant of
authorization was executed as per provision
of section 153B of the Act. It was therefore,
submitted that the Assessing Officer of the
searched person recorded the satisfaction on
the last date of the period on which, the
assessment of the searched person was to be
completed i.e. on 31.03.2018.
15. It was therefore, submitted that as per the
CBDT Circular No. 24/2015 dated 31.12.2015
which has prescribed three timelines for
recording of the satisfaction note in case of
the other persons referred to in section 153C
of the Act by the Assessing Officer of the
searched person is adhered to as the
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Assessing Officer of the searched person has
recorded the satisfaction note on 31.03.2018
which was within the time limit available to
him for completing Assessment Proceedings in
the cases related with the searched group.
16. Learned Senior Standing Counsel Mr. Patel
further submitted that there is no time limit
prescribed for recording satisfaction note in
case of the person other than the searched
person and no prejudice is caused to the
petitioner for recording the satisfaction
note by the respondent on 23.10.2019 and the
alleged delay in recording satisfaction note
in the facts of the case cannot be the ground
to quash the impugned notices when both the
Assessing Officers have arrived at the
satisfaction on the basis of the
incriminating material seized during the
course of search that the petitioner has paid
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on-money in cash for purchase of the
immovable property from the Venus Group.
17. With regard to contention of the petitioner
that the impugned notices are time barred for
the reason that six years must be computed
from the date when the material was forwarded
to the Jurisdictional Assessing Officer as
per the decision of the Hon’ble Apex Court,
it was submitted that satisfaction note was
recorded after the amendment of the provision
of section 153C by the Finance Act, 2015
w.e.f. 01.06.2015. Reliance was placed on the
decision of the Hon’ble Apex Court in case of
ITO vs. Vikram Sujit Kumar Bhatia reported
in 453 ITR 417 wherein it is held that the
amended provisions are not substantive but
clarificatory of the previous wordings of the
provisions. It was further submitted that the
provision of section 153C refers to the
assessment or re-assessment of the income of
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the other person in accordance with the
provision of section 153A and as per the
second proviso to section 153A of the Act
which has been inserted by the Finance Act
2017 w.e.f. 01.04.2017, ‘relevant assessment
year’ has been explained as per the
Explanation-1 to mean an assessment year
preceding the Assessment Year relevant to
the previous year in which, the search is
conducted or requisition is made which falls
beyond six years but not later than ten
Assessment Years from the end of the
Assessment Year relevant to the previous year
in which the search is conducted or
requisition is made if the escaped assessment
amount amounts to or is likely to amount to
Rs. 50 Lakh or more. It was therefore,
submitted that in the facts of the case, the
respondent-Assessing Officer has arrived at
the satisfaction that there is likely
escapement of income of Rs. 4,80,25,000/- in
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the Financial Years 2010-11 and 2011-12. It
was therefore, submitted that even applying
the decision of the Hon’ble Apex Court in
case of CIT vs. Jasjit Singh (supra), the
impugned notices are to be considered as
issued for Assessment Years covering the
period of ten Assessment Years from A.Y 2009-
10 to A.Y. 2018-19 which would include the
Assessment Year 2011-12 and 2012-13 in any of
the three scenarios considering the date of
forwarding the incriminating seized material
by the Assessing Officer of the searched
person to the jurisdictional Assessing
Officer either it being 31.03.2018 or
02.04.2018 or 21.10.2019. It was therefore,
submitted that the impugned notices may be
considered within the jurisdiction of the
Assessing Officer upto Assessment Year by
considering the total period for reassessment
of ten assessment years has escaped
assessment amount is more than Rs. 50 Lakh.
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18. With regard to the contention raised on
behalf of the petitioner that notices cannot
be issued for those years for which no
incriminating material is found as well as no
valid satisfaction is recorded to assume the
jurisdiction by the respondent-Assessing
Officer, it was submitted that such
contention can be raised by the petitioner
during the course of the assessment
proceedings and the Assessing Officer can
consider the same in accordance with law as
the petitioner has alternative remedy of
preferring an appeal if aggrieved by the
assessment order which may be passed by the
respondent-Assessing Officer.
19. In support of his submissions reliance was
placed on the decision of the Delhi High
Court in case of Indian National Congress vs.
Dy. Commissioner of Income Tax reported in
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[2024] 160 taxmann.com (Delhi) wherein, it is
held that the satisfaction note merely forms
the foundation for the initiation of the
action which would enable the Court to
evaluate whether an opinion has been validly
formed and as long as it rests on
incriminating material which pertains to the
assessment years in question, the same would
qualify the requirement of section 153C of
the Act. It was therefore, submitted that
satisfaction note recorded by the respondent-
Assessing Officer based upon the
incriminating seized material prima facie
shows the payment of on-money in cash by the
petitioner for purchase of the property from
the Venus Group which would be the subject-
matter of assessment proceedings.
20. Reliance was also placed on the decision of
the Delhi High Court in case of Principal
Commissioner of Income Tax vs Karina Airlines
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International Ltd. reported in (2024) 165
taxman.com 421 wherein it is held that in
case of search conducted in the Year 2016 and
the satisfaction was recorded in 2019 after
amendment to 153C by the Finance Act,2017
came into effect, block period of six
assessment years would get extended to ten
Assessment Years.
21. Reliance was placed on the decision of the
Jitendra Mansukhlal Adesara vs. Assistant
Commissioner of Income Tax reported in [2021]
126 Taxman.com 150 (Guj.) wherein it is held
by this Court that when the Assessing Officer
is satisfied, the documents containing the
details in the seized material from the
searched person and such material pertains to
the petitioner, it cannot be said that the
mandatory requirements of section 153C of the
Act have not been complied with.
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22. It was therefore, submitted that as per the
mandate of section 153C of the Act, notice is
required to be issued for 10 Assessment Years
which would cover the Assessment Years 2011-
12 and 2012-13 even if after applying the
decision in case of CIT vs. Jasjit Singh
(supra).
23. Reliance was placed on the decision of the
Hon’ble Apex Court in case of Commissioner of
Income Tax vs. Vijay N. Chandrani [2013] 35
taxmann.com 580 (SC) wherein it is held that
the petitioner is not entitled to invoke the
writ jurisdiction of the High Court without
exhausting alternative remedy provided under
the Act and at the stage of issuance of
notice, the High Court ought not to entertain
the writ petition and instead should have
directed the assessee to file reply to the
notices and upon receipt of the decision from
the Assessing Officer if for any reason it
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was aggrieved by the said decision, to
question the same before the Forum provided
under the Act.
24. It was therefore, submitted that the impugned
notices are issued after recording
satisfaction by the Assessing Officer and the
same cannot be said to be without
jurisdiction.
25. Having heard learned advocates for the
respective parties and considering the facts
and material of the case, the questions which
call for consideration are:
(1) Whether the impugned notices can be said
to be time barred ?
(2) Whether the Assessing Officer would have
no jurisdiction for the years for which,
no incriminating material is found?
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(3) Whether the Assessing Officer has assumed
the jurisdiction by recording valid
satisfaction to initiate the assessment
proceedings under section 153C of the Act
or not?
26. The provisions of Section 153C of the Act is
required to be considered as per the
decision of the Apex Court in case of CCIT
vs. Calcutta Knitwears (supra) which was
rendered in relation to section 158B of the
Act for issuance of notices for the
assessment of the block period and the CBDT
Circular No. 24/2015 issued in relation to
the assessment under section 153C of the Act
in view of the such decision which reads as
under:
“CIRCULAR NO.24/2016 [F.NO.278/M18C/
140/2015/ITJ], DATED 31-12-2015
1.The issue of recording of satisfaction
for the purposes of section 158BD/153C
has been subject matter of litigation.
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2. The Hon’ble Supreme Court in the case
of M/s Calcutta Knitwears in its
detailed judgment in Civil Appeal No.
3958 of 2014 dated 12-3-2014 [2014] 43
taxmann com 446 (SC) (available in NJRS
at 2014-LL-03 12-51) has tad down that
for the purpose of section 1SKBD of the
Act, recording of a satisfaction note
is a prerequisite and the satisfaction
note must be prepared by the AO before
he transmits the record to the other AO
who has jurisdiction over such other
person u/s 158BD. The Hon’ble Court
held that “the satisfaction note could
be prepared at any of the following
stages:
(a) at the time of or along with the
initiation of proceedings against
the searched person under section
1S8BC of the Act; or
(b) in the course of the assessment
proceedings under section 158BC of
the Act; or
(c) immediately after the assessment
proceedings are completed under
section 153BC of the Act of the
searched persona.”
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3.Several High Courts have held that the
provisions of section 153C of the Act
are substantially similar/parimateria w
the provisions of section 158BD of the
Act and therefore, the above guidelines
of the Hon’ble SC, apply to proceedings
u/s 153C of the IT Act, for the
purposes of assessment of income of
other than the searched person. This
view has been accepted by CBDT.
4.The guidelines of the Hon’ble Supreme
Court as referred to in para 2 above,
with regard to recording of
satisfaction note, may be brought to
the notice of all for strict
compliance. It is further clarified
that even if the AO of the searched
person and the “other person” is one
and the same, then also he is required
to record satisfaction as has been held
by the Courts.
5.in view of the above, filing of appeals
on the issue of recording of
satisfaction note should also be
decided in the light of the above
judgment. Accordingly, the Board hereby
directs that pending litigation with
regard to recording of satisfaction
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note under section 158BD/153C should be
withdrawn/not pressed if it does not
meet the guidelines laid down by the
Apex Court.”
27. In the facts of the case, the Assessing
Officer of the searched person has recorded
the satisfaction note on 31.03.2018 which is
on the last date of the assessment
proceedings of the searched person to be
completed under section 153B of the Act and
as such, it cannot be said that the
satisfaction note recorded by the Assessing
Officer of the searched person is contrary to
the decision of the CCIT vs. Calcutta
Knitwears (supra) or the Circular No. 24/2015
issued by the CBDT as it was on the same day
on which, the assessment proceedings of the
searched person ought to have been completed.
28. There is no provision in the Act prescribing
the time limit to record the satisfaction by
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the Jurisdictional Assessing Officer on
receipt of the incriminating seized material
from the Assessing Officer of the searched
person. However, the Hon’ble Supreme Court in
case of CIT vs. Jasjit Singh (supra) has
considered the aspect of recording the
satisfaction by the Jurisdictional Assessing
Officer by holding that the period of six
years would be reckoned in respect of which
the returns were to be filed would be from
the date of receipt of material by the
Jurisdictional Assessing Officer. The Hon’ble
Supreme Court after referring to the
provisions of section 153A and 153C of the
Act has held as under:
“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 somePage 27 of 63
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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 periodPage 28 of 63
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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 per- son, 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 re-
assessment 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
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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
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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.”
29. In view of the above dictum of law, the
period of six years to be computed would be
from the date when the material was forwarded
to the jurisdictional Assessing Officer which
can be either 31.03.2018 or 02.04.2018 or
23.10.2019 and accordingly, the Assessment
Years for which, the notices can be issued
would be in first scenario from A.Y. 2012-13
to 2017-18, in the second scenario from 2013-
14 to 2018-19 and in third scenario from
2014-15 to 2019-20.
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30. However, as contended by the learned Senior
Standing Counsel Mr. Patel for the Revenue
that the period of 10 years is required to be
reckoned as held by the Hon’ble Delhi High
Court in case of Principal Commissioner of
Income Tax vs Karina Airlines International
Ltd.(supra), whether the incriminating
material is received in either of the three
scenarios, the Assessment Years 2011-12 and
2012-13 would be covered within the period of
10 years to be reopened under section 153C
read with section 153A of the Act. The
Hon’ble Delhi High Court has held in the said
case as under:
“7. It becomes pertinent to note that as
those provisions stood prior
to Finance Act, 2017, the relevant
assessment years which could be
thrown open pursuant to a search
stood at six assessment years.
By virtue of Finance Act, 2017 thePage 32 of 63
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block period for search assessment
stood extended to ten assessments
years on account of the introduction
of the concept of “relevant
assessment year or years”. That
expression came to be defined by
Explanation 1 to Section 153A as
extending to the period which falls
beyond six assessment years but not
later than ten assessment years from
the end of the AY relevant to the
previous year in which the search was
conducted or requisition made
xxxxx
9. As is manifest from the above, clause
(c) of that Proviso clearly
stipulates that no notice for
assessment or reassessment for the
relevant assessment year or years
could be issued if a search had been
made prior to 01 April 2017. This is
evident from the Second Proviso
stipulating that the amended block
period provision would get attracted
only if the search had been initiated
or requisition made on or after the
first day of April 2017. UndisputedlyPage 33 of 63
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in the facts of the present case the
search was conducted on 07 April
2016.
xxxxxx
14. It becomes pertinent to recall that
Section 153A, as it stood prior to 01
April 2017, envisaged a search
assessment being undertaken “in
respect of each assessment year
falling within six assessment years
referred to in clause (b) thereof.
Clause (b) of Section 153A(1)
provided for the identification of
the six AYs’ with reference to the
“previous year in which the search is
conducted or requisition is made”.
The block of six AYs’ were to be
identified commencing from AO the AY
“immediately preceding the assessment
year relevant to the previous year”
in which the search may have been
conducted. The Finance Act,
2017 stretched the search assessment
to an additional four AYs’ with the
introduction of the concept of
“relevant assessment year” and which
was defined by Explanation 1 to
Section 153A(1) as being the periodPage 34 of 63
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which would fall beyond “six
assessment years but not later than
ten assessment years from the end of
the assessment year relevant to the
previous year” in which search was
conducted. A block period of ten AYs’
consequently became liable to
assessment in the case of a search
post the enactment of Finance Act,
2017.
15. The constitution of a block of ten
AYs’ in Section 153A was
contemporaneously added and
introduced in Section 153C. Post
Finance Act, 2017, an assessment
triggered by a search could thus
hypothetically extend to a block
period of ten years both in the case
of a searched as well as a non-
searched entity. In our opinion, the
amendments introduced in Section
153C, and on which reliance was
placed by Mr. Mann, were essentially
intended to place both Sections 153A
and 153C at par and for both
statutory provisions being available
to be invoked for the purposes of
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assessment covering a block of ten
Ays’.
16. It however becomes relevant to note
that Section 153C applies equally to
all non-searched entities and neither
carves out an exception nor does it
create a separate regime pertaining
to a contingency where the AO of the
searched and the non-searched entity
are one and the same. If the
submission of Mr. Mann were to be
accepted, it would amount to the
Court carving out an exception in
respect of those cases where the
jurisdictional AO of the searched and
non-searched entity were the same.
This would also lead and constrain
the Court to restrict the application
of the First Proviso to Section 153C
(1) of the Act only to those cases
where the AO of the non-searched
entity be one different from that of
the searched person. This would
clearly amount to a reconstruction of
Section 153C and creating an
exception which the Legislature chose
not to introduce.
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17. The First Proviso to Section 153C (1)
has been consistently recognized as
not being concerned merely with the
aspect of abatement, which is spoken
of in the Second Proviso to Section
153A (1) of the Act, but also to
regulate the date from which the six-
year period or the “relevant
assessment year” insofar as the non-
searched entity is concerned, is to
be reckoned. This position has been
consistently followed not just by
this Court but also by the Supreme
Court in Commissioner of Income Tax
14 vs. Jasjit Singh……..
18. Insofar as the present appeal is
concerned, on facts we find that
while it is true that AO of the
searched person as well as that of
the respondent assessee was the same,
undisputedly while in the case of the
former, satisfaction was recorded on
29 March 2019, the AO in the case of
the respondent assessee drew up a
Satisfaction Note on 15 May 2019.
19. In order to appreciate the essential
legislative objective underlying the
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handover of material and formation of
opinion by the AO of the non-searched
entity, we would have to bear the
following aspects in mind. We firstly
take note of the fact that Section
153C would get triggered firstly upon
the Assessing Authority of the
searched entity identifying documents
or material which are found to relate
to a person other than the entity
which was subjected to search. In
such a contingency, that Assessing
Authority is obligated to transmit
the relevant material to the AO of
the “other person”. The AO of the
non-searched entity is thereafter
required to scrutinize the material
so received and evaluate whether the
same is likely to have an impact “on
the determination of the total income
of such other person..”. This becomes
evident from the plain text of
Section 153C requiring the AO of the
non-searched party being “satisfied
that the books of account or
documents or assets seized have a
bearing on the determination of
total income of such other person..”.
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The material and documents unearthed
in the course of the search have to
be independently evaluated before a
reassessment exercise can be
initiated against a non-searched
person. Unless the AO of that “other
person” is satisfied that the
material so gathered is likely to
have an impact “on the determination
of the total income of such other
person”, the mere receipt of
documents would not suffice.
20. It thus becomes apparent that it is
the satisfaction arrived at under
Section 153C which constitutes the
cornerstone of that provision and the
primary ingredient for Section 153C
being set into motion. In our
considered opinion, the actual or
physical act of transmission of
documents is merely a step in aid of
formation of opinion whether an
assessment under Section 153C is
liable to be initiated. It is in that
sense merely a machinery provision
put in place to enable the AO of the
non-searched person to examine
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whether an assessment is liable to be
commenced under Section 153C of the
Act. Thus, even in a case where the
AO of the searched and the non-
searched party be one and the same,
it would be the formation of an
opinion that the material is likely
to “have a bearing on the
determination of the total income..”
which would constitute the core and
the heart of Section 153C.
21. A harmonious interpretation of the
main part of Section 153C and its
Proviso lead us to hold that in cases
where the jurisdictional AO is
common, the commencement point would
have to be construed as the date when
the satisfaction is formed by the
said AO with respect to such other
person. In our considered view, even
though there may not have been an
actual exchange of material unearthed
in the course of the search between
two separate authorities, it would be
the date when the AO records its
satisfaction with respect to the non-
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searched entity which would be of
seminal importance and constitute the
bedrock for commencement of action
under Section 153C.”
31. From the above analysis of section 153C
read with section 153A and its proviso
carried out by the Hon’ble Delhi High Court,
the period of 10 years is to be considered on
the basis of harmonious interpretation of
section 153C and its proviso to the effect
that the commencement of initiation of the
assessment proceedings is required to be
considered from the date when the
satisfaction is formed by the Assessing
Officer of the petitioner. Therefore,
applying the second proviso to section 153A
which has come into effect by the Finance
Act,2017 which is held to be clarificatory by
the Hon’ble Apex Court in case of Vikram
Sujit Kumar Bhatia (supra) , when the escaped
assessment is more than Rs. 50 Lakh, the
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extended period of 10 years would be
applicable. Therefore, even if it is held
that the satisfaction is recorded by the
jurisdictional Assessing Officer on
23.10.2019, then 10 years would be computed
as under applying provision of section 153C
and read with section 153A and proviso and
explanation thereto:
SR.NO. A.Y SR.NO. A.Y.
1 2018-19 6 2013-14
2 2017-18 7 2012-13
3 2016-17 8 2011-12
4 2015-16 9 2010-09
5 2014-15 10 2009-10
As the satisfaction was recorded on
23.10.2019, 1st Assessment Year to be
reopened would be Assessment Year 2018-2019
and the 10th Assessment year would be 2009-
10. Therefore, the impugned notice issued
from the Assessment Year 2009-10 to 2014-15
would be valid notices applying the provision
of section 153A of the Act by extended period
of 10 years.
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32. The decision of the Hon’ble Delhi High Court
in case of Indian National Congress vs. Dy.
Commissioner of Income Tax (supra)would be
also applicable in the facts of the case
wherein it is held as under:
“13. It would thus be wholly incorrect to
read the First Proviso to Section
153C of the Act as constituting a
bar of limitation or disabling the
respondents from initiating
assessment/reassessment for the
entire block period of ten
assessment years. Consequently, and
in our considered opinion, the
submission that the power to assess
would stretch only up to AY 2017-18
is misconceived. In light of the
plain language and text in
which Section 153C is couched, we
are of the considered opinion that
the material gathered in the course
of the search would have empowered
and enabled the respondent to
undertake an assessment for six
assessment years immediatelyPage 43 of 63
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preceding the assessment year
pertaining to the previous year in
which the search was conducted and
would also extend to the four
additional AYs’ which would stand
included by virtue of Explanation 1
to Section 153A of the Act. The
aforesaid position cannot possibly
be doubted bearing in mind Section
153C incorporating the phrase
“…..and for the relevant
assessment year or years referred to
in sub-section (1) of section 153A”.
For the purposes of understanding
the meaning to be assigned to the
expression relevant assessment year,
we would have to necessarily travel
back to Explanation 1 as placed
in Section 153A. The submission,
therefore, that Section 153C would
only extend to six assessment years
immediately preceding the AY
relevant to the financial year in
which the search took place is
wholly untenable.
14. These aspects are in any case no
longer res integra having been duly
considered by this Court as well as
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the Supreme Court right from the
time judgment came to be rendered
in SSP Aviation Ltd. vs. Deputy
Commissioner of Income Tax8 and
ending with the authoritative
pronouncement of the Supreme Court
in Commissioner Income Tax vs.
Jasjit Singh. More importantly, the
precedents rendered in the context
of the First Proviso to Section
153C have unequivocally held the
same not merely intended to deal
with the subject of abatement but
also determinative of the relevant
date for the purposes of computation
of the six or the ten assessment
years as the case may be…. … … …
15. Though not so articulated, it
appears that the contention of the
respondent not being entitled to
travel beyond the six assessment
years immediately preceding the
assessment year pertaining to the
year of search proceeds perhaps on
their understanding of Section
153A of the Act having not been
invoked. We presume that the
invocation of Section 153A was
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intended to refer to the Fourth
Proviso as placed in that Section
and which prescribes the conditions
precedent for the purposes of the
assessment or reassessment being
undertaken for the four additional
assessment years. For purposes of
clarity, we extract the Fourth
Proviso to Section 153A of the Act
hereunder: –
―Provided also that no notice for
assessment or reassessment shall
be issued by the Assessing
Officer for the relevant
assessment year or years
unless–
(a) the Assessing Officer has in
his possession books of account
or other documents or evidence
which reveal that the income,
represented in the form of
asset, which has escaped
assessment amounts to or is
likely to amount to fifty lakh
rupees or more in the relevant
assessment year or in aggregate
in the relevant assessment
years;
(b) the income referred to in
clause (a) or part thereof has
escaped assessment for such year
or years; andPage 46 of 63
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(c) the search under Section 132 is
initiated or requisition
under Section 132-A is made on
or after the 1st day of April,
2017.
16. It must at the outset be noted that
the Satisfaction Note which has been
drawn in unambiguous terms, and more
particularly in paragraph 140
thereof, recites that the AO was
satisfied that this was a fit case
for initiating proceedings
under Section 153C read with Section
153A of the Act for AY 2014-15 to AY
2020-21. There is thus an explicit
reference not only to Section
153A but also to the block of ten
assessment years which were proposed
to be made subject matter of the
impugned proceedings. The
submission, therefore, that Section
153A was not invoked is untenable.
xxxxx
20. The petitioner has woefully failed to
establish that the material which
forms the bedrock for recordal of
satisfaction is not founded on any
data, material evidence or
documentation pertaining to AYs’
2014- 15, 2015-16 and 2016-17. In
fact no submission in this respect
was either addressed or iterated. We
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note that the cumulative impact of
the material which had been gathered
in the course of the search and
which was also duly noticed in the
Satisfaction Note has also been
collated in the form of a chart
which stands extracted in
the Section 142(1) notice dated 01
March 2024. The said chart is
extracted hereinbelow: –
AY Amount in crores
2020-21 Rs. 12.70
2019-20 Rs. 348.78
2018-19 Rs.4.19
2017-18 Rs.6.27
2016-17 Rs.32.44
2015-16 Rs. 39.77
2014-15 Rs.79.72
As is manifest from the above, there
is specific reference to unaccounted
transactions pertaining to AYs 2014-
15, 2015-16 and 2016-17. The
aforesaid chart correlates with the
material which stands noticed and
forms part of the Satisfaction Note.
More importantly, the amounts
identified as relevant to the AYs’
in question ex facie meet the
prerequisites set out in the Fourth
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Proviso to Section 153A. We also
take into consideration the
indubitable fact that the cumulative
figure attributed to income which
has allegedly escaped assessment
would stand at approximately INR 520
crores.
21. That then takes us to the argument of
invocation of the Fourth Proviso
to Section 153A. In our considered
opinion, the Fourth Proviso mandates
that the AO must have in his
possession material which reveals
that income exceeding INR 50 lakhs
or more has escaped assessment in
the relevant AY or AYs. Clauses (a),
(b) and (c) as placed in the Fourth
Proviso thus constitute pre-
conditions which must be found to be
satisfied before an assessment or
re-assessment exercise may come to
be initiated for the entire block
period of ten assessment years. As
we view the computation exercise
undertaken by the respondent and
which stands represented in the
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shape of the chart which has been
extracted hereinabove, it is evident
that the prescription of INR 50
lakhs in the aggregate stands duly
satisfied. The aforesaid chart is
itself based on the evidence taken
note of in the Satisfaction Note and
thus constituting material in the
possession of the jurisdictional AO
and forming the basis for formation
of opinion. A reading of the
Satisfaction Note also leads us to
the irresistible conclusion that the
escaped income as estimated would
qualify the pre- conditions that
stand constructed by virtue of the
Fourth Proviso when viewed from the
point of quantum as well as non-
disclosure. Once the aforesaid
position is accepted, it becomes
apparent that the argument of
limitation would disintegrate.
22. Another submission which was addressed
by Dr. Singhvi was with respect to a
combined Satisfaction Note having
been prepared for all AYs in
question without explicit reference
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to year wise incriminating material
and taking into consideration
material that was gathered and
collected in the course of four
different searches. We find
ourselves unable to sustain that
submission bearing in mind the
indubitable fact that Section
153C of the Act represents the power
conferred upon the AO to commence a
process of assessment or
reassessment for a block period of
ten assessment years in the maximum.
The procedure as prescribed
in Section 153C is part of a
distinct statutory regime pertaining
to search assessments which came to
be introduced in the Act by virtue
of Finance Act, 2003 and intended to
act as a substitute to the procedure
which was otherwise envisaged under
Chapter XIV-B.
23. For the purposes of invoking Section
153C of the Act it is incumbent upon
the AO to be satisfied that the
material gathered in the course of
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the search and pertaining to the
non-searched person would have a
bearing on the determination of the
total income of such other person
either for six AYs’ or for the
relevant AY or AYs’. Since the
provision itself requires and
enables the AO to undertake an
assessment for a block period of ten
years, it would clearly not be
incumbent upon it to draw separate
or independent satisfaction notes
for each AY. A composite
Satisfaction Note would suffice the
requirements of Section 153C of the
Act provided it embody details of
the material gathered in the course
of the search and pertaining to the
AYs forming part of the block as a
whole. As long as the common
Satisfaction Note includes
sufficient particulars of the
incriminating material relevant to
the block of AYs’, the same would,
in our considered opinion, satisfy
the statutory requirement as imposed
by the Act. Singhad Technical
Education Society as also the
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decision of the Supreme Court
in Principal Commissioner of Income
Tax, Central-3 vs. Abhisar Buildwell
P. Ltd10 speak of incriminating
material being found and which may
impact the estimation of income
likely to have escaped assessment
for a particular AY. As we read and
go through the Satisfaction Note as
well as the orders disposing of
objections, it is manifest that the
respondent has rested its decision
on incriminating material found for
AYs 2014-15, 2015-16, 2016-17 and
stretching up to AY 2020-21.
24. The provision only requires the AO to
be satisfied that the material
collated and handed over is likely
to have an impact on the total
income for the relevant AY or AYs’.
While an assessment would
necessarily have to be made in
respect of each of the relevant AY
or AYs’, we find ourselves unable to
read Section 153A or 153C as
mandating separate Satisfaction
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Notes being drawn for each
assessment year. Our conclusion in
this respect stands fortified from
the language of Section 153A(1)
(a) which contemplates a notice
being issued calling upon the person
to furnish a return of income for
each of the six AYs’ 10 (2024) 2 SCC
433 or the relevant AY or AYs’. This
too appears to suggest that while
the notice could be composite and
based on a common satisfaction note
which encapsulates the incriminating
material pertaining to the AYs’ in
question, it is only returns which
must and mandatorily be filed
separately.
25. Regard must be had to the indubitable
fact that the Satisfaction Note
merely forms the foundation for
initiation of action and which would
enable us to evaluate whether an
opinion has been validly formed. As
long as it rests on incriminating
material which pertains to the AYs’
in question, the same would qualify
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the requirement of Section 153C. We
deem it apposite to observe that
while it would be imperative for the
Satisfaction Note to refer to the
material pertaining to the AYs’
which are sought to be reopened, a
consolidated Satisfaction Note
clearly does not appear to be an
anathema provided it rests on
material which pertains to the AYs’
which are sought to be reopened.
26. We in this respect also bear in mind
the lucid explanation of the
procedure liable to be adopted
under Sections 153A and 153C as came
to be enunciated by the Court
in Commissioner of Income Tax
(Central) -III Vs. Kabul
Chawla11 “37. On a conspectus
of section 153A(1) of the Act, read
with the provisos thereto, and in
the light of the law explained in
the aforementioned decisions, the
legal position that emerges is as
under:
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(i) Once a search takes place
under section 132 of the Act,
notice under section
153A(1) will have to be
mandatorily issued to the person
searched requiring him to file
returns for six assessment years
immediately preceding the
previous year relevant to the
assessment year in which the
search takes place.
(ii) Assessments and reassessments
pending on the date of the
search shall abate. The total
income for such assessment years
will have to be computed by the
Assessing Officers as a fresh
exercise.
(iii) The Assessing Officer will
exercise normal assessment
powers in respect of the six
years previous to the relevant
assessment year in which the
search takes place. The
Assessing Officer has the power
to assess and reassess the
“total income” of thePage 56 of 63
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aforementioned six years in
separate assessment orders for
each of the six years. In other
words, there will be only one
assessment order in respect of
each of the six assessment years
“in which both the disclosed and
the undisclosed income would be
brought to tax”.
(iv) Although section 153A does not
say that additions should be
strictly made on the basis of
evidence found in the course of
the search, or other post-search
material or information
available with the Assessing
Officer which can be related to
the evidence found, it does not
mean that the assessment “can be
arbitrary or made without any
relevance or nexus with the
seized material. Obviously, an
assessment has to be made under
this section only on the basis
of the seized material.”
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(v) In the absence of any
incriminating material, the
completed assessment can be
reiterated and the abated
assessment or reassessment can
be made. The word “assess”
in section 153A is relatable to
abated proceedings (i.e., those
pending on the date of search)
and the word “reassess” to the
completed assessment
proceedings.
(vi) In so far as the pending
assessments are concerned, the
jurisdiction to make the
original assessment and the
assessment under section
153A merges into one. Only one
assessment shall be made
separately for each assessment
year on the basis of the
findings of the search and any
other material existing or
brought on the record of the
Assessing Officer.
(vii) Completed assessments can be
interfered with by the Assessing
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Officer while making the
assessment under section
153A only on the basis of some
incriminating material unearthed
during the course of search or
requisition of documents or
undisclosed income or property
discovered in the course of
search which were not produced
or not already disclosed or made
known in the course of original
assessment.
xxxxxx
31. As would be evident from the aforesaid
passages, the Court chose to adopt
the principle of unreasonable delay
in initiation of proceedings. It
thus appears to have taken the
position that as a long as
proceedings are initiated within a
reasonable period from the closure
of assessment of the searched
person, a failure to take ―immediate
action would not be fatal to the
assessment. It is thus evident that
Calcutta Knitwears and the
expression immediately after as
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appearing therein has not been
construed or understood as being an
expression of inflexible hues. What
appears to have been frowned upon is
inordinate delay. The question of
whether delay is inordinate and
consequently warranting quashing of
the assessment proceedings itself,
would inevitably be a question of
fact which would have to be answered
in the facts and circumstances of
each case. We would also and
necessarily have to bear in
consideration the scope, extent and
complexity of the investigation and
enquiry which may have preceded the
initiation of proceedings under
Section 153C. However, we find
ourselves unconvinced to hold in
favour of the petitioner on this
score for reasons which follow.
xxxxxx
34. As is manifest from the above, while
the Section 153C notice was issued
on 07 March 2023, the Satisfaction
Note appears to have been provided
to the petitioner on 28 and 30 June
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2023. These writ petitions came to
be preferred long thereafter on 19
March 2024. We take note of the
statutory timeframes stipulated
under Section 153B of the Act for
completion of assessment proceedings
and more particularly the Second and
Third Proviso’s which mandate
assessment itself being completed
within twelve months from the time
when the books of account or
material is handed over to the AO of
the non-searched person. This would
mean that in the present case and
taking the date of handing over or
recordal of satisfaction as
constituting the date from which
that period is liable to be
reckoned, the assessment is liable
to be completed by 31 March 2024.”
33. In view of the above conspectus of law,
decisions cited by the learned advocate for
the petitioner are duly considered in the
above decisions and hence they are not dealt
with again.
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34. We are therefore of the opinion that the
impugned notices cannot be said to be time
barred considering the extended period of 10
years from the Assessment Year 2018-19 upto
Assessment Year 2009-10 considering the
previous year in which, considering the date
of receiving books of accounts or documents
or assets seized or requisitioned by the
Assessing Officer having jurisdiction being
24.10.2019 from the end of the Assessment
Year relevant to the previous A.Y. 2019-20.
35. In view of the above, we answer the Issue
No.1 in the negative that the notices are not
time barred and therefore, the other two
issues relating to the notices for the
Assessment Years for which, no incriminating
material is found and whether valid
satisfaction was recorded by the Assessing
Officer can be raised by the petitioner
during the course of the assessment
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proceedings as the same would depend upon the
facts to be considered by the Assessing
Officer. The petition therefore, being devoid
of any merit is accordingly dismissed. No
order as to costs. Rule is discharged.
(BHARGAV D. KARIA, J)
(D.N.RAY,J)
JYOTI V. JANI
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