Legally Bharat

Delhi High Court

Pr. Commissioner Of Income Tax -7, Delhi vs Naveen Kumar Gupta on 20 November, 2024

Author: Vibhu Bakhru

Bench: Vibhu Bakhru, Swarana Kanta Sharma

                              IN THE HIGH COURT OF DELHI AT NEW DELHI

                         %                              Judgment delivered on: 20.11.2024

                         +      ITA 401/2022

                         PR. COMMISSIONER OF INCOME
                         TAX -7, DELHI                                     .....Appellant

                                                        versus

                         NAVEEN KUMAR GUPTA                                ..... Respondent

                         Advocates who appeared in this case:
                         For the Appellant        : Mr. Puneet Rai, Mr. Ashvini Kumar & Mr.
                                                  Rishabh Nangia, Advs.
                         For the Respondent       : Mr. Kapil Sood & Mr. Sandeep Goel, Advs.

                         CORAM
                         HON'BLE MR JUSTICE VIBHU BAKHRU
                         HON'BLE MS JUSTICE SWARANA KANTA SHARMA

                                                     JUDGMENT

VIBHU BAKHRU, J
INTRODUCTION

1. The Revenue has filed the present appeal under Section 260A of
the Income Tax Act, 1961 [hereafter the Act] impugning an order dated
09.12.2021 [hereafter the impugned order] passed by the Income Tax
Appellate Tribunal [hereafter the ITAT] in ITA No.592/DEL/2020
captioned Shri Naveen Kumar Gupta v. The I.T.O.

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2. The learned ITAT had allowed the appeal preferred by the
respondent [hereafter the Assessee] against an order dated 26.11.2019
passed by the Commissioner of Income Tax (Appeals) [hereafter
CIT(A)], whereby the Assessee’s appeal against the assessment order
dated 26.12.2018 passed under Section 147 read with Section 143(3) of
the Act in respect of assessment year [AY] 2011-12 was dismissed.

3. The assessment of the Assessee’s income chargeable to tax for
the previous year relevant to the AY 2011-12 was reopened by issuance
of a notice under Section 148 of the Act on the basis of information and
evidence unearthed during the course of the search conducted on Shri
Anand Kumar Jain and Shri Naresh Kumar Jain group on 17.12.2015.
And, the Assessee’s income was reassessed under Section 147 of the
Act.

4. The learned ITAT held that the Assessing Officer [hereafter AO]
was required to frame the assessment/reassessment under Section 153C
of the Act and was precluded from proceeding under Section 147 of the
Act. Accordingly, the learned ITAT set aside the assessment order for
the aforesaid singular reason.

QUESTION OF LAW

5. This Court by an order dated 20.03.2024 admitted the present
appeal in respect of the following question of law:

“Whether in the facts and circumstances of the case, the ITAT
was correct in holding that provisions of section 153C have

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overriding effect on the provisions of section 147 of the
Income Tax Act, 1961?”

FACTUAL CONTEXT

6. Before proceeding further, it would be necessary to briefly
summarize the relevant facts for addressing the question of law as
framed.

7. At the material time – that is, the period relevant to AY 2011-12

– the Assessee, was engaged in the business of trading of shares,
securities, commodities, Future and Options (F&O), foreign exchange,
etc.

8. The Assessee filed his return of income for the AY 2011-12 on
30.09.2011 declaring a loss of ₹2,50,39,010/-.

9. On 17.12.2015, a search was conducted under Section 132 of the
Act in respect of Anand Kumar Jain and Naresh Kumar Jain [hereafter
Jain Brothers] and a large volume of documents were seized.
According to the Revenue, upon examination of the seized documents
and other documents obtained thereafter, including the bank statements
of certain companies, alleged to be the shell companies, it was revealed
that the Assessee was the major beneficiary of accommodation entry
operations carried on by Jain Brothers.

10. The Assessee had allegedly made a statement before the ACIT,
Central Circle-26, New Delhi to the effect that he had received the
entries of ₹11,39,99,000/-. In addition, the AO had also received
information from the investigation wing [DDIT (Inv.), Unit-2(2),

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Mumbai] that the Assessee had purchased 1994 units of a penny scrip
named SVC Resources Ltd., during the financial year 2010-11.

11. The AO, based on the information and material available, issued
a notice dated 28.03.2018 under Section 148 of the Act, for
reassessment of income for the AY 2011-12 after prior approval from
the competent authority. Thereafter, notices under Section 143(2) and
under Section 142(1) of the Act were also issued to the Assessee for
reassessing the income for the AY 2011-12.

12. The reassessment proceedings culminated in the assessment
order dated 26.12.2018, whereby the AO determined the Assessee’s
total income at ₹11,93,64,350/-. The AO added an amount of
₹11,30,00,000/- on the basis of a ledger submitted by the Assessee
indicating receipt of entries from shell companies operated by Jain
Brothers; an amount of ₹66,33,250/-, which was disclosed to be the
commission paid for the alleged entries; and, an amount of ₹31,100/-
paid to the Assessee for investment in penny stock – SVC Resources
Ltd. These additions were made under Section 68 of the Act.

13. Before proceeding further, it is relevant to note the reasons, as
recorded by the AO in the assessment order dated 26.12.2018, for
initiating the reassessment proceedings. The same are set out below:

“1. In this case an information has been received from O/o
ACIT, CC-26, new Delhi that during search and seizure
operation on Anand Kumar Jain and Naresh Kumar Jain
group of cases on 17.12.2015 (Jain Brothers entry
operators). A large volume of documents were seized.
On examination of the documents seized during the

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RAWAL
course of search and the bank statement of the shell
companies obtained thereafter highlighted the name of
Sh. Naveen Kumar Gupta as a major beneficiary of the
Jain Brothers.

The report states that Sh. Naveen Gupta was an
accomplice of Jin Brothers in this illegal business for
many years. The assessee has named all the companies
created by Jain brothers as bogus companies which were
managed only for the entry business. The report explains
at length the entire procedure of giving / receiving an
entry in lieu of cash from the various beneficiaries
including the assessee. It is stated in the report that during
01.04.2009 to 31.03.2016, Sh. Naveen Kumar Gupta has
taken entries from Jain brothers and their shell companies
amounting to Rs.87.43 crores during 01.04.2009 to
31.03.2016 for each transactions, Sh. Naveen Kumar
Gupta used to pay commission ranging from 2.5% to 4%.
The copy of transactions statement submitted by Sh.
Naveen Kumar Gupta with Asst. CIT, Central Circle-26,
New Delhi during his statement before them stated the he
had received the entries of Rs.11,39,00,000/- during FY
2010-11. On perusal of statements of the assessee as
submitted by him before ACIT, CC-26, the above receipts
were verifiable.

2. In this case an information has been received from
DDIT(Inv.) (Unit-2(2), Mumbai that the assessee has
purchased units of a penny scrip-SVC resource Ltd.
during FY 2010-11. As per the reports of DDIT (Inv.) the
assessee has purchased 1994 units of SVC resource on
21.01.2011 @15.6. The total traded value was
Rs.31,100/-.”

14. The assessment order also indicates that the Investigation Wing,
Mumbai had conducted enquiries in respect of the penny scrip, SVC
Resources Ltd., and transactions relating to the said stock which were
allegedly for providing bogus accommodation entries of long-term
capital gains / short term capital gains. It was reported that the modus

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RAWAL
operandi was to provide entries by manipulating the stock market. The
entry operator would gain control in respect of a penny stock. He would
then issue shares of the said penny stock to beneficiaries, and thereafter
rig the price to artificially increase the same. He would then assist the
beneficiaries to sell the same at the escalated price. Thus, resulting in
capital gains in the hands of the beneficiaries. The beneficiaries would
pay cash to the entry provider including commission, for providing the
entry.

SUBMISSIONS

15. Mr. Sood, the learned counsel appearing for the Assessee referred
to the decisions of various High Courts including the decision of the
Rajasthan High Court in Shyam Sunder Khandelwal v. Assistant
Commissioner of Income Tax (and connected petitions)1; the decision
of the Karnataka High Court in The Pr. Commissioner of Income Tax
& Anr. v. M/s VSL Mining Company Pvt. Ltd.2; and the decision of the
Patna High Court in Amit Kumar alias Amit Saraf v. Union of India
& Others3. He contended that Section 153C of the Act contains a
special provision relating to assessment of a person pursuant to material
found during the search operations conducted under Section 132 on any
other person or as a result of requisition made under Section 132A of
the Act. And, since the provisions of Section 153C of the Act are special
provisions, the same would override the other provisions relating to
assessment/reassessment under the Act including Section 147 of the

1 [2024] 471 ITR 45
2 Judgment dated 20.09.2024 in ITA No.32/2020
3 (2024) 462 ITR 205

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Act. He contended that since Section 153C of the Act sets out a
specified procedure for conducting the assessment, the same cannot be
side stepped.

16. Mr Rai, learned counsel appearing on behalf of the Revenue
countered the said submission. He contended that the assessments were
reopened not only on the basis of the material / information collected
pursuant to search conducted in respect of Jain Brothers but also on the
basis of the information received from the Investigation Wing. He also
contended that since the material collected during the search did not
belong to the Assessee, the proceedings under Section 153C of the Act
could not have been initiated.

17. Mr Rai relied heavily on the decision of the Supreme Court in
Principal Commissioner of Income-tax, Central-3 v. Abhisar
Buildwell (P) Ltd.4and on the strength of the said decision contended
that the issue whether assessments could be opened under Section 147
of the Act in cases, which are covered under Section 153A of the Act is
no longer res integra. The Supreme Court in the said case had held that
even in cases where completed assessment could not be reopened under
Section 153A of the Act recourse was available under the provisions of
Section 147/148 of the Act, subject to fulfilment of the conditions
mentioned in the said Section.

4 [2023] 149 taxmann.com 399 (SC)

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18. He also relied on the decision of the Gujarat High Court in Amar
Jewellers Ltd. v. Assistant Commissioner of Income Tax5 in support
of his contentions that the non obstante clause under Section 153C of
the Act did not override the provisions of Section 147 of the Act.

19. The present appeal was taken up for hearing along with ITA
No.218/2024 and W.P.(C) No.17326/2022, which also involved the
question whether reassessment under Section 147 of the Act would be
impermissible in cases where the same was based on information
obtained during the search and seizure operations conducted in respect
of another person other than the assessee.

ANALYSIS & CONCLUSION

20. The principal issue to be addressed is the interplay between the
provisions of Section 153C of the Act and Section 147 of the Act. It is
the Assessee’s case that recourse to Section 147 of the Act would be
unavailable in cases where the AO is empowered to proceed under
Section 153C of the Act.

21. At the outset, it is necessary to advert to the provisions of Section
153C of the Act, as applicable on the date of the search. The same is
set out below:

“Assessment of income of any other person.

153C (1) Notwithstanding anything contained in section
139, section 147, section 148, section 149, section 151 and
section 153, where the Assessing Officer is satisfied that,–

5 [2022] 137 taxmann.com 249 (Gujarat)

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(a) any money, bullion, jewellery or other valuable
article or thing, seized or requisitioned, belongs to;
or

(b) any books of account or documents, seized or
requisitioned, pertains or pertain to, or any
information contained therein, relates to,
a person other than the person referred to in section 153A, then,
the books of account or documents or assets, seized or
requisitioned shall be handed over to the Assessing Officer
having jurisdiction over such other person and that Assessing
Officer shall proceed against each such other person and issue
notice and assess or reassess the income of the other person in
accordance with the provisions of section 153A, if, that
Assessing Officer is satisfied that the books of account or
documents or assets seized or requisitioned have a bearing on the
determination of the total income of such other person for the
relevant assessment year or years referred to in sub-section (1)
of Section 153A.

Provided that in case of such other person, the reference to the
date of initiation of the search under section 132 or making of
requisition under section 132A in the second proviso to sub-
section (1) of section 153A shall be construed as reference to the
date of receiving the books of account or documents or assets
seized or requisitioned by the Assessing Officer having
jurisdiction over such other person
Provided further that the Central Government may by rules
made by it and published in the Official Gazette, specify the
class or classes of cases in respect of such other person, in which
the Assessing Officer shall not be required to issue notice for
assessing or reassessing the total income for six assessment years
immediately preceding the assessment year relevant to the
previous year in which search is conducted or requisition is made
except in cases where any assessment or reassessment has
abated.

(2) Where books of account or documents or assets seized or
requisitioned as referred to in sub-section (1) has or have been
received by the Assessing Officer having jurisdiction over such
other person after the due date for furnishing the return of
income for the assessment year relevant to the previous year in

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which search is conducted under section 132 or requisition is
made under section 132A and in respect of such assessment
year–

(a) no return of income has been furnished by such
other person and no notice under sub-section (1)
of section 142 has been issued to him, or

(b) a return of income has been furnished by such
other person but no notice under sub-section (2) of
section 143 has been served and limitation of
serving the notice under sub-section (2) of section
143 has expired, or

(c) assessment or reassessment, if any, has been made,
before the date of receiving the books of account or documents
or assets seized or requisitioned by the Assessing Officer having
jurisdiction over such other person, such Assessing Officer shall
issue the notice and assess or reassess total income of such other
person of such assessment year in the manner provided in section
153A.”

22. As is apparent from the plain language of Section 153C of the
Act, as was in force at the material time, an assessment under Section
153C of the Act could be initiated only in cases where the AO of the
person who was searched under Section 132 of the Act or in whose case
a requisition was made under Section 132A of the Act, was satisfied
that money, bullion, jewellery or other valuable articles belong to a
person other than the one searched or that the books of account and
documents seized or requisitioned pertained to or contain any
information relating to such other person.

23. If the aforesaid condition was satisfied, the AO of the searched
person was required to record the satisfaction to the aforesaid effect.
Recordal of such satisfaction is the second jurisdictional condition for
invoking the provision of Section 153C of the Act. The AO of the

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searched person was thereafter required to transmit the assets or
documents belonging to the person other than the searched person to the
AO of such other person. If the same was done, the third jurisdictional
pre-requisite would stand satisfied. The AO of such other person was
then required to examine the said material received by the AO of the
searched person and if it was found that the same had a bearing on the
determination of the income of such other person, the AO could proceed
to issue a notice under Section 153C of the Act.

24. It is relevant to note that Section 153C of the Act was amended
by virtue of the Finance Act, 2015 with effect from 01.06.2015. Prior
to the said amendment, Sub-section (1) of Section 153 of the Act read
as under:

“153-C. Assessment of income of any other person.–(1)
Notwithstanding anything contained in Section 139, Section
147, Section 148, Section 149, Section 151 and Section 153,
where the Assessing Officer is satisfied that any money,
bullion, jewellery or other valuable article or thing or books
of account or documents seized or requisitioned belongs or
belong to a person other than the person referred to in Section
153-A, then, the books of account or documents or assets
seized or requisitioned shall be handed over to the Assessing
Officer having jurisdiction over such other person and that

Assessing Officer shall proceed against other person and issue
such other person notice and assess or reassess income of such
other person in accordance with the provisions of Section
153A,

Provided that in case of such other person, the reference to the
date of initiation of the search under Section 132 or making of
requisition under Section 132-A in the second proviso to sub-
section (1) of Section 153-A shall be construed as reference
to the date of receiving the books of account or documents or

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assets seized or requisitioned by the Assessing Officer having
jurisdiction over such other person:

Provided further that the Central Government may by rules
made by it and published in the Official Gazette, specify the
class or classes of cases in respect of such other person, in
which the Assessing Officer shall not be required to issue
notice for assessing or reassessing the total income for six
assessment years immediately preceding the assessment year
relevant to the previous year in which search is conducted or
requisition is made except in cases where any assessment or
reassessment has abated.”

25. The language of Section 153C (1) of the Act, as in force prior to
01.06.2015, indicates that the process for triggering the machinery
provisions of Section 153C of the Act would arise only if the AO was
satisfied that money, bullion, jewellery or other valuable articles or
things or books of account or documents seized or requisitioned
“belongs or belong to” to a person other than the one referred to in
Section 153A of the Act. Thus, even though the documents seized
during search proceedings contained information pertaining to a person
other than the one searched, the same could not trigger the provision of
Section 153C of the Act. The said issue was subject matter of debate in
various Courts. However, in Pepsico India Holding (P) Ltd. v.
Assistant Commissioner of Income Tax & Anr.6, this Court took a view
that the words “belongs” or “belong to” could not be construed to mean
as “pertains” or “pertain to”.

26. The provisions of Section 153C of the Act were amended by the
Finance Act, 2015 to address the said issue. It is also material to note

6 2014 SCC OnLine Del 4155

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that in Income Tax Officer v. Vikram Sujitkumar Bhatia7, the
Supreme Court considered the question whether the amendment to
Section 153C of the Act as enacted by virtue of the Finance Act, 2015
would also be applicable to searches conducted under Section 132 of
the Act prior to 01.06.2015, that is the date on which the amended
Section 153C of the Act came into force. The Supreme Court accepted
that Section 153C of the Act is a machinery provision and the
substituted provision would also apply in respect of searches conducted
prior to 01.06.2015.

27. As noted above, the first jurisdictional condition to be satisfied
for invoking Section 153C of the Act is the satisfaction of the AO of the
searched person that the valuable articles, books of accounts or
documents belong to a third party (a person other than the searched
person) or contains information pertaining to the such other person.
Once the AO of a searched person reaches to the said conclusion, he has
to record his satisfaction and transmit the material to the AO exercising
jurisdiction in respect of the third party.

28. At the stage of recording a satisfaction that the valuable articles
or documents, which were found or requisitioned, belong to a third
party, it is not necessary for the AO to form any opinion that the
valuable articles, books of account or documents would reflect any
undisclosed income of such a person. The AO has to merely forward
the said material to the AO of the other person exercising jurisdiction

7 2023 SCC Online SC 370

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in respect of the other person. The question whether the said material
has any bearing on the income of such other person is required to be
determined by the Jurisdictional Assessment Officer of that person
(person other than the one searched). We may refer to the following
passage of the decision this Court in SSP Aviation Limited v. Deputy
Commissioner of Income Tax8 in this regard:

“… At the time when the Assessing Officer having
jurisdiction over the searched person reaches the
satisfaction that the document belongs to a person other
than the searched person, it is not necessary for him to
also reach a firm conclusion/opinion that the document
shows undisclosed income belonging to such other
person. That is a matter for enquiry, which is to be
conducted in the manner prescribed by section 153C.”

29. It is only when the AO of a third party (person other than the
searched person) receives the material (assets, books of account or
documents) from the AO of the searched person that he can proceed
further under Section 153C of the Act. In the first instance, he is
required to examine whether the material transmitted by the AO of a
searched person has any bearing on the income of such person.

30. In the case of Commissioner of Income Tax v. Kabul Chawla9 –
a judgment rendered in the context of Section 153A of the Act – this
Court held that completed assessment could be opened only on the basis
of incriminating material unearthed during the course of search or on
requisition of the same. Absent any incriminating material, the AO

8 [2012] 346 ITR 177
9 (2016) 380 ITR 573

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would have no jurisdiction in respect of the concluded assessments. It
is relevant to refer to the conclusions as summarized in the said
judgment. The same are extracted below:

“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:

(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 Officer 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 the 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

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to be made under this section only on the basis of seized
material.”

(v) In 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 153
A is relatable to abated proceedings (i.e., those pending on the
date of search) and the word “reassess” to the completed
assessment proceedings.

(vi) Insofar 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 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.”

31. The Hon’ble Gujarat High Court took a similar view in Principal
Commissioner of Income Tax v. Saumya Construction (P.) Ltd.10. It
is relevant to refer to the following extracts of the said decisions:

“15. On a plain reading of section 153A of the Act, it is
evident that the trigger point for exercise of powers thereunder
is a search under section 132 or a requisition under section
132A of the Act. Once a search or requisition is made, a
mandate is cast upon the Assessing Officer to issue notice
under section 153A of the Act to the person, requiring him to
furnish the return of income in respect of each assessment year

10 (2016) 387 ITR 529 (Gujarat)

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falling within six assessment years immediately preceding the
assessment year relevant to the previous year in which such
search is conducted or requisition is made and assess or
reassess the same. Since the assessment under section 153A of
the Act is linked with search and requisition under sections 132
and 132A of the Act, it is evident that the object of the section
is to bring to tax the undisclosed income which is found during
the course of or pursuant to the search or requisition. However,
instead of the earlier regime of block assessment whereby, it
was only the undisclosed income of the block period that was
assessed, section 153A of the Act seeks to assess the total
income for the assessment year, which is clear from the first
proviso thereto which provides that the Assessing Officer shall
assess or reassess the total income in respect of each
assessment year falling within such six assessment years. The
second proviso makes the intention of the Legislature clear as
the same provides that assessment or reassessment, if any,
relating to the six assessment years referred to in the sub-
section pending on the date of initiation of search under section
132 or requisition under section 132A, as the case may be, shall
abate. Sub-section (2) of section 153A of the Act provides that
if any proceeding or any order of assessment or reassessment
made under sub-section (1) is annulled in appeal or any other
legal provision, then the assessment or reassessment relating to
any assessment year which had abated under the second
proviso would stand revived. The proviso thereto says that
such revival shall cease to have effect if such order of
annulment is set aside. Thus, any proceeding of assessment or
reassessment falling within the six assessment years prior to
the search or requisition stands abated and the total income of
the assessee is required to be determined under section 153A
of the Act. Similarly, sub-section (2) provides for revival of
any assessment or reassessment which stood abated, if any
proceeding or any order of assessment or reassessment made
under section 153A of the Act is annulled in appeal or any other
proceeding.

16. Section 153A bears the heading “Assessment in case of
search or requisition”. It is well settled as held by the Supreme
Court in a catena of decisions that the heading of the section
can be regarded as a key to the interpretation of the operative
portion of the section and if there is no ambiguity in the

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language or if it is plain and clear, then the heading used in the
section strengthens that meaning. From the heading of section
153, the intention of the Legislature is clear, viz., to provide for
assessment in case of search and requisition. When the very
purpose of the provision is to make assessment in case of
search or requisition, it goes without saying that the assessment
has to have relation to the search or requisition. In other words,
the assessment should be connected with something found
during the search or requisition, viz., incriminating material
which reveals undisclosed income. Thus, while in view of the
mandate of sub-section (1) of section 153A of the Act, in every
case where there is a search or requisition, the Assessing
Officer is obliged to issue notice to such person to furnish
returns of income for the six years preceding the assessment
year relevant to the previous year in which the search is
conducted or requisition is made, any addition or disallowance
can be made only on the basis of material collected during the
search or requisition. In case no incriminating material is
found, as held by the Rajasthan High Court in the case of Jai
Steel (India) v. Asst.
CIT (supra), the earlier assessment would
have to be reiterated. In case where pending assessments have
abated, the Assessing Officer can pass assessment orders for
each of the six years determining the total income of the
assessee which would include income declared in the returns,
if any, furnished by the assessee as well as undisclosed income,
if any, unearthed during the search or requisition. In case where
a pending reassessment under section 147 of the Act has
abated, needless to state that the scope and ambit of the
assessment would include any order which the Assessing
Officer could have passed under section 147 of the Act as well
as under section 153A of the Act.”

32. The decision in the case of Commissioner of Income Tax v.
Kabul Chawla9 and Principal Commissioner of Income Tax v.
Saumya Construction (P.) Ltd.10 were rendered in the context of
Section 153A of the Act. It is relevant to note that although it was held
that assessment/reassessment can be made only on the basis of
incriminating material unearthed during the search or requisitioned yet

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it was accepted that in cases where search was conducted under Section
132 of the Act or requisition was made under Section 132A of the Act,
it was necessary for the AO to issue a notice under Section 153A of the
Act calling upon the assessee to furnish the return of income for the six
assessment years preceding the assessment year relevant to the previous
year in which the search was conducted or the requisition was made, as
the case may be. In cases where the assessment / reassessment had
abated by virtue of Section 153A of the Act, the AO was required to
complete the said assessment. However, in a case of unabated or
concluded assessments, the AO could reassess the same on the basis of
incriminating material found during the search or requisitioned.
However, if no incriminating material is found, the AO was required to
reiterate and close the assessments.

33. In Commissioner of Income Tax v. RRJ Securities Ltd.11 this
Court had examined the steps that are required for initiation and
completion of proceedings under Section 153C of the Act. We consider
it apposite to set out the following extract from the said decision:

13. The first and foremost step for initiation of proceedings
under Section 153C of the Act is for the Assessing Officer of
the searched person to be satisfied that the assets or documents
seized belong to the assessee (being a person other than the
searched person). The Assessing Officer of the Assessee, on
receiving the documents and the assets seized, would have
jurisdiction to commence proceedings under Section 153C of
the Act. The Assessing Officer of the searched person is not
required to examine whether the assets or documents seized
reflect undisclosed income. All that is required for him is to
satisfy himself that the assets or documents do not belong to
11 (2016) 380 ITR 612 (Del)

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the searched person but to another person. Thereafter, the
Assessing Officer has to transfer the seized assets/documents
to the Assessing Officer having jurisdiction of the assessee to
whom such assets/documents belong. Section 153C(1) of the
Act clearly postulates that once the Assessing Officer of a
person other than the one searched, has received the assets or
the documents, he is to issue a notice to assess/reassess the
income of such person, that is, the assessee other than the
person searched in accordance with provisions of section
153A of the Act.

34. In Saksham Commodities Ltd. v. Income-tax Officer & Anr.12
this Court had explained that after receipt of the material from the AO
of the searched person, the AO of the other person is required to
examine the same. It is only when he is satisfied that the books of
account, documents, assets seized or requisitioned have a bearing on the
income of the other person, that a notice under Section 153C of the Act
is required to be issued. The relevant extract of the said decision is set
out below:

“40. It is thus apparent that it is only when the transmitted
documents and material reaches the desk of the jurisdictional
Assessing Officer that it becomes empowered to initiate action
under Section 153C of the Act. This is evident from a plain
textual reading of that provision and which speaks of the
commencement point being the handing over of documents or
assets seized or requisitioned to the Assessing Officer of the
“other person” and it in turn proceeding to issue notice to
assess or reassess the income of the non-searched entity in
accordance with section 153A. However, the initiation of
action under section 153C is significantly premised upon the
Assessing Officer being satisfied that the books of account or
documents and assets seized or requisitioned having “a bearing
on the determination of the total income of such other person”.

This is manifest from the provision employing the expression

12 (2024) 464 ITR 1

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“if, that Assessing Officer is satisfied…..”. It would therefore
necessarily follow that the issuance of a notice under Section
153C is clearly not intended to be an inevitable consequence to
the receipt of material by the jurisdictional Assessing Officer.
That the Assessing Officer before commencement of action
under section 153C is also obliged to be satisfied that the
material so received would “have a bearing on the
determination of the total income of such other person” is an
aspect of significance and constitutes a fundamental point of
distinction between section 153A and section 153C. This
distinguishing element of the two provisions would become
further apparent from the discussion which ensues.”

35. In Principal Commissioner of Income-tax, Central-3 v. Abhisar
Buildwell (P) Ltd.4, the Supreme Court had examined the question that
whether the jurisdiction of the AO to make an assessment under Section
153A of the Act was confined to incriminating material found during
the course of the search under Section 132 of the Act or requisitioned
under Section 132A of the Act.
The Supreme Court referred to the legal
position as summarized by this Court in Commissioner of Income Tax
v. Kabul Chawla9 and the decision in Principal Commissioner of
Income Tax v. Saumya Construction (P.) Ltd.10 and expressly upheld
the same. It is relevant to refer to the following extracts from the said
decision:

“11. As per the provisions of Section 153-A, in case of a
search under Section 132 or requisition under Section 132-A,
the AO gets the jurisdiction to assess or reassess the “total
income” in respect of each assessment year falling within six
assessment years. However, it is required to be noted that as
per the second proviso to Section 153-A, the assessment or
reassessment, if any, relating to any assessment year falling
within the period of six assessment years pending on the date
of initiation of the search under Section 132 or making of
requisition under Section 132-A, as the case may be, shall

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abate. As per sub-section (2) of Section 153-A, if any
proceeding initiated or any order of assessment or
reassessment made under sub-section (1) has been annulled in
appeal or any other legal proceeding, then, notwithstanding
anything contained in sub-section (1) or Section 153, the
assessment or reassessment relating to any assessment year
which has abated under the second proviso to sub-section (1),
shall stand revived with effect from the date of receipt of the
order of such annulment by the Commissioner. Therefore, the
intention of the legislation seems to be that in case of search
only the pending assessment/reassessment proceedings shall
abate and the AO would assume the jurisdiction to assess or
reassess the “total income” for the entire six years’
period/block assessment period. The intention does not seem
to be to reopen the completed/unabated assessments, unless
any incriminating material is found with respect to assessment
year concerned falling within last six years preceding the
search. Therefore, on true interpretation of Section 153-A of
the 1961 Act, in case of a search under Section 132 or
requisition under Section 132-A and during the search any
incriminating material is found, even in case of
unabated/completed assessment, the AO would have the
jurisdiction to assess or reassess the “total income” taking into
consideration the incriminating material collected during the
search and other material which would include income
declared in the returns, if any, furnished by the assessee as
well as the undisclosed income. However, in case during the
search no incriminating material is found, in case of
completed/unabated assessment, the only remedy available to
the Revenue would be to initiate the reassessment proceedings
under Sections 147/48 of the Act, subject to fulfilment of the
conditions mentioned in Sections 147/148, as in such a
situation, the Revenue cannot be left with no remedy.
Therefore, even in case of block assessment under Section
153-A and in case of unabated/completed assessment and in
case no incriminating material is found during the search, the
power of the Revenue to have the reassessment under Sections
147/148 of the Act has to be saved, otherwise the Revenue
would be left without remedy.

12. If the submission on behalf of the Revenue that in case
of search even where no incriminating material is found

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during the course of search, even in case of
unabated/completed assessment, the AO can assess or
reassess the income/total income taking into consideration the
other material is accepted, in that case, there will be two
assessment orders, which shall not be permissible under the
law. At the cost of repetition, it is observed that the assessment
under Section 153-A of the Act is linked with the search and
requisition under Sections 132 and 132-A of the Act. The
object of Section 153-A is to bring under tax the undisclosed
income which is found during the course of search or pursuant
to search or requisition. Therefore, only in a case where the
undisclosed income is found on the basis of incriminating
material, the AO would assume the jurisdiction to assess or
reassess the total income for the entire six years block
assessment period even in case of completed/unabated
assessment. As per the second proviso to Section 153-A, only
pending assessment/reassessment shall stand abated and the
AO would assume the jurisdiction with respect to such abated
assessments. It does not provide that all completed/unabated
assessments shall abate. If the submission on behalf of the
Revenue is accepted, in that case, the second proviso to
Section 153-A and sub-section (2) of Section 153-A would be
redundant and/or re-writing the said provisions, which is not
permissible under the law.

13. For the reasons stated hereinabove, we are in complete
agreement with the view taken by the Delhi High Court in
Kabul Chawla (Supra) and the Gujarat High Court in the case
of Saumya Construction (Supra) and the decisions of the other
High Courts taking the view that no addition can be made in
respect of the completed assessments in absence of any
incriminating material.

14. In view of the above and for the reasons stated above, it
is concluded as under:

(i) That in case of search under Section 132 or requisition
under Section 132-A, the AO assumes the jurisdiction
for block assessment under Section 153-A;

(ii) All pending assessments/reassessments shall stand
abated;

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(iii) In case any incriminating material is found/unearthed,
even, in case of unabated/completed assessments, the
AO would assume the jurisdiction to assess or reassess
the “total income” taking into consideration the
incriminating material unearthed during the search and
the other material available with the AO including the
income declared in the returns; and

(iv) In case no incriminating material is unearthed during
the search, the AO cannot assess or reassess taking into
consideration the other material in respect of completed
assessments/unabated assessments. Meaning thereby, in
respect of completed/unabated assessments, no addition
can be made by the AO in absence of any incriminating
material found during the course of search under
Section 132 or requisition under Section 132-A of the
1961 Act. However, the completed/unabated
assessments can be re-opened by the AO in exercise of
powers under Sections 147/148 of the Act, subject to
fulfilment of the conditions as envisaged/mentioned
under Sections 147/148 of the Act and those powers are
saved.”

[emphasis added]

36. The decision in the case of Commissioner of Income Tax v.
Kabul Chawla9 and Principal Commissioner of Income-tax, Central-
3 v. Abhisar Buildwell (P) Ltd.4 was rendered in the context of Section
153A of the Act. However, the same would be equally applicable to
proceedings initiated under Section 153C(1) of the Act, which stipulates
that the AO would issue a notice to “assess / reassess the income of the
other person in accordance with the provisions of Section 153A of the
Act”.

37. It is apparent from the above discussion that provisions of Section
153A and 153C of the Act are applicable only if the conditions as
specified are fully satisfied. Absent any of the conditions, recourse to

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making an assessment/reassessment under these provisions is not
available.

38. The question whether reassessment under Section 147 of the Act
can be initiated in cases of material seized or information emanating
from a search conducted under Section 132 of the Act or any assets or
documents requisitioned under Section 132A of the Act, where the
conditions for initiating the assessment under Sections 153A and 153C
of the Act are not satisfied, is no longer res integra.

39. In Principal Commissioner of Income-tax, Central-3 v. Abhisar
Buildwell (P) Ltd.4 the Supreme Court had authoritatively held that
even in cases where assessment under Section 153A of the Act cannot
be initiated on account of the conditions for initiation of assessment /
reassessment under the said Section not being satisfied, it is open for
the Revenue to make the assessment / reassessment under Section 147
of the Act. This is of course subject to all conditions for such initiation
being fully satisfied.

40. The remaining aspect to be examined is whether in cases where
incriminating assets, documents or material are found during the search
conducted under Section 132 of the Act or requisitioned under Section
132A of the Act, proceedings under Section 147 of the Act for
reassessment can be initiated for assessment/ reassessment of income
notwithstanding that proceedings under Section 153C of the Act could
have been initiated. The learned ITAT has held that the said recourse is

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not open and it is necessary for the AO to follow the procedure as
stipulated under Section 153C of the Act.

41. As noted above, the jurisdiction of the AO to reassess the income
under Section 153C of the Act is predicated on (a) the AO of the
searched person being satisfied that the assets and material found during
the search proceedings or requisitioned are incriminating insofar as the
assessee (other than the searched person) is concerned; (b) recording its
satisfaction to the aforesaid effect; (c) transmitting the same to the AO
of the other person (person other than the searched person); (d) the AO
of the non-searched person being satisfied that the material information
received has a bearing on the determination of the total income; and, (e)
the AO of such non searched person issuing a notice to commence
assessment / reassessment proceedings. Indisputably, if any of the
aforesaid conditions are not satisfied, the income of such other person
cannot be assessed or reassessed under Section 153C of the Act.
According to the Assessee (and as accepted by ITAT), in such
circumstances, the AO would also be precluded from initiating the
proceedings under Section 147 of the Act. This is the central issue that
is required to be addressed.

42. The Assessee’s contention is founded essentially on two grounds.
First, that Section 153C of the Act commences with a non obstante
provision. And second, that the scheme under Sections 153A and 153C
of the Act is a special scheme for assessment in cases where the same
is premised on a search conducted under Section 132 or under Section
132A of the Act. Therefore, the special scheme would override the other

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provisions for assessment / reassessment of tax including Sections
143(3) and 147 of the Act.

43. It would thus be relevant to examine the import of the non
obstante provision of Section 153C of the Act. Section 153C of the Act
commences with the words “notwithstanding anything contained in
Section 139, Section 147, Section 148, Section 149, Section 151 and
Section 153 of the Act”. There is no cavil that the import of the said
words is that it would not be necessary to follow the procedure or the
rigours of the aforesaid provisions of Section 153C of the Act as
applicable. However, according to the Assessee, the import of the said
clause extends further to exclude the applicability of the said provisions
altogether. The Assessee contends that the provisions of Section 147 of
the Act are completely inapplicable or overridden by the provisions of
Section 153C of the Act in cases where the assessment / reassessment
can be premised on information or material found during the search
under Section 132 of the Act or the requisition made under Section
132A of the Act.

44. For the purposes of addressing the aforesaid question, it would
be necessary to briefly examine the Scheme of relevant provisions.
Sections 153A, 153B and 153C of the Act were inserted by Finance
Act, 2005 with effect from 01.06.2003. The said provisions replaced
the “Post Search Block Assessment Scheme” which was in force prior
to introduction of the aforesaid sections.

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45. The notes and clauses to the Finance Bill, 2003 indicates the
reasons for replacing the provisions for assessment in search cases
which were in force at the material time. The relevant notes and clauses
are set out below:

“Assessment in search cases-Abolition of the special
procedure in Chapter XIV-B and introduction of new
provisions

The existing provisions of the Chapter XIV-B provide for
a single assessment of undisclosed income of a block period,
which means the period comprising previous years relevant to six
assessment years preceding the previous year in which the search
was conducted and also includes the period up to the date of the
commencement of such search, and lay down the manner in
which such income is to be computed. The main objectives for
the introduction of the Chapter XIV-B were avoidance of
disputes, early finalisation of search assessments and reduction in
multiplicity of proceedings. The idea was to have a cost-effective,
efficient and meaningful search assessment procedure.

However, the experience on implementation of the special
procedure for search assessments (block assessment) contained in
Chapter XIV-B, has shown that the new scheme has failed in its
objective of early resolution of search assessments. The new
procedure postulates two parallel streams of assessment, i.e., one
of regular assessment and the other for block assessment during
the same period, i.e., during the block period Controversies have
sprung up questioning the treatment of a particular income as
‘undisclosed’ and whether it is relatable to the material found
during the course of search etc. Even where the facts are clear,
litigation on procedural matters continue to persist. The new
procedure has thus spawned a fresh stream of litigation.

It is proposed to provide that the provisions of this Chapter
shall not apply where a search is initiated under section 132, or
books of account, other documents or any assets are requisitioned
under section 132A after 31st May, 2003 by inserting a new
section 158BI in the Income-tax Act.

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It is also proposed to insert three new sections 153A, 153B
and 153C in the Income-tax Act to provide for assessment in case
of search or making requisition,

The proposed new section 153A provides the procedure
for completion of assessment where a search is initiated under
section 132 or books of account, or other documents or any assets
are requisitioned under section 132A after 31st May, 2003. In such
cases, the Assessing Officer shall issue notice to such person
requiring him to furnish, within such period as may be specified
in the notice, return of income in respect of six assessment years
immediately preceding the assessment year relevant to the
previous year in which the search was conducted under section
132 or requisition was made under section 132A. The Assessing
Officer shall assess or reassess the total income of each of these
six assessment years. Assessment or reassessment, if any, relating
to any assessment year falling within the period of six assessment
years pending on the date of initiation of the search under section
132 or requisition under section 132A, as the case may be, shall
abate. Save as otherwise provided in the proposed section 153A,
section 153B and section 153C, all other provisions of this Act
shall apply to the assessment or reassessment made under section
153A. In the assessment or reassessment made in respect of an
assessment year under this section, the tax shall be chargeable at
the rate or rates as applicable to such assessment year.

The proposed new section 153B provides for the time limit
for completion of search assessments. It provides that the
Assessing Officer shall make an order of assessment or
reassessment in respect of each assessment year, falling within
six assessment years under section 153A within a period of two
years from the end of the financial year in which the last of the
authorisations for search under section 132 or for requisition
under section 132A was executed. This section also provides the
time limit for completion of assessment in respect of the
assessment year relevant to the previous year in which the search
is conducted under section 132 or requisition is made under
section 132A within a period of two years from the end of the
financial year in which the last of the authorisations for search
under section 132 or for requisition under section 132A, as the
case may be, was executed. It also provides that in computing the
period of limitation for completion of such assessment or

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reassessment, the period during which the assessment proceeding
is stayed by an order or injunction of any court, or the period
commencing from the day on which the Assessing Officer directs
the assessee to get his accounts audited under sub-section (2A) of
section 142 and ending on the day on which the assessee is
required to furnish a report of such audit under that sub-section,
or the time taken in reopening the whole or any part of the
proceeding or giving an opportunity to the assessee of being
reheard under the proviso to section 129, or in a case where an
application made before the Settlement Commission under
section 245C is rejected by it or is not allowed to be proceeded
with by it, the period commencing on the date on which such
application is made and ending with the date on which the order
under sub-section (1) of section 245D is received by the
Commissioner under sub-section (2) of that section, shall be
excluded. If, after the exclusion of the aforesaid period, the period
of limitation available to the Assessing Officer for making an
order of assessment or reassessment, as the case maybe, is less
than sixty days, such remaining period shall be extended to sixty
days and the period of limitation shall be deemed to be extended
accordingly.

The proposed new section 153C provides that where an
Assessing Officer is satisfied that any money, bullion, jewellery
or other valuable article or thing or books of account or
documents seized or requisitioned belong or belongs to a person
other than the person referred to in section 153A, then the books
of account, or documents or assets seized or requisitioned shall
be handed over to the Assessing Officer having jurisdiction over
such other person and that Assessing Officer shall proceed against
such other person and issue such other person notice and assess
or reassess income of such other person in accordance with the
provisions of section 153A.

An appeal against the order of assessment or reassessment
under section 153A shall lie with the Commissioner of Income-
tax (Appeals).

Consequential amendments are also proposed in Section
132,132B,140A, 234A, 234B, 246A and 276CC to give reference
to Section 153A in these sections.”

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46. We also consider it apposite to refer to the Circular issued by
Central Board of Direct Taxes (CBDT) explaining the assessment /
reassessment in terms of Sections 153A, 153B and 153C of the Act.
The relevant extract of the said Circular is set out below:

“65. The special procedure for assessment of search cases
under /Chapter XIV-B be abolished:

65.1 The existing provisions of the Chapter XIV-B provide for
a single assessment of undisclosed income of a block period,
which means the period comprising previous years relevant to
six assessment years preceding the previous year in which the
search was conducted and also includes the period up to the
date of the commencement of such search, and lay down the
manner in which such income is to be computed.
65.2 The Finance Act, 2003, has provided that the provisions
of this Chapter shall not apply where a search is initiated under
section 132, or books of account, other documents or any assets
are requisitioned under section 132A after May 31, 2003, by
inserting a new section 158BI in the Income-tax Act.
65.3 Further three new sections 153A, 153B and 153C have
been inserted in the Income-tax Act to provide for assessment
in case of search or making requisition.

65.4 The new section 153A provides the procedure for
completion of assessment where a search is initiated under
section 132 or books of account, or other documents or any
assets are requisitioned under section 132A after May 31, 2003.

In such cases, the Assessing Officer shall issue notice to such
person requiring him to furnish, within such period as may be
specified in the notice, return of income in respect of six
assessment years immediately preceding the assessment year
relevant to the previous year in which the search was conducted
under section 132 or requisition was made under section 132A.
65.5 The Assessing Officer shall assess or reassess the total
income of each of these six assessment years. Assessment or
reassessment, if any, relating to any assessment year falling
within the period of six assessment years pending on the date
of initiation of the search under section 132 or requisition under

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section 132A, as the case may be, shall abate. It is clarified that
the appeal, revision or rectification proceedings pending on the
date of initiation of search under section 132 or requisition shall
not abate. Save as otherwise provided in the proposed section
153A, section 153B and section 153C, all other provisions of
this Act shall apply to the assessment or reassessment made
under section 153A. It is also clarified that assessment or
reassessment made under section 153A shall be subject to
interest, penalty and prosecution, if applicable. In the
assessment or reassessment made in respect of an assessment
year under this section, the tax shall be chargeable at the rate or
rates as applicable to such assessment year.

65.6 The new section 153B provides for the time limit for
completion of search assessments. It provides that the
Assessing Officer shall make an order of assessment or
reassessment in respect of each assessment year, falling within
six assessment years under section 153A within a period of two
years from the end of the financial year in which the last of the
authorisations for search under section 132 or for requisition
under section 132A was executed.

65.7 This section also provides that assessment in respect of the
assessment year relevant to the previous year in which the
search is conducted under section 132 or requisition is made
under section 132A shall be completed within a period of two
years from the end of the financial year in which the last of the
authorisations for search under section 132 or for requisition
under section 132A, as the case may be, was executed.
65.8 It also provides that in computing the period of limitation
for completion of such assessment or reassessment, the period
during which the assessment proceeding is stayed by an order
or injunction of any court ; or the period commencing from the
day on which the Assessing Officer directs the assessee to get
his accounts audited under sub-section (2A) of section 142 and
ending on the day on which the assessee is required to furnish
a report of such audit under that sub-section, or the time taken
in reopening the whole or any part of the proceeding or giving
an opportunity to the assessee of being re-heard under the
proviso to section 129, or in a case where an application made
before the Settlement Commission under section 245C is
rejected by it or is not allowed to be proceeded with by it, the

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period commencing on the date on which such application is
made and ending with the date on which the order under sub-
section (1) of section 245D is received by the Commissioner
under sub-section (2) of that section, shall be excluded. If, after
the exclusion of the aforesaid period, the period of limitation
available to the Assessing Officer for making an order of
assessment or reassessment, as the case may be, is less than
sixty days, such remaining period shall be extended to sixty
days and the period of limitation shall be deemed to be
extended accordingly.

65.9 The new section 153C provides that where an Assessing
Officer is satisfied that any money, bullion, jewellery or other
valuable article or thing or books of account or documents
seized or requisitioned belong or belongs to a person other than
the person referred to in section 153A, then the books of
account, or documents or assets seized or requisitioned shall be
handed over to the Assessing Officer having jurisdiction over
such other person and that Assessing Officer shall proceed
against such other person and issue such other person notice
and assess or reassess income of such other person in
accordance with the provisions of section 153A.
65.10 An appeal against the order of assessment or
reassessment under section 153A shall lie with the
Commissioner of Income-tax (Appeals).

65.11 Consequential amendments have also been made in
sections 132, 132B, 140A, 234A, 234B, 246A and 276CC to
give reference to section 153A in these sections.
65.12 These amendments will take effect from June 1, 2003.”

47. Under the erstwhile scheme of block assessment in search cases,
as was in force prior to the enactment of Sections 153A, 153B and 153C
of the Act, the AO was required to make an assessment of the
undisclosed income for the block period. Thus, there were two parallel
assessments, one in respect of disclosed income and the other in respect
of undisclosed income. The implementation of the said scheme, instead
of simplifying the procedure in search cases, further complicated the

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same. One of the issues that became the focal point in several cases was
whether income is required to be assessed as undisclosed income for the
block period or whether it was to be considered as covered under the
regular assessment.

48. Sections 153A and 153C of the Act were enacted to simplify that
procedure. The principal object of such enactment was to simplify the
assessment and to provide for a single assessment in respect of each
assessment year in cases relating to search under Section 132 of the Act
or requisition made under Section 132A of the Act. In Principal
Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P)
Ltd.4, the Supreme Court had taken a note of the legislative intent in
replacing the scheme of assessment / reassessment in search cases in the
following words:

“30. That prior to insertion of Section 153-A in the statute, the
relevant provision for block assessment was under Section 158-
BA of the 1961 Act. The erstwhile scheme of block assessment
under Section 158-BA envisaged assessment of “undisclosed
income” for two reasons, firstly that there were two parallel
assessments envisaged under the erstwhile regime i.e. : (i) block
assessment under Section 158-BA to assess the “undisclosed
income”, and (ii) regular assessment in accordance with the
provisions of the Act to make assessment qua income other than
undisclosed income. Secondly, that the “undisclosed income”

was chargeable to tax at a special rate of 60% under Section 113
whereas income other than “undisclosed income” was required to
be assessed under regular assessment procedure and was taxable
at normal rate. Therefore, Section 153-A came to be inserted and
brought on the statute. Under Section 153-A regime, the intention
of the legislation was to do away with the scheme of two parallel

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assessments and tax the “undisclosed” income too at the normal
rate of tax as against any special rate. Thus, after introduction of
Section 153-A and in case of search, there shall be block
assessment for six years. Search assessments/Block assessments
under Section 153-A are triggered by conducting of a valid search
under Section 132 of the 1961 Act. The very purpose of search,
which is a prerequisite/trigger for invoking the provisions of
Sections 153-A/153-C is detection of undisclosed income by
undertaking extraordinary power of search and seizure i.e. the
income which cannot be detected in ordinary course of regular
assessment. Thus, the foundation for making search assessments
under Sections 153-A/153-C can be said to be the existence of
incriminating material showing undisclosed income detected as a
result of search.”

49. In Amar Jewellers Ltd. v. Assistant Commissioner of Income
Tax5, the Gujarat High Court had examined the contentions as advanced
before this Court and considered the import of the non obstante clause
under Section 153C of the Act. In its decision, the Gujarat High Court
had observed as under:

“46. A non obstante clause is generally appended to a section
with a view to give the enacting part of the section, in case of
conflict, an overriding effect over the provision in the same or
other Act mentioned in the non obstante clause. It is equivalent
to saying that in spite of the provisions or Act mentioned in the
non obstante clause, the provision following it will have its full
operation or the provisions embraced in the non obstante clause
will not be an impediment for the operation of the enactment or
the provision in which the non obstante clause occurs. (see:

Principles of Statutory Interpretation, 9th Edition by Justice G. P.
Singh Chapter V, Synopsis IV at pages 318 and 319).

47. Normally the use of the phrase by the Legislature in a
statutory provision like notwithstanding anything to the contrary
contained in this Act is equivalent to saying that the Act shall be
no impediment to the measure [See: Law Lexicon words

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“notwithstanding anything in this Act to the contrary”]. Use of
such expression is another way of saying that the provision in
which the non obstante clause occurs usually would prevail over
the other provisions in the Act. Thus, the non obstante clauses
are not always to be regarded as repealing clauses nor as clauses
which expressly or completely supersede any other provision of
the law, but merely as clauses which remove all obstructions
which might arise out of the provisions of any other law in the
way of the operation of the principle enacting provision to which
the non obstante clause is attached. (See :Bipathumma v.

Mariam Bibi (1966) 1 MYSLJ 162, at page 165).

48. A non obstante clause has two parts – the non obstante
clause and the enacting part. The purpose of enacting a non
obstante clause is that in case of a conflict between the two parts,
the enacting part will have full sway in spite of the contrary
provisions contained in the non obstante clause. Therefore, the
object and purpose of the enacting part should be first
ascertained and then the assistance of the non obstante clause
should be taken to nullify the effect of any contrary provision
contained in the clause.

49. The enacting part of section 153A has three
stipulations–(i) to issue notice calling for the returns of income
for six assessment years (ii) to assess or reassess total income of
each of the six assessment years and (iii) not to proceed with any
pending assessment or reassessment as on the date of initiation
of search as the same would abate. Since some of the provisions
contained in the enacting part may come into conflict with the
provisions contained in the non obstante clause, these
impediments are removed by means of the non obstante clause.
Thus, by enacting the non obstante clause in the section, the
formalities of issuing notice under section 139, application of the
provisions of section 147, 148, 149 or 151 for reopening a case
for escaped assessment, taking of approval from the concerned
authorities for reopening the assessment and the time limit for
completion of regular assessment have been done away with.
Thus, assumption of jurisdiction by the Assessing Officer under
section 153A has been made simple and easy.

50. Section 153A is a self-contained code for each
assessments. The section states that on initiation of search, the

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Assessing Officer can issue a notice calling for the returns of
income for six assessment years preceding the previous year in
which the search has taken place. The non obstante clause
obviates the need to comply with the requirement of the regular
provisions.

*** *** ***

55. Thus, having regard to the aforesaid discussion, we have
reached to the conclusion that the argument of Mr. Hemani as
regards the non obstante clause contained in section 153A and
its effect is without any merit. It is difficult for us to take the
view that the non obstante clause in section 153A excludes the
very applicability of sections 147 and 148 respectively of the
Act. We are in agreement with the submission of Mr. Bhatt, the
learned senior counsel appearing for the Revenue that the non
obstante clause in section 153A should be understood as merely
dispensing with the procedural aspect of section 147 of the Act.”

50. The aforesaid decision was rendered in the contest of Section
153A of the Act. Although, the rationale as set out in the said decision
resonate with us, we are unable to concur that issuance of notice under
Section 153A of the Act is optional. Once a search has been conducted
under Section 132 of the Act or assets, documents or other material is
requisitioned under Section 132A of the Act, the AO is required to issue
a notice under Section 153A of the Act. This is necessary because in
terms of proviso to Section 153A of the Act, the pending proceedings
for assessment or reassessment for any of the assessment years falling
within the period of six assessment years prior to the date of initiation
of the search under Section 132 of the Act or acquisition under Section
132A of the Act, would abate. The said assessments would necessarily
be required to be completed under Section 153A of the Act. However,
commencement of proceedings under Section 153C of the Act is subject

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to additional conditions and it was not necessary that a notice under
Section 153C of the Act be issued. Section 153B of the Act also
stipulates the time limit for completion of assessment in cases under
Section 153A of the Act. In terms of Section 153B(1) of the Act,
assessment in respect of each of the six years, as referred to in Section
153A(b) of the Act, are required to be completed within the period of
two years from the end of the financial year in which the last of the
authorization for search under Section 132 of the Act or acquisition
under Section 132A of the Act were executed. The assessment in
respect of the year relevant to the previous year in which the search was
conducted under Section 132 of the Act or requisition made under
Section 132A of the Act is also required to be completed within the
aforesaid period.

51. It is necessary to note that there is a clear distinction between the
provisions of Sections 153A and 153C of the Act. The AO under
Section 153 of the Act has the discretion to assume jurisdiction. If the
jurisdictional conditions are satisfied, it is not necessary for the AO to
assume jurisdiction in such cases. In Agni Vishnu Ventures Pvt. Ltd.
v. Deputy Commissioner of Income Tax13, the Madras High Court had
highlighted the difference between the provisions of Sections 153A and
153C of the Act. It is relevant to refer to the following passages from
the said decision:

“63. Assessments made either under section 153A or 153C can
be sustained only if those assessments are based upon
incriminating materials found in the course of search indicating
13
Judgement dated 28.06.2023 in W.P. No. 24407/2021

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concealed assets/taxable income that have escaped assessment.
The scheme of assessment under sections 153A and 153C is
available to the Department in addition to all other methods of
assessment, revision and reassessment and each scheme has its
distinct set of conditions and stipulations, that must be strictly
adhered to.

*** *** ***

76. The ingredients of section 153A are:

(i) Initiation of search or requisition under the applicable
statutory provisions,

(ii) Such search/requisition being after May 31, 2003 but
before May 31, 2021.

77. The ingredients of section 153C are:

(i) Satisfaction of the Assessing Officer who is Assessing
Officer of the section 153A noticee that
money/bullion/jewellery/other valuable article or
thing/books of account or documents (incriminating
materials) seized/requisitioned belongs to/pertain to or any
information contained, relates to, a third party.

(ii) Recording of satisfaction as above.

(iii) Handing over of the incriminating material to the
Assessing Officer having jurisdiction over the third party.

(iv) Recording of satisfaction by the Assessing Officer of the
third party that the incriminating material has a bearing on
the determination of total income of the third party.

(v) Upon condition of recording of the satisfaction of both
officers as above, notices be issued to assess/reassess the
income of the third party in accordance with the procedure
stipulated under section 153A.

(iii) A mandate upon the Assessing Officer who “shall”

issue notice to the person searched.

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(iv) The notice shall require him to furnish within such
period as specified, a return of income.

(v) Such returns are to be filed in respect of each assessment
year falling within six assessment years referred to in that
provision duly verified and containing the required
particulars.

(vi) Upon receipt of the returns, reassess total income of six
assessment years immediately preceding the assessment
year relating to the previous year that search was
conducted/requisition made.

78. In my considered view, there is a vital distinction between
the object, intention as well as the express language of sections
153A and 153C. Section 153A addresses the searched entity and
the procedure set out is evidently a notch higher for this reason.
There is no discretion or condition precedent under section 153A
to the issuance of notice save the conduct of a search under
section 132 or making of a requisition under section 132A. Upon
the occurrence of one of the aforesaid events, it is incumbent
upon the officer to issue notice under section 153A to the
searched entity in line with the procedure stipulated.

79. Section 153C however requires the satisfaction of two
conditions prior to issuance of notice:

(i) Recording of satisfaction by the Assessing Officer of the
searched entities that some of the incriminating materials
relate to a third party.

(ii) Recording of satisfaction by the Assessing Officer of the
third party that the incriminating materials have a bearing on
the determination of the total income of that third party.

80. Notice under section 153C would have to be issued only
upon the concurrent satisfaction of both conditions as aforesaid.
To this extent, there is, in my considered opinion, a clear and
marked distinction between the provisions of sections 153A and
153C. The contention of the Revenue that a mandate is cast upon
the Assessing Officer of the third party to issue notice under
section 153C for all the years comprising the block,
mechanically and automatically, is thus rejected.

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81. To clarify, it is only where the satisfaction note recorded by
the receiving Assessing Officer, i.e., the Assessing Officer of the
third party reflects a clear finding that the incriminating material
received has a bearing on determination of total income of the
third party for six assessment years immediately preceding the
assessment year relevant to the previous year in which search is
conducted or requisition is made, that such notice would have to
be issued for all the years.

82. It thus flows from the provision that the receiving Assessing
Officer must apply his mind to the materials received and
ascertain precisely the specific year to which the incriminating
material relates. It is only when this determination/ascertainment
is complete that the flood gates of an assessment would open qua
those particular years. The issuance of a notice cannot be an
automated function unconnected to this exercise of analysis and
ascertainment by an Assessing Officer.

83. The construction of sections 153A and 153C is consciously
different and is seen to apply different yardsticks to an entity
searched and a third party, such yardstick being more exacting
in the case of the former. The process of assessment is
demanding and an assessee, once in receipt of a notice, is bound
by the stringent procedure under the Act, till finalisation of the
process.

84. In other words, a Damocles sword appears over the head of
an assessee with the issuance of every notice which is laid to rest
only upon conclusion of the proceedings; The sword cannot be
invoked lightly and except if the statutory condition is satisfied.
That is to state, an officer has to analyse and compartmentalise
the incriminating material year-wise, to arrive at a categoric
determination as to the year to which the incriminating material
relates and issue notices only for those years.

85. Needless to state these are some situations/issue when the
spread of information and the nature of the issue itself might
need more, and in- depth probing before such year-wise
determination is possible. In such cases, the officer would be
well within his right to state the nature of the issue and detail the
difficulties that present themselves in precise bifurcation at that
stage. This would reflect application of mind and, in my

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considered view, would serve as sufficient compliance with the
statutory condition.”

52. In the case of Saksham Commodities Ltd. v. Income-tax Officer
& Anr.12, this Court had explained the distinction between Sections
153A and 153C of the Act. The relevant extracts of the said decision
are as under:

“37. Having noticed the rival contentions which were addressed,
we firstly take note of the evident distinction that exists between
section 153A and section 153C. They are clearly couched in
language which is dissimilar. When we turn our gaze upon
section 153A, it becomes apparent that where a search is initiated
or documents and books requisitioned, the Assessing Officer is
mandated to issue notice calling upon the searched person to
submit a return of income in respect of each assessment year
falling within the six assessment years’ and for the “relevant
assessment year”. Upon submission of that return of income, the
Assessing Officer stands empowered statutorily to assess or
reassess the total income of six assessment years’ immediately
preceding the assessment year corresponding to the year of
search and for the “relevant assessment year”. The expression
“relevant assessment year” has been duly defined by Explanation
1 placed in Section 153A and is explained to include those years
which fall beyond the six assessment years’ spoken of earlier but
not later than ten assessment years’ from the end of the
assessment year relevant to the Financial Year in which the
search was conducted.

38. As was held in SSP Aviation Ltd v. Deputy Commissioner of
Income Tax, the Assessing Officer of the searched person while
proceeding to transmit the material gathered in the course of the
search to the Assessing Officer of the “other person” is not
obliged to form any opinion with respect to escapement of
income or for that matter the material likely to have an impact
on the total income of the non-searched entity. At the stage of
transmission of material, the Assessing Officer of the searched
person is only required to be satisfied that the material or

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documents unearthed pertain to a person or entity other than the
one searched.

*** *** ***

39. The principle that the Assessing Officer of the searched
person is only required to be satisfied that the documents or
materials pertain to the “other person” at the stage of
transmission of material or documents to the jurisdictional
Assessing Officer of the non-searched entity was reiterated in
RRJ Securities.

*** *** ***

40. It is thus apparent that it is only when the transmitted
documents and material reaches the desk of the jurisdictional
Assessing Officer that it becomes empowered to initiate action
under Section 153C of the Act. This is evident from a plain
textual reading of that provision and which speaks of the
commencement point being the handing over of documents or
assets seized or requisitioned to the Assessing Officer of the
“other person” and it in turn proceeding to issue notice to assess
or reassess the income of the non-searched entity in accordance
with Section 153A. However, the initiation of action under
Section 153C is significantly premised upon the Assessing
Officer being satisfied that the books of account or documents
and assets seized or requisitioned having “a bearing on the
determination of the total income of such other person”. This is
manifest from the provision employing the expression “if, that
Assessing Officer is satisfied…..”. It would therefore necessarily
follow that the issuance of a notice under Section 153C is clearly
not intended to be an inevitable consequence to the receipt of
material by the jurisdictional Assessing Officer. That the
Assessing Officer before commencement of action under
Section 153C is also obliged to be satisfied that the material so
received would “have a bearing on the determination of the total
income of such other person” is an aspect of significance and
constitutes a fundamental point of distinction between Section
153A and Section 153C. This distinguishing element of the two
provisions would become further apparent from the discussion
which ensues.

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41. Firstly, and from a historical perspective of the legislation
itself, we find that one of the significant amendments which
came to be introduced in Section 153C was ushered in 2014. The
Finance (No. 2) Bill, 2014, while seeking to explain the objective
of the amendments which were proposed to be incorporated
declared as follows:

*** *** ***

42. It would also be apposite to notice the Notes on Clause 53 of
the Finance Bill, 2014, which sought to amend Section 153C and
which is reproduced hereinbelow:

“Clause 53 of the Bill seeks to amend section 153C of
the Income-tax Act relating to assessment of income of
any other person.

The existing provisions contained in sub-section (1) of
the aforesaid section provide that notwithstanding
anything contained in section 139, section 147, section
148, section 149, section 151 and section 153, where the
Assessing Officer is satisfied that any money, bullion,
jewellery or other valuable article or thing or books of
account or documents seized or requisitioned belongs or
belong to a person, other than the person referred to in
section 153A, then the books of account or documents or
assets seized or requisitioned shall be handed over to the
Assessing Officer having jurisdiction over such other
person and that Assessing Officer shall proceed against
each such other person and issue such other person
notice and assess or reassess income of such other person
in accordance with the provisions of section 153A.
It is proposed to amend the said sub-section so as to
provide that notwithstanding anything contained in
section 139, section 147, section 148, section 149,
section 151 and section 153, where the Assessing Officer
is satisfied that any money, bullion, jewellery or other
valuable article or thing or books of account or
documents seized or requisitioned belongs or belong to
a person, other than the person referred to in section
153A, then the books of account or documents or assets
seized or requisitioned shall be handed over to the

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Assessing Officer having jurisdiction over such other
person and that Assessing Officer shall proceed against
each such other person and issue notice and assess or
reassess the income of the other person in accordance
with the provisions of section 153A, if, such Assessing
Officer is satisfied that the books of account or
documents or assets seized or requisitioned have a
bearing on the determination of the total income of such
other person for the relevant assessment year or years
referred to in sub-section (1) of section 153A.
This amendment will take effect from 1st October,
2014.”

43. It was consequent to the passing of the aforesaid Act that
Section 153C came to incorporate provisions relating to the
Assessing Officer being satisfied that the books of accounts,
documents or assets seized or requisitioned must “have a bearing
on the determination of the total income of such other person”

for the six preceding assessment years’ or the “relevant
assessment year” as referred to in Explanation 1 to Section
153A. Prior to the promulgation of these amendments, the
Assessing Officer of the non-searched party was not obliged to
form an opinion that the material received by it was likely to
impact the estimation of income of that person. Significantly,
although this prerequisite came to be incorporated in Section
153C, no such corresponding precondition was included in
Section 153A. This, although the legislative history of the search
assessment provisions placed in the Act would indicate that they
were amended from time to time in order to constitute a complete
and homogeneous code. This becomes apparent from the
legislative mandate of those two provisions being applicable to
searches undertaken in a particular time period, the principles of
abatement being replicated and the search assessment power
being available to be invoked for the “relevant assessment year”,
and which extended the power to be exercised over a ten year
block, being simultaneously introduced in those provisions. The
Legislature clearly intended both these provisions to form part
of a cohesive scheme and to be complementary to each other.
However, the aspects of satisfaction and of the material likely to
implicate or influence were not added in Section 153A. The fact
that any additions that may be ultimately made upon a

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culmination of assessment under Section 153A being indelibly
founded on the material gathered in the course of the search is a
separate issue all together.

*** *** ***

48. In terms of the Second Proviso to Section 153A, all
assessment or reassessment proceedings relating to the six
assessment years’ or the “relevant assessment year” pending on
the date of search are statutorily envisaged to abate. Abatement
is envisioned to be an inevitable consequence of the initiation of
action under Section 153A. Neither issuance of notice nor
abatement are predicated upon a formation of opinion by the
Assessing Officer of the searched person that the material is
likely to impact the total income of that assessee. However, the
spectre of abatement insofar as the “other person” is concerned
would arise only after the jurisdictional Assessing Officer has
formed the requisite satisfaction of the material having “a
bearing on the determination of the total income of such other
person” and having formed the opinion that proceedings under
Section 153C are liable to be initiated. It would be pertinent to
bear in mind that Kabul Chawla was a decision rendered in the
context of Section 153A. It was in the aforesaid backdrop that
the Court significantly observed that once a search takes place
under Section 132 of the Act, notice under Section 153A(1)
would mandatorily issue. The abatement of assessment and
reassessment pending on that date would, in the case of a Section
153A assessment, be a preordained consequence. However, and
in light of what has been observed hereinabove, it is apparent
that Section 153C constructs a subtle and yet significant
distinction insofar as the question of commencement of
proceedings or assumption of jurisdiction is concerned.”

53. The provision of Section 153C of the Act enables the Assessing
Officer to assess or re-assess the income of the assessee where any
incriminating assets, material, books of account or documents are found
(which either belongs to the assessee a person other than the searched
person or contains information pertaining to the assessee), in a search
conducted under Section 132 of the Act or requisition made under

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Section 132A of the Act in respect of another person. However, as
stated above, the AO must be satisfied that the assets or material found
or information contained in documents and books of account has a
bearing on the income of the assessee for the six assessment years
immediately preceding the AY relevant to the previous year in which
the search was conducted or the requisition under Section 132A of the
Act was made14. By its very nature, Section 153C of the Act is an
enabling provision, which enables the Assessing Officer to assume
jurisdiction to assess/reassess the income of the Assessee, in cases
where the jurisdictional conditions as set out in Section 153C are
satisfied. The non obstante provision as contained in Section 153C(1)
of the Act must necessarily be construed in the aforesaid context.

54. In Dayalbagh Educational Institute v. State of U.P.15 the Court
held as under:

“10. …..The non-obstante clause is appended to a
provision to give overriding effect over any existing law
which is inconsistent with the new enactment, where both
cannot be read harmoniously; for, even apart from such
clause, a later law abrogates earlier laws clearly
inconsistent with it. It can be invoked only in case of
irreconcilable conflict where both cannot be read
harmoniously. But, where the provisions of two or more
Acts can co-exist and can be enforced or applied without
abrogating or eroding the provisions of other Act, the
non-obstante clause will have no effect. Therefore, where
the provision of this Act cannot be read harmoniously
with the provisions of any other law in force at the
commencement of this Act, in that situation the
14
This is in terms of second proviso, which was inserted by Finance Act, 2012 with effect from
01.07.2012.

15 2001 SCC OnLine All 342

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provisions of this Act shall have overriding effect,
otherwise not.”

55. In Parayankandiyal Eravath Kanapravan Kalliani Amma (Smt)
v. K. Devi16, the Court held as under:

“77. “Non obstante clause is sometimes appended to a
section in the beginning, with a view to give the enacting
part of the section, in case of conflict, an overriding effect
over the provision or Act mentioned in that clause. It is
equivalent to saying that in spite of the provision or Act
mentioned in the non obstante clause, the enactment
following it will have its full operation or that the
provision indicated in the non obstante clause will not be
an impediment for the operation of the enactment.” (See:
Union of India v. G.M. Kokil [1984 Supp SCC 196 : 1984
SCC (L&S) 631 : AIR 1984 SC 1022] ; Chandavarkar
Sita Ratna Rao v. Ashalata S. Guram [(1986) 4 SCC 447]
SCC at p. 477, R.S. Raghunath v. State of Karnataka
[(1992) 1 SCC 335 : 1992 SCC (L&S) 286 : (1992) 19
ATC 507] ; G.P. Singh’s Principles of Statutory
Interpretation.)”

56. In Chandavarkar Sita Ratna Rao v. Ashalata S. Guram17 , the
Supreme Court held as under:

“67. A clause beginning with the expression
‘notwithstanding anything contained in this Act or in
some particular provision in the Act or in some particular
Act or in any law for the time being in force, or in any
contract’ is more often than not appended to a section in
the beginning with a view to give the enacting part of the
section in case of conflict an overriding effect over the
provision of the Act or the contract mentioned in the non
obstante clause. It is equivalent to saying that in spite of

16 (1996) 4 SCC 76
17 (1986) 4 SCC 447

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the provision of the Act or any other Act mentioned in the
non obstante clause or any contract or document
mentioned the enactment following it will have its full
operation or that the provisions embraced in the non
obstante clause would not be an impediment for an
operation of the enactment. See in this connection the
observations of this Court in South India Corpn. (P)
Ltd. v. Secy., Board of Revenue, Trivandrum [(1964) 4
SCR 280 : AIR 1964 SC 207] .

68. It is well settled that the expression ‘notwithstanding’
is in contradistinction to the phrase ‘subject to’, the latter
conveying the idea of a provision yielding place to
another provision or other provisions to which it is made
subject. This will be clarified in the instant case by
comparison of sub-section (1) of Section 15 with sub-
section (1) of Section 15-A. We are therefore unable to
accept, with respect, the view expressed by the Full
Bench of the Bombay High Court as relied on by the
learned Single Judge in the judgment under appeal.”

57. The aforesaid authorities clearly indicate that the purpose of a
non obstante clause is to provide primacy to certain provisions of the
enactment in case of conflict with the statutory provisions as mentioned
in the clause. The non obstante clause indicates the provisions/
enactments, which are overridden and the main enactment that
overrides those provisions. Thus, if a non obstante clause sets out an
enabling provision or one that confers jurisdiction, as the main
enactment, which is to override other provisions, it stands to reason that
the overriding effect of that enactment will become operative only when
the enabling provisions are used or the jurisdiction is assumed. In
relation to an enabling provision, the non obstante clause can be
construed to only mean that recourse to those provisions is available

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inspite of other provisions that are overridden. The non obstante
provision, in such circumstances, cannot be construed to mean that
recourse to a provision, which by nature is an enabling provision, is
necessary and by implication, the other provisions in respect of which,
the main enactment is accorded primacy are inoperative and nugatory.
Re-assessments under Section 153C of the Act and under Section
147/148 of the Act provide a machinery provision for reassessments in
given circumstances.

58. In a case where pursuant to search conducted under Section 132
of the Act or requisition made under Section 132A of the Act in respect
of another person (searched person), assets, documents or books of
account, which either belong to the assessee or contain information
pertaining to the said assessee, are found. And, the same are handed
over to the AO of the assessee; he would subject to satisfaction of the
other jurisdictional conditions stipulated under Section 153C of the Act,
having the jurisdiction to make a reassessment/assessment of the
income of the assessee under Section 153C of the Act. However, the
same does not mean that he is bound to exercise the said jurisdiction. In
the event, the AO does not assume it’s jurisdiction to proceed with
making an assessment/ reassessment under Section 153C of the Act,
recourse to Section 147/148 is not ousted. The non obstante provision
kicks-in only on the AO assuming the jurisdiction under Section 153C
of the Act, that is, if the AO exercises its jurisdiction to initiate the
machinery provisions of Section 153C of the Act to make an
assessment/reassessment of the assessee’s income for the stipulated

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period. The non obstante provisions do no come into play, if the AO
does not take recourse to provision of Section 153C of the Act.

59. The non obstante clause as used in Section 153C of the Act
cannot be read to completely exclude the provisions of Sections 143 or
147 of the Act in cases where the assessee’s income is sought to be
assessed inter alia on the basis of the information found during search
proceedings. However, it will not be open for the AO to take recourse
to Section 147 of the Act, where the AO has taken steps under Section
153C of the Act. Thus, if the conditions for exercise of jurisdiction
under Section 153C of the Act are satisfied and the AO issues a notice
as required under Section 153C of the Act, any reassessment under
Section 147 of the Act would obviously, be impermissible. This is
because the Act does not contemplate parallel assessment proceedings.
Where the AO is satisfied that the assets, material and documents
forwarded by the AO of the searched person under Section 153C of the
Act has a bearing on determination of the income of the assessee for
any of the years, the AO shall proceed to issue a notice under Section
153C of the Act. By virtue of non obstante clause, the AO is not
required to follow the procedural rigours of Section 148 of the Act.
Subject to obtaining the approval under Section 153D of the Act, if
necessary, the AO is not required to seek any approval from the
specified authority, as required under Section 148/151 of the Act for
issuing a notice under Section 153C of the Act and can proceed to assess
/ reassess income for the concerned assessment years.

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60. However, if the AO does not take recourse to Section 153C of
the Act but proceeds under Section 147 of the Act he would necessarily
have to follow the due procedure as specified for initiating such
proceedings.

61. The assumption that provisions of Section 153C of the Act
precludes any proceeding under Section 147 of the Act by virtue of the
non obstante clause, is unpersuasive. The scheme of Sections 153C of
the Act indicates that the said provision was enacted to simplify the
procedure, while maintaining the necessary safeguards, for assessment
/ reassessment in cases where assets belonging to the assessee or books
of account or documents, which contain information pertaining to the
assessee are found pursuant to a search conducted under Section 132 of
the Act or requisition made under Section 132A of the Act, in respect
of a person other than the assessee. This is subject to the same having a
bearing on the determination of income of the assessee. The AO is
neither require to record reasons for his belief that the income of the
assessee for the concerned assessment year has escaped assessment nor
does he require to seek further approvals as required under Section 148
of the Act. However, he must be satisfied that the assets seized or
requisitioned or the documents, books of account or other material
transmitted by the AO of the searched person belongs to or contains
information, which has a bearing on the determination of the income of
the assessee. The reassessment must be predicated on material held to
be incriminating and the income assessed / reassessed must be relatable
to the material found as held by this Court in Commissioner of Income

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Tax v. Kabul Chawla9 and affirmed by the Supreme Court in Principal
Commissioner of Income-tax, Central-3 v. Abhisar Buildwell (P)
Ltd.4.

62. In Shyam Sunder Khandelwal v. Assistant Commissioner of
Income Tax (and connected petitions)1, the Rajasthan High Court had
interpreted the non obstante clause of Sections 153A and 153C to have
an overriding effect on the legal provisions for assessment /
reassessment including under Sections 139,147,148, 149 and 153 of the
Act. We are unable to concur that the said provisions are overridden
merely on account of assets, books of account, documents and material
being seized or requisitioned which either belong to or contain
information regarding a person other than the one searched. If the AO
does not exercise the jurisdiction under Section 153C of the Act,
recourse to the normal provisions of assessment or reassessment are not
foreclosed. The provisions of Section 153C of the Act are enacted for
the purpose of simplifying the procedure in search cases. The import
of such provisions cannot be to oust the recourse to the normal
provisions, which in any event are available for assessment /
reassessment of an income of an assessee.

63. The decision of the Patna High Court in Amit Kumar alias Amit
Saraf v. Union of India3 relied upon by the learned counsel for the
Assessee, was rendered in the context of Section 153A of the Act where
the AO has to necessarily issue a notice and undertake the assessment /
reassessment proceedings in cases where a search is conducted under
Section 132 of the Act or requisition is made under Section 132A of the

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Act. In the said case, the time period thus available for completion of
the assessment as specified under Section 153B of the Act had expired.
Thus, this is a case where by virtue of Section 153A of the Act, the AO
has assumed jurisdiction but had not completed the assessment within
the prescribed period.

64. We are, respectfully, unable to concur with the decision of the
Karnataka High Court in The Pr. Commissioner of Income Tax & Anr.
v. M/s VSL Mining Company Pvt. Ltd.2. In the said case, the Court
concluded that “once material pursuant to a search is relied on, the AO
is required to follow the procedure as contemplated under Sections
153A, 153B and 153C of the Act and recourse of regular proceedings
are barred.

65. In the facts of the present case, the Revenue disputes that a
satisfaction note by the AO of the searched person (Jain Brothers) was
forwarded to the AO of the Assessee along with the requisite
documents. Thus, in the facts of the present case, the jurisdictional
conditions to initiate further steps under Section 153C of the Act were
not satisfied. However, the AO had received certain information from
the AO. A report was also received from the Investigation Wing,
Mumbai regarding the Assessee purchasing units of a penny stock
during the financial year 2010-11. Based on the aforesaid information,
including the information received from the Investigation Wing,
Mumbai, the AO issued a notice dated 23.08.2018 under Section 148 of
the Act. Admittedly, there is nothing on record to indicate that the AO
of the searched person had recorded a satisfaction note and transmitted

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the relevant material containing information regarding the Assessee to
the AO. There is also no material that the AO had on receipt of the said
information issued a notice under Section 153C of the Act. Thus, in
fact the AO did not assume jurisdiction under Section 153C of the Act.
Absent assumption of any jurisdiction, the question of Sections 147,
148 and 149 of the Act being overridden by virtue of the non obstante
clause of Section 153C of the Act, does not arise. The said clause would
be operative only if the AO had in fact assumed jurisdiction under
Section 153C of the Act. In that eventuality, recourse to the provisions
as named in the opening sentence of Sections 139, 147, 149, 151 and
153 of the Act would be ousted.

66. In the present case, the re-assessment proceedings are initiated
under Section 147 of the Act not only on the basis of the material
containing information that was found during the search conducted in
respect of Jain Brothers, but is also founded on the basis of other
information as obtained by the Investigation Wing, namely, that the
Assessee had purchased units of a penny scrip named SVC Resource
Ltd. This being the case, the decision of the Assessing Officer to re-
assessee the income of the Assessee under Section 147 of the Act cannot
be faulted.

67. The question of law as framed in the present case is answered in
the aforementioned terms. The impugned order passed by the learned
ITAT cannot be sustained. Since, the learned ITAT had not examined
the other grounds on which the Assessee had filed its appeal, we set
aside the impugned order and the Assessee’s appeal (ITA

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No.592/DEL/2020) in respect of the AY 2011-12 is restored before the
learned ITAT.

68. The appeal is allowed in the aforesaid terms.

VIBHU BAKHRU, J

SWARANA KANTA SHARMA, J
NOVEMBER 20, 2024
‘gsr’

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