Delhi High Court
Mahender Kumar Jain vs Assistant Commissioner Of Income Tax, … on 14 January, 2025
Author: Vibhu Bakhru
Bench: Tushar Rao Gedela, Vibhu Bakhru
$~77
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 14.01.2025
+ W.P.(C) 312/2025 & CM APPL. 1489-90/2025
MAHENDER KUMAR JAIN
.....Petitioner
Through: Mr Deepanshu Jain and Mr Shaantanu
Jain, Advocates.
versus
ASSISTANT COMMISSIONER OF INCOME TAX,
CENTRAL CIRCLE 3, DELHI & ANR.
.....Respondents
Through: Mr Sunil Aggarwal, SSC, Mr
Shivansh B Pandya, Mr Viplav
Acharya, JSCs and Mr Utkarsh
Tiwari, Advocate for the Revenue.
Mr Atul Kumar Pandey, Advocate for
R2.
CORAM:
HON’BLE THE ACTING CHIEF JUSTICE
HON’BLE MR. JUSTICE TUSHAR RAO GEDELA
VIBHU BAKHRU, ACJ. (ORAL)
1. The petitioner has filed the present petition, inter alia, impugning a
notice dated 30.08.2024 (hereafter the impugned notice) issued under
Section 148 of the Income Tax Act, 1961 (hereafter the Act) in respect of the
assessment year (AY) 2015-16. The petitioner also challenges the
constitutional validity of Explanation 2 to Section 148 of the Act.
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2. Mr Jain, the learned counsel appearing for the petitioner has confined
the present petition to assailing the impugned notice on the ground that it is
barred by limitation. He submits that the controversy involved in the present
petition is covered in favour of the petitioner by the earlier decision of this
court in Dinesh Jindal v. Assistant Commissioner of Income Tax, Central
Circle 20, Delhi & Others: Neutral Citation: 2024: DHC:4554-DB.
3. Undisputedly the initiation of the reassessment proceedings pursuant
to the search carried out on or after 01.04.2021 necessarily requires to be
initiated within the time frame as specified under Section 153A of the Act,
which was in force at the material time. The reassessments covered under
Section 153C of the Act are required to be reckoned from the date on which
the Assessing Officer (AO) of the searched person records the satisfaction
that the books of account, or documents or the material belongs to the
assessee (person other than the searched person) or contains information
relating to such other person.
4. In terms of Section 153A of the Act, the maximum of ten years is
required to be computed from the end of the assessment year relevant to the
financial year in which such satisfaction note was recorded. This issue is
also covered by an earlier decision of this court in The Pr. Commissioner of
Income Tax – Central-1 v. Ojjus Medicare Pvt. Ltd : Neutral Citation :
2024:DHC: 2629-DB.
5. Admittedly, in the present case, there is no material on record which
indicates that satisfaction note, as required under Section 153 C of the Act,Signature Not Verified
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SINGH RAWAT
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as in force at the material time, had been prepared by the AO of the searched
person and the relevant material belonging to or containing the information
pertaining to the petitioner had been handed over by the AO of the searched
person to the AO of the assessee.
6. In view of the above, the date of the issuance of the notice is required
to be considered for the purpose of computing the period of limitation as
would be applicable to the notice under Section 153C of the Act.
7. We also consider to refer to the following extract from the decision of
this court in Dinesh Jindal v. Assistant Commissioner of Income Tax,
Central Circle 20, Delhi & Others: (supra): –
8. Undisputedly, and in terms of Section 153C(3)
of the Act, any search if conducted after 01 April
2021, would cease to be regulated by that
provision. Sub-section (3), in that sense, embodies
a sunset clause insofar as the applicability of
Section 153C is concerned. The First Proviso to
Section 149(1), however, bids us to go back in a
point of time, and to examine whether a reopening
would sustain bearing in mind the timeframes as
they stood embodied in Section 149(1)(b) or
Section 153A and 153C, as the case may be. The
First Proviso essentially requires us to undertake
that consideration bearing in mind the timeframes
which stood specified in Sections 149, 153A and
153C as they stood prior to the commencement of
Finance Act, 2021.
9. Thus, an action of reassessment which comes to
be initiated in relation to a search undertaken on or
after 01 April 2021 would have to meet the
foundational tests as specified in the First ProvisoSignature Not Verified
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SINGH RAWAT
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to Section 149(1). A reassessment action would
thus have to not only satisfy the time frames
constructed in terms of Section 149, but in a
relevant case and which is concerned with a
search, also those which would be applicable by
virtue of the provisions of Section 153A and 153C.
10. Undisputedly, and if the validity of the
reassessment were to be tested on the anvil of
Section 153C, the petitioner would be entitled to
succeed for the following reasons. It is an
undisputed fact that the proceedings under Section
148 commenced on the basis of the impugned
notice dated 30 March 2023. This date would be of
seminal importance since the period of six AYs’ or
the “relevant assessment year” would have to be
reckoned from the date when action was initiated
to reopen the assessment pertaining to AY 2013-
14.
11. The computation of the six or the block of ten
AYs’ was explained by us in Ojjus Medicare
Private Limited in the following terms:
“D. The First Proviso to Section 153C
introduces a legal fiction on the basis of
which the commencement date for
computation of the six year or the ten year
block is deemed to be the date of receipt
of books of accounts by the jurisdictional
AO. The identification of the starting
block for the purposes of computation of
the six and the ten year period is governed
by the First Proviso to Section 153C,
which significantly shifts the reference
point spoken of in Section 153A(1), while
defining the point from which the period
of the “relevant assessment year” is to be
calculated, to the date of receipt of theSignature Not Verified
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SINGH RAWAT
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books of accounts, documents or assets
seized by the jurisdictional AO of the
non-searched person. The shift of the
relevant date in the case of a non-searched
person being regulated by the First
Proviso of Section 153C(1) is an issue
which is no longer res integra and stands
authoritatively settled by virtue of the
decisions of this Court in SSP Aviation
and RRJ Securities as well as the decision
of the Supreme Court in Jasjit Singh. The
aforesaid legal position also stood
reiterated by the Supreme Court in
Vikram Sujitkumar Bhatia. The
submission of the respondents, therefore,
that the block periods would have to be
reckoned with reference to the date of
search can neither be countenanced nor
accepted .
E. The reckoning of the six AYs’ would
require one to firstly identify the FY in
which the search was undertaken and
which would lead to the ascertainment of
the AY relevant to the previous year of
search. The block of six AYs’ would
consequently be those which immediately
precede the AY relevant to the year of
search. In the case of a search assessment
undertaken in terms of Section 153C, the
solitary distinction would be that the
previous year of search would stand
substituted by the date or the year in
which the books of accounts or
documents and assets seized are handed
over to the jurisdictional AO as opposed
to the year of search which constitutes the
basis for an assessment under SectionSignature Not Verified
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153A .
F. While the identification and
computation of the six AYs’ hinges upon
the phrase “immediately preceding the
assessment year relevant to the previous
year” of search, the ten year period would
have to be reckoned from the 31st day of
March of the AY relevant to the year of
search. This, since undisputedly,
Explanation 1 of Section 153A requires us
to reckon it “from the end of the
assessment year”. This distinction would
have to necessarily be acknowledged in
light of the statute having consciously
adopted the phraseology “immediately
preceding” when it be in relation to the
six year period and employing the
expression “from the end of the
assessment year” while speaking of the
ten year block .”
12. Viewed in that light, it is manifest that AY
2013-14 would fall beyond the block period of ten
years. It becomes pertinent to note that the First
Proviso to Section 149(1) compels us to test the
validity of initiation of action for reassessment
commenced pursuant to a search, based upon it
being found that the proceedings would have
sustained bearing in mind the timelines prescribed
in Sections 149, 153A and 153C, as they existed
prior to the commencement of Finance Act, 2021.
This necessarily requires us to advert to the
timeframes comprised in both Section 149(1)(b) as
well as Section 153C as it existed on the statute
book prior to 01 April 2021, which undisputedly
was the date from when Finance Act, 2021 came
into effect.
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SINGH RAWAT
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13. While it is true that Section 153C and the
procedure prescribed therein had ceased to be
applicable post 31 March 2021, the First Proviso to
Section 149(1) does not appear to suggest that the
First Proviso to Section 153C(1) would either
become inapplicable or be liable to be ignored.
Undisputedly, the First Proviso to Section
153C(1), by virtue of a legal fiction enshrined
therein requires one to treat the date of initiation of
search, and which otherwise constitutes the
commencement point for a search assessment in
the case of a non-searched party, to be construed as
the date when books of accounts or documents and
assets seized or requisitioned are transmitted to the
AO of such “other person”. Resultantly, the
computation of the six preceding AYs’ or the
“relevant assessment year” in the case of the non-
searched entity has to be reckoned from the time
when the material unearthed in the search is
handed over to the jurisdictional AO. The import
of this legal fiction is no longer res integra bearing
in mind the judgment of the Supreme Court in CIT
v. Jasjit Singh & Ors.:2023 SCC OnLine SC 1265
and the whole line of precedents rendered by our
High Court which were noticed in Ojjus Medicare
Private Limited. Those decisions have consistently
held that in the case of a non-searched entity, it is
the date of hand over of material, as opposed to
that of the actual search which would constitute the
starting point for reckoning the block of six or ten
AY’s.
14. However, Section 149(1), as it came to be
placed and introduced in the statute book by virtue
of Finance Act, 2021, neither effaces nor removes
from contemplation the First Proviso to Section
153C(1). Consequently, in cases where a search is
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SINGH RAWAT
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conducted after 31 March 2021, the said Proviso
would have to be construed and tested with
reference to the date when the AO decides to
initiate action against the non-searched entity.
While in the case of a search initiated after 31
March 2021 there would be no actual hand over of
material to the and the whole line of precedents
rendered by our High Court which were noticed in
Ojjus Medicare Private Limited. Those decisions
have consistently held that in the case of a non-
searched entity, it is the date of hand over of
material, as opposed to that of the actual search
which would constitute the starting point for
reckoning the block of six or ten jurisdictional AO,
that does not convince us to revert to Section 153A
and hold that the block period is liable to be
computed from the date of search. That, in our
considered opinion, would amount to rewriting
Section 153C which would clearly be
impermissible.”
[emphasis added]
8. In ATS Township Pvt Ltd v. Assistant Commissioner of Income Tax
Circle 1(1) Delhi & Others: Neutral Citation : 2024: DHC: 9978-DB, this
court had noted the decision in Dinesh Jindal v. Assistant Commissioner of
Income Tax, Central Circle 20, Delhi & Others: (supra) in regard to the
aspect of computation of the period, which could be covered under Section
153C of the Act in the context of search conducted under Section 132 of the
Act or requisition made under Section 132A of the Act, and had observed as
under:-
“10. The learned counsel for the Revenue had also
contended that the date of placing the material on
the insight portal ought to be considered the dateSignature Not Verified
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SINGH RAWAT
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of search for the purposes of computing limitation
under Section 153C of the Act. However, prima
facie, the same is contrary to the decision in
Dinesh Jindal v. Assistant Commissioner of
Income Tax, Central Circle 20, Delhi & Others:
(supra). It is to be noted that in said case, this
court had reasoned that in case of a search after
31.03.2021, there would be no actual handover of
material to the jurisdictional Assessing Officer and
therefore it would not be permissible to revert to
Section 153A of the Act for the purposes of
computing the period of limitation from the date of
the search. Prima facie, this reasoning would also
hold good in case of assuming the date of placing
information on insight portal as the date of search
for the purposes of the proviso to Section 153C of
the Act.
11. Uploading of information by the investigation
wing of the Income Tax department would not be a
substitute for recording of a satisfaction note by
the AO of a searched person and handing over the
assets, books of accounts or other material to the
AO of the person other than the searched person
for the purpose of initiation of proceedings under
Section 153C of the Act.”
9. It is apparent from the above, that in cases the search is conducted
after 31.03.2021, the period of limitation under Section 153C of the Act
would have to be construed with reference to the date on which the AO
decides to initiate action against a non-searched person.
10. It is relevant to note that in the present case, the AO exercising
jurisdiction in respect of the petitioner had prepared the satisfaction note (in
terms of Clause (iv) of Explanation 2 to proviso to Section 148 of the Act).
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SINGH RAWAT
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However, that cannot be construed as a satisfaction note by the AO of the
searched person. The date of the said satisfaction note cannot be considered
as the start point to consider the limitation period under Section 153C of the
Act.
11. It is also material to note the satisfaction note was prepared on
23.08.2024 and was approved on 29.08.2024 by the Chief Commissioner of
Income Tax. Thus, even if the limitation is computed on the basis of the
aforesaid approval, the same would be required to be computed from the end
of the assessment year relevant to the financial year in which such
satisfaction note was prepared.
12. The petitioner has set out a tabular statement in support of his
contention that the AY 2015-16 is beyond the period of ten years. The said
tabular statement is reproduced below: –
Analysis of time-period to issue reassessment notice.
Date of impugned notice under section 148 is 30.08.2024
This chart is prepared in light of the first proviso of
Section 149 of the Act as amended by Finance Act, 2021
Relevant Assessment Without prejudice, computation
Year for initiating of 10 years in light of first
proceedings under proviso to
Section 148 of the Section 149
Act
2025-26 1
2024-25 2
2023-24 3
2022-23 4
2021-22 5
2020-21 6
2019-20 7
2018-19 8
2017-18 9Signature Not Verified
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2016-15 10
2015-16 11 (Beyond terminal point of 10
years)
13. The learned counsel for the Revenue concurs with the aforesaid view.
14. In view of the above, the present petition is allowed. The impugned
notice and the proceedings pursuant thereto are set aside.
15. Pending applications are also disposed of.
VIBHU BAKHRU, ACJ
TUSHAR RAO GEDELA, J
JANUARY 14, 2025
M
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Signature Not Verified
Digitally Signed By:GANGA W.P. (C) 312/2025 Page 11 of 11
SINGH RAWAT
Signing Date:19.01.2025
11:09:22
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