Delhi High Court
Shweta Jain vs Assistant Commissioner Of Income Tax, … on 14 January, 2025
Author: Vibhu Bakhru
Bench: Tushar Rao Gedela, Vibhu Bakhru
$~76
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 14.01.2025
+ W.P.(C) 310/2025 & CM APPL. 1486-87/2025
SHWETA 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.
Mr Sandeep Vishnu, SPC, Advocate
for R2/UOI.
CORAM:
HON’BLE THE ACTING CHIEF JUSTICE
HON’BLE MR. JUSTICE TUSHAR RAO GEDELAVIBHU 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.
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 presentSignature Not Verified
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SINGH RAWAT
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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 153C of the Act, 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.
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SINGH RAWAT
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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 it apposite 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 Proviso to Section
149(1). A reassessment action would thus have to not
only satisfy the time frames constructed in terms of
Section 149, but in a relevant case and which is
concerned with a search, also those which would be
applicable by 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
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SINGH RAWAT
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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 the 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 theSignature Not Verified
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SINGH RAWAT
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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
Section 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 theSignature Not Verified
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SINGH RAWAT
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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.
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
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SINGH RAWAT
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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 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
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SINGH RAWAT
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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 date 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 31.3.2021, the period of limitation under Section 153C of the Act
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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).
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 period of 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 2Signature Not Verified
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2023-24 3
2022-23 4
2021-22 5
2020-21 6
2019-20 7
2018-19 8
2017-18 9
2016-15 10
2015-16 11 (Beyond terminal point of 10
years)
13. The learned 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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SINGH RAWAT
Signing Date:19.01.2025
11:09:22
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