ACIT, NEW DELHI vs. M/S. U.K. PAINTS INDIA PVT. LTD., NEW DELHI

PER SAKTIJIT DEY, JUDICIAL MEMBER:

by the Revenue are as under:

1. The order of Ld. CIT(A) is not correct in law and on facts.

2. On the facts and circumstances of the case, the Ld. CIT(A) has erred in quashing the order u/s. 153C on the ground that proper satisfaction has not been recorded:

3. On the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the date of recording satisfaction i.e. 08.10.2013 should be taken into account for determining the 6 years covered u/s. 153C instead of date of search i.e. 16.09.2011, even when the A.O. was same in both cases and no seized material has been transferred in reality.

4. On the facts and circumstances of the case, the Ld. CIT(A) has erred in ignoring the fact that in the Trilok Singh Dhillon & Ors. the Chhatisgarh High Court has held that the provisions of sub – section (1) to section 153C of the Act are not applicable in a case where the same A.O. has jurisdiction over the person searched and the third person.

5. The appellant craves leave to add, delete, amend any/all the grounds of appeal before or during the course of hearing of the appeal.

3. Briefly, the facts are that a search and seizure operation under Section 132 of the Income-Tax Act, 1961 was conducted on K.S. Dhingra, & G.S. Dhingra and other group entities on 16.09.2011. Consequent to such search and seizure operation and based on incriminating material alleged to have been found during such search operation, proceedings under Section 153C of the Act was initiated against the assessee for the year under consideration. In response to the statutory notices issued, assessee participated in the assessment proceedings. Ultimately, the Assessing Officer passed an assessment order under Section 153C read with section 143(3) of the Act on 28.03.2014 adding back an amount of Rs.6,21,00,000 to the income of the assessee. Challenging the assessment order, assessee filed an appeal before learned Commissioner (Appeals), inter alia, on the ground that the assessment order passed under Section 153C being without jurisdiction is invalid. It was the specific plea of the assessee before learned Commissioner (Appeals) that since the satisfaction note under Section 153C of the Act was recorded on 08.10.2013, in terms of section 153C read with section 153A of the Act, the Assessing Officer could have initiated proceedings under Section 153C of the Act for six preceding assessment years. In other words, it was the contention of the assessee that the block of six assessment years for which the Assessing Officer could have exercised jurisdiction under Section 153C read with section 153A of the Act are for assessment years 2008-09 to 2013-14. Being convinced with the submissions of the assessee and following the decision of Hon'ble jurisdictional High Court in case of CIT vs. RRJ Securities Ltd. (2015) 62 Taxmann.com 391 (Del.), learned Commissioner (Appeals) held that the Assessing Officer has no jurisdiction to initiate proceedings under Section 153C of the Act for assessment year 2006-07.

Accordingly, he quashed the assessment order.

As rightly observed by learned Commissioner (Appeals), the ratio laid down by the Hon'ble jurisdictional High Court in case of CIT vs. RRJ Securities Ltd. (supra) squarely applies to the present case. In this context, the following observations of learned Commissioner of Income-Tax(Appeals) would be of much relevance:

“4.2.4 I have considered the matter. As far as appellate authorities under the jurisdiction of the Hon'ble Delhi High Court are concerned, the existing law in this regard as now well settled by the Hon'ble Delhi High Court in the case of CIT vs. RRJ Securities Ltd. [2015] 62 taxmann.com 391 (Delhi). The relevant part of the judgment of Hon'ble Delhi High Court is reproduced below:

“24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of search under the second proviso to Section 153A of the Act has to be construed as the date of handing over of assets/documents belonging to the Assessee (being the person other than the one searched) to the AO having jurisdiction to assess the said Assessee. Further proceedings, by virtue of Section 153C(1) of the Act, would have to be in accordance with Section 153A of the Act and the reference to the date of search would have to be construed as the reference to the date of recording of satisfaction. It would follow that the six assessment years for which assessments/reassessments could be made under Section 153C of the Act would also have to be construed with reference to the date of handing over of assets/documents to the A.O of the Assessee. In this case, it would be the date of the recording of satisfaction under Section 153C of the Act, i.e. 8th September, 2010. In this view, the assessments made in respect of assessment years 2003-04 and 2004-05 would be beyond the period of six assessment years as reckoned with reference to the date of recording of satisfaction by the AO of the searched person. It is contended by the Revenue that the relevant six assessment years would be assessment years prior to the assessment year relevant to the previous year in which the search was conducted. If this interpretation as canvassed by the Revenue is accepted, it would mean that whereas in case of a person searched, assessments in relation to six previous years preceding the year in which the search takes place can be reopened but in case of any other person, who is not searched but his assets are seized from the searched person, the period for which the assessments could be reopened would be much beyond the period of six years. This is so because the date of handing over of assets/documents of a person, other than the searched person, to the AO would be subsequent to the date of the search. This, in our view, would be contrary to the scheme of Section 153(1) of the Act, which construes the date of receipt of assets and documents by the AO of the Assessee (other than one searched) as the date of the search on the Assessee. The rationale appears to be that whereas in the case of a searched person the AO of the searched person assumes possession of seized assets/documents on search of the Assessee; the seized assets/documents belonging to a person other than a searched person come into the possession of the AO of that person only after the AO of the searched person is satisfied that the assets/documents do not belong to the searched person. Thus, the date on which the AO of the person other than the one searched assumes the possession of the seized assets would be the relevant date for applying the provisions of Section 153A of the Act. We, therefore, accept the contention that in any view of the matter, assessment for A.Y 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee’s income for that year.”

4.2.5 The binding law therefore is that for assessments carried out by issue of notice u/s. 153C, the period of 6 years shall be reckoned with respect to the date in which A.O. of the other person assumes possession of the seized assets/documents. In a case where the A.O. of the searched person as well as of the other person is one and the same, the date on which satisfaction is recorded would be the date on which A.O. assumes possession of the seized documents in his capacity as A.O. of the person other than person searched. Following this binding law as laid down by the Jurisdictional High Court, I hold that the issue of notice and consequently, the assessment made u/s. 153C is without jurisdiction for the A.Y. 2006-07 and has to be quashed. I direct accordingly. These grounds of appeal succeed.”

Order pronounced in the open court on 13th May, 2022.