MUKESH MANEKCHAND SHETH vs. ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-2

Facts

The writ applicant, Mukesh Manekchand Sheth, challenged notices issued under Section 153C of the Income Tax Act, 1961, for Assessment Years (AY) 2009-10 to AY 2015-16. The challenge was based on the legality and validity of these notices. The case was heard by the Gujarat High Court, which referred to a coordinate bench's judgment dated April 2, 2019, that dealt with a batch of similar writ applications concerning Section 153C notices. The coordinate bench had addressed four key questions regarding the maintainability of the petitions, the applicability of amended Section 153C provisions, limitation, and the relevant assessment years under Section 153A.

Held

The High Court, following a coordinate bench's decision, held that the writ applications were maintainable. Regarding the applicability of amended Section 153C, it was held that the amended provisions, effective from June 1, 2015, were prospective and not applicable to searches initiated before that date, as applying them retrospectively would affect substantive rights. On the issue of limitation, the Court found that if the statute provides an alternative period of limitation, the notices are not barred merely because the initial period has elapsed. Critically, concerning the relevant assessment years under Section 153A, the Court held that the six assessment years preceding the assessment year relevant to the previous year of search are the only ones that can be covered. For a search on September 4, 2013, the relevant AY was 2014-15, making the six preceding AYs 2013-14 to 2008-09. For searches on December 4, 2014, and March 13, 2015, the relevant AY was 2015-16, making the six preceding AYs 2014-15 to 2009-10. Notices issued for assessment years beyond these six years were held to be without jurisdiction. Consequently, the impugned notices and any assessment orders passed under Section 153C were quashed and set aside.

Key Issues

1. Whether the writ applications challenging notices under Section 153C of the Income Tax Act, 1961, were maintainable? 2. Whether Section 153C of the Act, as amended effective from June 1, 2015, was applicable to cases where the search was initiated prior to that date? 3. Whether the notices issued under Section 153C of the Act were barred by limitation? 4. What are the relevant Assessment Years contemplated under Section 153A of the Act for issuing notices? Assessee's Contentions: The assessee challenged the notices under Section 153C on grounds of legality and validity, implicitly arguing they were issued beyond the prescribed period or without proper jurisdiction. The specific arguments are not detailed but are inferred from the reliefs sought (quashing notices and staying proceedings). Revenue's Contentions: The revenue's contentions are not recorded in the judgment. The judgment notes that Mrs. Mauna Bhatt, learned senior standing counsel, waived service of notice of rule on behalf of the respondent.