ASSISTANT COMMISSIONER OF INCOME TAX, NEW DELHI vs. KINETIC COMMUNICATIONS LIMITED, PUNE, MAHARASHTRA

PER ANUBHAV SHARMA, JM:

This appeal is preferred by the Revenue against the order dated
16.08.2024 of the Commissioner of Income-tax (Appeals)-26, New Delhi
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(hereinafter referred to as the Ld. First Appellate Authority or ‘the Ld. FAA’, for short) in Appeal No.10641/2014-15 arising out of the appeal before it against the order dated 28.03.2023 passed u/s 153C r.w.s. 143(3) of the Income
Tax Act, 1961 (hereinafter referred as ‘the Act’) by the ACIT, Central Circle-
15, New Delhi (hereinafter referred to as the Ld. AO). The assessee has filed the Cross Objection.

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The necessary facts and relevant findings of Ld. CIT(A) are reproduced below:
“6.2.1. On perusal of the assessment order, it has been found that a search
& seizure operation u/s 132 of the Act was carried on 02.01.2020 in the Sushen Mohan Gupta and Group of cases. In the said search, premise of M/s ZF Steering Gear India Limited was also covered where some documents including digital data, pertaining to the appellant were found and seized. The AO of the searched person recorded his satisfaction on and handed over the relevant seized material to the AO of the other person i.e. the appellant as certain documents pertaining to the appellant which have bearing on determination of total income for the relevant assessment year. The Ld. AO has also recorded his satisfaction u/s 153C of the Act for the year under consideration on 24.08.2022 and issued notice u/s 153C of the Act in the case of appellant for the assessment year 2015-16 on 25.08.2022. The assessment proceedings u/s 153C of the Act were completed for the year under consideration on 28.03.2023. 6.2.2. The judicial position of the judgment of CIT v. RRJ Securities 380
ITR 612 has been examined in detail. The relevant para of the order of Juri ictional High Court in the case of CIT v, RRJ Securities 380 ITR 612
has held as under;

“24. As discussed hereinbefore, in terms of proviso to Section 153C of the Act, a reference to the date of the search under the second proviso to Section 153 A 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 A O having juri iction 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 AO 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 the assessment years prior to the assessment year relevant to the previous year in which the search
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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 153C(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 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 AY 2003-04 and AY 2004-05 were outside the scope of Section 153C of the Act and the. AO had no juri iction to make an assessment of the Assessee's income for that year. ”

“13) Mr. Jehangir D. Mistri, learned senior counsel appearing for the assessee, countered the aforesaid submissions. He argued that the Tribunal was right in permitting the assessee to raise the issue regarding validity of notice under Section 153C of the Act when it was ex facie found that such a notice was time barred and, therefore, it. was a juri ictional ground which, could be raised by the assessee. Coming to the merits of that ground, learned senior counsel submitted that the Satisfaction Note dated April 18, 2007
is ex facie recorded/prepared by the AO in his capacity as the AO of the assessee society and does not http://www. itatonline.org 10
set out the date on which the books of accounts or documents or assets seized etc. from the person searched were handed over/dealt with in the capacity of AO of the assessee society, but this cannot be earlier than April 18, 2007, i.e. the date when the Satisfaction
Note was prepared. Since the Assessment Order pursuant thereto
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can be passed under Section 153A(1) of the Act for a period of six
Assessment Years, immediately preceding the Assessment. Year relevant to the Previous Year in which the books of accounts or documents or assets were received by the AO of the assessee, he argued that no notice could have been issued for the Assessment
Years prior to 2002-03. Therefore, notice for the Assessment Years
2000-01 and 2001-02 was clearly time barred. In respect of Assessment Years 2002-03 and 2003-04, the submission of Mr.
Mistri was that one of the juri ictional conditions precedent to the issue of a notice under Section 153C is that ‘money, bullion, jewellery or other valuable article or thing’ or any ‘books of accounts or documents' must be seized or requisitioned. In the present case, nothing was seized relating to any of the Assessment
Years in question and hence the notice under Section 153C and the assessment under Section 153A, read with Section 153C, pursuant thereto are invalid. ”

“In the present batch., List I pertains to writ petitions which have Satisfaction Notes recorded or section 153C notices issued between the period 1-4-2021 to 31- 3-2022. Undisputedly, the First
Proviso to section 153C, and which has been consistently recognized to also embody the commencement point for reckoning the six or the ten assessment years, shifts the relevant date from the date of initiation of search or a requisition made to the date of receipt of books of account or documents and assets seized by the juri ictional Assessing Officer of the non¬searched person.
Consequently, the block of six or ten assessment years would have to be reckoned bearing the aforesaid date in mind. Although in the present batch of writ petitions, the date of actual handing over has not been ' explicitly mentioned in a majority of the writ petitions, learned counsels for respective sides had addressed submissions based on the assumption that it would be the date of issuance of the Satisfaction Note by the Assessment Officer of the non- searched person and in the case of non-availability of such a note, the date of issuance of the section 153C notices which would be pertinent for the purposes of the First Proviso to section 153C.
[Para 86]


Assuming, therefore, that the handover of material gathered in the course of the search and pertaining to the non-
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searched person occurred between 1-4-2021 to 31-3-2022, the same would essentially constitute financial year 2021- 22 as being the previous year of search for the purposes of the non-searched entity. As a necessary corollary, the relevant assessment year would become assessment year 2022-23. Assessment year 2022-23
would thus constitute the starting point for the purposes of identifying the six years which are spoken of in section 153C. The six assessment years are envisaged to be those which immediately precede the assessment year so identified with reference to the previous year of search. It would thus lead us to conclude that it would be the six assessment year immediately preceding assessment year 2022-23 which could have formed the basis for initiation of action under section 153C. Consequently, assessment year 2021-22 would become the first of the six preceding assessment year and would as per the table set out hereinabove terminate at assessment year 2016-17. [Para 87]

In view of the above, since, the assessing officer has initiated assessment proceedings under section 153C for the six assessment years starting from AY 2016-17 to AY 2021-22, following the current judicial views the AY
2015-16 was outside the purview of the AO to initiate proceedings U/s 153C of the Act. Therefore, the relevant Assessment Year i.e. 2015-16 of the appellant is outside the purview of section 153C of the Act and thus, the assessment order framed u/s 153C of the Act for the assessment year 2015-
16 is barred by limitation. Accordingly, the ground taken by the appellant is allowed to that extent.”
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Order pronounced in the open court on 17.04.2025. (AVDHESH KUMAR MISHRA)
JUDICIAL MEMBER

Dated: 17th April, 2025. dk