A.C.I.T., CENTRAL CIRCLE-4(3), KOLKATA, KOLKATA vs. JAIDEEP HALWASIYA, KOLKATA

The facts in brief are that the assessee filed the return of income on 29.09.2015 showing total income of ₹3,60,000/-and current year loss at ₹19,34,040/-. The case of the assessee was selected for scrutiny and assessment was framed accordingly, u/s 143(3) of the Act on 05.05.2017, assessing the total income at ₹14,56,810/-. A search action u/s 132(1) of the Act was conducted on 06.02.2019, in case of Shri Avtar Singh Kochar, wherein certain incriminating materials marked as Annexure A-1 & A-2, Team KG-01, was found and seized. These were the digital evidences in the form of conversation and whatsapp chats between Shri Avtar Singh Kochar and Shri Jaideep Halwasiya (Mobile No.9831005356). The AO received copy of the seized materials in respect of Shri Jaideep halwasiya and accordingly, notice u/s 153C of the Act was issued on 14.10.2022 after recording the detailed satisfaction. The assessee complied with the said notice

In the appellate proceedings, the ld. CIT (A) allowed the appeal of the assessee on the legal issue that the additions made by the AO was not made with reference to any incriminating material seized during the course of search and therefore, proceeding along with addition made u/s 153C of the Act was treated as void and not maintainable. The ld. CIT (A) dismissed the additional ground raised by the assessee challenging the proceeding u/s 153C of the Act as to the timeline of 6 assessment years. According to the ld CIT(A) the date of search and not the date of satisfaction note has to be considered for the purpose of reckoning the period of 6 years assessment years. The ld. CIT (A) dismissed the plea of the assessee by relying on the amendment made u/s 153C of the Act by the Finance Act, 2017. The ld. AO held that the amendment made by the Finance Act, 2017 has clarified that treatment in respect of date of initiation of search for the purpose of section 153C and 153A of the Act which is the one and the same. Ld CIT(A). Prior to the amendment date a satisfaction note used to be considered as date of initiation of search for the purpose of section 153C of the Act. However, 01.04.2017, there is no different between the date of search for the purpose of 153C of the Act and 153A of the Act.

The ld. DR on the other hand relied on the order of the ld. lower authorities by submitting that the six assessment years which can be reopened u/s 153C of the Act were to be reckoned from the assessment year relevant to financial year in which the search was conducted u/s 132(1) of the Act or requisition was made u/s 132A of the Act and therefore, the appeal of the assessee may kindly be dismissed. The ld. AR submitted that the ld. CIT (A) has rightly passed the order by relying on the amendment made by Finance Act, 2017, wherein the distinction between 153A and 153C has been done away with.

After hearing the rival contentions and perusing the materials available on record, we find that the search action u/s 132(1) of the Act was conducted on Shri Avtar Singh Kochar on 06.02.2019, during which certain incriminating material was found which was having bearing on the determination of income of the assessee i.e. Shri Jaideep Halwasiya. For the purpose of invoking provisions u/s 153C of the Act, seized materials were received by the ld. AO of the assessee vide e-mail on 26.09.2022. Now the question before us is whether the instant assessment year falls beyond the period of six assessment years which have to be reopened u/s 153C of the Act. After perusing the section 153C of the Act and proviso thereto and also the “87. Assuming, therefore, that the handover of material gathered in the course of the search and pertaining to the non-searched person occurred between 01 April 2021 to 31 March 2022, the same would essentially constitute FY 2021-22 as being the previous year of search for the purposes of the non-searched entity. As a necessary corollary, the relevant AY would become AY 2022-23. AY 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 AYs' are envisaged to be those which immediately precede the AY so identified with reference to the previous year of search. It would thus lead us to conclude that it would be the six AYs' immediately preceding AY 2022- 23 which could have formed the basis for initiation of action under section 153C. Consequently, and reckoned backward, the six relevant AYs' would be:- Computation of the six-year block period as provided under No. of years section 153C of the Act AY 2021-22 1 AY 2020-21 2 AY 2019-20 3 AY 2018-19 4 AY 2017-18 5 AY 2016-17 6 Consequently, AY 2021-22 would become the first of the six preceding AYs' and would as per the table set out hereinabove terminate at AY 2016-17.”

The Hon'ble Supreme Court in the case of ITO Vs. Vikram Sujitkumar Bhatia (supra) has also held that six assessment years has to be computed from the assessment year relevant to the financial year in which the bogus documents or assets are received by the ld. AO of the other persons from the ld. AO of the search person by holding and observing as under:-

Since, we have allowed the legal plea of the assessee in the cross objection, the revenue’s appeal becomes infractuous and is dismissed.

In the result, the appeal of the Revenue is dismissed and the cross objection by the assessee is allowed.