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Facts
A search on a third party revealed incriminating material pertaining to the assessee, leading to a Section 153C notice for A.Y. 2015-16. The Assessing Officer subsequently made a significant addition for bogus F&O losses. The assessee filed a cross-objection, contending that the assessment for A.Y. 2015-16 was barred by limitation as it fell outside the permissible six-year period, arguing that the relevant date for reckoning should be when the AO of the non-searched person received the seized materials (26.09.2022).
Held
The Tribunal held that for proceedings under Section 153C, the six assessment years must be reckoned backward from the end of the assessment year relevant to the financial year in which the AO of the non-searched person received the seized materials. As the materials were received on 26.09.2022 (F.Y. 2022-23, A.Y. 2023-24), the six assessable years are from A.Y. 2017-18 to A.Y. 2022-23. Consequently, A.Y. 2015-16 fell outside this period, rendering the assessment order under Section 153C without jurisdiction.
Key Issues
Whether the assessment for A.Y. 2015-16 under Section 153C of the Income Tax Act was barred by limitation, specifically regarding the correct date for reckoning the six assessment years based on the receipt of seized material by the Assessing Officer of the non-searched person.
Sections Cited
147, 143(3), 153A, 153A(1), 153C, 153C(1), 132, 132(1), 132A
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Income Tax Appellate Tribunal, “C” BENCH, KOLKATA
Before: SHRI RAJESH KUMAR, AM & SHRI SONJOY SARMA, JM
This is an appeal preferred by the Revenue and CO by the assessee against the order of the Commissioner of Income-tax (Appeals), Kolkata-27 (hereinafter referred to as the “Ld. CIT(A)”] dated 30.08.2024 for the AY 2015-16.
1. That, on the facts and circumstances of the case, the Ld. CIT(A) has erred in considering the search date as 06.02.2019 for computing the period of six years as per section 153C(1) of the Act without considering the first proviso to section 153C of the Act which specifies that date of initiation of search /s 153C shall be the date on which the books of account or documents or asset seized is handed over to the AO having jurisdiction over such other person u/s 153C i.e. 26.09.2022 in the case of the assessee.
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.”
“5. Ultimately, the final order which came to be passed by the Court reads as under: "In the light of the above discussion, the petitions succeed, and are accordingly, allowed. The impugned notices issued under section 153C of the Income Tax Act, 1961 in each of the petitions are hereby quashed and set aside. In cases where the assessment orders are subject matter of challenge, the impugned assessment orders are hereby quashed and set aside on the ground that the very initiation of proceedings under section 153C of the Income Tax Act, 1961 was without jurisdiction. Rule is made absolutely accordingly in each of the petitions, with no order as to cost.”
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:-
“10.2 At this stage, the first proviso to section 153C of the Act, 1961 is required to be referred to. The first proviso to section 153C of the Act, 1961 came to be inserted vide Finance Act, 2005 with retrospective effect from 1-6-2003, which provides that the reference to the date of initiation of the search under section 132 or making of requisition under section 132-A in the second proviso to sub-section (1) of section 153-A shall be construed as a reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. Proviso to section 153C as inserted vide Finance Act, 2005 reads as under: — "Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132-A in the second proviso to sub-section (1) of section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person." 10.3 Thus, as per the proviso to section 153C as inserted vide Finance Act, 2005, and the effect of the said proviso is that it creates a deeming fiction wherein any reference made to the date of initiation of search is deemed to be a reference made to the date when the Assessing Officer of the non-searched person receives the books of account or documents or assets seized etc. Thus, in the present case, even though the search under section 132 was initiated prior to the amendment to section 153C w.e.f. 1-6- 2015, the books of account or documents or assets were seized by the Assessing
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.
Order pronounced in the open court on 13.02.2025.