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Facts
A search and seizure operation was conducted on M3M Group on 21.07.2016, during which documents pertaining to the assessee, Marconi Infratech Pvt. Ltd., were seized. The Assessing Officer recorded satisfaction on 31.10.2018 and issued a notice under Section 153C to the assessee on 22.11.2018 for Assessment Years 2011-12 to 2017-18. The assessee challenged the notices for A.Ys. 2011-12 and 2012-13, contending they were time-barred and the satisfaction note was invalid due to lack of correlation with seized material.
Held
The Tribunal held that the satisfaction note, recorded on 31.10.2018, meant the six-year block period for assessment under Section 153C would commence from A.Y. 2013-14, thereby rendering reassessments for A.Ys. 2011-12 and 2012-13 time-barred. It clarified that the Finance Act, 2017 amendments to Section 153C apply prospectively and did not affect the search conducted in 2016. Furthermore, the satisfaction note was found vague and failed to establish a direct correlation between the seized material and the assessee's income for the specific assessment years, thus invalidating the reassessment proceedings.
Key Issues
Whether assessment notices issued under Section 153C for A.Ys. 2011-12 and 2012-13 were time-barred given the date of satisfaction and the prospective application of the Finance Act, 2017 amendment, and whether the recorded satisfaction note was valid and established a direct correlation between seized documents and the assessee's income for the relevant assessment years.
Sections Cited
250(6), 153A(1)(b), 153B(1)(b), 143(3), 132, 127, 153C, 197, 142(1), 143(2), 148, 132A
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Income Tax Appellate Tribunal, DELHI BENCH ‘E’, NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & MS. MADHUMITA ROY
Appellant by : Shri S. S. Nager, C.A. Ms. Aabgina Chishti, Adv. & Shri Gaurav Sachdeva, C.A. Respondent by : Shri Subhra Jyoti Chakraborty, CIT-D.R. Date of Hearing 06.06.2024 21.06.2024 Date of Pronouncement O R D E R PER MS. MADHUMITA ROY – JUDICIAL MEMBER :
These bunch of appeals filed by the assessee are directed against the common order dated 28.08.2023 passed by the Learned Commissioner of Income Tax (Appeals)-3, Gurgaon under Section 250(6) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) arising out of the orders dated 18.12.2018 & 09.07.2019 passed by the to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 2 - DCIT, Central Circle – II, Faridabad under Section 153A(1)(b) and 153B(1)(b) read with Section 143(3) of the Act for Assessment Years 2011-12 to 2017-18 respectively.
2. Since all the matters relate to the same assessee, these are heard analogously and are being disposed of by this common order.
The brief facts leading to the case is this that a search and seizure operation under Section 132 of the Act was conducted on 21.07.2016 at the residential as well as office premises of M3M Group of Cases and Shri Gaurav Jain, the then VP Finance of the M3M Group. Among the seized documents, information pertaining to the assessee was found and the Assessing Officer recorded his satisfaction that the same had bearing on the determination of the total income of the assessee. The case was further centralized in the Circle by and under the order dated 10.10.2018 under Section 127 of the Act and the seized documents/materials in the group was received by the Circle from the DDIT (Inv.)-1 Gurugram. The satisfaction note was therefore, recorded by the ACIT, Central Circle-2, Faridabad i.e. the AO of the assessee on 31.10.2018 and notice under Section153C of the Act was finally issued to the assessee on 22.11.2018 directing the assessee to file its return of income in respect of Assessment Year commencing from 2011-12 to 2017-18 i.e. the six Assessment Years immediately preceding the Assessment Year relevant to the previous year in which search was conducted in this case. The block years were reopened for the period of A.Ys. 2011-12 to 2017-18 to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 3 - considering the amendment brought to Section 153C of the Act by and under the Finance Act, 2017 w.e.f. 01.04.2017. Relevant to note that, the satisfaction note was recorded subsequent to that amendment only on 31.10.2018.
At the time of hearing of the instant appeal the representative of the assessee submitted before us that the notice under Section 153C of the Act will be valid for a period of six years from the end of the financial year preceding the date on which the satisfaction was recorded. Further that as the amendment made to Section 153C would be applicable prospectively as clarified by CBDT Circular No.2/2018 dated 15.02.2018, the assessment orders passed for the A.Ys. 2011-12 to 2012- 13 is, not within the purview of the Block period as the satisfaction was recorded on 31.10.2018 and thus illegal, void ab initio, barred by limitation and therefore, liable to be quashed as the case made out by the assessee. On this issue, the Learned Counsel appearing for the assessee relied upon the judgment passed by the Co-ordinate Bench in the case of Shalimar Town Planners Pvt. Ltd. vs. ACIT, Central Circle – 23, New Delhi in 5128, 6307 & 2312/Del/2013 for A.Ys. 2005- 06, 2006-07, 2008-09 & 2009-10. It was submitted by the Ld. AR that the order quashing the assessment proceeding passed by the Coordinate bench in the above matters on the identical facts has been upheld by the Hon’ble High Court and further confirmed by the Hon’ble Apex Court. A copy of each of the order passed by the Coordinate Bench, the Hon’ble High Court and the Hon’ble Apex Court has been filed before us. He has ITA Nos. 3126 to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 4 - further relied upon the judgement passed in the matter of CIT Vs RRJ Securities Ltd, reported in (2015) 62 Taxmann.com 391 (Delhi High Court) and PCIT vs. Sarwan Agency (P.) Ltd., reported in (2017) 185 taxmann.com 269 (Delhi). The judgement passed by the Hon’ble Delhi High Court in the matter of Karina A irlines International Vs ACIT in & Ors was also relied upon.
On the other hand the Learned DR relied upon the order of assessment made by the Learned AR.
We have heard the rival contentions made by the respective parties and we have also perused the relevant materials available on record. The bone of contention of the assessee’s Counsel is this that in a case where Section 153C is applicable, date of receipt of asset and document by Assessing Officer of the assessee other than the searched person is construed as the date of search. As the date of recording satisfaction by the AO of the assessee was 31.10.2018, the past 6 years ought to have been considered for reopening was from A.Y. 2013-14 not A.Y. 2011-12 or 2012-13. Precisely the search of M3M Group was conducted though on 21.07.2016, the starting point of computation of block period under Section 153C of the Act would be the date of recording of satisfaction on the basis of seized documents and notice issued to the assessee and the reassessment proceedings for assessment years 2011-12 and 2012-13 is, therefore, beyond jurisdiction, not maintainable and void ab initio. to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 5 - 7. We note that the Learned DR has not been able to controvert such submissions made by the Assessee’s Counsel.
8. We have further considered the CBDT Circular being No.2/2018 dated 15.02.2018 annexed at page 2 of the paper book filed before us, the relevant portion thereof is as follows:
“80.1 The provisions of clause (c) of the section 197 of the Finance Act, 2016 provide that where any income has accrued, arisen or been received or any asset has been acquired out of such income prior to commencement of the Income Declaration Scheme, 2016 (the Scheme), and no declaration in respect of such income is made under the Scheme, then, such income shall be deemed to have accrued, arisen or received, as the case may be, in the year in which a notice under sub-section (1) of section 142 or sub-section (2) of section 143 or section 148 or section 153A or section 153C of the Income-tax Act is issued by the Assessing Officer, and provisions of the said Act shall apply accordingly.
80.2 In view of the various representations received from stakeholders, section 197 of the Finance Act, 2016 has been amended so as to omit clause (c) of the said section.
80.3 Applicability: This amendment takes effect retrospectively from 1st June, 2016.
80.4 However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including section 132A cases) and the same is represented in the form of undisclosed investment in any asset, section 153A of the Income-tax Act relating to search assessments has been amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided up to the tenth assessment year if— to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 6 - (i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year); (ii) such income escaping assessment is represented in the form of asset; (iii) the income escaping assessment or part thereof relates to such year or years.
80.5 Applicability: The amended provisions of section 153A of the Income-tax Act shall apply where search under section 132 of the Income-tax Act is initiated or requisition under section 132A of the Income-tax Act is made on or after the 1st day of April, 2017.
80.6 Section 153C of the Income-tax Act has also been amended to provide a reference to the relevant assessment year or years as referred to in section 153A of the Income-tax Act.
80.7 Applicability: These amendments take effect from 1st April, 2017.”
9. Along with the judgement relied upon by the Learned AR, we have also considered the judgment passed by the Co-ordinate Bench in the matter of Shalimar Town Planners Pvt. Ltd. (supra) as relied upon by the Learned AR wherein the identical issue has been discussed in the following manner :
32. Before answering these question certain facts further need to be noted. On 03.09.2008 notice u/s 153A was issued by the ld AO in case of BPTP Ltd for Assessment Year 2003-04 to 2007-08. This company was incorporated on 11.08.2003 so the effective years were assessment to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 7 - year 2004-05 to 2007-08. No satisfaction note was recorded by the ld AO in the file of BPTP Ltd with respect to the documents belonging to the assessee. For this proposition, the assessee has shown the order sheet of BPTP Ltd as well as letter dated 04.01.2016 of the ld AO, wherein, in response to RTI Query, it was stated that since the ld AO of BPTP Ltd and the assessee was same, therefore, no separate satisfaction was recorded in the file of BPTP Ltd before assuming jurisdiction in case of assessee u/s 153C of the Act. Further satisfaction was recorded in the case of the assessee on 19.08.2009 by the ld AO which is placed at page No. 17 to 20 of the PB. However, on 19.08.2009 itself, notice u/s 153C of the Act were issued to the assessee for Assessment Years 2005-06, 2006-07 and 2007-08. Admittedly, no notice u/s 153C was issued for Assessment Year 2009-10 and assessment was concluded on 15.12.2011 u/s 143(3) of the Act. In case of Shri Jasjit Singh (supra) the revenue challenged the order of the coordinate bench dated 05.11.2014 wherein, it was held that in case of the assessee the date of receipt of the seized material would be the date of search and six year period would be reckoned from that date. The coordinate bench in that case quashed the assessment framed u/s 143(3) of the Act for Assessment Year 2009-10 where the satisfaction note was recorded and material belonging to the assessee was received on 16.06.2009. The Hon'ble Delhi High Court on appeal upheld the order of the coordinate bench quashing the assessment. In the present case also identical facts are on record. The satisfaction was recorded on 19.08.2009 and assessment for Assessment Year 2009-10 is passed u/s 143(3) of the Act. Therefore, respectfully following the decision of the Hon'ble Delhi High Court for CIT Vs. Jasjit Singh [supra] we quashed the order passed by the ld AO u/s 143(3) of the Act for impugned assessment order. In view of this, additional ground raised by the assessee is allowed.
10. In this matter we find that the Hon’ble Delhi High Court in Revenue’s appeal confirmed the order passed by the Coordinate Bench which was further confirmed by the Hon’ble Apex Court by under the judgement and order dated 21 March 2024 in favour of the assessee. to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 8 - Thus the ratio laid down therein to this effect that the starting point of computation of block period under Section 153C of the Act would be the date of recording of satisfaction on the basis of seized documents and notice issued to the assessee has attained finality.
11. The assessee further relied upon a judgment passed by the Co- ordinate Bench of Tribunal in the case of Karina Airlines International Ltd. vs. ACIT in dated 09.06.2021. On this issue the relevant discussion made by the Bench is as follows:
“5. Insofar as the issue of limitation covered by ground No. 1 is concerned, it is argued by the Ld. AR that in case of a “searched person”, provisions of section 153A are applicable, in accordance with which, the assessing officer is to assess or reassess total income of “searched person” for six assessment years immediately preceding the assessment year relevant to the assessment year in which search is conducted or requisition is made; whereas the second proviso to sub- section (i) of section 153A also provides that assessment or reassessment of these six assessment years, if pending on the date of initiation of search u/s 132 or making of requisition u/s 132A, as the case may be, shall abate. On this basis he submits that, inasmuch as the search u/s 132 was conducted in the case of Sh Harvansh Chawla on 07.04.2016, the date of search falls in A.Y. 2017-18 in the case of Sh Harvansh Chawla, and consequently, the assessing officer in the case of Sh Harvansh Chawla was empowered to initiate the proceedings u/s 153A for immediately preceding six years from A.Y. 2011-12 to A.Y. 2016-17. He, however, submits that in case of the assessee who happens to be the “person other than the searched person”, provisions of section 153C are applicable and in such case, the “date of search or date of requisition” as referred to in section 153A issubstituted by the “date of handing over of documents by the assessing officer of searched person to the assessing officer of other person”. to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 9 -
6. On this premise, he continues to submit that, the assessing officer in his capacity as A.O. of the searched person has recorded satisfaction on 29.03.2019, which establishes that, at the earliest, it is the date of 29.03.2019, when the assessing officer can be presumed to have got the documents in his capacity as assessing officer of the appellant, on the basis of which proceedings u/s 153C have been initiated. Since the date of such recording of satisfaction on 29.03.2019 falls in previous year 2018-19 relevant to A.Y. 2019-20, the immediately preceding six years are A.Y. 2013-14 to A.Y. 2018-19, and, therefore, the notice u/s 153C for A.Y. 2012-13 could not have been issued by the learned Assessing Officer, as the same are barred by limitation.
Per contra, Ld. DR submits that the implementation provisions have to be interpreted in consonance with the charging provision and there cannot be any anomalous situation created by the interpretation of the implementation provision; that the provisions under sections 153A of the Act and 153C of the Act have to be construed in such a harmonious way that there will not be any different sets of 6 years for reopening of the assessments in case of the person searched and the other person. She also referred to the amendment brought by the Finance Act, 2017 w.e.f. 1/4/2017 to the effect that the 6 assessment years to be reckoned shall be the 6 previous years immediately preceding the assessment year relevant to the previous year in which the search was conducted. The sum and substance of the argument of Ld. DR is that there cannot be two sets of 6 years for the purposes of section 153A of the Act and 153C of the Act respectively.
In reply, Ld. AR submitted that in Pr. CIT v Sarwar Agency P. Ltd. [2017)185 taxmann.com 269 (Delhi) the Hon’ble jurisdictional High Court held that the amendment is only prospective in nature and has no retrospective application, and since the search in this case happened to be on 7/4/2016 it is earlier to the amendment and the amendment has, therefore, no application to the facts of the case. He further placed reliance on the decisions of the Hon’ble jurisdictional High Court in the cases of CIT v RRJ Securities Ltd. 120151 62
ITA Nos. 3126 to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 10 - taxmann.com 391 (Delhi) and ARN Infrastructure India Ltd v ACIT [20171 81taxmann.com 260 (Delhi) and the view taken by a coordinate Bench of this Tribunal in the case of MIKADOREALTORS P. LTD. VERSUS PR. CIT (CENTRAL) GURUGRAM. 2021 (5)TMI 722 - ITAT DELHI in support of his argument that the assessment is time-barred.
We have gone through the record in the light of the submissions made on either side. Insofar as the facts are concerned there is no dispute. Search in the case of Harvesh Chawla took place on 7/4/2016, the satisfaction by the learned Assessing Officer of the searched person was recorded on 29/3/2019 and the seized material was handed over to the learned Assessing Officer of the assessee who had recorded his satisfaction on 15/9/2019. It is clear that the date of search had fallen in the A.Y. 2017-18 which is relevant for the case of the person searched; whereas the satisfaction recorded by the learned Assessing Officer of the searched person on 29/3/2019 had fallen in the assessment year 2019-20 in which case the immediately preceding 6 assessment years would be assessment years 2013-14 to 2018-19; and the date of satisfaction recorded by the learned Assessing Officer of the assessee on 15/5/2019 falls in the assessment year 2020-21 in which case the immediately preceding 6 assessment years would be the assessment years from 2014- 15 to 2019-20.
It is, therefore, clear that when we reckon the 6 assessment years with reference to the recording of satisfaction by the learned Assessing Officer of the searched person or with reference to the recording of satisfaction by the learned Assessing Officer of the other person, in either case the assessment year 2012-13 is well beyond such period. So far as this factual position is concerned, it remains unassailable.
In respect of the starting point for computation of the block period, the Hon’ble Delhi High Court in the case of Pr. CIT v Sarwar Agency (P.)Ltd. [2017)185 taxmann.com 269 (Delhi) clearly held that in case of other person u/s 153C of the Act, the starting point for computation of the block period would be the date from on which based to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 11 - on the seized documents, notice is issued to the other person.It was further held by the Hon’ble court that the amendment made in section 153C by Finance Act 2017 w.e.f. 1st April 2017 which states that block period for the “searched person” as well as the “other person” would be same six AYs immediately preceding the year of search is only prospective. It makes the things clear that the search that took place on 7/4/2016 in this case is prior to amendment unaffected by the amendment made by way of Finance Act 2017.
We find that the order passed on the identical issue in the case of Pr. CIT vs. Sarwar Agency P. Ltd (supra) as relied upon by the Learned AR has been duly taken care of in the above matter and the issue has been decided in favour of the assessee.
In the case in hand, the AO of the assessee recorded satisfaction on 31.10.2018 and issued notice under Section 153C of the Act to the assessee on 22.11.2018 directing him to file its return of income in respect of block Assessment Years from 2011-12 to 2017-18 immediately preceding the Assessment Year relevant to the previous year in which search was conducted considering the amendment brought to Section 153C of the Act in terms of the notification dated 01.04.2017. But the search took place on 21.07.2016 prior to the amendment of Section 153C of the Act having prospective effect. Therefore, the case made out by the assessee is found to be acceptable.
Having regard to the aforesaid facts, since admittedly, the satisfaction was recorded by the Learned AO of the assessee on to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 12 - 31.10.2018, falls in the Assessment year 2018-19, the immediately preceding 6 Assessment Years would be the Assessment Years from 2013- 14 to 2018-2019 . Therefore, the notice under Section 153C of the Act could not have been issued for A.Ys. 2011-12 and 2012-13 as rightly pointed out by Learned Counsel appearing for the assessee. Thus, taking into consideration the entire aspect of the matter and further having regard to the amendment under 2017 Act w.e.f 01.04.2017 with prospective effect as clarified by CBDT Circular No.2/2018 dated 15.02.2018, as the recording of satisfaction was made by the Learned AO of the assessee only on 30.10.2018, the issuance of notice under Section 153C of the Act for A.Ys. 2011-12 & 2012-13 since had not fall in the previous 6 years, the assumption of jurisdiction in reopening of assessment under Section 153C of the Act for A.Ys. 2011-12 and 2012- 13, therefore, found to be not maintainable. The same is void ab initio and thus, quashed.
In the result, the assessee’s appeals for A.Ys. 2011-12 and 2012-13 are allowed.
Apart from the above fact, the Learned Counsel appearing for the assessee submitted before us that the Learned CIT(A) erred in law and also in fact in upholding the assumption of jurisdiction in the absence of a valid satisfaction note recorded in the case of searched person and the appellant under Section 153C of the Act. Rather the same is issued in access of jurisdiction. to 3132/Del/2023 Marconi Infratech P. Ltd. vs ACIT Asst.Years : 2011-12 to 2017-18 - 13 - In this regard, he has taken us to the satisfaction note recorded by the ACIT, Central Circle – II, Faridabad dated 30.10.2018 in respect of the entire block period commencing from A.Ys. 2011-12 to 2017-18 appearing at page 88 of the paper book filed by the assessee before us. The contest whereof is as follows:
“Reasons/Satisfaction note for taking up the case of M/s. Marconi Infratech Pvt. Ltd. under section 153C of the Income Tax Act, 1961
Name and address of the M/s. Marconi Infratech Pvt. Ltd. Assessee Asst. Year 2011-12 to 2017-18 PAN AAGCM1219E Status Company By virtue of the authorization of the Director of Income Tax (Investigation), Chandigarh, a search & seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter called ‘the Act’) was carried out associated with the M/s. M3M Group.
During search & seizure operation u/s 132 of the Income Tax Act carried out at Chamber No.Paras Twin Towers, Tower B, 6th Floor, Golf Course Road, Sector 54, Gurgaon 122002 belonging to M3M Group seized material i.e. Annexure A-3 was seized from the aforementioned premises.
3. In view of the above and as per the provisions of sub section (1) of the section 153C of the Act, I am satisfied that the document seized as mentioned above contains information relating to the assessee M/s. Marconi Infratech Pvt. Ltd. and will have bearing on the Marconi Infratech Pvt. Ltd. Accordingly, after consideration, it is decided to issue such other person (M/s. Marconi Infratech Pvt. Ltd.) notice as per provisions of Section 153C r.w.s 153A of the Act.