NITIN GUPTA HUF,DELHI vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE -32, DELHI, DELHI

The provisions of the section are further explained stating that the AO shall assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted ‘and the relevant assessment years.’ The provisions of the above section are to be read in tandem with section 153C of the Act in respect of assessment in the case of a non-searched person.

The issue, i.e. what would be the commencement point for the purposes of computation of the six year block and how the six year block will be computed is no more res Integra. In fact, as mentioned earlier, this issue has been considered by the jurisdictional High Court in the case of Ojjus Medicare (P.) Ltd. In the aforesaid judgment, with respect to what would be the commencement point for the purposes of computation of Nitin Gupta HUF the six and ten year block, the Hon’ble High Court after discussing the statutory provisions and various judicial pronouncements has held as under: “F. IDENTIFICATION OF THE COMMENCEMENT POINT FOR THE PURPOSES OF COMPUTATION OF THE SIX AND TEN YEAR BLOCK 75. The First Proviso to section 15 3C significantly shifts the reference point which is spoken of in section 153A(1) while defining the point from which the period of six AYs' is to be calculated, and which stipulates it to be the date of search or requisition, to the date of receipt of books of account, documents or assets seized or requisitioned by the jurisdictional AO of the non-searched person. The Proviso, thus by virtue of a deeming legal fiction, shifts the commencement point from the date of initiation of search or making of requisition to the date of receipt of books, documents or assets by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a. non-searched person thus being governed and regulated by the First Proviso of section 153C(1) is, however, an issue which is no longer res Integra..... ...................... ......................

The aforesaid discussion thus renders a determinative quietus to the identification of the starling post from which the block of six AYs' or the "relevant assessment year" would have to be calculated. The contention of the respondents that the said block periods would, have to be reckoned with reference to the date of search thus can neither be countenanced nor possibly accepted. That submission is clearly addressed contrary to a long and consistent line of precedents which have held to the contrary and which unequivocally accepted the point of commencement for the purposes of identifying the six or the "relevant assessment year" to be etched from the date of handover of documents, assets or things to the AO of the non-searched party. ..............

As would be evident from the above, although the decisions in Sarwar Agency and RRJ Securities were cited, the learned Judge chose to observe that the section 153C(1) Proviso would only be liable to be construed as relevant for the purposes of abatement. We find ourselves unable to sustain that line of reasoning since both Sarwar Agency as well as RRJ Securities have struck a line which is in consonance with the view taken Nitin Gupta HUF in SSP Aviation and which has since come to be affirmed by the Supreme Court in Jasjit Singh. In any case, the law as enunciated in RKM Powergen would not sustain bearing in mind the express enunciation of the legal position by the Supreme Court as is manifest from a reading of paragraph 9 of Jasjit Singh.

That then takes us to the principal question of identifying the point of origin for the purposes of computation of the six AYs' and the "relevant assessment year" as defined by section J53A. As is manifest from a plain reading of section 153C, the six AYs' are ordained to he those which immediately precede the A Y relevant to the previous year in which the search may have been conducted or requisition made. The block of six AYs' would thus have to be identified bearing in mind the AY pertaining to the FY in which the search had been conducted or requisition made. The aforesaid AY would thus constitute the anchor point for the purposes of identification of the six AYs'. The statute envisages a similar process to be adopted for the purposes of computation of the "relevant assessment year" and where applicable constructs a block of ten AYs'. The significant difference between the two however is that while the six AYs' hinge upon the phrase "immediately preceding" the AY pertaining to the search year, the ten AYs' are liable to be computed or reckoned from the end of the AY relevant to the year of search. In our considered opinion, the petitioners have correctly identified the aforesaid distinction as being crucial and determinative for the purposes of reckoning the six and the ten AY block period. In the aforesaid judgment, the Hon’ble Court also held as below: “..B. Both Sections 153A and 153C embody non-obstante clauses and are in express terms ordained, to override Sections 139, 147 to 149, 151 and 153 of the Act. By virtue of the 2017 Amending Act, significant amendments came to be introduced in Section 153A. These included, inter alia, the search assessment block being enlarged, to ten A Ys consequent to the addition of the stipulation of "relevant assessment, year", which was defined to mean those years which would fall beyond, the six-year block period but not later than ten AYs'. The block period for search assessment thus came to be enlarged to stretch up to ten AYs'. The 2017 Amending Act also put in place certain prerequisite conditions which would, have to inevitably be shown to be satisfied before the search assessment could, stretch to the "relevant assessment year". The preconditions include the prescription of Nitin Gupta HUF income having escaped assessment and represented in the form of an asset amounting to or "likely to amount to" INR 50 lakhs or more in the "relevant assessment year" or in aggregate in the "relevant assessment years". C. Section 153C, on the other hand, pertains to the non- searched entity and to whom any material, books of accounts, or documents may have been seized and found to belong to or pertain to a. person other than the searched person. As in the case of Section 153A, Section I53C was also to apply to all searches that may have been undertaken between the period. 01 June 2003 to 31 March 2021. In terms of that provision, the AO stands similarly empowered to undertake and. initiate an assessment in respect of a non-searched entity for the six AYs' as well as for "the relevant assessment year". The A Ys\ which would consequently be thrown open for assessment or reassessment under Section 153C follows lines pari materia with Section 153A. D. The First Proviso to Section 153C introduces a legal fiction based on which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point, spoken of in Section J53A(l), while defining the point from which the period of the "relevant assessment year" is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an Issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ z Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted. E. The reckoning of the six AYs’ would require one to firstly identify the FY in which the search was undertaken and which would lead, to the ascertainment of the AY relevant to the previous year of search. The block of six AYs’ would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section Nitin Gupta HUF 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed, to the year of search which constitutes the basis for an assessment under Section 153A... In the aforesaid judgement, on the issue of the threshold of income having escaped assessment, the Hon’ble Court also held as below: G. Insofar as the thresholds put in place by virtue of the Fourth Proviso to Section 153A are concerned and the argument of the writ petitioners of the condition of INR 50 lakhs being an unwavering precondition, we find ourselves unable to sustain that submission, bearing in mind the indubitable fact that proceedings for search assessment commence upon the issuance of a notice and the AO at that stage having really not had the occasion to undertake a. detailed or in depth examination of (he evidence collected or come to a definitive opinion with respect to the total income which may have escaped assessment. Since the computation and assessment of income that is likely to have escaped assessment would at this stage be provisional, it would be incorrect to strike down initiation of action on a mere ex facie examination of the Satisfaction Note. We also in this regard bear in mind the Fourth Proviso using the expression "amounts to or is likely to amount". The usage of the phrase "likely to" is indicative of the Legislature being conscious of the provisional character of the opinion that the AO may have formed at that stage. H. However, and at the same time, even if the identified asset at that stage be quantified as less than INR 50 lakhs, the AO must for reasons to be duly recorded, be of the opinion that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. The aforesaid satisfaction would have to be based on an assessment of the material gathered and the potentiality of the same being indicative of the escaped assessment exceeding INR 50 lakhs. The formation of opinion in this respect would have to be based not on mere ipse dixit but reflective of a fair assessment of the quantum of income likely to have escaped assessment as distinct from mere speculation and conjecture. I. We further hold that since the precondition ofINR 50 lakhs or more constitutes a sine qua non for initiating action for the extended ten year block, the aforesaid satisfaction and the reasons in support thereof would have to borne out from the Satisfaction Note itself We are Nitin Gupta HUF also of the opinion that the precondition ofINR 50 lakhs is not liable to be viewed as being the qualifying criteria for each "relevant assessment year" that may be thrown open and that the said condition would stand satisfied if the escaped income cumulatively or in the aggregate meets the minimum benchmark of INR 50 lakhs. J........ K....... L. The legislative intent of those provisions having retroactive application is clearly evidenced from the statue declaring that they would apply to all searches conducted between 3.1 May 2003 to 31 March 2021, and the Fourth Proviso in unambiguous terms extending the applicability of those provisions to all searches conducted post 01 April 2017 and Sections 153A and 15 3C superseding the provisions for reassessment, otherwise appearing in the Act. .........

As referred to in the above judgement itself and as cited by the appellant in appeal, the position of law with reference to date of reckoning for calculating six AYs for reopening post-search has also been, laid down by the Hon’ble Supreme Court in the case of CIT v. Jasjit Singh [2023] 458 ITR 437 (SC) and the Hon’ble Delhi High Court in the case of CIT v. RRJ Securities Ltd [2016j 380 ITR 612 (Delhi). The relevant extracts of the decisions of the Hon’ble Supreme Court and the Hon’ble jurisdictional High Court are reproduced below: In Jasjit Singh (supra), the Hon’ble Supreme Court observed as under: ‘9. It is evident on a plain interpretation of Section 15 3C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted). The revenue argued that the proviso (to Section 153(c)(1)] is confined in its application to the question of abatement.

This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which Nitin Gupta HUF SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Section 132 would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" as is sought to be contended by the revenue, (to the dale of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis- proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee’s prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts... ’ In RRJ Securities (Supra), the Hon’ble Delhi High Court 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 153A 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 AO having jurisdiction 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 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 Nitin Gupta HUF lakes 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 A O had no Jurisdiction to make an assessment of the Assessee's income for that year.’ 15. The period of six assessment years as per the decision of the Hon’ble jurisdictional High Court of Delhi thus means six years prior to the assessment year in which the seized material was handed over to the AO of the ‘other’ (non-searched) person/satisfaction note for proceedings u/s 153C was recorded by the concerned AO. As seen from copies of documents in paper book filed in appeal, the satisfaction note was recorded by the AO of the searched person on 10.05.2022 and by the AO of the appellant on 24.06.2022 and the notice u/s 153C was issued on 29.06.2022, i.e. in the F.Y. 2022-23 relevant to AY 2023-24. Therefore, by this yardstick, six years period as referred to in section 153C(1) of the Act would be from AY 2017-18 to 2023-24, with AYs 2016-17, 2015-16 and 2014-15 being the ‘relevant assessment years.’ 16. To ascertain whether the income escaping assessment in the relevant assessment year or the aggregate of the assessment years amounted to or was likely to amount to Rs. 50 Lakhs or more, the copies of the satisfaction notes recorded, as submitted by the Nitin Gupta HUF From the above, it is seen that the aggregate of the income having escaped assessment for the ‘relevant assessment years’. i.e. AY 2014-15 (FY 2013-14), AY 2015-16 (FY 2014-15) and AY 2016-17 (FY 2015- 16) as per the satisfaction notes recorded falls short of Rs. 50 lakhs and does not fulfill the threshold requirement as per statute and as per the ratio of decision delivered in the case of Ojjus Medicare.

Thus, following the ratio of decision of the Hon’ble jurisdictional High Court in the case of Ojjus Medicare (supra), the satisfaction notes in the instant case do not show that the income, represented in the form of asset which has escaped assessment, amounts to or is likely to amount to Rs. 50 Lakhs or more in ^e ‘relevant assessment year’ or in aggregate in the ‘relevant assessment years’ in the case of the appellant under consideration.

Thus, the condition spelt out in the statute and as interpreted by the Hon’ble Courts for permitting reopening beyond six years was not fulfilled in the instant case. The case of the impugned A.Y 2016-17 falls beyond the period of six years preceding the assessment year relevant to the previous year in which the satisfaction notes were drawn / notice u/s 153C was issued. The period of six years that could be reopened by the AO thus terminates with the AY 2017-18. The contention of the appellant therefore bears merit.

Relying on the above-mentioned case laws and respectfully following the judgment of the Hon’ble jurisdictional High Court in the case of Ojjus Medicare (P.) Ltd (supra), it is seen that A.Y. 2016-17 is not covered within six AYs as per section 153C of the Act and the condition/s for assessing it as part of the relevant assessment year/s was not existent. The notice issued for the instant assessment year would thus fall beyond the ambit of six AYs' as provided under section 153C read with section 153 A, and hence the impugned assessment order dated 31.03.2024 passed u/s 153C of the Act for the instant AY in pursuance of such notice would not survive, having no legs to stand, and is thus annulled.

As it is held that the Assessing Officer did not have the jurisdiction to assess the appellant’s case for the A.Y 2016-17, therefore, all the other grounds raised by the appellant are rendered academic in nature, and hence not required to be adjudicated upon. There is hence no adjudication on merits in this case.”

All other pleadings between the parties on merits herein stand rendered academic.