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Facts
A search and seizure operation on Filatex Group led to the discovery of documents pertaining to the assessee, Vrinda Farms Pvt. Ltd. This resulted in the issuance of a notice under Section 148 for reassessment for AY 2012-13. The Assessing Officer completed the reassessment, determining a much higher income.
Held
The Tribunal held that the reassessment proceedings initiated for AY 2012-13 were beyond the ten-year limitation period prescribed by Section 149(1) read with Sections 153A and 153C of the Income Tax Act. The key issue was the computation of this ten-year block period.
Key Issues
Whether the reassessment notice issued under Section 148 for AY 2012-13 was within the prescribed limitation period, considering the search conducted on 01.09.2021 and the provisions of Section 149 and 153A/153C of the Income Tax Act.
Sections Cited
147, 143(3), 148, 132, 153A, 153C, 149(1), 149(1)(b)
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Income Tax Appellate Tribunal, DELHI BENCH “C”: NEW DELHI
Before: SHRI M. BALAGANESH
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2012-13, arises out of the order of the ld. Commissioner of Income Tax (Appeals)-23, New Delhi [hereinafter referred to as „ld. CIT(A)‟, in short] dated 28.08.2024 against the order of assessment passed u/s 147 r.w.s, 143(3) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 26.03.2024 by the Assessing Officer, ACIT, Central Circle-4, Delhi (hereinafter referred to as „ld. AO‟).
Though the assessee has raised several grounds of appeal before us, the crucial issue to be decided in this appeal is as to whether the ld CIT(A) was justified in holding that AY 2012-13 could not have been covered for a search operation conducted on 01.09.2021 in view of Explanation 1 to Section 153A of the Act. This issue goes to the root of the mater and hence, we deem it fit to address the same first.
We have heard the rival submissions and perused the material available on record. A search and seizure action u/s 132 of the Act was carried out in the case of Filatex Group and related entities on 01.09.2021. On analysis of materials seized u/s 132 of the Act in the case of Filatex Group, it was found that seized material contained books of accounts or documents, pertaining to, or any information contained therein relating to, the assessee herein, suggesting escapement of income in the hands of the assessee. Accordingly, after taking approval from the competent authority satisfaction was recorded and notice u/s 148 of the Act was issued on 31.03.2023 to the assessee herein. It is pertinent to note that the assessee had originally filed its return of income for AY 2012-13 on 29.09.2012 declaring taxable income of Rs. 7,76,210/-. In response to the notice issued u/s 148 of the Act, the assessee filed its return of income on 21.04.2023 declaring the same taxable income of Rs. 7,76,210/-. The assessee is engaged in the business of Arts, Paintings and real estate. The re- assessment was completed in the hands of the assessee for AY 2012-13 determining total income of Rs. 4,19,22,990/- vide order u/s 147 read with Section 143(3) of the Act dated 26.03.2024. This reassessment order was sought to be quashed by the ld CIT(A) by observing as under:-
“11 The issue involved and raised by the appellant is the year from which computation of block of ten years should be made. As per the AD, on the plain reading of provisions of newly substituted section 149 (substituted by Finance Act, 2021 w.e.f 01.04.20211, the period of ten years is to be reckoned from the year of search. However, it is the contention of the appellant that the period of ten years is to be reckoned from the year in which the satisfaction for re-opening is recorded 12 It is also contended by Appellant that for computing ten year's block, the year of preparation of such satisfaction note shall be considered as first year and accordingly no notice u/s 148 can be issued prior to A.Y. 2014-15. Thus, Appellant contented that A.Y 2012-13 would be 12th year which is not permissible as per the decision of Hon'ble Delhi High Court in the case of Dinesh Jindal v/s. ACIT-20, New Delhi W.P.(C) 12091/2023 & CM APPL 47460/2023 (Judgement Dated 27th May, 2024) wherein on the similar set of facts, Hon'ble Jurisdictional High Court has quashed notice issued u/s. 148 dated 30th March, 2023 for A.Y. 2013-14. The Hon'ble Jurisdictional High Court emphasized that Section 153C, which ceased to apply post-March 31, 2021, due to first proviso to section 149, must still be considered for reassessments initiated after 1st April 2021. The Hon'ble court held that the legal fiction under the first proviso to Section 153C(1) remains relevant, requiring the computation of the ten years period from the date when the books of accounts or documents are handed over to the jurisdictional AO. 13 In the case of Dinesh Jindal, the Hon'ble Delhi High Court has held as under- 12. Viewed in that light, it is manifest that AY 2013-14 would fall beyond the black period of ten years. It becomes pertinent to note that the First Proviso to Section 149(1) compers us to test the validity of initiation of action for reassessment commenced pursuant to a search, based upon it being found that the proceedings would have sustained bearing in minst the timelines prescribed in Sections 149, 1534 and 1530C as they existed prior to the commencement of Finance Act 2021. This timeframes comprised in both Section 149(1)(b) as well as Section 153C as it existed on the is necessarily requires us to advert to the statute book prior to 01 April 2021, which undisputedly was the date from when Finance Act, 2021 came into effect.
While it is true that Section 153C and the procedure presented therein had ceased to be applicable post 31 March 2021, the First Proviso to Section 149(1) does not appear to suggest that the First Proviso to Section 153C(1) would either become inapplicable or be liable to be ignored. Undisputedly, the First Proviso to Section 153C(1), by virtue of a legal fiction enshrined therein requires one to treat the date of initiation of search, and which otherwise constitutes Page | 3 the commencement point for a search assessment in the case of a non-searched party, to be construed as the date when books of accounts or documents and assets seized or requisitioned are transmitted to the AD of such "other person". Resultantly, the computation of the six preceding AYs or the "relevant assessment year in the case of the non-searched entity has to be reckoned from the time when the material unearthed in the search is handed over to the jurisdictional AD. The import of this legal fiction is no longer res integra bearing in mind the judgment of the Supreme Court in CIT v. Jasjit Singh & Ors, and the whole line of precedents rendered by our High Court which were noticed in Ojjus Medicare Private Limited. Those decisions have consistently held that in the case of a non- searched entity, it is the date of hand over of material, as opposed to that of the actual search which would constitute the starting point for reckoning the block of six or ten Ays.
14. However, Section 149(1), as it came to be placed and introduced in the statute book by virtue of Finance Act, 2021, neither effaces nor removes from contemplation the first Provision to Section 1530(1). Consequently, in cases where a search is conducted after 31 March 2021, the said Proviso would have to be construed and tested with reference to the da when the All decides to initiate action against the non-searched entity. While in the case of a search initiated after 31 March 2021 there would be no actual hand over of material to jurisdictional AO, that does not convince us to revert to Section 153A and hold that the block period is liable to be computed from the date of search. That, in our considered opinion, would amount to rewriting Section 1530 which would clearly be impermissible.
15. We find ourselves unable to construe or read the First Proviso to Section 149(1) as requiring us to ignore the First Proviso to Section 153C(1), and for the purposes of computation, reconstruct the point from which the "relevant assessment year" is liable to be computed in the case of a non-searched person. Notwithstanding the procedure under Section 153C having not been adhered to, by virtue of the search having been conducted after 31 March 2021, there exists no justification to reconstruct the point from which the computational exercise would have to be undertaken. This, since accepting the submission as canvassed by Mr. Meharchandani, would not only amount to a virtual reconstruction of the statutory prescription of limitation, it would also be contrary to the plain and manifest command of the First Proviso to Section 149(1), and which compels us to adjudge the validity of reopening based on the best of "could not have been issued at that time on account of being beyond the time limit specified under or Section 1534 or Section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021. Page | 4
Regard must also be had to the statutory scheme for search assessments as it existed prior to Finance Act, 2021 and the indubitable fact that will in the case of the searched person, the six year or the ten year block period is liable to be computed with reference to the date of search, in the case of the non-searched entity, it has to necessarily be the date when the material is handed over to the jurisdictional AC of the "other person" All that would happen in the case of a search which takes place on or after 01 April 2021, and which warrants a reassessment action being commenced in relation to an AY prior to the first day of April, 2021, since no transmission of material would have occurred, we would necessarily have to bear in mind, the date when a decision may be taken by the jurisdictional AO to proceed against the non-searched entity in terms of the amended scheme pertaining to search assessments, and which now stands merged with the larger power of reassessment which stands comprised in Sections 147 and 148 of the Act.
Insofar as the two Provisos to Section 149(1) are concerned, we had in Ojjus Medicare Private Limited observed as follows "108. We also find ourselves unable to countenance the submissions based upon the two Proviso's placed in Section 149 for the following reasons. It must at the outset be noted that Section 149 regulates the time within which a notice under Section 148 may be issued. It thus neither ventures nor attempts to regulate the search assessment powers that are available to be invoked in terms of Sections 153A or 153C. Secondly, although the First Proviso (and to the extent that it included a reference to Sections 153A and 153C), came to be introduced by virtue of Finance Act, 2022 (Act 6 of 2022] with retrospective effect from 01 April 2021, the non obstante clause in Sections 1534 and 153C was left untouched. Of equal significance is the fact that that Sections 1534 and 153C of their own stipulate no period within which a notice initiating search assessment may be issued. We further find that the bar created by virtue of the First Proviso is in relation to Sections 1534 and 1530 as they stood immediately before the commencement of Finance Act, 2021. The concept of relevant assessment year and the block of ten Ays' was made part of those provisions way back in 2017 itself and thus formed an integral part of those provisions as on 01 April 2021. 109. Any doubt that could have possibly been harboured is in any case stand dispelled by the Second Proviso to Section 149 and which unambiguously proclaims that the provisions of that sub-section would not apply to searches se conducted or requisitions made prior to 31 March 2021. Thus, all searches conducted prior to 31 March 2021 remained unimpacted by the Provisos placed in Section 149 of Page | 5 the Act. These statutory amendments to Section 149 would have to be read in juxtaposition with Section 153C(3)which brought the curtains down upon search assessments liable to be made in accordance with the trinity provisions with effect from 01 April2021 This, since Parliament by virtue of Finance Act, 2021 had merged the original reassessment power as well as those which maybe predicated upon a search within the ambit of Section 145 and its family of provisions 18. Bearing in mind the aforesaid, the computation of the relevant assessment year from the date of the impugned Section 148 notice It is therefore ex facie evident that AY 2013-14 falls beyond the ten- year block period as set out under Section 153C read with Section 153A of the Act. Consequently, the impugned notice dated 30 March 2023 has been issued beyond limitation and is liable to be quashed and set aside on this score alone. All consequential actions pursuant to the impugned notice would thus meet a similar fate.
On the prayer pertaining to reading down of Explanation 2(iv) to Section 148 of the Act, we note that the said issue along with a challenge to the vires of the said Explanation is being considered by us in WP(C) 1023/2024 Deeksha Holding Limited v. ACIT, Delhi & Anr. Thus, we refrain from answering this question in the instant writ petition. The same is consequently kept open to be urged by the assessee in an appropriate case and if circumstances so warrant 21. In view of the above, we allow the instant writ petition and quash the impugned notice dated 30 March 2023 and all consequential actions pursuant to the said notice."
The identical issue arose before the Hon'ble Delhi High Court in the case of Filatex India Limited (the flagship company of the group). While disposing the writ petition order no. W.P(C)12148/2023 & CM APPL 47752/2023 dated 15.04.2024 "This writ petition has been preferred seeking the following reliefs:- "(1) Issue a writ in the nature of mandamus/ certiorari or any other appropriate writ, order or direction for quashing:; (a) the notice dated 13.03.2023 issued under section 14th of the Income Tax Act, 1961 (the Act”)
(b) the order dated 18.05.2023 passed by Respondent No. I whereby objections of the Petitioner were mechanically disposed off in the case of the Petitioner for assessment year 2012-13, and all proceedings/ actions taken consequent thereto, (II) stay the reassessment proceedings inibated in the case of the Petitioner vide impugned notice dated 13.03.2023 issued under section 148 of the Act, and/or any other proceedings Initiated there under for the assessment year 2012-13, during pendency of the present petition, This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/04/2024 at 20:38:40 (III) grant ad-interim ex-parte stay in terms of prayer (II) above (IV) call for the records of the case from the Respondents, (V) pass such other order or orders as this Hon'ble Court may deem fit and proper in the facts and circumstances of the case 2. The challenge which stands raised was succinctly noticed in our order dated 15 September 2023 and which reads thus:- 1. Allowed, subject to the petitioner fling legible copies of the annexures, at least three days before the next date of hearing WP(C) 12148/2023 & CM APPL 47752/2023 (Application filed on behalf of the petitioner seeking interim relief) 2. This wit petition concerns Assessment Year (AY) 2012-13 3. The record shows that the scrutiny assessment order under Section 143(2) of the Income Tax Act, 1961 (in short, "Act") was passed on 16.03.2015 4. The record also shows that a search action under Section L of the Act was conducted on 01.09.2021 5. The petitioner had been issued a notice dated 13.03.2023, under Section 145 of the Act It is the contention of the petitioner that the notice is time-barred. In this behalf, Mr Ajay Vohra, learned senior counsel, who appears on behalf of the petitioner, has placed reliance on the following tabular chart: Assessment Computation of 6 Computation of 10 Year(s) years BAR OF LIMITATION AY 2012-13- This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/04/2024 at 20:38:40 5.1 In this context, our attention has been drawn to the first proviso appended to the Section 149(1) of the Act, in addition to Section 1534(1)(b) and Explanation 1 appended thereto. Mr Vehra relles upon the judgment dated 24.03.2021, 5.2 In support of this submission, Mr passed by the Madurai Bench of the Madras High Court in W.P. (MD) No. 4327/2021 and W.M.P. (MD) Nos. 3513, 3515 & 3516 of 2021, titled AB. Sahullah vs. The Assistant Commissioner of Income Tax, Central Circle- 1.
Inctix 5.3 It is also pointed out that this issue is also being considered by this Court in W.P. (C) 5643/2023, bred Alankit Insurance TPA Limited vs. Dr. Commissioner of Income Tax Circle 28, Delhi 6. Accordingly, issue notice 5.1 Mr Kunal Sharma, learned senior standing counsel, who appears on behalf of respondent/revenue, accepts notice 7. Counter affidavit will be filed within the next two weeks will filed at least two days before the next date of hearing. 7.1 Rejoinder thereto, if any, will 5. List the matter on 17.10.2023.
9. Meanwhile, there shall be a stay on the operation of the impugned notice dated 13.03.2023, Ull further directions of the court 10. Parties will act based on the digitally signed copy of the order."
3. As is evident from the prima facie observations which came to be rendered by us on that occasion, the reassessment which is sought to be initiated for Assessment Year ["AY"] 2012-13 would not sustain bearing in mind the prescription of limitation as contained in Section 149/1)(b) of the Income Tax Act, 1961 ("Act") as it stood at the relevant time.
4. We note that while dealing with a similar question of computation of the time limit for the "relevant assessment year as provided under Explanation I to Section 1534 of the Act, we had in This is a digitally signed order. Page | 8 The authenticity of the order can be re-verified from Delhi High Court. Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/04/2024 at 20:38:40 the case of Principal Commissioner of Income Tax-Central-1 Olius Medicare Pvt. Ltd. (2024 SCC Online Del 2439) held as follows. "D. The First Proviso to Section 153C introduces a legal fiction on the basis of 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 1530, which significantly shifts the reference point spoken of m Section 153AC 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 AD of the non-searched person. The shift of the relevant date in the case of a non-searched pension 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 RRI 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 therefore, that the block periods would have to be reckoned with reference to the date or 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 1530, 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 1534 F. While the identification and computation of the six AYs hinges upon the phrase "immediately preceding the assessment year relevant to the previous year" of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it "from the end of the assessment year". This distinction would have to necessarily be acknowledged in light of the Page | 9 statute having consciously adopted the phraseology "Immediately preceding" when it be in relation to the This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 22/04/2024 at 20:38:40 six year period and employing the expression "from the end of the assessment year while speaking of the ten year block"
5. In view of the aforesaid, we find ourselves unable to sustain the impugned notice dated 13 March 2023 issued under Section 148 of the Act.
6. The writ petition is accordingly allowed and the impugned order dated 18 May 2023 disposing off the objections of the petitioner is hereby quashed. We in consequence also quash the notice dated 13 March 2023 purporting to commence proceedings under Section 148 of the Act.
The writ petition shall stand disposed of along with all pending applications on the aforesaid terms."
It is further seen that Hon'ble Delhi High Court in the case of Pr. CIT v Karina Airlines International Ltd ITA 690/2023 (Delhi) (Judgment pronounced on: 02 August 2024) interpreted the decision of Hon'ble Supreme Court in the case of Jasjit Singh and concluded that the date of recording of satisfaction note is key event through which, AO of non- searched person decides to proceed against such person and thus such date will replace the date of search for the purpose of computing ten years block. Relevant extracts are already reproduced above. Similar view is taken by Hon'ble Delhi High Court in the case of Flowmore Ltd. v. ACIT [2024] 164 taxmann.com 738 (Delhi) [27-05-2024] and Dinesh Jindal vs ACIT [2024] 164 taxmann.com 746 (Delhi). 16. the above referred decisions of the Hon'ble jurisdictional High Court has referred to the decision in the case of Ojju Medicare Pvt. Ltd. (Supra). The Hon'ble Delhi High Court in the case of Ojjus Medicare Pvt. Ltd. (Supra) has considered its earlier decision in the case of M/s. RRJ Securities Ltd. [2016] 380 ITR 612(Delhi) dated 30.10.2015 wherein the Hon'ble Court had held as under:- "the date of handing over of material, will be construed as the reference date for initiation of action u/s 153C of the Act, as against date of initiation of search, construed the reference date for initiation of action u/s 153A of the Act.
17. Thus, in view of the various decisions of Hon'ble Jurisdictional High Courts, the date of recording of satisfaction note is to be construed as date of search for determining the limitation for initiating proceedings u/s. 153C/147 of the Act 18. The issue of computation of time limit for issue of notice u/s. 148 has been decided in many decisions on the similar lines as in section 153C. In those decisions, the date of recording of satisfaction has been considered as the date of search for reckoning the period of 10 years block as mentioned in 149 of the Act. Some of the decisions in this case has been reproduced above. 19. In view of the above decisions of Hon‟ble Courts, it is found that the AO of the appellant had jurisdiction to serve upon the appellant notice u/s 148 of the Act only up to the AY 2014-15 and not prior to that AY. Therefore, the assessment proceeding-initiated u/s 148 of the Act by the AO for the AY 2012-13, based on the search and seizure operation conducted on 01.09.2021 and the satisfaction recorded on 24.03.2023 is beyond the limitation period provided u/s. 149(1) r.w.s 1534 and 153C for initiating proceedings u/s 148. 20. Hence the assessment order passed u/s 147 r.w.s 143(3) of the I. T. Act 1961 dated 26.03.2024 by the AO in the case of appellant for the AY 2012- 13 is bad in law as the Assessing Officer did not have the jurisdiction to issue notice u/s 148 of the Act. Accordingly, the addition made by the AO is liable to be deleted. 21. As it is held that the Assessing Officer did not have the jurisdiction to assess the case for the A.Y 2012-13, therefore, all the other grounds raised by the appellant are academic and hence not required to be adjudicated separately. Hence, ground no. 1 and additional ground no.1 and 2 raised by the appellant is allowed.”
We find that the issue in dispute had been adjudicated by the ld CIT(A) by placing reliance on various decisions of Hon‟ble Jurisdictional High Court referred supra. In view of the binding judicial precedents and no contrary materials has been placed on record by the ld DR before us showing whereby the aforesaid decisions have been either reversed or stayed by the Hon'ble Supreme Court, we find no infirmity in the order of the ld CIT(A) quashing the assessment for AY 2012-13. Hence, ground No. 2 raised by the revenue is hereby dismissed and quashing of assessment made by the ld CIT(A) is hereby confirmed.
Since, the entire assessment is quashed, the adjudication of other grounds raised by the revenue on merits need not be gone into and they are left open. The Cross Objection of the assessee is only supportive of the ld CIT(A).
In the result, appeal of the revenue is dismissed and the CO of the assessee is dismissed as infructuous.
Order pronounced in the open court on 28/11/2025.