DEPUTY COMMISSIONER OF INCOME TAX, DELHI vs. RICHFIELD GOODS PRIVATE LIMITED, KOLKATA

Now there can be a situation when during the search conducted on one person under Section 132, some 3 CO No.112/Del/2025 RICHFIELD GOODS PRIVATE LIMITED, KOLKATA documents or valuable assets or books of account belonging to some other person, in whose case the search is not conducted may be found. In such case, the Assessing Officer has to first be satisfied u/s 153C, which provides the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the AO having jurisdiction over the other person. Thereafter, the AO having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search u/s 132 or the requisition u/s 132A. For instance, in the present case, with reference to the Puri Group of Companies, such date will be 5.1.2009. However, in the case of the other person, which in the present case is the petitioner herein, such date will be the date of receiving the books of account or documents or assets seized or requisition by the Assessing Officer having jurisdiction over such other person. In the case of the other person, the question of pendency and abatement of the proceedings of assessment or reassessment of pendency and abatement of the proceedings of assessment or reassessment to the six assessment years will be examined with reference to such date.”

It is evident on a plain interpretation of Section 153C(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 153C was enacted. The revenue CO No.112/Del/2025 RICHFIELD GOODS PRIVATE LIMITED, KOLKATA 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 SSP Aviation adopted, the AO, 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 AO. In that event if the date would virtually “relate back" as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceeding 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.

For the foregoing reasons, the Court finds no merit in these appeals; they are accordingly dismissed, without order on costs.

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 sec. 153A of the Act and the reference to the date of search would hjave 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 u/s 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 u/s 153C of the Act, i.e., 8th September, 2010. In this view, the assessments CO No.112/Del/2025 RICHFIELD GOODS PRIVATE LIMITED, KOLKATA made in respect of AYs 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 takes 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 ot 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 sec 153A of the Act. We, therefore, accept the contention that in any view of the matter, AY 2003-04 and 2004-05 were outside the scope of sec. 153C of the Act and the AO had no jurisdiction to make an assessment of the Assessee’s income for that year.” 4.1.4 The submission of the appellant and the judicial position on the facts of the case have been carefully perused. Since the satisfaction was recorded in the FY 2021-22, deemed search year for proceedings u/s 153C should be FY 2021-22 and therefore six asstt. years immediately preceding the asstt. year relevant to CO No.112/Del/2025 RICHFIELD GOODS PRIVATE LIMITED, KOLKATA the previous year as referred in sec. 153C(1) should have been from AY 2016-17 to 2021-22. 4.1.5 Relying on the above mentioned case laws, I hold that AY 2013-14 is not covered within six AYs as per sec. 153C of the Act; therefore the Additional Ground No.1 of appeal is allowed. Accordingly, the addition made by the AO is deleted. 4.2 Since Additional Ground No.1 of the appeal has been allowed and relief granted to the appellant, Ground Nos. 1 to 12 raised by the appellant are now purely academic in nature. Therefore, there is no need to adjudicate these grounds separately.”

On careful perusal of the order of the Ld. CIT(Appeals), we do not see any valid reason to interfere with the findings of the Ld. CIT(Appeals) in holding that the assessment year under appeal is out of the block of six assessment years as per the provision of section 153C of the Income Tax Act. Thus, the order of the Ld. CIT(A) is sustained and the grounds raised by then Revenue are rejected.

In the result, appeal of the Revenue is dismissed and the cross objection of the assessee is dismissed as not pressed.