Facts of the Case

The petitioner, Sunil Kumar Dhaiya, challenged a notice dated 31.08.2024 issued under Section 148 of the Income-tax Act seeking to reopen the assessment for Assessment Year 2014-15. The notice was issued pursuant to a search conducted under Section 132 at the premises of one Mr. Ishwar Singh and his associates. During the search, certain documents were allegedly found indicating cash payments of ₹1,36,00,000 made by the petitioner to Ms. Meenakshi Bindish for purchase of immovable property.

Based on this material, the Assessing Officer issued the impugned notice under Section 148. The petitioner contended that the notice was barred by limitation in view of the first proviso to Section 149(1), which requires examination of whether action could have been taken under Sections 153A or 153C as they stood prior to the Finance Act, 2021.

Issues Involved

Whether the notice issued under Section 148 for AY 2014-15 was barred by limitation, whether principles governing Section 153C assessments were required to be applied for computing limitation under the first proviso to Section 149(1), and how the ten-year block period was to be computed in cases arising out of searches conducted after 31.03.2021.

Petitioner’s Arguments

The petitioner argued that although Section 153C is not applicable to searches conducted after 31.03.2021, the first proviso to Section 149(1) mandates a backward-looking test to determine whether reassessment would have been permissible under the pre-Finance Act, 2021 regime. Applying the principles laid down in Dinesh Jindal, Ojjus Medicare and other binding precedents, it was contended that AY 2014-15 fell outside the permissible ten-year block and was therefore barred by limitation.

Respondent’s Arguments

The Revenue sought to justify issuance of the notice by contending that incriminating material relating to the petitioner was found during the search and that reassessment proceedings were therefore validly initiated. However, the Revenue fairly conceded that the issue of limitation was covered by earlier decisions of the Delhi High Court.

Court Order / Findings

The Delhi High Court held that even though Section 153C is inapplicable to searches conducted after 31.03.2021, the first proviso to Section 149(1) requires the Court to examine whether reassessment would have been permissible under Sections 153A or 153C as they stood prior to the Finance Act, 2021. Relying on its earlier decisions in Dinesh Jindal v. ACIT, Ojjus Medicare Pvt. Ltd., KAD Housing Pvt. Ltd. and Pankaj Jain, the Court reiterated that the ten-year block must be computed from the end of the assessment year relevant to the financial year in which reassessment action is initiated.

Applying these principles, the Court accepted the petitioner’s tabular computation showing that the ten-year block extended only up to AY 2016-17 and that AY 2014-15 was clearly barred by limitation. The Court noted that the Revenue concurred with this legal position. Accordingly, the impugned notice was held to be without jurisdiction.

Important Clarification

The High Court clarified that for reassessment proceedings initiated pursuant to search-related material after 01.04.2021, limitation must still be tested on the anvil of Sections 153A and 153C as they existed prior to the Finance Act, 2021, in terms of the first proviso to Section 149(1). Assessment years falling outside the computed six-year or ten-year block cannot be reopened.

Final Outcome

The writ petition was allowed. The notice dated 31.08.2024 issued under Section 148 for Assessment Year 2014-15 was set aside as being barred by limitation, and all proceedings pursuant thereto stood quashed.

Link to download the order - https://www.mytaxexpert.co.in/uploads/1769677662_SUNILKUMARDHAIYAVsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE29DELHI.pdf

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