Facts of the Case

The Revenue filed an appeal under Section 260A of the Income-tax Act challenging the order dated 13.09.2024 passed by the Income Tax Appellate Tribunal in ITA No. 1343/Del/2024 for Assessment Year 2012-13. The ITAT order formed part of a common order passed in a batch of seven appeals filed by the assessee against final assessment orders passed under Sections 144C and 153C read with Section 143(3).

The assessee filed his return of income for AY 2012-13 on 24.09.2012 declaring income of ₹10,03,030, which was processed under Section 143(1). On 30.06.2019, a search under Section 132 was conducted in the case of one Sanjay Jain, pursuant to which the assessee was initially treated as a searched person and notice under Section 153A was issued.

Subsequently, during pendency of proceedings, information was received regarding a separate search conducted on 30.06.2019 in the case of Rajeev Saxena. The Assessing Officer of the searched person recorded a satisfaction note stating that documents seized belonged to or pertained to the assessee. Thereafter, proceedings under Section 153A were dropped and notice dated 29.09.2021 was issued to the assessee under Section 153C. The assessment culminated in additions made on a protective basis.

The assessee’s objections before the Dispute Resolution Panel were rejected and final assessment order dated 30.01.2024 was passed. The ITAT allowed the assessee’s appeal holding that assumption of jurisdiction under Section 153C for AY 2012-13 was invalid. Aggrieved, the Revenue approached the High Court.

Issues Involved

Whether the block period for assessment under Section 153C is to be computed from the date of initiation of search or from the date of recording of the satisfaction note by the Assessing Officer of the non-searched person, and whether Assessment Year 2012-13 fell outside the permissible block of ten years.

Petitioner’s Arguments

The Revenue contended that the ITAT erred in holding that the block period under Section 153C is to be reckoned from the date of receipt of seized material and satisfaction note by the Assessing Officer of the non-searched person. It was argued that the first proviso to Section 153C dealt only with abatement of proceedings and not with computation of block period, and that after the Finance Act, 2017 amendment, the block period under Sections 153A and 153C must be uniformly reckoned from the year of search.

Respondent’s Arguments

The assessee supported the order of the ITAT and submitted that the issue was squarely covered by the Delhi High Court’s earlier decision in Principal Commissioner of Income Tax-Central-1 vs. Ojjus Medicare Pvt. Ltd., wherein it was held that the ten-year block under Section 153C must be computed from the end of the assessment year in which the satisfaction note is recorded by the Assessing Officer having jurisdiction over the non-searched person.

Court Order / Findings

The Delhi High Court noted that the satisfaction note under Section 153C in the present case was recorded on 29.09.2021. Applying the ratio laid down in Ojjus Medicare Pvt. Ltd., the Court held that the block of ten assessment years must be reckoned from the end of Assessment Year 2022-23.

On this basis, the Court held that Assessment Year 2012-13 clearly fell outside the permissible block of ten years and therefore could not be reopened under Section 153C read with Section 153A. The Court found no infirmity in the ITAT’s conclusion that assumption of jurisdiction by the Assessing Officer was invalid.

In view of this finding, the Court held that it was unnecessary to examine the other questions raised by the Revenue, including those relating to protective additions and cross-examination.

Important Clarification

The High Court reaffirmed that for proceedings under Section 153C, the relevant block period must be computed with reference to the date of recording of the satisfaction note by the Assessing Officer of the non-searched person, and not the date of initiation of search. Any assessment year falling outside such block cannot be subjected to proceedings under Section 153C.

Final Outcome

The appeal filed by the Revenue was dismissed. The Delhi High Court held that no substantial question of law arose for consideration and upheld the ITAT’s order quashing proceedings under Section 153C for Assessment Year 2012-13.

Link to download order https://www.mytaxexpert.co.in/uploads/1769757325_THEPR.COMMISSIONEROFINCOMETAXCENTRAL1VsAMOLAWASTHI.pdf 

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