2018 (5) TMI 2115 - HC - Income Tax

Court upholds Section 153C of Income Tax Act, orders fresh assessment within 6 months

The Court upheld the validity of Section 153C of the Income Tax Act, 1961, following precedents clarifying related sections. It directed the Revenue to ... Validity of assessment u/s 153A/153C - proof of incriminating material - assessment in case of third party - HELD THAT:- Third party assessments are to be completed in certain other proceedings has been the subject matter in several other Division Bench judgments including the judgments in the cases of ‘Commissioner of Income Tax vs. Super Malls Pvt. Ltd.’ [2016 (11) TMI 1370 - DELHI HIGH COURT], ‘Commissioner of Income Tax vs. Nau Nidh Overseas Pvt. Ltd.’,[2017 (3) TMI 108 - DELHI HIGH COURT] ‘Commissioner of Income Tax-7 vs. RRJ Securities Ltd.’, [2015 (11) TMI 19 - DELHI HIGH COURT]. and ‘ARN Infrastructures India Ltd. vs. Assistant Commissioner of Income Tax’ [2017 (4) TMI 1194 - DELHI HIGH COURT] The Court is of the opinion that the challenge to the provisions of Section 153 of the Act has been rendered academic to an extent since these judgments have tempered in the condition of the use of statutory powers as it were. Consequently, the Revenue is directed to proceed afresh and re-determine the assessment u/s 153A/153C of the Act in accordance with law having regard to the above judgments, within six months from today. At the same time, it is clarified that the assessee is precluded from urging the bar of limitation having regard to the fact that the order had ensured and bound the parties till now. All rights and contentions of the parties are reserved. Issues:Validity of Section 153C of the Income Tax Act, 1961 challenged on various grounds.Analysis:The petitions challenged the validity of Section 153C of the Income Tax Act, 1961. The Court entertained the proceedings and issued a common order on 18.03.2014. The Court noted that during the pendency of the petitions, the interpretation of Chapter-XIV of the Act, including Sections 153-A and 153-C, was clarified in the case of 'Commissioner of Income Tax vs. Kabul Chawla'. The Court extracted the conclusions from the Kabul Chawla case, emphasizing the mandatory issuance of notice under Section 153 A (1) post a search under Section 132, abatement of pending assessments, and the power of the Assessing Officer (AO) to assess and reassess the total income for the relevant assessment years. The Court highlighted the necessity of assessments being based on seized material and the distinction between 'assess' and 'reassess' under Section 153 A.The Court also referred to other Division Bench judgments regarding third-party assessments in various proceedings. Considering subsequent developments and judgments, the Court opined that the challenge to Section 153 of the Act had been addressed to some extent by these judgments, regulating the use of statutory powers. Consequently, the Revenue was directed to conduct a fresh assessment under Sections 153A/153C within six months in compliance with the law and the aforementioned judgments. The Court clarified that the assessee could not invoke the bar of limitation due to the previous order binding the parties. The rights and contentions of all parties were reserved, and the writ petitions were disposed of accordingly.