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of <h1>Section 153C amendment applies to pre-amendment searches when documents received post-amendment date</h1> <h3>Income Tax Officer Versus Vikram Sujitkumar Bhatia</h3> Income Tax Officer Versus Vikram Sujitkumar Bhatia - 2023 INSC 327, [2023] 453 ITR 417 (SC) Issues Involved:1. Applicability of the amendment to Section 153C of the Income Tax Act, 1961.2. Interpretation of 'belongs to' vs. 'pertains to' in Section 153C.3. Retrospective application of amendments in tax law.4. Impact on substantive rights of assessees.Summary:Issue 1: Applicability of the Amendment to Section 153CThe core issue was whether the amendment to Section 153C of the Income Tax Act, 1961, introduced by the Finance Act, 2015, would apply to searches conducted under Section 132 before 01.06.2015. The Supreme Court held that the amendment is applicable to searches conducted before the amendment date. It emphasized that the amendment was introduced to address the mischief identified by the Delhi High Court in Pepsico India Holdings Private Limited vs. Assistant Commissioner of Income Tax, where the term 'belongs to' was interpreted narrowly, preventing action against third parties despite incriminating material being found.Issue 2: Interpretation of 'Belongs to' vs. 'Pertains to'The Court noted that the amendment substituted the words 'belongs or belong to' with 'pertains or pertain to' to broaden the scope of Section 153C. This change was intended to include situations where incriminating documents or materials related to third parties were found during search proceedings, thus allowing the Revenue to proceed against such third parties.Issue 3: Retrospective Application of AmendmentsThe Court held that amendments made by substitution relate back to the date of the Parent Act, effectively replacing the earlier provisions as if they never existed. The Court cited precedents like Shamrao V. Parulekar vs. District Magistrate and Zile Singh vs. State of Haryana to support this interpretation. It was emphasized that the legislative intent behind the amendment was to address the mischief identified and should be applied to all pending and future proceedings, irrespective of the search date.Issue 4: Impact on Substantive Rights of AssesseesThe Court rejected the argument that the amendment affected substantive rights of the assessees, stating that Section 153C is a machinery provision. It emphasized that the primary intention of the legislature was to include persons against whom incriminating material was found during search proceedings. The Court noted that interpreting the amendment as prospective only would frustrate the legislative intent and the purpose of the statute.Conclusion:The Supreme Court overturned the High Court's decision, holding that the amendment to Section 153C by the Finance Act, 2015, applies to searches conducted before the amendment date. The Court allowed the Revenue's appeals and provided liberty to the assessees to challenge the assessment orders before CIT (A) on any other grounds within four weeks.
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