Interpretation of Section 153C six year limitation for third party assessments: proviso fixes start from forwarding, appeal dismissed

Interpretation of the proviso to the assessment provision for third parties resolves whether the six year limitation for filing returns runs from the date materials are forwarded or from the date of search and seizure. The court construed the proviso to govern both abatement and the commencement of the limitation period, reasoning that treating the seizure date as the start would unfairly prejudice uninvolved third parties if materials are forwarded much later. Consequence: the limitation begins from the date of forwarding of materials to the third party's assessing officer, and the appeal was dismissed.

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Issues involved: Interpretation of Section 153C of the Income Tax Act, 1961 regarding the date from which the six-year period for filing returns by third parties is to be reckoned.

In a batch of appeals, the issue revolved around the interpretation of Section 153C of the Income Tax Act, 1961, specifically concerning the date from which the six-year period for filing returns by third parties is to be reckoned. The appeals stemmed from the Delhi High Court dismissing revenue's appeals under Section 260A of the IT Act. The facts in one appeal highlighted that search and seizure proceedings were conducted at the premises of a particular group, leading to notices being issued to the respondents' assessees by the Assessing Officer. The main contention was regarding the period from which the assessees were required to file returns, whether from the date of forwarding materials or the date of the search and seizure proceedings.

The impugned order upheld the decision of the Income Tax Appellate Tribunal, which favored the assessees' arguments regarding the date for filing returns. The revenue contended that the date under Section 153(1) should be related to the second proviso to Section 153A, citing a Delhi High Court ruling in "SSP Aviation Ltd. vs. Deputy Commissioner of Income Tax."

The Court examined Sections 153A and 153C of the IT Act, focusing on the provisions relevant to the case. The High Court's reasoning in SSP Aviation highlighted the process for assessing income of other persons not covered by the search, emphasizing the importance of the date for pending proceedings to abate.

Upon analyzing Section 153C(1), the Court determined that the proviso aimed to address not only the question of abatement but also the commencement date of the six-year period for filing returns by third parties. The revenue's argument that the proviso was limited to abatement was deemed insubstantial. The Court emphasized that a plain reading of Section 153C supported the interpretation adopted.

Consequently, the Court found no merit in the appeals and dismissed them without any order on costs.

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