Reassessment notices under Section 148 valid despite time-bar claims when third-party search yields assessee documents

The Jharkhand HC upheld the validity of reassessment notices issued under Section 148 for AY 2013-14, rejecting the petitioner's contention that the notices were time-barred. The court held that where search was conducted on a third party and documents relating to the assessee were seized, the 10-year limitation period under Section 149 applied. The court clarified that Section 153C(2) permits assessment in the same manner as Section 153A, and distinguished between survey and search was irrelevant. The AO was justified in reopening assessment with proper sanction from competent authority. Petition dismissed.

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Issues Involved:
1. Legality and jurisdiction of the notice issued under Section 148 of the Income Tax Act, 1961.
2. Applicability of the time limit prescribed under Section 149 of the Income Tax Act.
3. Distinction between search and survey operations under the Income Tax Act.

Summary:

1. Legality and Jurisdiction of the Notice Issued Under Section 148 of the Income Tax Act, 1961:
The petitioners challenged the jurisdiction for issuance of notice under Section 148 of the Act, arguing that the notices were issued on a factually incorrect premise and beyond the prescribed limitation period. The court examined the legislative intent behind the Finance Act, 2021, which aimed to reduce the time limit for ordinary cases to three years and introduced a threshold amount for invoking an extended time limit of ten years. The court found that the notices were issued based on information obtained from search and seizure operations, which suggested that income chargeable to tax had escaped assessment.

2. Applicability of the Time Limit Prescribed Under Section 149 of the Income Tax Act:
The court noted that under the old provisions, the Assessing Officer could assess six assessment years in the case of a search. The Finance Act, 2021, expanded this to ten years under certain conditions. The court concluded that the notices issued under Section 148 for the assessment year 2013-14 were within the jurisdiction as they fell within the ten-year period from the end of the relevant assessment year. The court emphasized that the first proviso to Section 149 stipulates that notices can be issued if they could have been issued under the old provisions of Sections 153A and 153C.

3. Distinction Between Search and Survey Operations Under the Income Tax Act:
The petitioner argued that since only a survey was conducted in the case of Devika Constructions, the ten-year period should not apply. The court rejected this argument, stating that Section 153C(2) of the Act clearly explains that the Assessing Officer shall issue notice and assess or reassess the total income of such other person in the same manner as provided in Section 153A. The court found no distinction between search and survey in this context and upheld the notices issued.

Conclusion:
The court held that the Assessing Officer was justified in reopening the assessment for the assessment year 2013-14 for both petitioners, as they had taken the previous sanction of the competent authority. There was no illegality in the initiation of reassessment proceedings by issuing notices under Section 148 of the Income Tax Act. Consequently, both writ applications were dismissed without interfering with the respective show-cause notices.

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