2025 (2) TMI 1229 - HC - Income Tax

Six-Year Limitation Under Section 153C Starts When AO Receives Seized Documents, Not Original Search Date

The HC upheld the Tribunal's dismissal of the appellant's appeals for AYs 2003-04 and 2004-05, confirming that the six-year limitation period under ... Assessment u/s 153C - computation of the six year period - Period of limitation - HELD THAT:- We note that a search and seizure operation is stated to have been carried out u/s 132 of the Income Tax Act, 1961 Act on the RL Group on 13 December 2005. On documents found and seized in the course thereof being scrutinized, the same appear to have been forwarded to the AO of the appellant upon the AO of the searched person being satisfied that they belonged to the appellant-assessee. It is this which led to the issuance of notice under Section 153C of the Act on 12 March 2009. We note that before the Tribunal, the appellant had categorically argued that in terms of the provisions comprised in Section 153C, it would be the date of receiving the books of account by the jurisdictional AO of the non-searched entity, which would be deemed to be the date of search. Proceeding further to deal with the appeals pertaining to AYs 2003-04 and 2004-05, the Tribunal has essentially borne in mind the computation of the six year period and the AYs which it would cover and which stands encapsulated in paragraph 10 of its order. Since both AYs 2003-04 and 2004-05 fell within the block of six years, the Tribunal has proceeded to dismiss the appeals of the assessee for the aforementioned two years. We note that in terms of the First Proviso to Section 153C(1) of the Act, the deeming provision clearly bids us to transpose the date of transfer of material as being the date of actual search in case of the non-searched entity. This position of law is clearly well settled as would be evident from the following passages of the judgment of Vikram Sujitkumar Bhatia [2023 (4) TMI 296 - SUPREME COURT] as held in the present case, even though the search under Section 132 was initiated prior to the amendment to Section 153-C w.e.f. 1-6-2015, the books of account or documents or assets were seized by the assessing officer of the non-searched person only on 25-4-2017, which is subsequent to the amendment, therefore, when the notice under Section 153-C was issued on 4-5-2018, the provision of the law existing as on that date i.e. the amended Section 153-C shall be applicable. The questions as posited are answered in the negative and against the appellant-assessee. 1. ISSUES PRESENTED AND CONSIDERED Whether the orders of the Income Tax Appellate Tribunal (Tribunal) are perverse due to failure to address grounds and judgments cited before it. Whether the assessments are void for being passed after the expiry of the limitation period, specifically after 31.12.2018. Whether the Tribunal's orders are illegal on the ground that additions were made without adhering to principles of natural justice. Interpretation and application of Section 153C of the Income Tax Act, 1961, particularly regarding the computation of the six-year block period for assessments following a search and seizure operation under Section 132. Whether the date of receipt of seized material by the Assessing Officer (AO) of a non-searched entity is to be treated as the date of search for limitation and assessment purposes. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Alleged perversity of the Tribunal's order for failure to deal with grounds and judgments cited - Legal Framework and Precedents: The Tribunal is required to consider all grounds raised and relevant judicial precedents while adjudicating appeals. - Court's Interpretation and Reasoning: The Tribunal explicitly acknowledged and accepted the appellant's proposition regarding the date of receipt of books of account under Section 153C, indicating engagement with the grounds and precedents. - Key Evidence and Findings: The Tribunal's order reproduced relevant findings and cited authoritative judgments, demonstrating that it addressed the legal contentions. - Application of Law to Facts: The Tribunal applied the settled legal position on Section 153C and the limitation period accordingly. - Treatment of Competing Arguments: No specific failure to consider grounds or judgments was established; the Tribunal's reasoning was comprehensive. - Conclusion: The challenge on perversity for non-consideration of grounds and judgments is unfounded. Issue 2: Validity of assessments passed after the limitation period (post 31.12.2018) - Legal Framework and Precedents: Section 153C and Section 153A of the Income Tax Act prescribe limitation periods for assessments following search and seizure operations. The six-year block period is reckoned from the date of search or deemed search. - Court's Interpretation and Reasoning: The Court observed that the limitation period for the non-searched entity begins from the date of receipt of seized material by its AO, as per the first proviso to Section 153C(1). - Key Evidence and Findings: The seized material was received by the AO on 12.03.2009, and notices were issued within the limitation period for AYs 2003-04 and 2004-05, which fall within the six-year block. - Application of Law to Facts: Since the assessments for AYs 2003-04 and 2004-05 were made within the six-year block period computed from the date of receipt, they are not barred by limitation. - Treatment of Competing Arguments: The appellant's argument that the limitation should relate back to the date of search under Section 132 was rejected based on the statutory proviso and Supreme Court precedents. - Conclusion: The assessments for AYs 2003-04 and 2004-05 are valid and not time barred; the appeal on this ground fails. Issue 3: Alleged violation of principles of natural justice in making additions - Legal Framework and Precedents: Principles of natural justice require that a party be given a fair opportunity to present its case before adverse additions or assessments are made. - Court's Interpretation and Reasoning: The record showed no indication that the Tribunal or AO failed to provide the appellant an opportunity to be heard or to consider its submissions. - Key Evidence and Findings: No specific instances or evidence of denial of natural justice were demonstrated by the appellant. - Application of Law to Facts: The procedural safeguards were complied with during the assessment and appellate proceedings. - Treatment of Competing Arguments: The appellant's contention was not supported by factual or legal basis. - Conclusion: No violation of natural justice principles occurred; this ground is dismissed. Issue 4: Interpretation of Section 153C regarding the date of search for non-searched entities - Legal Framework and Precedents: Section 153C(1) provides for assessments of persons other than the searched person when documents or assets belonging to them are found during a search. The first proviso to Section 153C(1), inserted retrospectively from 1.6.2003, deems the date of receipt of seized material by the AO of the non-searched person as the date of search for limitation purposes. - Court's Interpretation and Reasoning: The Court relied on authoritative Supreme Court rulings which clarified that the six-year block period for the non-searched person must be computed from the date of receipt of seized material, not the date of the original search. - Key Evidence and Findings: The Tribunal correctly applied this principle, holding that AYs 2003-04 and 2004-05 fell within the six-year period computed from 12.03.2009, the date of receipt of material by the AO. - Application of Law to Facts: The appellant's assessments for AY 2000-01 fell outside the six-year block and were rightly quashed, while assessments for AYs 2003-04 and 2004-05 were held valid. - Treatment of Competing Arguments: The Revenue's contrary argument that the proviso applies only to abatement and not limitation was rejected as lacking merit and contrary to legislative intent and judicial interpretation. - Conclusion: The proviso to Section 153C(1) creates a deeming fiction for the date of search for non-searched persons, which governs limitation and assessment periods; this interpretation was correctly applied. Issue 5: Computation of the six-year block period for assessment years following search and seizure - Legal Framework and Precedents: Section 153A(1)(b) limits assessments or reassessments to six assessment years immediately preceding the year in which the search is conducted or deemed conducted. - Court's Interpretation and Reasoning: The Tribunal identified the six relevant assessment years as 2003-04 to 2008-09, computed from the date of receipt of seized material by the AO of the non-searched entity. - Key Evidence and Findings: AY 2000-01 was outside this block and thus barred by limitation; AYs 2003-04 and 2004-05 fell within the block. - Application of Law to Facts: The Tribunal correctly dismissed appeals relating to AYs 2003-04 and 2004-05 and allowed the appeal for AY 2000-01. - Treatment of Competing Arguments: The appellant's contention that the block period should relate back to the original search date was rejected based on statutory proviso and judicial precedents. - Conclusion: The six-year block period was correctly computed and applied by the Tribunal.