2025 (4) TMI 613 - HC - Income Tax

Section 153C notice validity upheld as six-year limitation calculated from asset seizure date, not search date

Sunil Khetpalia Versus Assitant Commissioner of Income Tax, Central Circle 3 (1), Chennai

Madras HC dismissed writ petitions challenging validity of notice issued under Section 153C on limitation grounds. Court held that for calculating ... Validity of Notice issued u/s 153C as barred by limitation - HELD THAT:- In this case, the search was conducted on 10.11.2020. Thereafter, the documents or assets were seized or requisitioned by the AO on 30.06.2022 and the show cause notice dated 30.12.2024 was issued. The claim of the petitioner is that the date of issuance of show cause notice should be considered as the date of initiation of proceedings as far as the other person is concerned and hence, the limitation period of 6 year has to be calculated from the said date, in which case, the present proceedings are barred by limitation. In this case, on 10.11.2020, the search was not conducted in the petitioner's premises. The petitioner is the other person, from whom the documents or assets were seized or requisitioned on 30.06.2022 and thus, the said date, i.e., 30.06.2022, only has to be considered for calculating the limitation period of 6 years. With regard to all other aspects, i.e., for initiation or completion of proceedings, it is left open for the petitioner to give suitable reply to the show cause notice dated 30.12.2024 and contest the same in accordance with law, if so advised. As far as the settlement arrived at IBS is concerned, even though the case was settled before the IBS, the liberty is granted to the Department to proceed further, in future, if any new material is found. When such being the case, this Court finds no substance in the submissions made by the petitioner on this aspect. For all the reasons stated above, this Court does not find any merits in the submissions made by the petitioner on the aspect of limitation and thus, this Court is not inclined to interfere with either the impugned notice dated 30.12.2024 or the impugned order dated 13.03.2025. Therefore, the writ petitions are liable to be dismissed. 1. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment include:- Whether the notice issued under Section 153C dated 30.12.2024 was barred by the limitation period of six years as stipulated under the Income Tax Act.- Whether the respondent's actions were justified in issuing a notice and an order after a settlement had been reached with the Interim Board for Settlement (IBS) on a previous occasion.- The interpretation of the starting point for the limitation period under Section 153C, specifically whether it begins from the date of the search or the date of receiving the documents or assets from the other person.2. ISSUE-WISE DETAILED ANALYSISIssue 1: Limitation Period under Section 153C- Relevant Legal Framework and Precedents: Section 153C of the Income Tax Act deals with the assessment of income of any other person when documents or assets are seized. The provision includes a limitation period of six years for issuing notices, starting from the date of receiving the books of account or documents from the other person.- Court's Interpretation and Reasoning: The Court interpreted the proviso to Section 153C, which specifies that the limitation period starts from the date the Assessing Officer receives the documents or assets from the other person, not from the date of the search. The Court emphasized that the date of receiving the documents, i.e., 30.06.2022, is crucial for calculating the limitation period.- Key Evidence and Findings: The documents were collected from the petitioner on 30.06.2022, and the notice was issued on 30.12.2024. The Court found that the notice was issued within the six-year limitation period starting from 30.06.2022.- Application of Law to Facts: The Court applied the legal framework of Section 153C and determined that the notice was within the permissible time frame, as the limitation period began on 30.06.2022.- Treatment of Competing Arguments: The petitioner argued that the limitation should be calculated from the date of the search, while the respondent contended it should start from the date of receiving the documents. The Court sided with the respondent's interpretation.- Conclusions: The Court concluded that the notice was not barred by limitation and was issued within the legal time frame.Issue 2: Settlement with the Interim Board for Settlement (IBS)- Relevant Legal Framework and Precedents: The petitioner previously reached a settlement with the IBS, which typically resolves disputes and prevents further action on the same issues unless new material is found.- Court's Interpretation and Reasoning: The Court noted that the settlement with the IBS allowed the Department to initiate proceedings if new material was discovered. The Court found that the respondent was within their rights to issue a notice based on new findings.- Key Evidence and Findings: The respondent was granted liberty to raise similar issues in the future if new material was discovered, which justified the issuance of the notice.- Application of Law to Facts: The Court applied the terms of the IBS settlement and found that the respondent acted within their rights as new material had been found.- Treatment of Competing Arguments: The petitioner argued that the settlement barred further action, while the respondent argued that new material justified the notice. The Court agreed with the respondent.- Conclusions: The Court concluded that the respondent's actions were justified under the terms of the IBS settlement.3. SIGNIFICANT HOLDINGS- The Court held that the limitation period under Section 153C begins from the date the Assessing Officer receives the documents or assets from the other person, as per the first proviso to Section 153C(1).- The Court emphasized that the notice dated 30.12.2024 was issued within the permissible time frame, as the limitation period started on 30.06.2022.- The Court reiterated that the settlement with the IBS allowed for future proceedings if new material was found, thus justifying the respondent's actions.- The Court dismissed the writ petitions, granting the petitioner liberty to respond to the show cause notice within 30 days.