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1. ISSUES PRESENTED AND CONSIDERED
1.1 Whether the assessments proposed under Section 153C for A.Y. 2014-15 to 2019-20 were barred by limitation under Section 153B(1), read with its third proviso and the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020.
1.2 Whether, in a case where the Assessing Officer of the searched person and the other person (third party) is the same, the second limb of clause (ii) of the third proviso to Section 153B(1) (relating to "handing over" of seized material under Section 153C) can extend the limitation period.
1.3 Whether transfer of records from the Investigation Wing to the common Assessing Officer, or the date of the satisfaction note, can be treated as the "handing over" contemplated by clause (ii) of the third proviso to Section 153B(1) for computing limitation.
1.4 Whether the interpretation adopted by the Madras High Court in treating the date of the satisfaction note as a deemed "handing over" date for limitation under Section 153B(1) should be followed.
2. ISSUE-WISE DETAILED ANALYSIS
Issue 1: Limitation for completion of assessments under Section 153C for the relevant assessment years
Legal framework
2.1 The Court considered Section 153C, which enables assessment of a person other than the searched person where seized material "belongs to" or "relates to" such other person.
2.2 The Court analysed Section 153B(1) and in particular its third proviso, clause (ii), applicable where the last authorisation for search was executed during the financial year commencing on or after 1 April 2019. Under this proviso: (i) the period of limitation in respect of search assessments is twelve months from the end of the financial year in which the last authorisation was executed; and (ii) in the case of "other person" under Section 153C, the limitation is the later of twelve months from the end of the financial year of the last authorisation, or twelve months from the end of the financial year in which the seized material is "handed over" under Section 153C to the Assessing Officer having jurisdiction over such other person.
2.3 The Court also took into account extensions of time under the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 and Notification No. S.O. 966(E) dated 27.02.2021.
Interpretation and reasoning
2.4 The search on the searched party took place on 21.08.2019. Since this was after 01.04.2019, the third proviso to Section 153B(1) applied. Under the first limb of clause (ii), the limitation period expired on 31.03.2021 (twelve months from the end of F.Y. 2019-20).
2.5 The Court noted that by virtue of TOLA and the above notification, this limitation stood extended up to 30.09.2021.
2.6 The Court recorded the petitioner's categorical statement, not disputed by the Revenue, that no assessment under Section 153C had been completed by 30.09.2021, and that show cause notices dated 11.03.2022 and 16.03.2022 were issued thereafter for completing the assessment.
Conclusions
2.7 As the assessments under Section 153C for A.Y. 2014-15 to 2019-20 were not completed on or before 30.09.2021, the Court held that the proceedings were barred by limitation and could not be validly continued thereafter.
Issue 2: Applicability of the second limb of clause (ii) of the third proviso to Section 153B(1) where the Assessing Officer is common
Legal framework
2.8 The Court examined the scheme of Section 153C and Section 153B(1), including the requirement under Section 153C that seized material "shall be handed over to the Assessing Officer having jurisdiction over such other person."
2.9 The Court relied on the judgment of the Supreme Court in Super Malls Pvt. Ltd. v. PCIT, which analysed Section 153C and the mechanism for recording satisfaction and transmission of seized material from the Assessing Officer of the searched person to the Assessing Officer of the other person.
Interpretation and reasoning
2.10 The Court derived from Super Malls Pvt. Ltd. that two scenarios exist: (i) where the Assessing Officer of the searched person and of the other person are different, and (ii) where they are the same.
2.11 In the first scenario, the Assessing Officer of the searched person must record satisfaction that seized documents belong to another person and then transmit such documents, together with the satisfaction note, to the Assessing Officer of the other person. The "handing over" in Section 153C and in the proviso to Section 153B(1) relates to this inter-officer transfer.
2.12 In the second scenario, where the Assessing Officer of the searched person and of the other person is the same, the Supreme Court has clarified that the second requirement of "transmitting the documents" does not arise, because there is no question of an Assessing Officer transmitting documents to himself. In that situation, there can be a single satisfaction note, but no transfer of records between officers.
2.13 Applying this interpretation, the Court held that in the present case the Assessing Officer of the searched party and the petitioner (third party) is one and the same (Central Circle 4(1), Mumbai). Therefore, there was no "handing over" of seized documents under Section 153C from one Assessing Officer to another.
2.14 Consequently, the second limb of clause (ii) of the third proviso to Section 153B(1)-which is premised on such a transfer to a different Assessing Officer-could not operate so as to afford an additional limitation period based on an alleged "handing over" date.
Conclusions
2.15 The Court held that where the Assessing Officer of the searched person and the "other person" under Section 153C is the same, the second limb of clause (ii) of the third proviso to Section 153B(1) is inapplicable, and limitation must be computed solely with reference to the first limb (twelve months from the end of the financial year in which the search took place, as extended by TOLA).
Issue 3: Whether transfer from the Investigation Wing or the date of the satisfaction note can be treated as "handing over" for limitation purposes
Interpretation and reasoning
2.16 The Revenue argued that seized documents relating to the petitioner were transferred by the Investigation Wing to the common Assessing Officer on 21.08.2020 and that the second limb of clause (ii) of the third proviso to Section 153B(1) should run from the end of the financial year containing that date, thereby extending limitation up to 31.03.2022.
2.17 The Court rejected this contention, holding that the statutory scheme contemplates "handing over" under Section 153C by the Assessing Officer of the searched person to the Assessing Officer of the other person, not a movement of records from the Investigation Wing to the Assessing Officer of the searched person.
2.18 The Court noted that there is no reference in the third proviso to Section 153B(1) to any transfer of records from the Investigation Wing; the time consumed by internal departmental processes, including the Investigation Wing's transfer to the Assessing Officer of the searched person, is subsumed within the first limb of clause (ii).
2.19 The Court observed that accepting the Revenue's interpretation would render the first limb of clause (ii) otiose, because in every case there is some gap between the date of search and the date on which the Investigation Wing transmits the records to the Assessing Officer. If limitation were always computed from the latter event, the first limb would never have practical application, which is impermissible in statutory interpretation.
2.20 The Court also considered the argument, based on a Madras High Court decision, that the date of the satisfaction note should be treated as a deemed "handing over" date. It held that there is no such stipulation in clause (ii) of the third proviso to Section 153B(1), and that importing such a fiction is unwarranted.
2.21 In any event, on the facts, the satisfaction note in the present case was undated, as admitted by the Revenue, making that doctrine inapplicable even on its own terms.
Conclusions
2.22 Transfer of records from the Investigation Wing to the Assessing Officer, or the date of a satisfaction note (particularly when undated), cannot be treated as the "handing over" contemplated by clause (ii) of the third proviso to Section 153B(1) for computation of limitation.
2.23 The only relevant "handing over" for the purposes of the second limb of the proviso is a transfer under Section 153C from the Assessing Officer of the searched person to a different Assessing Officer of the other person, which did not occur here.
Issue 4: Applicability of the Madras High Court decision on deemed "handing over" via satisfaction note
Legal framework and precedent considered
2.24 The Revenue relied on a decision of the Madras High Court which held that even when the Assessing Officer of the searched person and the other person is the same, the date of the satisfaction note should be treated as the deemed date of "handing over" for computing limitation under Section 153B(1), such that twelve months from the end of the financial year of that deemed "handing over" would govern.
Interpretation and reasoning
2.25 The Court held that this Madras decision was not applicable on facts because the satisfaction note in the present case was admittedly undated, preventing any identification of a deemed "handing over" date.
2.26 Independently of that factual distinction, the Court expressly declined to agree with the reasoning of the Madras High Court. It found no textual basis in clause (ii) of the third proviso to Section 153B(1)(b) for treating the date of the satisfaction note as a deemed date of "handing over."
2.27 The Court further observed that the Madras decision did not correctly read and apply the Supreme Court's decision in Super Malls Pvt. Ltd., which had categorically stated that where the Assessing Officer for the searched person and the other person is the same, there is no question of transmitting seized documents to oneself; hence the second requirement of transmission does not arise.
Conclusions
2.28 The Court held that the interpretation adopted by the Madras High Court regarding deemed "handing over" via the satisfaction note is not acceptable and cannot be applied in the present case.
2.29 The correct position, in line with Super Malls Pvt. Ltd., is that in cases where a common Assessing Officer exists for the searched and the other person, there is no "handing over" as envisaged by the second limb of clause (ii) of the third proviso, and limitation must be governed solely by the first limb, subject to statutory extensions.
Overall Disposition
2.30 On the basis of the above findings, the Court concluded that the proceedings under Section 153C for A.Y. 2014-15 to 2019-20 were time-barred, and accordingly quashed the notices issued under Section 153C and consequential proceedings, allowing the writ petition to that extent, without any order as to costs.
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