Income reassessment notices u/s153C for AY 2014-15 quashed after escapement below ?50 lakh blocked 10-year limit

HC held that reassessment proceedings initiated by notices under s.153C for AY 2014-15 were barred because the respondent sought to invoke the extended ten-year period despite alleged income escapement being below the statutory threshold of Rs.50,00,000. Since the recorded escapement was only Rs.26,00,000, the precondition for action beyond the normal limitation was not satisfied. Consequently, the impugned s.153C notices were quashed and set aside.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the impugned notice issued under Section 153C for the relevant assessment year could be sustained when, applying the Supreme Court's interpretation, the permissible period for initiating Section 153C proceedings is to be reckoned from the date of receipt of books of account/documents/assets by the jurisdictional Assessing Officer of the assessee (third party), and not from the date of search/seizure.

(ii) Whether the impugned Section 153C notice was liable to be quashed where the action sought to travel beyond the permissible ten-year window and the "escapement of income" reflected in the satisfaction recorded was below Rs. 50,00,000/-.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Commencement point for reckoning the period under Section 153C in third-party cases

Legal framework: The Court considered Section 153C and applied the Supreme Court's interpretation that the proviso is not confined only to abatement, but also governs the date from which the relevant period is to be reckoned for a person other than the searched person.

Interpretation and reasoning: The Court accepted the proposition that, in third-party proceedings under Section 153C, the relevant reckoning does not "relate back" to the date of search. Instead, the period begins from the date on which the jurisdictional Assessing Officer of the third party receives the seized/requisitioned material from the Assessing Officer of the searched person. This interpretation was applied to avoid disproportionate prejudice to a third party who may otherwise be subjected to proceedings long after the search, merely due to delay in forwarding material.

Conclusion: On the facts as presented and not controverted by the revenue, the Court proceeded on the basis that the impugned action could not be sustained if it purported to extend beyond the permissible period as computed in the manner mandated by the Supreme Court.

Issue (ii): Validity of the impugned Section 153C notice where the case fell outside the ten-year scope and escapement was below Rs. 50,00,000/-

Legal framework: The Court applied the Supreme Court decision relied upon by the petitioner, including the limitation on extending action beyond the standard window up to ten years, and the asserted threshold requirement of Rs. 50,00,000/- for such extended reach as argued on the basis of the satisfaction recorded.

Interpretation and reasoning: The petitioner contended that the relevant year was the 10th year and that the satisfaction reflected escapement of income of less than Rs. 50,00,000/- (stated as Rs. 26,00,000/-). The revenue's counsel stated an inability to controvert these factual assertions and also could not dispute that, as canvassed, the action was outside the ten-year scope in the given circumstances. The Court treated these uncontroverted facts as determinative for the legality of the impugned notice.

Conclusion: Because the escapement amount was found (on the uncontroverted record before the Court) to be below Rs. 50,00,000/-, the Court held that the impugned notice under Section 153C for the concerned assessment year could not stand and therefore quashed and set it aside.

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