TaxTMI 
TaxTMI 
2024 (12) TMI 391
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.... of the notices, vide letter dated 18.11.2019 requested the respondent assessing officer for documents relied upon by the respondent along with satisfaction recorded under section 153C of the Act. The respondents supplied satisfaction recorded by the Assessing Officer of the searched person on 31.03.2018 as well as the satisfaction recorded by the respondent vide letter dated 25.11.2019. As per the satisfaction note, for initiation of the assessment proceedings under section 153C of the Act, it is revealed that during the course of search at the office premises of M/s. Venus Infrastructure and Developers Pvt Ltd and Shri Ashok S. Vasvani for Venus Group on 10.03.2015, various loose papers, documents and digital data were seized and 11 documents pertaining to the petitioner were identified. 5. The respondent who is Assessing Officer of the petitioner, recorded satisfaction note on 23.10.2019 for initiation of the assessment proceedings under section 153C of the Act for the Assessment Years 2009-10 to 2014-15 in respect of each of the Assessment Year falling within six Assessment Years immediately preceding the Assessment Year relevant to previous year in which the search was cond....
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....d person. 8. It was submitted that in the facts of the case, the search was conducted on 10.03.2015 whereas, the satisfaction note of Assessing Officer of the searched person was recorded on 31.03.2018 i.e. almost after three years whereas, the satisfaction note dated 23.10.2019 recorded by the respondent- Assessing Officer of the petitioner was even later i.e. after more than four years from the date of the search and one and half years from the date of the satisfaction note recorded by the Assessing Officer of the searched person. 9. It was therefore submitted that as the satisfaction note ought to have been recorded at the time of search along with initiation of the proceedings against the searched person and in view of the facts of the case, as the same is recorded only after more than three years from the date of search, such satisfaction note is therefore, time barred. Reliance was placed on the decision of CIT vs. Jitendra H. Modi vs. reported in 403 ITR 110 (Guj.) and in case of Commissioner of Income Tax vs. Bharat Bhushan Jain reported in 370 ITR 695 (Delhi). 10. It was further contended that the impugned notices are also time barred for the reason that six years....
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....f Principal Commissioner of Income Tax (Central)-2 vs Index Securities (P.) Ltd reported in [2017] 86 Taxman.com 84 (Delhi). 13. It was also submitted that no valid satisfaction is recorded by both the Assessing Officers to assume jurisdiction to issue notice as in view of the fact that incriminating material referred to in the satisfaction note does not disclose which document relates to the petitioner leading to the belief that there is unaccounted income. It was submitted that the satisfaction note only refers to the documents found during the course of the search from the Venus Group and it only says that in case of the petitioner Rs. 4.8 Crore on-money was paid without referring to any incriminating material against the petitioner. Reliance was placed on the following decisions: a.Principal Commissioner of Income Tax vs. Abhisar Buildwell (P.) Ltd reported in 454 ITR 212(SC) b.Sri Sai Cashews reported in [2021] 131 taxmann.com 177 (Orissa) c.Principal Commissioner of Income Tax vs. Vikas Telecom Ltd reported in [2022] 135 taxmann.com 362 (Delhi) d.Sunway Realtech (P.) Ltd reported in [2022] 142 taxmann.com 477 (Delhi) 14. Per contra, l....
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....at satisfaction note was recorded after the amendment of the provision of section 153C by the Finance Act, 2015 w.e.f. 01.06.2015. Reliance was placed on the decision of the Hon'ble Apex Court in case of ITO vs. Vikram Sujit Kumar Bhatia reported in 453 ITR 417 wherein it is held that the amended provisions are not substantive but clarificatory of the previous wordings of the provisions. It was further submitted that the provision of section 153C refers to the assessment or re-assessment of the income of the other person in accordance with the provision of section 153A and as per the second proviso to section 153A of the Act which has been inserted by the Finance Act 2017 w.e.f. 01.04.2017, 'relevant assessment year' has been explained as per the Explanation-1 to mean an assessment year preceding the Assessment Year relevant to the previous year in which, the search is conducted or requisition is made which falls beyond six years but not later than ten Assessment Years from the end of the Assessment Year relevant to the previous year in which the search is conducted or requisition is made if the escaped assessment amount amounts to or is likely to amount to Rs. 50 Lakh or more. It ....
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....ized material prima facie shows the payment of on-money in cash by the petitioner for purchase of the property from the Venus Group which would be the subjectmatter of assessment proceedings. 20. Reliance was also placed on the decision of the Delhi High Court in case of Principal Commissioner of Income Tax vs Karina Airlines International Ltd. reported in (2024) 165 taxman.com 421 wherein it is held that in case of search conducted in the Year 2016 and the satisfaction was recorded in 2019 after amendment to 153C by the Finance Act,2017 came into effect, block period of six assessment years would get extended to ten Assessment Years. 21. Reliance was placed on the decision of the Jitendra Mansukhlal Adesara vs. Assistant Commissioner of Income Tax reported in [2021] 126 Taxman.com 150 (Guj.) wherein it is held by this Court that when the Assessing Officer is satisfied, the documents containing the details in the seized material from the searched person and such material pertains to the petitioner, it cannot be said that the mandatory requirements of section 153C of the Act have not been complied with. 22. It was therefore, submitted that as per the mandate of section 153C....
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....12-3-2014 [2014] 43 taxmann com 446 (SC) (available in NJRS at 2014-LL-03 12-51) has tad down that for the purpose of section 1SKBD of the Act, recording of a satisfaction note is a prerequisite and the satisfaction note must be prepared by the AO before he transmits the record to the other AO who has jurisdiction over such other person u/s 158BD. The Hon'ble Court held that "the satisfaction note could be prepared at any of the following stages: (a) at the time of or along with the initiation of proceedings against the searched person under section 1S8BC of the Act; or (b) in the course of the assessment proceedings under section 158BC of the Act; or (c) immediately after the assessment proceedings are completed under section 153BC of the Act of the searched persona." 3.Several High Courts have held that the provisions of section 153C of the Act are substantially similar/parimateria w the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. ....
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....conducted, may be found. In such case, the Assessing Officer has to first be satisfied under Section 153C, which provides for the assessment of income of any other person, i.e., any other person who is not covered by the search, that the books of account or other valuable article or document belongs to the other person (person other than the one searched). He shall hand over the valuable article or books of account or document to the Assessing Officer having jurisdiction over the other person. Thereafter, the Assessing Officer having jurisdiction over the other person has to proceed against him and issue notice to that person in order to assess or reassess the income of such other person in the, manner contemplated by the provisions of Section 153A. Now a question may arise as to the applicability of the second proviso to Section 153A in the case of the other person, in order to examine the question of pending proceedings which have to abate. In the case of the searched person, the date with reference to which the proceedings for assessment or reassessment of any assessment year within the period of the six assessment years shall abate, is the date of initiation of the search under....
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....uld be from the date when the material was forwarded to the jurisdictional Assessing Officer which can be either 31.03.2018 or 02.04.2018 or 23.10.2019 and accordingly, the Assessment Years for which, the notices can be issued would be in first scenario from A.Y. 2012-13 to 2017-18, in the second scenario from 2013- 14 to 2018-19 and in third scenario from 2014-15 to 2019-20. 30. However, as contended by the learned Senior Standing Counsel Mr. Patel for the Revenue that the period of 10 years is required to be reckoned as held by the Hon'ble Delhi High Court in case of Principal Commissioner of Income Tax vs Karina Airlines International Ltd.(supra), whether the incriminating material is received in either of the three scenarios, the Assessment Years 2011-12 and 2012-13 would be covered within the period of 10 years to be reopened under section 153C read with section 153A of the Act. The Hon'ble Delhi High Court has held in the said case as under : "7. It becomes pertinent to note that as those provisions stood prior to Finance Act, 2017, the relevant assessment years which could be thrown open pursuant to a search stood at six assessment years. By virtue of Finance Act....
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.... thus hypothetically extend to a block period of ten years both in the case of a searched as well as a nonsearched entity. In our opinion, the amendments introduced in Section 153C, and on which reliance was placed by Mr. Mann, were essentially intended to place both Sections 153A and 153C at par and for both statutory provisions being available to be invoked for the purposes of assessment covering a block of ten Ays'. 16. It however becomes relevant to note that Section 153C applies equally to all non-searched entities and neither carves out an exception nor does it create a separate regime pertaining to a contingency where the AO of the searched and the non-searched entity are one and the same. If the submission of Mr. Mann were to be accepted, it would amount to the Court carving out an exception in respect of those cases where the jurisdictional AO of the searched and non-searched entity were the same. This would also lead and constrain the Court to restrict the application of the First Proviso to Section 153C (1) of the Act only to those cases where the AO of the non-searched entity be one different from that of the searched person. This would clearly amount to a ....
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.... the total income of such other person", the mere receipt of documents would not suffice. 20. It thus becomes apparent that it is the satisfaction arrived at under Section 153C which constitutes the cornerstone of that provision and the primary ingredient for Section 153C being set into motion. In our considered opinion, the actual or physical act of transmission of documents is merely a step in aid of formation of opinion whether an assessment under Section 153C is liable to be initiated. It is in that sense merely a machinery provision put in place to enable the AO of the non-searched person to examine whether an assessment is liable to be commenced under Section 153C of the Act. Thus, even in a case where the AO of the searched and the nonsearched party be one and the same, it would be the formation of an opinion that the material is likely to "have a bearing on the determination of the total income.." which would constitute the core and the heart of Section 153C. 21. A harmonious interpretation of the main part of Section 153C and its Proviso lead us to hold that in cases where the jurisdictional AO is common, the commencement point would have to be construed ....
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....ling the respondents from initiating assessment/reassessment for the entire block period of ten assessment years. Consequently, and in our considered opinion, the submission that the power to assess would stretch only up to AY 2017-18 is misconceived. In light of the plain language and text in which Section 153C is couched, we are of the considered opinion that the material gathered in the course of the search would have empowered and enabled the respondent to undertake an assessment for six assessment years immediately preceding the assessment year pertaining to the previous year in which the search was conducted and would also extend to the four additional AYs' which would stand included by virtue of Explanation 1 to Section 153A of the Act. The aforesaid position cannot possibly be doubted bearing in mind Section 153C incorporating the phrase ".....and for the relevant assessment year or years referred to in sub-section (1) of section 153A". For the purposes of understanding the meaning to be assigned to the expression relevant assessment year, we would have to necessarily travel back to Explanation 1 as placed in Section 153A. The submission, therefore, that Sectio....
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.... drawn in unambiguous terms, and more particularly in paragraph 140 thereof, recites that the AO was satisfied that this was a fit case for initiating proceedings under Section 153C read with Section 153A of the Act for AY 2014-15 to AY 2020-21. There is thus an explicit reference not only to Section 153A but also to the block of ten assessment years which were proposed to be made subject matter of the impugned proceedings. The submission, therefore, that Section 153A was not invoked is untenable. xxxxx 20. The petitioner has woefully failed to establish that the material which forms the bedrock for recordal of satisfaction is not founded on any data, material evidence or documentation pertaining to AYs' 2014- 15, 2015-16 and 2016-17. In fact no submission in this respect was either addressed or iterated. We note that the cumulative impact of the material which had been gathered in the course of the search and which was also duly noticed in the Satisfaction Note has also been collated in the form of a chart which stands extracted in the Section 142(1) notice dated 01 March 2024. The said chart is extracted hereinbelow : - AY Amount in crores 2020-21 ....
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....nsideration material that was gathered and collected in the course of four different searches. We find ourselves unable to sustain that submission bearing in mind the indubitable fact that Section 153C of the Act represents the power conferred upon the AO to commence a process of assessment or reassessment for a block period of ten assessment years in the maximum. The procedure as prescribed in Section 153C is part of a distinct statutory regime pertaining to search assessments which came to be introduced in the Act by virtue of Finance Act, 2003 and intended to act as a substitute to the procedure which was otherwise envisaged under Chapter XIV-B. 23. For the purposes of invoking Section 153C of the Act it is incumbent upon the AO to be satisfied that the material gathered in the course of the search and pertaining to the non-searched person would have a bearing on the determination of the total income of such other person either for six AYs' or for the relevant AY or AYs'. Since the provision itself requires and enables the AO to undertake an assessment for a block period of ten years, it would clearly not be incumbent upon it to draw separate or independent sati....
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....ve that while it would be imperative for the Satisfaction Note to refer to the material pertaining to the AYs' which are sought to be reopened, a consolidated Satisfaction Note clearly does not appear to be an anathema provided it rests on material which pertains to the AYs' which are sought to be reopened. 26. We in this respect also bear in mind the lucid explanation of the procedure liable to be adopted under Sections 153A and 153C as came to be enunciated by the Court in Commissioner of Income Tax (Central) -III Vs. Kabul Chawla11 "37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessmen....
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.... appears to have taken the position that as a long as proceedings are initiated within a reasonable period from the closure of assessment of the searched person, a failure to take ―immediate action would not be fatal to the assessment. It is thus evident that Calcutta Knitwears and the expression immediately after as appearing therein has not been construed or understood as being an expression of inflexible hues. What appears to have been frowned upon is inordinate delay. The question of whether delay is inordinate and consequently warranting quashing of the assessment proceedings itself, would inevitably be a question of fact which would have to be answered in the facts and circumstances of each case. We would also and necessarily have to bear in consideration the scope, extent and complexity of the investigation and enquiry which may have preceded the initiation of proceedings under Section 153C. However, we find ourselves unconvinced to hold in favour of the petitioner on this score for reasons which follow. xxxxxx 34. As is manifest from the above, while the Section 153C notice was issued on 07 March 2023, the Satisfaction Note appears to have been provi....