2024 (4) TMI 1201 - HC - Income Tax

Validity of notices u/s 153C beyond the maximum window of ten years as prescribed - HELD THAT - The issue in any case stands answered and covered in favour of the writ petitioner in light of the judgment rendered in Ojjus Medicare Pvt. Ltd 2024 (4) TMI 268 - DELHI HIGH COURT as held reckoning of the six AYs would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A. While the identification and computation of the six AYs hinges upon the phrase immediately preceding the assessment year relevant to the previous year of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it from the end of the assessment year . This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology immediately preceding when it be in relation to the six year period and employing the expression from the end of the assessment year while speaking of the ten year block. Thus we allow the instant writ petitions and quash the impugned notices dated 05 September 2022 issued under Section 153C.

Summary

Issues:
Challenge against impugned notices under Section 153C of the Income Tax Act for AY 2010-11 and AY 2011-12 based on the time limitation.

Analysis:
The writ petitions were filed against notices dated 05 September 2022 issued under Section 153C of the Income Tax Act for AY 2010-11 and AY 2011-12. The key contention revolved around the time limitation aspect, specifically the maximum window of ten years as prescribed by law. The court noted that the notices fell beyond the permissible time frame. This crucial point was pivotal in determining the outcome of the case.

The judgment referred to a previous case, Principal Commissioner of Income Tax-1 vs. Ojjus Medicare Pvt. Ltd, where the issue regarding the computation of the block periods under Section 153C was extensively discussed and settled. The legal fiction introduced by the First Proviso to Section 153C was highlighted, which shifted the reference point for calculating the relevant assessment year to the date of receipt of books of accounts by the jurisdictional AO. This shift was deemed significant and had been authoritatively settled in various judicial decisions, including those by the Supreme Court.

The judgment further elaborated on the computation of the block periods, emphasizing the distinction between the six-year and ten-year periods. It was clarified that the identification of the six AYs would be based on the financial year of the search, leading to the ascertainment of the AY relevant to the previous year of the search. On the other hand, the ten-year period would commence from the 31st day of March of the AY relevant to the year of search, as mandated by Explanation 1 of Section 153A. The court underscored the statutory language used in differentiating between the two periods, highlighting the phrase "immediately preceding" for the six-year period and "from the end of the assessment year" for the ten-year block.

In light of the legal principles established in the Ojjus Medicare case and the interpretation of relevant provisions, the court allowed the writ petitions and quashed the impugned notices issued under Section 153C of the Income Tax Act for AY 2010-11 and AY 2011-12, along with all consequential proceedings stemming from those notices. The decision was grounded in the statutory framework and judicial precedents, ensuring adherence to the prescribed time limitations and procedural requirements under the law.