2024 (3) TMI 1126 - HC - Income Tax

Assessment u/s 153C - Requirement of satisfaction note - inordinate delay in commencement of proceedings - HELD THAT - While the Section 153C notice was issued on 07 March 2023, the Satisfaction Note appears to have been provided to the petitioner on 28 and 30 June 2023. These writ petitions came to be preferred long thereafter on 19 March 2024. We take note of the statutory timeframes stipulated under Section 153B of the Act for completion of assessment proceedings and more particularly the Second and Third Proviso s which mandate assessment itself being completed within twelve months from the time when the books of account or material is handed over to the AO of the non-searched person. This would mean that in the present case and taking the date of handing over or recordal of satisfaction as constituting the date from which that period is liable to be reckoned, the assessment is liable to be completed by 31 March 2024. Writ petitioner has thus chosen to approach this Court only a few days before the time for completion of assessment would expire and at the proverbial fag end of the proceedings. We consequently find no justification to interdict the assessment proceedings at this belated stage by invoking our jurisdiction under Article 226 of the Constitution. However and whether the asserted delay in commencement of proceedings would be fatal to the assessment itself is a question that we leave open to be urged at an appropriate juncture.

Summary

Issues Involved:
1. Validity of initiation of proceedings u/s 153C of the Income Tax Act, 1961.
2. Limitation period for assessment under Section 153C.
3. Requirement of specific incriminating material for each assessment year.
4. Legality of a combined Satisfaction Note.
5. Delay in commencement of proceedings under Section 153C.

Summary:

1. Validity of initiation of proceedings u/s 153C:
The petitioner challenged the initiation of proceedings u/s 153C based on searches conducted in April 2019 and subsequent Satisfaction Notes. The petitioner argued that the assessment for AYs 2014-15, 2015-16, and 2016-17 would be barred by limitation as per the First Proviso to Section 153C. The Court held that the power to assess or reassess extends to six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted and includes four additional AYs by virtue of Explanation 1 to Section 153A.

2. Limitation period for assessment under Section 153C:
The petitioner contended that the assessment for AYs 2014-15, 2015-16, and 2016-17 was barred by limitation. The Court clarified that the First Proviso to Section 153C does not constitute a bar of limitation and does not disable the respondents from initiating assessment/reassessment for the entire block period of ten assessment years. The Court cited the Supreme Court's judgment in Commissioner Income Tax vs. Jasjit Singh, which held that the relevant date for computation of the six or ten assessment years is determined by the First Proviso to Section 153C.

3. Requirement of specific incriminating material for each assessment year:
The petitioner argued that Section 153C requires specific reference to incriminating material for each AY. The Court found that the Satisfaction Note referred to substantial and concrete evidence warranting further scrutiny. The material included documents, loose sheets, electronic evidence, and statements recorded during searches, which were relevant to the AYs in question.

4. Legality of a combined Satisfaction Note:
The petitioner contended that a combined Satisfaction Note does not satisfy the statutory requirements of Section 153C. The Court held that a composite Satisfaction Note is permissible as long as it includes sufficient particulars of incriminating material relevant to the block of AYs. The Court noted that the provision allows for a block period assessment, and separate Satisfaction Notes for each AY are not mandatory.

5. Delay in commencement of proceedings under Section 153C:
The petitioner argued that the commencement of proceedings was inordinately delayed. The Court referred to the Supreme Court's judgment in Calcutta Knitwears, which allowed for the satisfaction note to be prepared "immediately after" the assessment proceedings. The Court noted that the expression "immediately after" should not be taken literally and that the delay must be unreasonable to invalidate the proceedings. The Court found that the delay in the present case was not unreasonable and did not justify quashing the assessment proceedings.

Conclusion:
The Court dismissed the writ petitions, holding that the initiation of proceedings u/s 153C was valid, the limitation period was not a bar, a combined Satisfaction Note was permissible, and the delay in commencement of proceedings was not unreasonable. The assessment proceedings were allowed to continue.