9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (8) TMI 293 - HC - Income TaxLimitation for initiation of proceedings u/s 153C - HELD 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 reconstruction of Section 153C and creating an exception which the Legislature chose not to introduce. The First Proviso to Section 153C (1) has been consistently recognized as not being concerned merely with the aspect of abatement, which is spoken of in the Second Proviso to Section 153A (1) of the Act, but also to regulate the date from which the six-year period or the relevant assessment year insofar as the non-searched entity is concerned, is to be reckoned. This position has been consistently followed not just by this Court but also by the Supreme Court in Commissioner of Income Tax 14 vs. Jasjit Singh 2023 (10) TMI 572 - SUPREME COURT . The material and documents unearthed in the course of the search have to be independently evaluated before a reassessment exercise can be initiated against a non-searched person. Unless the AO of that other person is satisfied that the material so gathered is likely to have an impact on the determination of the total income of such other person , the mere receipt of documents would not suffice. 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 u/s 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 u/s 153C - Thus, even in a case where the AO of the searched and the non-searched 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. 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 as the date when the satisfaction is formed by the said AO with respect to such other person. In our considered view, even though there may not have been an actual exchange of material unearthed in the course of the search between two separate authorities, it would be the date when the AO records its satisfaction with respect to the non-searched entity which would be of seminal importance and constitute the bedrock for commencement of action u/s 153C.
Issues Involved:
1. Whether the ITAT erred in law by quashing the assessment based on the amendment under section 153C which came into effect from 01.04.2017 while the search was conducted in 2016. 2. Whether the ITAT erred in law by quashing the assessment under section 153C on grounds that the relevant assessment year should be decided based on the date of recording satisfaction and not the date of the search. 3. Whether the ITAT erred in law by ignoring that implementation provisions have to be interpreted in consonance with the charging provision. 4. Whether the ITAT erred in law by ignoring the fact that the assessment was made as per the proviso of section 153C in effect on the date of recording the satisfaction. Detailed Analysis: Issue 1: Applicability of Amendment to Section 153C The Principal Commissioner challenged the ITAT's decision to quash the assessment on the grounds that the amendment to section 153C, effective from 01.04.2017, was only clarificatory in nature and should apply retrospectively. The ITAT held that since the search was conducted in 2016, the amendment could not be applied retroactively. The Tribunal emphasized that the amendment extended the block period for search assessment from six to ten years, but this extension was only applicable to searches initiated on or after 01.04.2017. The Court upheld the ITAT's view, noting that the Second Proviso to Section 153A clearly stipulates that the extended period of ten years applies only if the search is initiated on or after 01.04.2017. Since the search in this case was conducted on 07.04.2016, the amendment did not apply. Issue 2: Date of Recording Satisfaction vs. Date of Search The ITAT quashed the assessment under section 153C on the grounds that the relevant assessment year should be decided based on the date of recording satisfaction (15.05.2019) and not the date of the search (07.04.2016). The Tribunal found that the satisfaction note was recorded after the amendment to section 153C came into effect, making the amended provisions applicable. However, the Court clarified that the satisfaction note's date is crucial for initiating proceedings under section 153C, and the six-year period should be calculated from the date of recording satisfaction. The Court emphasized that the satisfaction note is essential for setting the reassessment process in motion and that the amendments introduced by the Finance Act, 2017, were intended to align sections 153A and 153C. Issue 3: Interpretation of Implementation Provisions The Principal Commissioner argued that the implementation provisions should be interpreted harmoniously with the charging provisions to avoid any anomalous situations. The Court agreed with the ITAT's interpretation that the amendments to sections 153A and 153C were intended to place both sections at par, allowing for a block period of ten years for both searched and non-searched entities. The Court noted that the amendments were designed to ensure consistency and avoid different sets of six years for reopening assessments. The Court also highlighted that the First Proviso to Section 153C (1) regulates the date from which the six-year period or the "relevant assessment year" is to be reckoned for non-searched entities. Issue 4: Assessment as per Proviso of Section 153C The ITAT quashed the assessment on the grounds that the assessment was made as per the proviso of section 153C in effect on the date of recording satisfaction. The Court upheld the ITAT's decision, emphasizing that the satisfaction note is the cornerstone of section 153C and that the actual transmission of documents is merely a step in aid of forming an opinion. The Court clarified that even if the same AO handles both the searched and non-searched entities, the satisfaction note's date is crucial for initiating proceedings under section 153C. The Court concluded that the reassessment for AY 2012-13, which fell beyond six assessment years from the date of recording satisfaction, would not sustain. Conclusion: The Court found no merit in the appeal and upheld the ITAT's decision to quash the assessment. The questions posed by the Principal Commissioner were answered against the appellants, and the appeal was dismissed. The Court emphasized the importance of the satisfaction note in initiating proceedings under section 153C and clarified that the amendments introduced by the Finance Act, 2017, were intended to align sections 153A and 153C, ensuring consistency in the assessment process.
|
