2017 (8) TMI 733 - HC - Income Tax

Assessment u/s 153C in the case of the other person - satisfaction note by the AO of the searched party - Held that - Referring to the recent amendment made in Section 153 C of the Act by the Finance Act, 2017 with effect from 1st April 2017. This amendment in effect states that the block period for the searched person as well as the other person would be the same six AYs immediately preceding the year of search. This amendment is prospective. Since in the case of the other person the AO issues notice only subsequent to the notices issued under Section 153 A to the searched person, the starting point for computation of the block period would be the date on which, based on the seized documents, notice is issued to the other person under Section 153 C of the Act. Thus in the present case, the six year period prior to AY 2012-13 i.e. AY 2007-08 to AY 2012-13. Thus no notice could be issued under Section 153 C of the Act to reopen the Assessee s assessment for AY 2006-07. - Decided in favour of assessee.

Summary

Issues:
1. Jurisdiction of notice issued under Section 153 C for AY 2006-07.
2. Interpretation of provisions of Section 153 C and Section 153 A regarding block period for assessment/reassessment.

Issue 1: Jurisdiction of notice under Section 153 C for AY 2006-07
The appeal was filed by the Revenue challenging the ITAT's order regarding the jurisdiction of the notice issued to the Assessee under Section 153 C of the Income Tax Act for the Assessment Year (AY) 2006-07. The dispute revolved around whether the notice was justified since the AY in question was beyond the purview of issuance under the said provision. The Revenue argued that the notice abatement provision applied to pending assessments and did not affect the computation of the block period. Conversely, the Assessee contended that the starting point for the block period should be the date of notice issuance to the 'other person' under Section 153 C, referencing a previous court decision supporting their stance.

Issue 2: Interpretation of provisions of Section 153 C and Section 153 A
The interpretation of Section 153 C and Section 153 A was crucial in determining the block period for assessment/reassessment. The Revenue argued that the block period for the searched person and the 'other person' should remain the same, regardless of delays in transmitting documents. However, the Assessee relied on a court decision emphasizing that the block period should start from the date of notice issuance to the 'other person' under Section 153 C. The court referred to previous judgments and highlighted the requirement for the AO to issue notices and proceed with assessments/reassessments in accordance with Section 153 A. The court also noted a recent amendment to Section 153 C, making the block period consistent for both searched and 'other persons.'

In conclusion, the court dismissed the appeal, stating that no substantial question of law arose from the ITAT's order. The court declined to reconsider its previous decision, citing consistent application and the recent prospective amendment to Section 153 C aligning the block period for both searched and 'other persons.'