Facts of the Case

The petitioner challenged the initiation of reassessment proceedings under Section 148 of the Income Tax Act, 1961 for Assessment Year 2013-14. The impugned action was based on a search conducted on 9 February 2022 in the case of M/s Proform Interiors Private Limited, a third party.

Pursuant to the search, the Revenue issued a notice dated 30 March 2023 seeking to reopen the petitioner’s assessment. The respondents contended that since the search was conducted after 1 April 2021, the procedure under Section 148A was not required due to the statutory exemption applicable to search cases.

Initially, the Court had granted interim protection after observing that the reassessment might be barred by limitation under Section 149(1).

Issues Involved

  1. Whether reassessment for AY 2013-14 initiated after a search conducted in 2022 was within the limitation prescribed under Section 149.
  2. Whether timelines under Sections 153A and 153C (as they existed prior to the Finance Act, 2021) must be considered for post-2021 search cases.
  3. Determination of the starting point for computing the block period for a non-searched person.

Petitioner’s Arguments

The petitioner argued that the impugned notice was issued beyond the permissible time limit. Reliance was placed on earlier decisions holding that in cases involving a non-searched person, the relevant block period must be computed with reference to the date when material is handed over to the jurisdictional Assessing Officer, not the date of search.

Respondent’s Arguments

The Revenue contended that since the search occurred after 1 April 2021, reassessment proceedings were governed solely by Section 148 and the limitation should be computed from the date of search. It argued that the provisions of Section 153C were no longer applicable and therefore need not be considered.

Court Order / Findings

  • The First Proviso to Section 149(1) requires testing the validity of reopening against the timelines under Sections 149, 153A, and 153C as they stood prior to the Finance Act, 2021.
  • In the case of a non-searched person, the computation of the block period is governed by the legal fiction under the First Proviso to Section 153C, which treats the date of receipt of seized material by the jurisdictional Assessing Officer as the starting point.
  • The Court rejected the Revenue’s argument that limitation should be computed solely from the date of search.
  • When the statutory framework was correctly applied, AY 2013-14 fell beyond even the ten-year block period.

Important Clarification

The ruling clarifies that even after the overhaul of reassessment provisions by the Finance Act, 2021, search-related reassessment must still satisfy the limitation safeguards embedded in the earlier statutory framework when required by the proviso to Section 149(1).

It further confirms that for non-searched persons, the relevant date for computing limitation is linked to the transmission of seized material to the jurisdictional Assessing Officer, not merely the date of search.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1772177163_DINESHJINDALVsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE20DELHIORS..pdf 

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