Facts of the Case

The batch of writ petitions and connected appeals arose from search and seizure operations conducted under the Income-tax Act, 1961, leading to issuance of notices for assessment or reassessment under Sections 153A and 153C. The impugned notices sought to reopen assessment years extending beyond the normal six-year period and, in several instances, beyond ten years from the relevant assessment year. The assessees challenged the validity of these notices, particularly invoking the Fourth Proviso to Section 153A, which permits reopening of up to ten years only where escaped income represented in the form of an asset amounts to or is likely to amount to ₹50 lakh or more.

Issues Involved

  1. Whether notices issued under Sections 153A/153C for assessment years beyond the permissible statutory block period were valid.
  2. Whether the ₹50 lakh threshold prescribed in the Fourth Proviso to Section 153A constitutes a mandatory precondition for invoking the extended ten-year period.
  3. Whether concluded assessments attain finality that bars initiation of search assessments.
  4. Whether the satisfaction recorded by the Assessing Officer must demonstrate that escaped income is likely to exceed the statutory threshold.

Petitioner’s Arguments

  • The impugned notices were issued for assessment years falling beyond the maximum permissible period prescribed by law.
  • The statutory condition of escaped income of ₹50 lakh or more, represented in the form of an asset, was not satisfied or properly established.
  • Once the time limit for reassessment had expired, the assessments had attained finality, and reopening them violated settled legal principles.
  • The satisfaction note did not contain adequate material to justify invocation of the extended period.

Respondent’s Arguments

  • Search assessment provisions operate independently and override ordinary reassessment provisions.
  • The statute permits reopening for up to ten years subject to conditions, and the determination of escaped income at the initiation stage is necessarily provisional.
  • The requirement is that escaped income “amounts to or is likely to amount to” ₹50 lakh, indicating that certainty is not required at the notice stage.
  • Finality of prior assessments does not preclude action following a search, as search provisions are triggered by an unpredictable event.

Court Order / Findings

  • The extended ten-year period under the Fourth Proviso to Section 153A can be invoked only where the escaped income represented in the form of an asset is at least ₹50 lakh or is likely to reach that amount.
  • The Assessing Officer must record reasons demonstrating that the ultimate escaped income is likely to exceed the threshold; mere conjecture or speculation is insufficient.
  • The ₹50 lakh condition applies cumulatively and not necessarily to each individual assessment year.
  • Search assessment provisions override reassessment provisions and are not controlled by limitation periods applicable to reassessment.
  • However, notices issued for assessment years falling beyond the ten-year block period are without jurisdiction and liable to be quashed.

Applying these principles, the Court:

  • Allowed writ petitions relating to assessment years beyond the ten-year limit and quashed the impugned notices.
  • In one instance where the relevant year fell within ten years but the asset value was below ₹50 lakh, the notice was quashed with liberty to the Assessing Officer to re-examine whether the statutory conditions were met and initiate fresh proceedings if permissible in law.
  • Dismissed the connected appeal (ITA 52/2024).

Important Clarification

  • The ₹50 lakh threshold is a sine qua non for invoking the extended period but may be satisfied on an aggregate basis.
  • Satisfaction must be evident from the recorded note itself.
  • Finality of earlier assessments does not create an absolute vested right against search assessments.
  • Search provisions possess overriding effect and operate independently of reassessment timelines.
  • Initiation of proceedings at the notice stage involves a provisional opinion based on available material.

Link to download the order –   https://www.mytaxexpert.co.in/uploads/1772263329_ALANKITFINSECLIMITEDVsDEPUTYCOMMISSIONEROFINCOMETAXCENTRALCIRCLE28DELHI.pdf 

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