Facts of the Case

  • The Revenue filed an appeal against the order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2009–10.
  • During search proceedings, certain documents such as original share certificates relating to share capital and premium were found at the premises of the issuing company.
  • The Revenue contended that such documents indicated that the investor companies were accommodation entry providers.
  • The satisfaction note under Section 153C was recorded on 29 January 2016.

Issues Involved

  1. Whether reassessment under Section 153C can be initiated for Assessment Year 2009–10 based on a satisfaction note recorded in 2016.
  2. Whether the presence of documents at the premises of the issuing company constituted “incriminating material.”
  3. Whether the ITAT erred in holding that no valid incriminating material was found.

Petitioner’s Arguments (Revenue)

  • The ITAT erred in concluding that no incriminating material was found during the search.
  • The discovery of original share certificates at the issuing company’s premises established a nexus indicating bogus investor entities.
  • There existed a live link between the seized material and the additions made.

Respondent’s Arguments (Assessee)

  • The reassessment proceedings were barred by limitation under Section 153C.
  • The relevant assessment year (2009–10) fell outside the permissible six-year period calculated from the date of recording of satisfaction.
  • No valid incriminating material justifying reopening was found.

Court’s Findings / Judgment

  • The Court relied on precedents including CIT v. RRJ Securities Ltd. (2016) 380 ITR 612 and PCIT v. Sarwar Agency (P.) Ltd. (2017) 397 ITR 400.
  • It held that:
    • The six-year period under Section 153C must be computed from the date of recording of satisfaction, not the date of search.
    • For satisfaction recorded on 29 January 2016, the relevant assessment years would be 2010–11 to 2015–16.
  • Since AY 2009–10 fell outside this period, reassessment was invalid.
  • No substantial question of law arose; hence, the appeal was dismissed.

Important Clarification by the Court

  • The trigger point for Section 153C is the date of recording of satisfaction, not the search date.
  • The scope of reassessment is strictly limited to six assessment years preceding such date.
  • Any reassessment beyond this statutory period is legally unsustainable.

Sections Involved

  • Section 153C of the Income Tax Act, 1961
  • Section 153A of the Income Tax Act, 1961

Link to download the order -https://delhihighcourt.nic.in/app/case_number_pdf/2022:DHC:3916-DB/MMH26092022ITA3202022_183637.pdf

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