Facts of the Case

A search and seizure operation under Section 132 of the Income Tax Act, 1961 was conducted in the Tinna Group of cases on 11 November 2010. During the course of the search, certain documents pertaining to Sarwar Agency Pvt. Ltd. were found and seized.

The Assessing Officer (AO) of the searched person recorded satisfaction and forwarded the seized documents to the jurisdictional AO of the assessee on 3 January 2013. Thereafter, a notice under Section 153C was issued to the assessee on 4 January 2013 for reassessment proceedings.

The dispute arose because the Revenue sought to reopen Assessment Year 2006–07, whereas the assessee contended that AY 2006–07 fell outside the permissible six-year period contemplated under Section 153C read with Section 153A.

 Issues Involved

  1. Whether notice issued under Section 153C for AY 2006–07 was legally valid?
  2. Whether the six assessment years for the “other person” under Section 153C are to be reckoned from:
    • the date of search under Section 132, or
    • the date of handing over/receipt of seized documents by the jurisdictional AO?
  3. Whether the amendment made by the Finance Act, 2017 to Section 153C could apply retrospectively?

 Petitioner’s Arguments (Revenue Department)

The Revenue argued that:

  • The first proviso to Section 153C refers only to the second proviso to Section 153A(1) concerning abatement of pending assessments.
  • The computation of the six-year block period should remain linked to the date of search, irrespective of when documents are handed over to the AO of the “other person.”
  • Therefore, the block period applicable to both the searched person and the other person should remain identical.
  • The ITAT erred in quashing the notice issued under Section 153C.

 Respondent’s Arguments (Assessee)

The assessee submitted that:

  • In cases under Section 153C, the proceedings commence only after the seized documents are received by the AO having jurisdiction over the other person.
  • Therefore, the starting point for computation of six assessment years must be the date of receipt of documents, not the original search date.
  • Since the documents were received on 3 January 2013, the relevant six assessment years would be AY 2007–08 to AY 2012–13.
  • Consequently, AY 2006–07 falls beyond jurisdiction and could not be reopened.
  • Reliance was placed on the Delhi High Court judgment in Commissioner of Income Tax-7 vs. RRJ Securities Ltd.

 Court Findings / Court Order

The Delhi High Court upheld the order of the ITAT and dismissed the Revenue’s appeal.

The Court held that:

  • In proceedings under Section 153C, the relevant date for determining the six-year assessment block is the date on which the seized documents are handed over to the AO of the other person.
  • The legal position had already been settled in RRJ Securities Ltd. and subsequently followed in ARN Infrastructure India Ltd.
  • Since the documents were received in January 2013, the six assessment years would start from AY 2007–08, making AY 2006–07 beyond permissible jurisdiction.
  • The amendment introduced by the Finance Act, 2017 making the block period identical for both searched and other person is prospective in nature and cannot govern earlier years.

Accordingly, the Court found no substantial question of law and dismissed the appeal.

 Important Clarification

This judgment clarified the pre-amendment legal position under Section 153C:

  • For the “other person”, the six-year block period is computed from the date when the seized material is received by the AO having jurisdiction over such person.
  • The date of search is not the determinative date for the “other person.”
  • The Finance Act, 2017 amendment changed this position prospectively by aligning both periods with the date of search.

This ruling is significant for reassessment jurisdiction and limitation in search-related tax proceedings.

 Sections Involved

  • Section 132 – Search and Seizure
  • Section 153A – Assessment in case of search or requisition
  • Section 153C – Assessment of income of any other person
  • Section 260A – Appeal to High Court

 Link to download the order - https://delhihighcourt.nic.in/app/case_number_pdf/2017:DHC:4512-DB/PMS17082017ITA4222017.pdf

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