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2023 (9) TMI 890 - HC - Income TaxAssessment u/s 153C - Assessment based on search on third party - recording of satisfaction by AO that the books of accounts/documents/assets, seized or requisitioned have a bearing on the determination of total income of the other person, he is mandated to issue a notice for the entirety of the block of 6 assessment years and there is no discretion that has accorded to him in this regard. HELD THAT:- Section 153A provides for assessment in the case of the searched/requisitioned entity, whereas 153C deals with the assessment of income of any other person in respect of whom valuable assets were found in the course of the search. Both the provisions commence with a non-obstante clause, notwithstanding the provisions of Sections 139, 147, 148, 149, 151 and 153 and relate to a period of 6 assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition made and operates simultaneously with both Sections 153A and 153C. In addition, in the case of such other person, since satisfaction has to be recorded by two Assessing Officers (of the searched entity as well as third party) and there may be some elapse in time for the transfer of records from the first officer to the second, Section 153C(2) provides for the framing of the assessment for an additional year, ie., the year of search as well, in certain demarcated situations. Since that situation does not arise in the present case, I desist from elaborating further in this regard. With the amendment of the provisions in 2017 by Finance Act, 2017, with effect from 01.04.2017, the Department was also entitled to extend the block period for a further period of 4 years in addition to the 6 years originally provided, though for the 4 years brought within the ambit of the block period, an additional condition has been imposed, being the availability of material revealing that income that has escaped assessment exceeds 50 lakhs or more. The scheme of a block assessment includes both assessment as well as reassessment and is a scheme different and distinct from all the other modes of assessment as well as re-assessment already available under the Act including reassessment under Section 147. The premise of this scheme of assessment is a search/requisition, although the scope of assessment extends to ‘total income’. This view finds support from the recent judgment of the Hon’ble Supreme Court in Principal Commissioner of Income Tax, Central -3 V.Abhisar Buildwell P. Ltd. [2023 (4) TMI 1056 - SUPREME COURT] confirming the decision in Commissioner of Income Tax V. Kabul Chawla [2015 (9) TMI 80 - DELHI HIGH COURT] Assessments made either under Section 153A or 153C can be sustained only if those assessments are based upon incriminating materials found in the course of search indicating concealed assets/taxable income that have escaped assessment. The scheme of assessment under Sections 153 A and 153C is available to the Department in addition to all other methods of assessment, revision and reassessment and each scheme has its distinct set of conditions and stipulations, that must be strictly adhered to. Department has argued that the issuance of notice for all 6 years preceding the previous year, relevant to the assessment year in which the search takes place is mandatory, irrespective of whether the satisfaction note reveals the seizure of any incriminating material in the case of the assessee concerned - There is a vital distinction between the object, intention as well as the express language of Sections 153A and 153C. Section 153A addresses the searched entity and the procedure set out is evidently a notch higher for this reason. There is no discretion or condition precedent under Section 153A to the issuance of notice save the conduct of a search under Section 132 or making of a requisition under Section 132A. Upon the occurrence of one of the aforesaid events, it is incumbent upon the officer to issue notice under Section 153A to the searched entity in line with the procedure stipulated. Notice under Section 153C would have to be issued only upon the concurrent satisfaction of both conditions as aforesaid. To this extent, there is, in my considered opinion, a clear and marked distinction between the provisions of Section 153A and 153C. The contention of the revenue that a mandate is cast upon the Assessing Officer of the third party to issue notice under Section 153C for all the years comprising the block, mechanically and automatically, is thus rejected. To clarify, it is only where the satisfaction note recorded by the receiving Assessing Officer, i.e., the Assessing Officer of the third party reflects a clear finding that the incriminating material received has a bearing on determination of total income of the third party for 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, that such notice would have to be issued for all the years. It thus flows from the provision that the receiving assessing officer must apply his mind to the materials received and ascertain precisely the specific year to which the incriminating material relates. It is only when this determination/ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of a notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by an assessing officer. The construction of Section 153 A and 153 C is consciously different and is seen to apply different yardsticks to an entity searched and a third party, such yardstick being more exacting in the case of the former. The process of assessment is demanding and an assessee, once in receipt of a notice, is bound by the stringent procedure under the Act, till finalisation of the process. As on date, when the matters are being heard, the assessments have been allowed to be proceeded with till completion of assessment, which gives the Court the benefit of not just the satisfaction note but the show cause notices as well as the orders of assessment. These records reveal the variation between the satisfaction note and the assessment order in terms of the records seized, making it evident that there has been an omission on the part of the officer who has recorded satisfaction to refer to the small note books in relation to AYs 2016-17 and 2017-18. The legal issue is hence decided in favour of the petitioners, and would have to be applied to determine the validity or otherwise of each of the orders of assessment passed in the case of each of the petitioners. This Court is not in possession of all satisfaction notes. In some cases, the assessing authority has recorded satisfaction by way of a consolidated note, whereas in some others, this Court is given to understand that the satisfaction notes are individual relating to a specific year.
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