2025 (7) TMI 35 - AT - Income Tax

Assessment u/s 153C - period of limitation - relevant date in the case of a non-searched person - statutory provisions of the Act - assumption of jurisdiction - law with regard to block assessment years - reckoning of the six AYs - HELD THAT - Law with regard to block assessment years for which assessments can be completed in the case of other person stands settled that it is from the date of handing over of incriminating material and recording of the satisfaction the block assessments periods have to be determined. On the admitted facts it comes up that notices u/s 153C were issued on 26.09.2019 and if recording of the satisfaction note and receiving of record from the assessing officer of the searched person is considered as 26.09.2019 the search year in the case of the present assessee as other person would be 2020-21. In that case assessments for AYs 2014-15 to 2019-20 would fall in the search years and the present assessment years fall beyond the block assessment periods. Though the ld. DR has submitted that this amendment is prospective however the issue has been well considered in the case of Ojjus Medicare Pvt. Ltd. 2024 (4) TMI 268 - DELHI HIGH COURT as held that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted. The reckoning of the six AYs would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A - Decided in favour of revenue.

Summary

The core legal questions considered by the Tribunal in this appeal are:

1. Whether the assumption of jurisdiction by the Assessing Officer (AO) under section 153C of the Income-tax Act, 1961 (the Act) in respect of the assessee is valid and within the prescribed limitation period.

2. The determination of the relevant block assessment years for completion of assessments under section 153C in the case of a non-searched person, specifically whether the limitation period should be reckoned from the date of search or from the date of receipt of incriminating material by the AO.

3. Whether the assessments completed for the assessment years (AYs) 2010-11 to 2012-13 fall within the permissible block period under section 153C, given the date of search and the date of issuance of notices.

Issue-wise Detailed Analysis

Issue 1: Validity of assumption of jurisdiction under section 153C of the Act

Relevant legal framework and precedents: Section 153C empowers the AO to make an assessment or reassessment in the case of a person other than the searched person, based on books of account or documents or assets seized during a search conducted on another person. The limitation period for such assessments is governed by the proviso to section 153C(1), which introduces a legal fiction regarding the computation of the block period.

Precedents relied upon include the decisions in SSP Aviation Ltd v. Dy.CIT, CIT v. RRJ Securities Ltd, and the Supreme Court rulings in CIT v Jasjit Singh and ITO v. Vikram Sujitkumar Bhatia, which clarify that the limitation period for assessments under section 153C is to be reckoned from the date of receipt of seized material by the AO of the non-searched person, not from the date of the search itself.

Court's interpretation and reasoning: The Tribunal noted that the search was conducted on 05.10.2017 in the case of a related person, and notices under section 153C were issued to the assessee on 26.09.2019. The AO assumed jurisdiction for AYs 2010-11 to 2017-18. However, applying the legal position established by the cited precedents, the relevant date for computing the block period is the date of receipt of incriminating material by the AO of the assessee, i.e., 26.09.2019.

Application of law to facts: Since the date of receipt of material is 26.09.2019, the block assessment years for the non-searched person would be AYs 2014-15 to 2019-20 (covering six years preceding the AY relevant to the date of receipt). The AYs under consideration (2010-11 to 2012-13) fall outside this block period.

Treatment of competing arguments: The Revenue contended that the amendment to section 153C is prospective and that the limitation period should be reckoned from the date of search. The Tribunal rejected this submission, relying on authoritative judicial pronouncements which have settled the issue against the Revenue's stance.

Conclusion: The assumption of jurisdiction by the AO under section 153C for the AYs in question is bad in law and barred by limitation.

Issue 2: Determination of block assessment years under section 153C for a non-searched person

Relevant legal framework and precedents: The first proviso to section 153C(1) creates a legal fiction that the date of receipt of seized books of account or documents by the AO of the non-searched person is deemed to be the date of search for limitation purposes. This shifts the reference point from the date of search to the date of receipt of incriminating material for computing the block period.

The Tribunal extensively relied on the decision in Ojjus Medicare Pvt Ltd, which elucidated that the block period of six or ten years under section 153C is to be reckoned from the date of receipt of seized material, not the date of search. This principle has been consistently upheld by the Delhi High Court and the Supreme Court.

Court's interpretation and reasoning: The Tribunal emphasized that the block period calculation under section 153C differs from that under section 153A. While section 153A's limitation period is reckoned from the date of search, section 153C's limitation period for a non-searched person is reckoned from the date of receipt of seized material by the AO.

Application of law to facts: Applying this legal framework to the facts, the Tribunal found that the relevant date for the assessee is 26.09.2019, the date on which the AO received the incriminating material. Therefore, the block period covers AYs 2014-15 to 2019-20, and earlier AYs like 2010-11 to 2012-13 fall outside the permissible block period.

Treatment of competing arguments: The Revenue's contention that the date of search should be the starting point was found untenable in light of binding precedents. The Tribunal rejected the Revenue's argument and held that the legal fiction introduced by the proviso to section 153C must be applied to determine the limitation period.

Conclusion: The block assessment years for the non-searched person must be computed from the date of receipt of incriminating material, rendering the assessments for AYs 2010-11 to 2012-13 invalid.

Issue 3: Validity of assessments completed for AYs 2010-11 to 2012-13 under section 153C

Relevant legal framework and precedents: The limitation period for assessments under section 153C is strictly governed by the proviso to section 153C(1), as interpreted by the courts in the aforementioned cases.

Court's interpretation and reasoning: Since the assessments were completed for AYs 2010-11 to 2012-13, which fall outside the block period computed from the date of receipt of seized material, the assessments are barred by limitation.

Application of law to facts: The Tribunal found that the AO's assumption of jurisdiction and completion of assessments for these AYs was without jurisdiction and contrary to statutory provisions.

Treatment of competing arguments: The Revenue's submission that the assessments were valid was rejected based on the settled legal position.

Conclusion: The impugned assessments for AYs 2010-11 to 2012-13 are quashed as barred by limitation.

Significant Holdings

The Tribunal held:

"First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the 'relevant assessment year' is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person."

"The submission of the revenue, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted."

Core principles established include:

• The limitation period for assessments under section 153C for a non-searched person is computed from the date of receipt of incriminating material by the AO, not the date of search.
• Assessments completed beyond the block period thus computed are barred by limitation and without jurisdiction.
• The legal fiction introduced by the proviso to section 153C is binding and overrides the general principles applicable under section 153A.

Final determinations:

• The AO's assumption of jurisdiction under section 153C for AYs 2010-11 to 2012-13 is invalid and barred by limitation.
• The impugned assessments for these AYs are quashed.
• The appeals filed by the assessee are allowed, and the Revenue's appeals are dismissed.