Assessment Years Falling Beyond Prescribed Period Cannot Be Reopened In Search Proceedings: ITAT Delhi

The Delhi Income Tax Appellate Tribunal (ITAT) on 24 August held that an Assessing Officer cannot assume jurisdiction under Section 153C of the Income Tax Act, 1961, for assessment years falling outside the statutory block prescribed under the provision. The provision applies to the assessment of income of a person other than the person searched, where seized material is found to relate to such person.

A Bench comprising Accountant Member S. Rifaur Rahman and Judicial Member Sunil Kumar Singh upheld the orders passed by the Commissioner of Income Tax (Appeals) [CIT(A)] in favour of Royal Sales Private Limited and dismissed the Revenue's appeals for assessment years (AYs) 2010-11 and 2011-12. The Tribunal observed:

“We observe that the assessment years 2010-11 and 2011-12 under consideration clearly fall outside the scope of application of section 153C of the Act, for the reason that the date of search for the unsearched parties are the date on which the documents were handed over to the Assessing Officer of such other person or from the date on which the satisfaction was recorded by the Assessing Officer of the other person.”

The dispute arose from search proceedings conducted against the Alankrit Group on 18 October 2019. Although the search was conducted in 2019, the Assessing Officer of the searched person recorded satisfaction only on 14 June 2022, after which the relevant material was handed over to the Assessing Officer having jurisdiction over Royal Sales. The Assessing Officer of Royal Sales recorded his satisfaction on 30 June 2022 and initiated proceedings against the company under Section 153C.

Royal Sales contended that the amended Section 153C, particularly its first proviso, governed the computation of the block of assessment years applicable to it. It argued that the relevant date for determining the block was the date on which the seized material was handed over to the Assessing Officer having jurisdiction over the non-searched person or the date on which such Assessing Officer recorded satisfaction.

The Revenue challenged the CIT(A)'s orders before the Tribunal. It disputed the CIT(A)'s reliance on the Delhi High Court's decision in PCIT v. Ojjus Medicare Pvt. Ltd., contending that the Revenue had challenged that decision before the Supreme Court.

It also argued that the decisions relied upon by the CIT(A), including CIT v. Jasjit Singh and CIT v. RRJ Securities Ltd., concerned searches conducted before 1 April 2017 and therefore could not govern the present case.

The Tribunal rejected the Revenue's contentions and relied on the legal position laid down by the courts on determining the relevant block of assessment years for a non-searched person under Section 153C.

It particularly relied on the Supreme Court's decision in Jasjit Singh, which affirmed that, in the case of a non-searched person, the relevant point for determining the block period is linked to the date on which the seized material comes into the possession of the Assessing Officer having jurisdiction over that person. The Bench also followed the Delhi High Court's ruling in Ojjus Medicare, which considered the operation of the first proviso to Section 153C.

Applying these principles, it held that AYs 2010-11 and 2011-12 fell outside the permissible block of assessment years under Section 153C. It consequently held that the assessments were beyond the limitation prescribed under the provision and that the jurisdiction assumed by the Assessing Officer was untenable.

Accordingly, the ITAT upheld the CIT(A)'s orders and dismissed both Revenue appeals.

Counsel for the Assessee: Pratap Gupta, CA

Counsel for the Revenue: Vikram Singh Sharma, CIT-DR