+ W.p.(C) 3679/2025 And Cm Appl v. Assistant Commissioner Of Income Tax Circle 22 2 Delhi & Ors

$~96 IN THE HIGH COURT OF DELHI AT NEW DELHI+W.P.(C) 3679/2025 and CM APPL. 17249/2025SHIVA UTENSILS INDUSTRIES PRIVATELIMITEDTHROUGH MR. SHIV KUMARGUPTA DIRECTOR.....PetitionerSHIVA UTENSILS INDUSTRIES PRIVATELIMITEDTHROUGH MR. SHIV KUMARGUPTA DIRECTOR.....Petitioner .....PetitionerThrough:Mr Nischay Kantoor, Advocate. versus ASSISTANT COMMISSIONER OF INCOMETAX CIRCLE 22 2 DELHI & ORS. .....RespondentsMr Sunil Agrawal, SSC. Through: CORAM: HON'BLE MR. JUSTICE VIBHU BAKHRUHON'BLE MR. JUSTICE TEJAS KARIAO R D E R26.03.2025 % 1.The petitioner [Assessee] has filed the present petition impugninga notice dated 31.03.2024 [impugned notice] issued under Section 148of the Income Tax Act, 1961 [the Act] in respect of Assessment Year 2014-15. It is the Assessee’s case that the said notice is barred bylimitation. The issuance of said notice is premised on a search conductedon 09.06.2022 under Section 132 of the Act in case of Sh. NareshKumar Kejriwal. It is alleged that during the course of search orrequisition made under Section 132A of the Act, certain books ofaccountordocumentswerefoundbelongingtoorcontaininginformation relating to the Assessee. 2.The controversy involved in the present case is covered by theearlierdecisionofthiscourtinDineshJindalv.AssistantCommissioner of Income Tax, Central Circle 20, Delhi & Others: Neutral Citation No.: 2024:DHC:4554-DB, wherein this court has held as under: “8.Undisputedly, and in terms of Section 153C(3) of the Act,any search if conducted after 01 April 2021, would cease to beregulated by that provision. Sub-section (3), in that sense,embodies a sunset clause insofar as the applicability of Section153C is concerned. The First Proviso to Section 149(1),however, bids us to go back in a point of time, and to examinewhether a reopening would sustain bearing in mind thetimeframes as they stood embodied in Section 149(1)(b) orSection 153A and 153C, as the case may be. The First Provisoessentially requires us to undertake that consideration bearingin mind the timeframes which stood specified in Sections 149,153A and 153C as they stood prior to the commencement ofFinance Act, 2021.any search if conducted after 01 April 2021, would cease to beregulated by that provision. Sub-section (3), in that sense,embodies a sunset clause insofar as the applicability of Section153C is concerned. The First Proviso to Section 149(1),however, bids us to go back in a point of time, and to examinewhether a reopening would sustain bearing in mind thetimeframes as they stood embodied in Section 149(1)(b) orSection 153A and 153C, as the case may be. The First Provisoessentially requires us to undertake that consideration bearingin mind the timeframes which stood specified in Sections 149,153A and 153C as they stood prior to the commencement ofFinance Act, 2021. 9.Thus, an action of reassessment which comes to beinitiated in relation to a search undertaken on or after 01 April2021 would have to meet the foundational tests as specified inthe First Proviso to Section 149(1). A reassessment actionwould thus have to not only satisfy the time frames constructedin terms of Section 149, but in a relevant case and which isconcerned with a search, also those which would be applicableby virtue of the provisions of Section 153A and 153C. 10. Undisputedly, and if the validity of the reassessment wereto be tested on the anvil of Section 153C, the petitioner wouldbe entitled to succeed for the following reasons. It is anundisputed fact that the proceedings under Section 148commenced on the basis of the impugned notice dated 30March 2023. This date would be of seminal importance sincethe period of six AYs’ or the “relevant assessment year” wouldhave to be reckoned from the date when action was initiated toreopen the assessment pertaining to AY 2013- 14. 11. The computation of the six or the block of ten AYs’ wasexplained by us in Ojjus Medicare Private Limited in thefollowing terms: 10. Undisputedly, and if the validity of the reassessment wereto be tested on the anvil of Section 153C, the petitioner wouldbe entitled to succeed for the following reasons. It is anundisputed fact that the proceedings under Section 148commenced on the basis of the impugned notice dated 30March 2023. This date would be of seminal importance sincethe period of six AYs’ or the “relevant assessment year” wouldhave to be reckoned from the date when action was initiated toreopen the assessment pertaining to AY 2013- 14. 11. The computation of the six or the block of ten AYs’ wasexplained by us in Ojjus Medicare Private Limited in thefollowing terms: “D. The First Proviso to Section 153C introduces a legalfiction on the basis of which the commencement date forcomputation of the six year or the ten year block isdeemed to be the date of receipt of books of accounts bythe jurisdictional AO. The identification of the startingfiction on the basis of which the commencement date forcomputation of the six year or the ten year block isdeemed to be the date of receipt of books of accounts bythe jurisdictional AO. The identification of the starting block for the purposes of computation of the six and theten year period is governed by the First Proviso toSection 153C, which significantly shifts the referencepoint spoken of in Section 153A(1), while defining thepoint from which the period of the “relevant assessmentyear” is to be calculated, to the date of receipt of thebooks of accounts, documents or assets seized by the-jurisdictional AO of the nonsearched person. The shift ofthe relevant date in the case of a non-searched personbeing regulated by the First Proviso of Section 153C(1) isan issue which is no longer res integra and standsauthoritatively settled by virtue of the decisions of thisCourt in SSP Aviation and RRJ Securities as well as thedecision of the Supreme Court in Jasjit Singh. Theaforesaid legal position also stood reiterated by theSupreme Court in Vikram Sujitkumar Bhatia. Thesubmission of the respondents, therefore, that the blockperiods would have to be reckoned with reference to thedate of search can neither be countenanced nor accepted.E. The reckoning of the six AYs' would require one tofirstlyidentifytheFYinwhichthesearchwasundertaken and which would lead to the ascertainment ofthe AY relevant to the previous year of search. The blockofsixAYs'wouldconsequentlybethosewhichimmediately precede the AY relevant to the year ofsearch. In the case of a search assessment undertaken interms of Section 153C, the solitary distinction would bethat the previous year of search would stand substitutedby the date or the year in which the books of accounts ordocuments and assets seized are handed over to thejurisdictional AO as opposed to the year of search whichconstitutes the basis for an assessment under Section153A. F. While the identification and computation of the sixAYs' hinges upon the phrase “immediately preceding theassessment year relevant to the previous year” of search,the ten year period would have to be reckoned from the31st day of March of the AY relevant to the year ofsearch. This, since undisputedly, Explanation 1 ofSection 153A requires us to reckon it “from the end ofthe assessment year”. This distinction would have to F. While the identification and computation of the sixAYs' hinges upon the phrase “immediately preceding theassessment year relevant to the previous year” of search,the ten year period would have to be reckoned from the31st day of March of the AY relevant to the year ofsearch. This, since undisputedly, Explanation 1 ofSection 153A requires us to reckon it “from the end ofthe assessment year”. This distinction would have to necessarily be acknowledged in light of the statute havingconsciouslyadoptedthephraseology“immediatelypreceding” when it be in relation to the six year periodand employing the expression “from the end of theassessment year” while speaking of the ten year block .”12.Viewed in that light, it is manifest that AY 2013-14 wouldfall beyond the block period of ten years. It becomes pertinent tonote that the First Proviso to Section 149(1) compels us to test thevalidity of initiation of action for reassessment commencedpursuant to a search, based upon it being found that theproceedings would have sustained bearing in mind the timelinesprescribed in Sections 149, 153A and 153C, as they existed priorto the commencement of Finance Act, 2021. This necessarilyrequires us to advert to the timeframes comprised in both Section149(1)(b) as well as Section 153C as it existed on the statute bookprior to 01 April 2021, which undisputedly was the date fromwhen Finance Act, 2021 came into effect. 13.While it is true that Section 153C and the procedureprescribed therein had ceased to be applicable post 31 March2021, the First Proviso to Section 149(1) does not appear tosuggest that the First Proviso to Section 153C(1) would eitherbecome inapplicable or be liable to be ignored. Undisputedly, theFirst Proviso to Section 153C(1), by virtue of a legal fictionenshrined therein requires one to treat the date of initiation ofsearch, and which otherwise constitutes the commencement pointfor a search assessment in the case of a non-searched party, to beconstrued as the date when books of accounts or documents andassets seized or requisitioned are transmitted to the AO of such“other person”. Resultantly, the computation of the six precedingAYs’ or the “relevant assessment year” in the case of the nonsearched entity has to be reckoned from the time when thematerialunearthedinthesearchishandedovertothejurisdictional AO. The import of this legal fiction is no longer resintegra bearing in mind the judgment of the Supreme Court in CITv. Jasjit Singh & Ors.:2023 SCC OnLine SC 1265 and the wholeline of precedents rendered by our High Court which were noticedin OjjusMedicarePrivate Limited.Those decisions haveconsistently held that in the case of a non-searched entity, it is thedate of hand over of material, as opposed to that of the actualsearch which would constitute the starting point for reckoning theblock of six or ten AY’s. 14.However, Section 149(1), as it came to be placed andintroduced in the statute book by virtue of Finance Act, 2021,neither effaces nor removes from contemplation the First Provisoto Section 153C(1). Consequently, in cases where a search isconducted after 31 March 2021, the said Proviso would have to beconstrued and tested with reference to the date when the AO-decides to initiate action against the nonsearched entity. While inthe case of a search initiated after 31 March 2021 there would beno actual hand over of material to the and the whole line ofprecedents rendered by our High Court which were noticed inOjjusMedicarePrivateLimited.Thosedecisionshaveconsistently held that in the case of a non searched entity, it is thedate of hand over of material, as opposed to that of the actualsearch which would constitute the starting point for reckoning theblock of six or ten jurisdictional AO, that does not convince us torevert to Section 153A and hold that the block period is liable tobe computed from the date of search. That, in our consideredopinion, would amount to rewriting Section 153C which wouldclearly be impermissible.” [emphasis added] [emphasis added] 3.Following the aforesaid decision, this court in Pankaj Jain v.Assistant Commissioner of Income Tax: Neutral Citation No.:2025:DHC:157-DB, held that in cases where the search has beenconducted after 31.03.2021, the period of limitation under Section 153Cof the Act is necessarily to be construed with reference to the date onwhich the Assessing Officer initiates actions against a non-searched person.This is on account of the fact that the provisionsregarding recording of a satisfaction note by the AO of the searchedperson and handing over of the records as required under Section 153Cof the Act, is no longer applicable after 31.03.2021.However, theperiod of limitation for the assessments that could be reopened isnecessarily to be reckoned in reference to Section 153C of the Act read with Section 153A of the Act for the purposes of the purposes of the firstproviso to Section 149(1) of the Act. 4.In The Pr. Commissioner of Income Tax - Central-1 v. Ojjus Medicare Pvt. Ltd.: Neutral Citation No.: 2024:DHC:2629-DB, thiscourt had explained that the block period of ten years is required to bereckoned from the end of the assessment year relevant to the financialyear in which the satisfaction note is recorded. 5.Since there is no procedure for recording of the satisfaction note,the date on which the AO decides to initiate action – that is, the date onwhich the notice under Section 148 of the Act is issued – is required tobe considered as a point of reference. In the present case, the impugnednotice was issued on 31.03.2024. Thus, the block period of ten years isrequired to be reckoned from the end of the AY 2024-25, which isrelevant to FY 2023-24 in which the notice was issued. 6.The learned counsel for the Assessee has handed over a tabularstatement setting out the block of ten years that would possibly becovered by a notice issued in FY 2023-24. The said tabular statement isset out below: 7.It is clear that AY 2014-15 falls beyond the period of ten yearswhich could be reopened pursuant to the impugned notice. In view ofthe above, the present petition is allowed and the impugned notice andall proceedings initiated pursuant thereto are set aside. Pendingapplication shall also stand disposed of. VIBHU BAKHRU, J MARCH 26, 2025/tr TEJAS KARIA, J