The Delhi High Court has held that provisions of section 153C does not have an overriding effect on provisions of section 147 of Income Tax Act, 1961.
The bench of Justice Vibhu Bakhru and Justice Swarana Kanta Sharma has observed that AO did not assume jurisdiction under Section 153C of the Act. Absent assumption of any jurisdiction, the question of Sections 147, 148 and 149 of the Act being overridden by virtue of the non obstante clause of Section 153C of the Act, does not arise. The said clause would be operative only if the AO had in fact assumed jurisdiction under Section 153C. In that eventuality, recourse to the provisions as named in the opening sentence of Sections 139, 147, 149, 151 and 153 of the Act would be ousted.
Table of Contents
Background
The department has filed the appeal under Section 260A of the Income Tax Act, 1961 challenging an order passed by the Income Tax Appellate Tribunal (ITAT).
The ITAT had allowed the appeal preferred by the respondent-Assessee against an order passed by the Commissioner of Income Tax (Appeals) (CIT(A)), by which the Assessee’s appeal against the assessment order passed under Section 147 read with Section 143(3) of the Act in respect of assessment year 2011-12 was dismissed.
The assessment of the Assessee’s income chargeable to tax for the previous year relevant to the AY 2011-12 was reopened by issuance of a notice under Section 148 of the Act on the basis of information and evidence unearthed during the course of the search conducted on Shri Anand Kumar Jain and Shri Naresh Kumar Jain group on 17.12.2015. And, the Assessee’s income was reassessed under Section 147 of the Income Tax Act.
The ITAT held that the Assessing Officer (AO) was required to frame the assessment/reassessment under Section 153C and was precluded from proceeding under Section 147. Accordingly, the ITAT set aside the assessment order for the aforesaid singular reason.
Arguments
The assessee contended that Section 153C contains a special provision relating to assessment of a person pursuant to material found during the search operations conducted under Section 132 on any other person or as a result of requisition made under Section 132A of the Act. And, since the provisions of Section 153C of the Act are special provisions, the same would override the other provisions relating to assessment/reassessment under the Act including Section 147 of the Act.
The assessee argued that since Section 153C of the Income Tax Act sets out a specified procedure for conducting the assessment, the same cannot be sidestepped.
The department contended that the assessments were reopened not only on the basis of the material / information collected pursuant to search conducted in respect of Jain Brothers but also on the basis of the information received from the Investigation Wing. He also contended that since the material collected during the search did not belong to the Assessee, the proceedings under Section 153C of the Act could not have been initiated.
Interplay Between Provisions Of Section 153C And Section 147 Of The Income Tax Act
The principal issue to be addressed is the interplay between the provisions of Section 153C of the Act and Section 147 of the Act. It is the Assessee’s case that recourse to Section 147 would be unavailable in cases where the AO is empowered to proceed under Section 153C of the Income Tax Act.
As is apparent from the plain language of Section 153C, as was in force at the material time, an assessment under Section 153C of the Act could be initiated only in cases where the AO of the person who was searched under Section 132 of the Act or in whose case a requisition was made under Section 132A of the Act, was satisfied that money, bullion, jewellery or other valuable articles belong to a person other than the one searched or that the books of account and documents seized or requisitioned pertained to or contain any information relating to such other person.
The AO of the searched person was required to record the satisfaction to the aforesaid effect. Recordal of such satisfaction is the second jurisdictional condition for invoking the provision of Section 153C of the Act. The AO of the searched person was thereafter required to transmit the assets or documents belonging to the person other than the searched person to the AO of such other person.
If the same was done, the third jurisdictional pre-requisite would stand satisfied. The AO of such other person was then required to examine the said material received by the AO of the searched person and if it was found that the same had a bearing on the determination of the income of such other person, the AO could proceed to issue a notice under Section 153C.
The language of Section 153C (1) of the Act, as in force prior to 01.06.2015, indicates that the process for triggering the machinery provisions of Section 153C of the Act would arise only if the AO was satisfied that money, bullion, jewellery or other valuable articles or things or books of account or documents seized or requisitioned “belongs or belong to” to a person other than the one referred to in Section 153A of the Act. Thus, even though the documents seized during search proceedings contained information pertaining to a person other than the one searched, the same could not trigger the provision of Section 153C of the Act.
The question whether reassessment under Section 147 of the Act can be initiated in cases of material seized or information emanating from a search conducted under Section 132 of the Act or any assets or documents requisitioned under Section 132A of the Act, where the conditions for initiating the assessment under Sections 153A and 153C of the Act are not satisfied, is no longer res integra.
Conclusion
The court held that even in cases where assessment under Section 153A of the Act cannot be initiated on account of the conditions for initiation of assessment / reassessment under the said Section not being satisfied, it is open for the Revenue to make the assessment / reassessment under Section 147. This is of course subject to all conditions for such initiation being fully satisfied.
The court while allowing the appeal held that the re-assessment proceedings are initiated under Section 147 of the Income Tax Act not only on the basis of the material containing information that was found during the search conducted in respect of Jain Brothers, but is also founded on the basis of other information as obtained by the Investigation Wing, namely, that the Assessee had purchased units of a penny scrip named SVC Resource Ltd. This being the case, the decision of the Assessing Officer to re-assess the income of the Assessee under Section 147 cannot be faulted.
Case Details
Case Title: PCIT Versus Naveen Kumar Gupta
Case No.: ITA 401/2022
Date: 20.11.2024
Counsel For Petitioner: Puneet Rai
Counsel For Respondent: Kapil Sood & Sandeep Goel,
