Income Tax Act | S.153C Notices Unsustainable When Search For 'Other Person' Initiated After 01.04.2021: Madras High Court

Section 153C of the Income Tax Act applies when documents or assets belonging to a third party are found during a search, and an assessment is made against that person.

Section 153C(3) of the Income Tax Act states that Section 153C shall not apply to any search initiated under Section 132 or books/assets requisitioned under Section 132A on or after April 1, 2021.

Justice Krishnan Ramasamy stated that the first proviso to Sub-Section (1) of Section 153C is not only for the purpose of abatement but also for all other purposes, viz., initiation of search for other person in terms of Section 153C(3) of the Act. In such a case, the date of initiation of search for the assessee is the date on which the documents were handed over to the JAO of the assessee, i.e., 25.11.2022 is the date of initiation of search for the assessee.

In the case at hand, on 29.01.2019, the Income Tax Authorities searched the premises of a third party. The authorities obtained incriminating materials pertaining to the assessee/petitioner at the aforementioned third-party premises.

Pursuant to the same, the notice under Section 148A of the Income Tax Act was issued to the assessee on 15.03.2022 for the AY 2018-19. Subsequently, the notice under Section 148 of the Act was issued without granting sufficient opportunity to the assessee to file objections to the aforesaid notice.

Therefore, the assessee challenged the notice by way of filing a writ petition, wherein the Madras High Court set aside the notice and directed the concerned officer to issue a fresh hearing.

Thereafter, the Assessing Officer/1^st respondent had called for objections from the assessee, and accordingly, the assessee submitted the objections. After considering the said objections, the Assessing Officer had dropped the proceedings vide order dated 30.08.2022.

After a lapse of more than 5 months, the Assistant Commissioner of Income Tax/2^nd respondent issued the impugned notice, under Section 153C of the Income Tax Act, on 07.02.2023 for AYs 2013-14 to 2019-20.

Now, the main grievance of the assessee is that the search was initiated on 25.11.2022, and no notice under Section 153C of the Act can be issued after 01.04.2021 for all the AYs in terms of Sub-Section (3) of Section 153C.

The department submitted that the first proviso to Section 153C(1) of the Act would apply only with regard to the abatement of the proceedings for a period of 6 years prior to the relevant date and for all other practical purposes, the initiation of search would be either the date, on which the search was conducted on searched person under Section 132 or on the date of making of requisition under Section 132A of the Act. Hence, the application of Sub-Section (3) of Section 153 would not at all come into the picture.

The bench opined that in terms of Sub-Section (3) of Section 153C, the provision of Section 153C will not apply for any search, which is initiated on or after 01.04.2021.

The bench stated that in this case, the date of handing over of seized material to the assessee's JAO is on 25.11.2022, and the said date is the date of initiation of search for the assessee. Thus, it is crystal clear like cloudless sky that the initiation of search was subsequent to 01.04.2021, for which, the provisions of Section 153C will not apply.

The impugned notices dated 07.02.2023 are unsustainable, and the same were issued without authority and against the provisions of Sub-Section (3) of Section 153C of the Act, added the bench.

In view of the above, the bench allowed the petition.

Case Title: Shri. Harigovind v. Assistant Commissioner Of Income Tax Non-corporate

Case Number: W.P.Nos.23014 of 2023

Counsel for Petitioner/Assessee: A.P. Srinivas

Counsel for Respondent/Department: A.N.R. Jayaprathap

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