Delhi High Court Ruling Limits Block Period Assessment
Recently, the Delhi High Court rendered a significant decision regarding the power to assess the block period of ten years concerning income tax proceedings. In the case of a search conducted prior to April 1, 2017, the Court held that the amendments introduced by the Finance Act of 2017, extending the block period for search assessment to ten assessment years, would not be applicable.
The bench, comprised of Justice Yashwant Varma and Justice Ravinder Dudeja, highlighted that the date of the search in question was April 7, 2016, indicating that the amendments to Section 153C brought about by the Finance Act of 2017 would not apply. Prior to this amendment, the block period stood at six assessment years.
The case pertained to a search and seizure action initiated on April 7, 2016, which led to the recording of a satisfaction note by the assessing officer in accordance with Section 153A of the Income Tax Act, 1961. The respondent-assessee, a non-searched entity, had a satisfaction note drawn in its respect and referable to Section 153C on May 15, 2019. Subsequently, the Assessing Officer (AO) made additions in the assessment under Section 153C, relating to foreign inward remittances and debts written off.
Following an appeal, the Commissioner of Income Tax (Appeals) deleted a substantial addition and confirmed another. This decision led to an increase in the assessee’s income by INR 2,23,25,000. The matter was then brought before the Tribunal, which invalidated the initiation of reassessment proceedings under Section 153C on the grounds of limitation, emphasizing that the amendment introduced by the Finance Act, 2017 would not be applicable to a search conducted on April 7, 2016.
The department contended that the block of six assessment years was inherently linked to the previous year in which the search was conducted, even in the case of a non-searched entity. The Court, however, disagreed with this interpretation. It highlighted that in cases where the assessing officer was common for both the searched and non-searched entities, the jurisdictional AO being the same, the actual handing over of books of accounts or documents between authorities would not occur. The Court also stressed that the pivotal point for the commencement of action under Section 153C would be the date when the AO records satisfaction with respect to the non-searched entity.
Ultimately, the Court dismissed the appeal by the department, solidifying its position on the applicability of the amendments introduced by the Finance Act of 2017 to search assessments. This ruling provides significant clarity on the statute and has far-reaching implications for future income tax proceedings.
The case referred to in this article is “PCIT Versus Karina Airlines International Ltd” under Case No. ITA 690/2023. For further details, you can access the complete order here.
