Case Law Details
ACIT Vs Pramod Jain (Supreme Court of India)
The proceedings arose from writ petitions challenging notices issued under Section 148 of the Income Tax Act, 1961 and orders dated 05.03.2022 rejecting objections to those notices. The lead case concerned Assessment Year 2014-15, where the petitioner had filed a return declaring income of Rs.18,76,890/-. A notice under Section 148 was issued on 30.03.2021, the petitioner subsequently filed a return, sought the recorded reasons, and objected to the initiation of reassessment proceedings. The objections were rejected, leading to the writ petitions.
Before the Rajasthan High Court, the petitioners contended that the Section 148 notices were founded entirely on material seized during a search conducted on the Manihar Group. According to them, where the proceedings were based on seized material relating to a person other than the searched person, the Department was required to invoke Section 153C, which is the special provision applicable to such cases, and not Section 148. The respondents argued that Sections 153A to 153D did not exclude the operation of Section 148, that reassessment under Section 148 could also be initiated in search-related matters, and that acceptance of the petitioners’ contention would render Section 148 redundant. They further submitted that Section 153C was intended for block periods and that Section 148 could be invoked where the information did not extend to all six years or where material other than seized material required consideration.
The High Court identified the principal issue as the applicability of Sections 153C and 148 where material relating to a person other than the searched person was seized during a search or requisition. It examined the legislative history of the special assessment provisions, tracing the transition from the block assessment regime under Sections 158B to 158BG to the introduction of Sections 153A to 153D by the Finance Act, 2003, and noted that the Finance Act, 2021 restricted the operation of Section 153A to searches initiated on or before 31.03.2021 while simultaneously substituting the reassessment regime under Section 148 and introducing Section 148A. It also referred to Explanation 2 to the substituted Section 148, which deems the Assessing Officer to possess information suggesting escapement of income in specified search-related situations.
Referring to the Supreme Court decision in Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell P. Ltd., the High Court noted that the Supreme Court had held that in search cases the Assessing Officer assumes jurisdiction under Section 153A to assess or reassess total income and that completed assessments can be reopened under Sections 147 and 148 where no incriminating material is unearthed during the search, subject to fulfilment of the statutory conditions.
Applying these principles, the High Court found that the recorded reasons for reopening were founded on incriminating material, documents, pen drives and statements obtained during the search of the Manihar Group, from which the Assessing Officer concluded that loans advanced and interest earned were unaccounted. Since the very basis of the Section 148 proceedings was seized material relating to the petitioners, the High Court held that in such circumstances the Assessing Officer was required to proceed under Section 153C, subject to fulfilment of the statutory conditions, and thereafter follow the procedure prescribed under Section 153A. It held that Sections 153A and 153C constitute special provisions overriding the general reassessment provisions, that their fields of operation differ from Section 148, and that applying Section 153C in such circumstances does not render Section 148 redundant, as Section 148 continues to apply in regular reassessment cases and where no incriminating material is seized during a search. The Court also rejected the contention that Section 153C applies only where incriminating material exists for all relevant preceding years, observing that once the statutory conditions are satisfied, proceedings must be initiated under Section 153C, although the Assessing Officer is not obliged to make additions for every year. After discussing the authorities cited by both sides, the High Court quashed the Section 148 notices and the consequential orders while granting liberty to the respondents to proceed against the petitioners in accordance with law. Having accepted this ground, it did not examine the remaining challenges. The writ petitions were accordingly allowed.
The Revenue challenged the common High Court judgment before the Supreme Court by filing Special Leave Petitions. The Supreme Court noted that there was a gross delay of 322 days and 358 days respectively in filing the Special Leave Petitions and held that the delay had not been satisfactorily explained. The Court further observed that, even otherwise, it found no good reason to interfere with the common impugned order passed by the High Court. Accordingly, the Special Leave Petitions were dismissed both on the ground of delay and on merits. At the same time, the Supreme Court expressly kept the question of law open and disposed of the pending applications, if any. As a result, the High Court’s common order remained undisturbed, although the Supreme Court did not finally determine the underlying legal question.
Read Also Order of Rajasthan HC: Shyam Sunder Khandelwal Vs ACIT: Interplay between Sections 147/148 & 153C
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. There is a gross delay of 322 and 358 days respectively in filing the Special Leave Petitions which has not been satisfactorily explained by the petitioner.
2. Even otherwise, we find no good reason to interfere with the common impugned order passed by the High Court.
3. The Special Leave Petitions are, accordingly, dismissed on the ground of delay as well as merits.
4. However, the question of law is kept open.
5. Pending applications, if any, shall also stand disposed of
Author Bio
