ITO Vs Saksham Commodities Limited (Supreme Court of India)
The Supreme Court of India dismissed the Special Leave Petitions filed by the Income Tax Officer and other Revenue authorities challenging the Delhi High Court’s judgment in Saksham Commodities Limited v. ITO and connected matters. The Supreme Court recorded that the petitions had been filed with delays of 124 and 127 days, respectively, which had not been satisfactorily explained. After hearing counsel for the petitioners and examining the Special Leave Petitions, the Court also found no merit in them. Accordingly, the petitions were dismissed both on the ground of delay and on merits, and all pending applications were disposed of. The Supreme Court’s short order did not separately analyse Section 153C of the Income-tax Act, 1961 or provide detailed reasoning on the underlying reassessment controversy.
Background: Delhi High Court Judgment
The underlying dispute arose from notices issued under Section 153C to Saksham Commodities Limited and several other assessees following search proceedings. In the lead matter, a search conducted on 18 October 2019 in the Alankit Group resulted in the recovery of material relating to financial years 2009-10, 2010-11 and 2011-12. However, the Assessing Officer issued a notice dated 11 July 2022 seeking reassessment for Assessment Year 2015-16. The assessee challenged the notice on the ground that the seized material did not relate to the assessment year sought to be reopened and therefore could not justify the assumption of jurisdiction under Section 153C.
The Delhi High Court examined the distinction between Sections 153A and 153C, particularly the requirement that seized material must have a bearing on the determination of total income of the person other than the searched person. Referring to judicial precedents including CIT v. Sinhgad Technical Education Society, CIT v. Kabul Chawla, CIT v. RRJ Securities Ltd. and PCIT v. Abhisar Buildwell Pvt. Ltd., the High Court held that the existence of incriminating material relating to one assessment year did not automatically authorise reassessment of every assessment year falling within the statutory block. The Assessing Officer was required to examine the seized material and identify the assessment years whose income could be affected before initiating proceedings under Section 153C.
Applying these principles, the High Court found that the Revenue had proceeded on an erroneous assumption that recovery of incriminating material permitted reassessment of the entire block of assessment years. It consequently quashed the impugned notices in the successful writ petitions. However, W.P.(C) Nos. 3007/2023 and 3019/2023 were dismissed because the satisfaction notes specifically identified material relating to the assessment years concerned. The subsequent dismissal of the Revenue’s Special Leave Petitions by the Supreme Court left the High Court’s judgment undisturbed, without supplying additional substantive reasoning on the interpretation of Section 153C.
Related Delhi High Court Judgment: The underlying judgment examines the requirement of assessment-year-specific incriminating material for proceedings under Section 153C. Read: Reassessment of completed assessment Without Incriminating Material Untenable: Delhi HC.
Cases Discussed
The following precedents were discussed in the accompanying Delhi High Court judgment, not independently analysed in the Supreme Court’s short dismissal order.
1. CIT v. Sinhgad Technical Education Society, (2018) 11 SCC 490 — Seized material must correlate with the assessment years sought to be reopened under Section 153C.
2. CIT v. Kabul Chawla, (2016) 380 ITR 573 (Delhi) — Completed assessments cannot ordinarily be disturbed under Section 153A without incriminating material.
3. CIT v. RRJ Securities Ltd., (2016) 380 ITR 612 (Delhi) — Seized documents must have a bearing on the assessment years for which concluded assessments are sought to be reopened.
4. PCIT v. Abhisar Buildwell Pvt. Ltd., (2024) 2 SCC 433 — Additions in completed or unabated assessments under Section 153A require incriminating material found during search.
5. PCIT v. Index Securities Pvt. Ltd., 2017 SCC OnLine Del 10310 — The correlation between seized material and the assessment year is an essential jurisdictional requirement under Section 153C.
Read also Judgment: Saksham Commodities Limited Vs ITO (Delhi High Court); W.P.(C) 1459/2024 & CM APPL 6031/2024; 09/04/2024
FULL TEXT OF THE SUPREME COURT JUDGMENT/ORDER
1. Heard the learned counsel for the petitioners.
2. There is a delay of 124 and 127 days in filing the Special Leave Petitions respectively, which has not been satisfactorily explained. Even otherwise, we have gone through the Special Leave Petition and do not find any merit in the same.
3. The Special Leave Petitions are, therefore, dismissed on the ground of delay as well as on merits.
4. Pending application(s), if any, stand disposed of.
