Section 153-C of Income Tax Act

Supreme Court: In an important ruling on Income Tax, the bench of MR Shah* and BV Nagarathna, JJ has held that the amendment brought to Section 153-C of the Income Tax Act, 1961 vide Finance Act, 2015 shall be applicable to searches conducted under Section 132 of the Act, 1961 before 01.06.2015, i.e., the date of the amendment. Consequently, the Court has set aside the Gujarat High Court judgment wherein the contrary was held.

Why was Section 153-C amended?

In the pre-amended Section 153-C, the words used were “belongs or belong to” a person other than the searched person. When in Pepsico India Holdings Private Limited v. ACIT, 2014 SCC OnLine Del 4155, the Delhi High Court interpreted the expression “belong to” and observed and held that there is a difference and distinction between “belong to” and “pertain to” and held that on the basis of the registered sale deed seized from the premises of the searched person, it cannot be said that it “belongs to” the vendor, it led to a situation where, though incriminating material pertaining to third party was found during the search proceedings under Section 132, the Revenue could not proceed against the third parties. Finding that the Delhi High Court observations were coming in the way of suppressing the very mischief which the legislature intended to suppress, the amendment in Section 153-C was brought and the words “belongs or belong to” were substituted by the words “pertains or pertain to”.

Why Amended Section 153-C to be applied retrospectively?

It was argued before the Court that the amended Section 153-C brings into its fold, the assessees, who were not so far covered by it and, therefore, it affects the substantive rights of the assessees and, hence, it should not be made applicable retrospectively.

Rejecting this argument, the Court has held that even the unamended Section 153-C pertains to the assessment of income of any other person. The object and purpose of Section 153-C is to address the persons other than the searched person. Even as per the unamended Section 153-C, the proceeding against other persons (other than the searched person) was on the basis of the seizure of books of account or documents seized or requisitioned “belongs or belong to” a person other than the searched person.

Therefore, the Court refused to hold that despite the fact that the incriminating materials have been found in the form of books of account or documents or assets relating to them from the premises of the searched person, still they may not be subjected to the proceedings under Section 153-C solely on the ground that the search was conducted prior to the amendment. It was held that if the same is accepted, not just the very object and purpose of the amendment to Section 153-C, which is by way of substitution of the words “belongs or belong to” to the words “pertains or pertain to”, but even the object and purpose of Section 153-C namely, for assessment of income of any other person (other than the searched person) shall be frustrated.

[Income Tax Officer v. Vikram Sujit kumar Bhatia, 2023 SCC OnLine SC 370, decided on 06-04-2023]

*Judgment authored by Justice MR Shah

Know Thy Judge | Justice M. R. Shah

Advocates who appeared in this case:

ASG K M Natraj, A.S.G., Adv. Zoheb Hussain, Adv. Gargi Khanna, Adv. Bijan Ghosh, Adv. Manish, Adv. Aakansha Kaul, Adv. Navanjay Mahapatra, AOR Raj Bahadur Yadav, AOR Anil Katiyar, AOR Haresh Raichura, Adv. Saroj Raichura, Adv. Kalp Raichura, Adv. Rajat Vats, AOR Khushboo Vinodray Malkan, AOR Purvish Jitendra Malkan, Adv. Sidhir Mehta, Adv. Dharita Purvish Malkan, Adv. Jitendra Manilal Malkan, Adv. Deepa Gorasia, Adv. Nayan Gupata, Adv. Alok Kumar, Adv. Deepak Mani Tripathi, Adv. Deepak Tripathi, Adv. Nayan Gupta, Adv. Bhavna Sarkar, Adv. Ajit Rao, Adv. Shailee Mehta, Adv. Saudagar Singh, Sr Adv. R. K. Patel, AOR Manisha T. Karia, Adv. Nidhi Nagpal, Adv. Adarsh Kumar Adv. Aditya Kesar, Adv. Rohan Trivedi, Adv. Darshan R. Patel, Sr Adv. Tushar Hemani, Adv. Vaibhavi Parikh, AOR Anushree Prashit Kapadia, Sr Adv Saurabh Soparkar, Adv. Bandish Soparkar, Adv. Pradhuman Gohil, AOR Taruna Singh Gohil, Adv. Ranu Purohit, Adv. Alapati Sahithya Krishna, AOR Neelam Singh, AOR Roshan Santhalia, AOR Subodh S. Patil, AOR Chitranshul A. Sinha, AOR Siddhartha Jha.

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