The Delhi High Court has held that the initiation of Section 153C of the Income Tax Act assessment proceedings falling beyond the maximum 10-year block period is unsustainable.
Flowmore Limited, the petitioner/assessee has challenged the notice issued under Section 148 of the Income Tax Act, 1961. The notice sought to reassess the petitioner for Assessment Year 2013–14. Since the notice was issued on March 31, 2023, it would be the amended regime of reassessment that came into effect on April 1, 2021, which would be applicable. The action for reassessment would thus have to satisfy the provisions made in the First Proviso to Section 149(1).
Based on the search and seizure operation conducted in respect of the Alankit Group on October 18, 2019, the petitioner was served a notice under Section 153C on March 3, 2022. On the culmination of those proceedings, the respondent proceeded to pass a final order of assessment on March 23, 2023, accepting the income that had been assessed originally under Section 143(3) of the Act.
The petitioner disclosed that, insofar as the original Section 143(3) assessment was concerned, an appeal was taken to the Income Tax Appellate Tribunal, which ultimately accorded relief to the petitioner with respect to disallowances made under Section 40(a)(ia).
The assessee contended that the subsequent notice under Section 148 of the Act dated March 31, 2023, was concerned with a search that was conducted in the case of the Proform Group on February 9, 2022. Undisputedly and to reopen, bear in mind the proviso to Section 149(1), action could have been initiated only up to AY 2014–15.
The division bench of Justice Yashwant Varma and Justice Purushaindra Kumar Kaurav has observed that any action for reassessment of an AY before April 1, 2021, can be sustained only if it is compliant with the timeframes specified under Section 149(1)(b), Section 153A, or Section 153C, as the case may be, and based on those provisions as they existed before the commencement of the Finance Act, 2021.
The court held that AY 2013–14 falls beyond the ten-year block period as set out under Section 153C read with Section 153A of the Act. Consequently, the impugned notice was rendered unsustainable.
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