By CA Sombir Singh The Delhi High Court has held that reassessment proceedings initiated under Section 147 of the Income Tax Act, 1961, are valid even if the jurisdictional conditions for invoking Section 153C are unsatisfied. The court observed that the AO is empowered to invoke Section 147, provided it adheres to procedural requirements, even when Section 153C could have been an alternative. This decision addressed the interplay between these two provisions.
The Revenue argued that the reassessment was based not only on incriminating material found during a search but also on information received from the Investigation Wing. It contended that the AO could not invoke Section 153C because the seized material did not directly pertain to the Assessee. The Revenue relied on the Supreme Court’s decision in Abhisar Buildwell (P) Ltd., which clarified that Sections 147/148 could still apply even if the conditions for Sections 153A/153C were unmet. It emphasized that the procedural rigors of Section 147 were duly followed in this case.
The Assessee contented that Section 153C, being a special provision, overrides the general provisions of Section 147 in cases involving search-related assessments. It argued that the non obstante clause in Section 153C precludes the application of Section 147 when search material forms the basis of the proceedings. The Assessee relied on decision of Shyam Sunder Khandelwal (Rajasthan HC), VSL Mining Company(Karnataka HC), andAmit Kumar alias Amit Saraf(Patna HC) to substantiate that the AO was obligated to follow the procedures outlined in Section 153A or 153C once material pursuant to a search is relied on and recourse of reassessment proceedings are barred.
The Delhi High Court rejected the contention of the Assessee, holding that Section 147 proceedings are permissible where the conditions for Section 153C are not satisfied. The court examines the non obstante clause in the context of provisions drawn in Section 153C, and expresses that non obstante provision kicks in only on the assumption of jurisdiction by the AO u/s 153C i.e. AO exercises its jurisdiction to initiate the machinery provisions of Section 153C to make assessment/reassessment for the stipulated period. The Court also states that non obstante provisions do not come in play where the AO does not take recourse of provisions u/s 153C. Relying on the Supreme Court’s decision in Abhisar Buildwell (P) Ltd., the court affirmed that reassessment under Section 147 is valid when it basis of the material containing information that was found during the search and on the basis of other information as obtained by the Investigation Wing where the procedural requirements of Section 147 are fulfilled. The court further clarified that where the AO does not take recourse to Section 153C but proceeds u/s 147 he would necessarily have to follow the due procedure as specified for initiating such proceedings; the availability of Section 153C does not bar the use of Section 147 when the 153C is not invoked.
This judgment underscores the interplay between Section 147 and Section 153C, maintaining the validity of the section 147 in cases where the section 153C cannot be invoked.
Case title- PCIT-7, Delhi v. Naveen Kumar Gupta
Date of order:- 20.11.2024