My Form 3 charges the higher search-case amount because the addition against me came out of a search on somebody else. Is mine a 'search case' under the 2020 scheme?
Not on these facts. Row (b) of the Table to section 3 of the Direct Tax Vivad se Vishwas Act, 2020 applies only where the tax arrear includes tax, interest or penalty determined in an assessment made on the basis of a search under section 132 or a requisition under section 132A. The Bombay High Court set aside the Form 3 and directed a fresh Form 3 treating the assessee as a non-search case, applying CBDT Circular 4/2021 dated 23 March 2021, which replaced the answer to FAQ 70 of Circular 21/2020 and now requires three cumulative conditions.
Decided by the High Court (Sunil P. Deshmukh J and Abhay Ahuja J) on 2021-04-27, reported as Direct Tax Vivad se Vishwas Act, 2020; Writ Petition No.586 of 2021 (Bombay High Court); judgment reserved 5 April 2021, pronounced 27 April 2021. It bears on section DTVSV 2020, section 132, section 132A, section 153A, section 153C of the Income Tax Act 1961, in Appeals, Search, Survey & Block Assessment and How Tax Law Is Read matters.
This is the case that killed FAQ 70 in its original form, under which any s.143(3) or s.144 assessment framed on the strength of a search in another taxpayer's case was automatically a search case. Circular 4/2021 now defines a search case as an assessment or reassessment under s.143(3), 144, 147, 153A, 153C or 158BC, in the case of a person referred to in s.153A, s.153C, s.158BC or s.158BD, made on the basis of a search initiated under s.132 or a requisition under s.132A — and the Court read those as three cumulative criteria, all of which must be satisfied. That test does the work: a penny-stock addition built on statements recorded in a Kolkata investigation search and a survey on brokers, in a CASS-selected scrutiny of the assessee's own return, is not a search case. The financial stake is the whole point. The Court took the difference as 100 per cent of the disputed tax in an ordinary case against 125 per cent where the assessment is on the basis of a search (para 31) — that is row (a) against row (b) of the Table to s.3, taken in the earlier of the Table's two columns. Row (b) charges the disputed tax plus twenty-five per cent in the earlier column and plus thirty-five per cent in the later one, in each case with a proviso ignoring the excess where that addition exceeds the aggregate interest and penalty. Do not take the column dates from this judgment: it reproduces the Table as first enacted, with columns keyed to 31 March 2020 and 1 April 2020, and s.5 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 substituted, and deemed to have substituted, "31st day of December, 2020 or such later date as may be notified" and "1st day of January, 2021 or such later date as may be notified". Two further provisos halve the amount: where the appeal, writ or SLP on an issue is the income-tax authority's own, and where the appellant has already won that issue before a higher forum that has not been reversed.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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For AY 2015-16 the assessee returned Rs 1,52,19,010. His case was picked up for scrutiny under CASS and an order under s.143(3) added Rs 84,25,075 under s.68 and Rs 11,75,901 under s.69C, the Assessing Officer's case being that he had booked artificial long-term capital gains of Rs 5,73,23,123 and claimed s.10(38) exemption by selling shares of Lifeline Drugs and Pharma Limited for Rs 5,87,95,055, whose price had been rigged by operators. The material came from a search under s.132 by the Kolkata Investigation wing, with statements under s.132(4), and from a survey under s.133A on Gateway Financial Service Limited and Korp Securities Limited. A s.154 order of 18 February 2019 revised the s.68 addition to Rs 5,87,95,055. With appeals pending before the CIT(A), the assessee filed Form 1 on 16 December 2020 declaring disputed income of Rs 5,98,90,960 and disputed tax of Rs 2,02,69,581, offering 100 per cent of the disputed tax. By order dated 26 January 2021 the designated authority issued Form 3 determining Rs 2,57,67,714, being 125 per cent of the disputed tax, relying on FAQ 70. While the petition was pending, CBDT issued Circular 4/2021 dated 23 March 2021 modifying the answer to FAQ 70.
The petition was allowed, the Form 3 order dated 26 January 2021 was set aside, and the designated authority was directed to pass a fresh Form 3 determining the tax payable as a non-search case, in accordance with the Act read with Rule 4 and Circular 4/2021, within two weeks (paras 42 to 44). To be a search case under Circular 4/2021 the assessment or reassessment must satisfy three cumulative criteria — the section under which it is made, the assessee being a person referred to in s.153A, s.153C, s.158BC or s.158BD, and the assessment being on the basis of a search under s.132 or a requisition under s.132A (para 34). Here the second and third criteria failed (paras 36 and 37). It was unnecessary to decide the challenge to the vires of Circular 21/2020 (para 38).
The Court extracted s.3 with its Table and three provisos, and identified the difference: 100 per cent of disputed tax in an ordinary case, 125 per cent where the assessment is on the basis of a search (para 31). It extracted FAQ 70 and its original answer (para 32), then Circular 4/2021 in full, and broke the new definition into three numbered criteria which must all be satisfied (para 34). Turning to the facts, no proceedings under s.153A or s.153C had been initiated against the assessee, and s.158BI excludes Chapter XIV-B for searches initiated after 31 May 2003, which all the searches and surveys here post-dated; so the assessee was not a person referred to in any of the four sections (para 36). On the third criterion, the assessment recited only s.143(3), the case had been selected under CASS, no notice issued pursuant to any search or requisition, and the assessee's name figured in none of the s.132(4) or survey statements; the statement recorded from him under s.131 on 14 December 2017 disclosed no incriminating material or admission, and the allegation of collusion with the operators was 'rather conjecturous' (para 37). The Court recorded that circulars issued under ss.10 and 11, which it extracted, are to remove difficulties and tone down the rigour of the law and cannot be adverse to the assessee in beneficial legislation (paras 39 and 40).
Since petitioner's case cannot be regarded as a search case, consequently order dated 26th January 2021 in Form No.3, passed by Respondent No.1 being the Designated Authority, would be unsustainable.
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Handle my notice → Ask a CA on WhatsAppNot on these facts. Row (b) of the Table to section 3 of the Direct Tax Vivad se Vishwas Act, 2020 applies only where the tax arrear includes tax, interest or penalty determined in an assessment made on the basis of a search under section 132 or a requisition under section 132A. The Bombay High Court set aside the Form 3 and directed a fresh Form 3 treating the assessee as a non-search case, applying CBDT Circular 4/2021 dated 23 March 2021, which replaced the answer to FAQ 70 of Circular 21/2020 and now requires three cumulative conditions. This was decided by the High Court (Sunil P. Deshmukh J and Abhay Ahuja J) and bears on section DTVSV 2020, section 132, section 132A, section 153A, section 153C of the Income Tax Act 1961. It is reported as Direct Tax Vivad se Vishwas Act, 2020; Writ Petition No.586 of 2021 (Bombay High Court); judgment reserved 5 April 2021, pronounced 27 April 2021. This is the case that killed FAQ 70 in its original form, under which any s.143(3) or s.144 assessment framed on the strength of a search in another taxpayer's case was automatically a search case. Circular 4/2021 now defines a search case as an assessment or reassessment under s.143(3), 144, 147, 153A, 153C or 158BC, in the case of a person referred to in s.153A, s.153C, s.158BC or s.158BD, made on the basis of a search initiated under s.132 or a requisition under s.132A — and the Court read those as three cumulative criteria, all of which must be satisfied. That test does the work: a penny-stock addition built on statements recorded in a Kolkata investigation search and a survey on brokers, in a CASS-selected scrutiny of the assessee's own return, is not a search case. The financial stake is the whole point. The Court took the difference as 100 per cent of the disputed tax in an ordinary case against 125 per cent where the assessment is on the basis of a search (para 31) — that is row (a) against row (b) of the Table to s.3, taken in the earlier of the Table's two columns. Row (b) charges the disputed tax plus twenty-five per cent in the earlier column and plus thirty-five per cent in the later one, in each case with a proviso ignoring the excess where that addition exceeds the aggregate interest and penalty. Do not take the column dates from this judgment: it reproduces the Table as first enacted, with columns keyed to 31 March 2020 and 1 April 2020, and s.5 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020 substituted, and deemed to have substituted, "31st day of December, 2020 or such later date as may be notified" and "1st day of January, 2021 or such later date as may be notified". Two further provisos halve the amount: where the appeal, writ or SLP on an issue is the income-tax authority's own, and where the appellant has already won that issue before a higher forum that has not been reversed. If it applies to you, the first step is this: Read the assessment order and check what it is passed under: if it recites only s.143(3) and is not read with any provision of Chapter XIV-B or with s.153A or s.153C, the second of the three criteria in Circular 4/2021 fails and the case is not a search case.
For AY 2015-16 the assessee returned Rs 1,52,19,010. His case was picked up for scrutiny under CASS and an order under s.143(3) added Rs 84,25,075 under s.68 and Rs 11,75,901 under s.69C, the Assessing Officer's case being that he had booked artificial long-term capital gains of Rs 5,73,23,123 and claimed s.10(38) exemption by selling shares of Lifeline Drugs and Pharma Limited for Rs 5,87,95,055, whose price had been rigged by operators. The material came from a search under s.132 by the Kolkata Investigation wing, with statements under s.132(4), and from a survey under s.133A on Gateway Financial Service Limited and Korp Securities Limited. A s.154 order of 18 February 2019 revised the s.68 addition to Rs 5,87,95,055. With appeals pending before the CIT(A), the assessee filed Form 1 on 16 December 2020 declaring disputed income of Rs 5,98,90,960 and disputed tax of Rs 2,02,69,581, offering 100 per cent of the disputed tax. By order dated 26 January 2021 the designated authority issued Form 3 determining Rs 2,57,67,714, being 125 per cent of the disputed tax, relying on FAQ 70. While the petition was pending, CBDT issued Circular 4/2021 dated 23 March 2021 modifying the answer to FAQ 70. The matter was decided on 2021-04-27 by the High Court (Sunil P. Deshmukh J and Abhay Ahuja J). On those facts the High Court held as follows. The petition was allowed, the Form 3 order dated 26 January 2021 was set aside, and the designated authority was directed to pass a fresh Form 3 determining the tax payable as a non-search case, in accordance with the Act read with Rule 4 and Circular 4/2021, within two weeks (paras 42 to 44). To be a search case under Circular 4/2021 the assessment or reassessment must satisfy three cumulative criteria — the section under which it is made, the assessee being a person referred to in s.153A, s.153C, s.158BC or s.158BD, and the assessment being on the basis of a search under s.132 or a requisition under s.132A (para 34). Here the second and third criteria failed (paras 36 and 37). It was unnecessary to decide the challenge to the vires of Circular 21/2020 (para 38).
The Court extracted s.3 with its Table and three provisos, and identified the difference: 100 per cent of disputed tax in an ordinary case, 125 per cent where the assessment is on the basis of a search (para 31). It extracted FAQ 70 and its original answer (para 32), then Circular 4/2021 in full, and broke the new definition into three numbered criteria which must all be satisfied (para 34). Turning to the facts, no proceedings under s.153A or s.153C had been initiated against the assessee, and s.158BI excludes Chapter XIV-B for searches initiated after 31 May 2003, which all the searches and surveys here post-dated; so the assessee was not a person referred to in any of the four sections (para 36). On the third criterion, the assessment recited only s.143(3), the case had been selected under CASS, no notice issued pursuant to any search or requisition, and the assessee's name figured in none of the s.132(4) or survey statements; the statement recorded from him under s.131 on 14 December 2017 disclosed no incriminating material or admission, and the allegation of collusion with the operators was 'rather conjecturous' (para 37). The Court recorded that circulars issued under ss.10 and 11, which it extracted, are to remove difficulties and tone down the rigour of the law and cannot be adverse to the assessee in beneficial legislation (paras 39 and 40). In the words reproduced by the source cited on this page: "Since petitioner's case cannot be regarded as a search case, consequently order dated 26th January 2021 in Form No.3, passed by Respondent No.1 being the Designated Authority, would be unsustainable."
It was decided by the High Court on 2021-04-27 and is reported as Direct Tax Vivad se Vishwas Act, 2020; Writ Petition No.586 of 2021 (Bombay High Court); judgment reserved 5 April 2021, pronounced 27 April 2021. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section DTVSV 2020, section 132, section 132A, section 153A, section 153C, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The petition was allowed, the Form 3 order dated 26 January 2021 was set aside, and the designated authority was directed to pass a fresh Form 3 determining the tax payable as a non-search case, in accordance with the Act read with Rule 4 and Circular 4/2021, within two weeks (paras 42 to 44). To be a search case under Circular 4/2021 the assessment or reassessment must satisfy three cumulative criteria — the section under which it is made, the assessee being a person referred to in s.153A, s.153C, s.158BC or s.158BD, and the assessment being on the basis of a search under s.132 or a requisition under s.132A (para 34). Here the second and third criteria failed (paras 36 and 37). It was unnecessary to decide the challenge to the vires of Circular 21/2020 (para 38). It arises in Appeals, Search, Survey & Block Assessment and How Tax Law Is Read matters, on section DTVSV 2020, section 132, section 132A, section 153A, section 153C of the Income Tax Act 1961, and was decided by Sunil P. Deshmukh J and Abhay Ahuja J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Check whether the assessee is a person referred to in s.153A, s.153C, s.158BC or s.158BD — that is a separate condition from the assessment section and is where most departmental classifications collapse. Look for the assessee's own name in the s.132(4) statements and survey statements relied on in the assessment order; the absence of any allegation that incriminating material belonging to the assessee was found in the search was decisive here. If Form 3 was issued before 23 March 2021 on the strength of the original FAQ 70, ask for a fresh Form 3 under Circular 4/2021 rather than litigating the vires of Circular 21/2020 — the Court found it unnecessary to decide the vires point. Where the appeal being settled is the department's own, claim the one-half concession in the first proviso to s.3; where the assessee has already succeeded on the issue before the Tribunal or the High Court and that decision stands, claim it under the second or third proviso.
Validity check could not be completed. Validity check could not be completed. No later treatment was searched for or located, and the Speaking to Minutes Order of 29 April 2021 noted on the face of the report could not be retrieved, so it is not known whether the text as read is the final text. The operative reasoning depends on CBDT Circular 4/2021 of 23 March 2021, and any later circular modifying that definition would displace it; no check for a later circular was made. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The report carries a header line reading "This Order is modified/corrected by Speaking to Minutes Order dated 29/04/2021". That correction order could not be retrieved and its effect on the text is unknown; treat every figure and date below as subject to it. Internal date conflict: para 2 gives the s.143(3) order as dated 27 December 2017, para 37 as 22 December 2017. The Table to s.3 as rendered on this page is corrupt and NO figure has been taken from it: its row (a) first money column prints the second column's words merged into it ("Amount of the disputed tax and ten per cent of disputed tax; provided that…"), and its row (c) prints "Thirty-five per cent" in the later column where four other sources — the Delhi High Court in Prayas Buildwell, the Allahabad High Court in Digvendra Pratap Singh, the Madras High Court in United Capital Partners India Pvt. Ltd., and the Statement of Objects and Reasons reproduced at para 19 of Boddu Ramesh — all print thirty per cent. The row (b) figures of twenty-five and thirty-five per cent, which are the ones this entry uses, appear identically in all five reproductions. The Table's column headings as printed here are the Act as first enacted and were retrospectively substituted by s.5 of the Taxation and Other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020. The paragraph numbering was checked sequentially from 33 to 36 because two fetches differed by one on the s.153A/153C extract: para 33 states the effect of the original FAQ 70 answer, para 34 quotes Circular 4/2021 in full and then enumerates the three criteria, para 35 introduces and quotes ss.153A and 153C, para 36 holds criterion (ii) not satisfied. The document runs to para 44; paras 7 to 26 are counsel's submissions on both sides and no locator has been taken from them. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petition was allowed, the Form 3 order dated 26 January 2021 was set aside, and the designated authority was directed to pass a fresh Form 3 determining the tax payable as a non-search case, in accordance with the Act read with Rule 4 and Circular 4/2021, within two weeks (paras 42 to 44). To be a search case under Circular 4/2021 the assessment or reassessment must satisfy three cumulative criteria — the section under which it is made, the assessee being a person referred to in s.153A, s.153C, s.158BC or s.158BD, and the assessment being on the basis of a search under s.132 or a requisition under s.132A (para 34). Here the second and third criteria failed (paras 36 and 37). It was unnecessary to decide the challenge to the vires of Circular 21/2020 (para 38).
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When must the satisfaction note be recorded before proceedings are taken against a third party?
The seized documents say nothing about the years being assessed. Can s.153C still be used for them?
The search party carted away all our books. Does the way a search was conducted make it illegal?
The search was before June 2015 but the notice came later. Which version of s.153C applies?