The search was before June 2015 but the notice came later. Which version of s.153C applies?
The amended one. The 2015 amendment, which changed 'belongs to' into 'pertains to', applies to searches conducted before 1 June 2015 as well, because the trigger is when the material reaches the officer having jurisdiction over the other person.
Decided by the Supreme Court (M.R. Shah J and B.V. Nagarathna J) on 2023-04-06, reported as (2023) 453 ITR 417 (SC); 293 Taxman 4; [2023] 149 taxmann.com 123 (SC); 332 CTR 1; 2023 LiveLaw (SC) 274; Civil Appeal Nos. 911 to 1026 of 2022. It bears on section 132, section 153C, section 153A of the Income Tax Act 1961, in Search, Survey & Block Assessment matters.
Included because it goes against the taxpayer, and because it closes off an argument that was widely run in the years after 2015. Anyone holding a s.153C notice arising from an older search needs to know it is gone.
Binding on every court and authority in India.
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A search under s.132 was carried out on 4 September 2013 at the premises of the H.N. Safal group and incriminating material was seized. On 25 April 2017 the Assessing Officer of the searched person recorded satisfaction that certain documents pertained to the respondent-assessees and forwarded the satisfaction note and the material to their Assessing Officer the same day. That officer recorded his own satisfaction and issued notices under s.153C on 4 May 2018. In the interval the Finance Act 2015 had, with effect from 1 June 2015, substituted the words 'pertains or pertain to' for 'belongs or belong to' in s.153C. The Gujarat High Court held that the amended provision applied only to searches initiated on or after 1 June 2015 and quashed the notices and the consequent assessments; the Revenue appealed.
The question of law — whether the amendment made to s.153C by the Finance Act 2015 applies to searches conducted under s.132 before 1 June 2015 — was answered in favour of the Revenue: it does. The first proviso to s.153C, inserted by the Finance Act 2005 with retrospective effect from 1 June 2003, creates a deeming fiction by which a reference to the date of initiation of the search is read as a reference to the date on which the Assessing Officer of the person other than the searched person receives the seized books, documents or assets. Here that date was 25 April 2017, after the amendment, so the notices of 4 May 2018 were governed by the amended provision. The High Court's common judgment was quashed and set aside. The Court did not uphold the assessments themselves: it expressly reserved liberty to the assessees to challenge the assessment orders before the Commissioner (Appeals) on any other grounds available to them, directing that appeals filed within four weeks be decided on their merits.
Three strands. First, the amendment was made by substitution, and an amendment by substitution wipes the earlier words off the statute book and replaces them as if the unamended words had never existed (Shamrao V. Parulekar v. District Magistrate [1952] 2 SCC 1; Zile Singh v. State of Haryana [2004] 8 SCC 1). Second, the substitution was remedial: the Delhi High Court in Pepsico India Holdings (P.) Ltd. v. Asstt. CIT [2014] 50 taxmann.com 299 had read 'belongs to' narrowly, with the result that the Revenue could not proceed against a third party even where incriminating material relating to that party was found in a search, and Parliament substituted 'pertains or pertain to' to remove that mischief. Third, s.153C is a machinery provision — the High Court itself had so held — and machinery provisions of a taxing statute must be construed to give effect to their manifest purpose and to effectuate rather than defeat the object of the statute (Calcutta Knitwears; Girdhari Lal; Hindustan Bulk Carriers). The assessees' argument that the amendment enlarged the class of persons caught and so touched substantive rights was called attractive but rejected: even the unamended section was directed at persons other than the searched person, and confining the amendment to post-amendment searches would frustrate both the amendment and the section.
the amendment brought to section 153C of the Act, 1961 vide Finance Act, 2015 shall be applicable to searches conducted under section 132 of the Act, 1961 before 1-6-2015, i.e., the date of the amendment.
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Handle my notice → Ask a CA on WhatsAppThe amended one. The 2015 amendment, which changed 'belongs to' into 'pertains to', applies to searches conducted before 1 June 2015 as well, because the trigger is when the material reaches the officer having jurisdiction over the other person. This was decided by the Supreme Court (M.R. Shah J and B.V. Nagarathna J) and bears on section 132, section 153C, section 153A of the Income Tax Act 1961. It is reported as (2023) 453 ITR 417 (SC); 293 Taxman 4; [2023] 149 taxmann.com 123 (SC); 332 CTR 1; 2023 LiveLaw (SC) 274; Civil Appeal Nos. 911 to 1026 of 2022. Included because it goes against the taxpayer, and because it closes off an argument that was widely run in the years after 2015. Anyone holding a s.153C notice arising from an older search needs to know it is gone. If it applies to you, the first step is this: Note the date the material was handed to your Assessing Officer, not just the date of the search — that is the operative date.
A search under s.132 was carried out on 4 September 2013 at the premises of the H.N. Safal group and incriminating material was seized. On 25 April 2017 the Assessing Officer of the searched person recorded satisfaction that certain documents pertained to the respondent-assessees and forwarded the satisfaction note and the material to their Assessing Officer the same day. That officer recorded his own satisfaction and issued notices under s.153C on 4 May 2018. In the interval the Finance Act 2015 had, with effect from 1 June 2015, substituted the words 'pertains or pertain to' for 'belongs or belong to' in s.153C. The Gujarat High Court held that the amended provision applied only to searches initiated on or after 1 June 2015 and quashed the notices and the consequent assessments; the Revenue appealed. The matter was decided on 2023-04-06 by the Supreme Court (M.R. Shah J and B.V. Nagarathna J). On those facts the Supreme Court held as follows. The question of law — whether the amendment made to s.153C by the Finance Act 2015 applies to searches conducted under s.132 before 1 June 2015 — was answered in favour of the Revenue: it does. The first proviso to s.153C, inserted by the Finance Act 2005 with retrospective effect from 1 June 2003, creates a deeming fiction by which a reference to the date of initiation of the search is read as a reference to the date on which the Assessing Officer of the person other than the searched person receives the seized books, documents or assets. Here that date was 25 April 2017, after the amendment, so the notices of 4 May 2018 were governed by the amended provision. The High Court's common judgment was quashed and set aside. The Court did not uphold the assessments themselves: it expressly reserved liberty to the assessees to challenge the assessment orders before the Commissioner (Appeals) on any other grounds available to them, directing that appeals filed within four weeks be decided on their merits.
Three strands. First, the amendment was made by substitution, and an amendment by substitution wipes the earlier words off the statute book and replaces them as if the unamended words had never existed (Shamrao V. Parulekar v. District Magistrate [1952] 2 SCC 1; Zile Singh v. State of Haryana [2004] 8 SCC 1). Second, the substitution was remedial: the Delhi High Court in Pepsico India Holdings (P.) Ltd. v. Asstt. CIT [2014] 50 taxmann.com 299 had read 'belongs to' narrowly, with the result that the Revenue could not proceed against a third party even where incriminating material relating to that party was found in a search, and Parliament substituted 'pertains or pertain to' to remove that mischief. Third, s.153C is a machinery provision — the High Court itself had so held — and machinery provisions of a taxing statute must be construed to give effect to their manifest purpose and to effectuate rather than defeat the object of the statute (Calcutta Knitwears; Girdhari Lal; Hindustan Bulk Carriers). The assessees' argument that the amendment enlarged the class of persons caught and so touched substantive rights was called attractive but rejected: even the unamended section was directed at persons other than the searched person, and confining the amendment to post-amendment searches would frustrate both the amendment and the section. In the words reproduced by the source cited on this page: "the amendment brought to section 153C of the Act, 1961 vide Finance Act, 2015 shall be applicable to searches conducted under section 132 of the Act, 1961 before 1-6-2015, i.e., the date of the amendment."
It was decided by the Supreme Court on 2023-04-06 and is reported as (2023) 453 ITR 417 (SC); 293 Taxman 4; [2023] 149 taxmann.com 123 (SC); 332 CTR 1; 2023 LiveLaw (SC) 274; Civil Appeal Nos. 911 to 1026 of 2022. Binding on every court and authority in India. A Supreme Court decision binds every assessing officer, every Commissioner (Appeals), every bench of the Income Tax Appellate Tribunal and every High Court in India. An officer who declines to follow it is acting contrary to law, and that refusal is itself a ground of appeal. On section 132, section 153C, section 153A, 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 department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The question of law — whether the amendment made to s.153C by the Finance Act 2015 applies to searches conducted under s.132 before 1 June 2015 — was answered in favour of the Revenue: it does. The first proviso to s.153C, inserted by the Finance Act 2005 with retrospective effect from 1 June 2003, creates a deeming fiction by which a reference to the date of initiation of the search is read as a reference to the date on which the Assessing Officer of the person other than the searched person receives the seized books, documents or assets. Here that date was 25 April 2017, after the amendment, so the notices of 4 May 2018 were governed by the amended provision. The High Court's common judgment was quashed and set aside. The Court did not uphold the assessments themselves: it expressly reserved liberty to the assessees to challenge the assessment orders before the Commissioner (Appeals) on any other grounds available to them, directing that appeals filed within four weeks be decided on their merits. It arises in Search, Survey & Block Assessment matters, on section 132, section 153C, section 153A of the Income Tax Act 1961, and was decided by M.R. Shah J and B.V. Nagarathna 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. Do not run the pre-2015 wording argument; look instead at whether the material pertains to your specific assessment years. Read it with Sinhgad, which is where the surviving argument lives.
Still good law. Sets aside the Gujarat High Court in Anil Kumar Gopikishan Agrawal v. Asstt. CIT [2019] 106 taxmann.com 137 (Guj.). Applied by the Delhi High Court in Principal CIT (Central-1) v. Ojjus Medicare (P.) Ltd. [2024] 161 taxmann.com 160 (Delhi), decided 3 April 2024, which treated this decision as settling that the first proviso to s.153C(1) shifts the relevant date from the date of search to the date on which the jurisdictional Assessing Officer of the non-searched person receives the material, and used it to fix the starting point for computing the block of six or ten assessment years. Note that for searches initiated on or after 1 September 2024 s.153C no longer applies — block assessment under Chapter XIV-B was reintroduced by the Finance (No. 2) Act 2024. 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.
At least one secondary page carries a headline stating the opposite of the actual holding; read the judgment, not the headline. Two points to carry into any citation of it. The trigger is the first proviso to s.153C, inserted by the Finance Act 2005 with retrospective effect from 1 June 2003, which substitutes the date the jurisdictional Assessing Officer receives the material for the date of the search — so the answer in any given case turns on that receipt date, not on the amendment date in the abstract. And the Court decided only the question of law; it left the assessees free to attack the assessment orders before the Commissioner (Appeals) on every other ground. 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 question of law — whether the amendment made to s.153C by the Finance Act 2015 applies to searches conducted under s.132 before 1 June 2015 — was answered in favour of the Revenue: it does. The first proviso to s.153C, inserted by the Finance Act 2005 with retrospective effect from 1 June 2003, creates a deeming fiction by which a reference to the date of initiation of the search is read as a reference to the date on which the Assessing Officer of the person other than the searched person receives the seized books, documents or assets. Here that date was 25 April 2017, after the amendment, so the notices of 4 May 2018 were governed by the amended provision. The High Court's common judgment was quashed and set aside. The Court did not uphold the assessments themselves: it expressly reserved liberty to the assessees to challenge the assessment orders before the Commissioner (Appeals) on any other grounds available to them, directing that appeals filed within four weeks be decided on their merits.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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?
What has to happen before a search at someone else's premises can be used against you?