Income Tax Act, 1961: s.153C – Assessment of income of any other person – Initiation of search u/s.132 prior to the amendment to s.153C – Applicability of the amended s.153C – On facts, search u/s.132 conducted on the premises on 04.09.2013 and s.153C as it stood then was applicable – W.e.f. 01.06.2015, s.153C amended vide Finance Act, 2015 – Books of account or documents or assets seized by the Assessing Officer of the person other than searched on 25.04.2017, subsequent to the amendment of s.153 C – Issuance of notice u/s.153C on 04.05.2018 – Held: Proviso to s.153C creates a deeming fiction wherein any reference made to the date of initiation of search is deemed to be a reference made to the date when the Assessing Officer of the non-searched person receives the books of account or documents or assets seized etc – Thus, even though the search u/s.132 was initiated prior to the amendment to s.153C w.e.f. 01.06.2015, the books of account or documents or assets were seized by the Assessing Officer of the non-searched person only on 25.04.2017, which is subsequent to the amendment, thus, when the notice u/s.153C was issued on 04.05.2018, the provision of the law existing as on that date, i.e., the amended s.153C would be applicable – Moreover, the object and purpose of s.153C is to address the persons other than the searched person – Thus, the order passed by the High Court that s.153C as amended by the Finance Act, 2015 w.e.f. from 01.06.2015 shall not be applicable to searches conducted prior to 01.06.2015 is held to be unsustainable – Amendment brought to s.153C applicable to searches conducted u/s.132 before 01.06.2015, i.e., the date of the amendment – Finance Act, 2015.
s.153C (amended by Finance Act, 2015)– Object/Purpose of – Stated.
Interpretation of Statutes: Taxing Statute – Interpretation of machinery provision – Held: Courts, while interpreting machinery provisions of a taxing statute, must give effect to its manifest purpose by construing it in such a manner so as to effectuate the object and purpose of the statute – s. 153C of the Act is a machinery provision – Thus, the object and purpose of the amendment to be seen.
Allowing the appeals, the Court
HELD : 1.1 As per the proviso to Section 153C of the Income Tax Act, 1961 as inserted vide Finance Act, 2005, and the effect of the said proviso is that it creates a deeming fiction wherein any reference made to the date of initiation of search is deemed to be a reference made to the date when the Assessing Officer of the non-searched person receives the books of account or documents or assets seized etc. Thus, in the instant case, even though the search under Section 132 was initiated prior to the amendment to Section 153C w.e.f. 01.06.2015, the books of account or documents or assets were seized by the Assessing Officer of the non-searched person only on 25.04.2017, which is subsequent to the amendment, therefore, when the notice under Section 153C was issued on 04.05.2018, the provision of the law existing as on that date, i.e., the amended Section 153C shall be applicable. [Para 10.3][777-E-F]
1.2. Section 153C of the Act is a machinery provision. The Courts, while interpreting machinery provisions of a taxing statute, must give effect to its manifest purpose by construing it in such a manner so as to effectuate the object and purpose of the statute. [Para 10.6][781-B]
1.3. Even the unamended s.153C pertains to the assessment of income of any other person. The object and purpose of Section 153C is to address the persons other than the searched person. Even as per the unamended Section 153C, 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. However, it appears that as in the case of Pepsico India Holdings Private Limited, the Delhi High Court interpreted the words “belong to” restrictively and/or narrowly and which led to a situation where, though incriminating material pertaining to a third party / person was found during search proceedings under Section 132, the Revenue could not proceed against such a third party, which necessitated the legislature / Parliament to clarify by substituting the words “belongs or belong to” to the words “pertains or pertain to” and to remedy the mischief that was noted pursuant to the judgment of the Delhi High Court. Therefore, if the submission on behalf of the respective respondents – assessees 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 153C solely on the ground that the search was conducted prior to the amendment is accepted, in that case, the very object and purpose of the amendment to Section 153C, which is by way of substitution of the words “belongs or belong to” to the words “pertains or pertain to” shall be frustrated. Any interpretation, which may frustrate the very object and purpose of the Act/Statute shall be avoided by the Court. If the interpretation as canvassed on behalf of the respective respondents is accepted, in that case, even the object and purpose of Section 153C namely, for assessment of income of any other person (other than the searched person) shall be frustrated. [Para 10.8][785-G-H; 786A-E]
1.4 The impugned common judgment and order passed by the High Court is held to be unsustainable, and is quashed and set aside. The amendment brought to s. 153C of the 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. [Para 11][786-F-G]
Pepsico India Holdings Private Limited vs. Assistant Commissioner of Income Tax, 2014 SCC OnLine Del 4155; Shamrao v. Parulekar vs. District Magistrate, (1952) 2 SCC 1 : 1952 SCR 683, Zile Singh vs. State of Haryana, (2004) 8 SCC 1; Commissioner of Income Tax - III vs. Calcutta Knitwears, Ludhiana (2014) 6 SCC 444; Government of Andhra Pradesh vs. Hindustan Machine Tools Ltd., (1975) 2 SCC 274; Lily Thomas vs. Union of India (2013) 7 SCC 653; Controller of Estate Duty vs. M.A. Merchant, 1989 Supp (1) SCC 499; State of Tamil Nadu vs. Star Tobacco Co., (1974)
3 SCC 249; Girdhari Lal & Sons vs. Balbir Nath Mathur (1986) 2 SCC 237; Commissioner of Income Tax vs. Hindustan Bulk Carriers (2003) 3 SCC 57 - referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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