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Commissioner of Income Tax 14 vs. Jasjit Singh (2023 INSC 882)

Not available · 2023 INSC 882Decided 26 Sept 2023
Not available
S. Ravindra Bhat · Aravind Kumar

Background

Following a search-and-seizure operation on a business group (M/s KOUTON Group) in 2009, the Income Tax Department found documents and material that it believed "belonged to" other, third-party taxpayers who had not themselves been searched. Under Section 153C of the Income Tax Act, the Department can reassess such third parties' past six years of income, but a dispute arose over which date should mark the start of that six-year window: the date of the original search of the main party, or the later date when the papers were actually handed over to the tax officer in charge of the third party. The Delhi High Court, following its own earlier ruling (SSP Aviation), held it was the later "handover" date, and the tax department appealed.

Decision Breakdown

The Supreme Court upheld the High Court's approach, agreeing that the six-year assessment period for a third party under Section 153C runs from the date the seized material is actually received by the assessing officer with jurisdiction over that third party, not from the date of the original search. The Court reasoned that treating the original search date as the trigger would unfairly penalise third parties who had no connection to the search and no way of knowing they would be drawn into proceedings, potentially forcing them to preserve records far beyond the legally required period. The appeals filed by the tax department were accordingly dismissed.

Lesson Learnt

If you are not the person actually searched by tax authorities but get roped into an assessment because your documents were found with someone else, the clock for how far back the taxman can reopen your returns runs from when your file was actually transferred to your assessing officer, not from the date of the original raid on someone else.

Official source (sci.gov.in)View Judgment (PDF)

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