Does Amendment to Income Tax Act, 1961 applies to searches before amendment: Supreme Court

On April 6, 2023, the Supreme Court bench including Justice CT Ravikumar and Justice MR Shah heard the Income Tax Officer vs Vikram Sujitkumar Bhatia case. In this case, the question, “Whether the amendment brought to Section 153C of the Income Tax Act, 1961 vide Finance Act, 2015 would be applicable to searches conducted under Section 132 of the Act, 1961 before the date of amendment?” was answered. The bench stated that 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 01.06.2015, i.e., the date of amendment. The top Court demonstrated that the provisions of one section of the statute could not defeat those of another unless it is impossible to effect a reconciliation between them. The bench also highlighted 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.”

In this case, an individual filed a Return of Income for the Assessment Year (A.Y.) 2012-13 on 11.09.2012 declaring a total income of Rs. 44,73,820/- as business income from a partnership firm and other income. A search came to be conducted on various premises of H.N. Safal Group and a panchnama was prepared. On the basis of the seized material, the Assessing Officer initiated proceedings against the assessee. Moreover, a hard disk was seized, which contained an Excel sheet with the data of the computer of the searched person, wherein there were references to the petitioner’s name. Similar notices under Section 153C of the Act, 1961 were challenged by other persons. The High Court observed that “Section 153C of the Act, 1961 is a machinery provision for assessment of income of a person other than the person searched; Section 153C of the Act as amended w.e.f. 01.06.2015 by Finance Act, 2015 shall not be made applicable with respect to the searches conducted prior to 01.06.2015.” The impugned judgment and order passed by the High Court were quashed and set aside by the top Court.

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