Amendment to Section 153C vide Finance Act, 2015 applicable to searches conducted u/s 132 before 01.06.2015 – Supreme Court
ABCAUS Case Law Citation:
ABCAUS 3698 (2023) (04) SC
Important Case Laws relied upon by parties:
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. Stateof Haryana, (2004) 8 SCC 1
Girdhari Lal & Sons Vs. Balbir Nath Mathur, (1986) 2 SCC 237
Commissioner of Income Tax vs. Calcutta Knitwears (2014) 6 SCC 444
Commissioner of Income Tax vs. Hindustan Bulk Carriers, (2003) 3 SCC 57
The question of law that fell for consideration of the Apex Court was:
“Whether amendment brought to Section 153C of the Income Tax Act, 1961 (the Act) vide Finance Act, 2015 would be applicable to searches conducted under Section 132 of the Act, 1961 before 01.06.2015, i.e., the date of amendment?”
In the instant case, the Income Tax Department has challeeged the order of the Hon’ble High Court in holding that Section153C of the Act, (as amended by Finance Act, 2015) would not apply to searches under Section 132 of the Act initiated before the date of the amendment.
The case of respondent assessee(s) was that by way of amendment to Section 153C by Finance Act, 2015, it brings into its fold, the assessees – persons, who were not so far covered by it and, therefore, it affects the substantive rights of the assessees and, hence, it should not be made applicable retrospectively.
The Hon’ble Supreme Court observed that Section 153C before the amendment in 2015 provided that where the Assessing Officer was satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned “belongs or belong to” a person other than the searched person, then, such seized or requisitioned material shall be handed over to the Assessing Officer having jurisdiction over such other person who shall proceed against such other person.
Section 153C was amended by Finance Act, 2015 w.e.f. 01.06.2015 and the words “belongs or belong to” came to be substituted by the words “pertains or pertain to”.
The Hon’ble Supreme Court observed that the object and purpose of Section153C 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, 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” to remedy the said mischief.
The Hon’ble Supreme Court observed that once the primary intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the Court to give the statute a purposeful or a functional interpretation. It is further observed that the primary and foremost task of a court in interpreting a statute is to ascertain the intention of the legislature, actual or imputed.
Accordingly, the Hon’ble Supreme Court answered the question of law framed in favour of the Revenue by holding that the amendment to Section 153C of the Act, vide Finance Act, 2015 shall be applicable to searches conducted u/s 132 even before 01.06.2015, i.e., the date of the amendment.
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