Mr Sumit Lalchandani, Mr Shankey Agarwal, Mr Saurabh Nandy and Mr Siddharth Aggarwal, Advocates v. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE – 25

Judgment

1. The petitioner has filed the present petition, inter alia, impugning a notice dated 21.03.2024 [impugned notice] issued under Section 148 of the Income Tax Act, 1961 [Act] and the reassessment proceedings conducted pursuant to the impugned notice. It is the petitioner’s case that the impugned notice is barred by limitation and therefore, the reassessment proceedings initiated are without jurisdiction.

2. Thus, the principal question that falls for consideration of this court is whether the impugned notice has been issued beyond the period stipulated Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 1 of 17 under Section 149(1) of the Act. PREFATORY FACTS

3. Briefly stated, the facts relevant to address the aforesaid controversy are as under:

3.1 The petitioner filed its income tax return under Section 139(1) of the Act in respect of Assessment Year [AY] 2016-17 on 30.11.2016. The petitioner’s return of income was selected for scrutiny and the Assessing Officer [AO] issued a notice dated 04.09.2017 under Section 143(2) of the Act. The said proceedings culminated in an assessment order dated

18.12.2018 passed under Section 143(3) of the Act. In terms of the said assessment order, the AO made an addition of ₹2,98,84,704/- to the declared income of the petitioner for AY 2016-17.

3.2 The petitioner appealed the said assessment order before the Commissioner of Income Tax (Appeals)-8, Mumbai [CIT(A)].

3.3 The said appeal was partially allowed by an order dated 14.02.2020, whereby the learned CIT(A) deleted the addition of ₹8,35,864/- made on account of disallowance under Section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962 [Rules].

3.4 The income tax officials conducted search and seizure operations in the premises of the petitioner; other related entities; and at the residences of the key managerial personnel during 21.03.2023 to 25.03.2023.

3.5 Thereafter, on 21.03.2024, the AO issued the impugned notice and Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 2 of 17 also forwarded the reasons for initiating the reassessment proceedings.

3.6 As noted above, the petitioner has filed the present petition assailing the impugned notice on the ground that the same is barred by limitation. RIVAL CONTENTIONS

4. Mr Sumit Lalchandani, learned counsel appearing for the petitioner

contended that in terms of the first proviso to Section 149(1) of the Act, the reassessment of income relating to AY 2016-17 could not be reopened beyond the period of six years, which immediately preceded the assessment year relating to the previous year in which the search is conducted under Section 132 of the Act or requisition is made under Section 132A of the Act. It is contended that the search under Section 132 of the Act in the present case was conducted during the period 21.03.2023 to 25.03.2023, that is, during the previous year 2022-23. Thus, the period of six years for which the AO can travel back to reassess the petitioner’s income is required to be reckoned from immediately preceding AY 2023-24, and AY 2016-17 falls beyond the period of six years.

5. Mr Abhishek Maratha, learned counsel appearing for the Revenue countered the said submissions. He contended that, in terms of Section 149(1)(b) of the Act, the limitation for reopening of the assessment would extend to ten years, being the maximum period for which reassessment could be initiated by issuing a notice under Section 153A of the Act, subject to incriminating material being found during the search conducted under Section 132 of the Act or requisition being made under Section 132A of the Act. He submitted that in terms of Section 149(1)(b) of the Act, as was in Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 3 of 17 force at the material time, the assessment could be opened for a period exceeding three years but not more than ten years. However, by virtue of the proviso to Section 149(1) of the Act, no such notice under Section 148 of the Act could be issued if such a notice could not be issued under Sections 148, 153A or 153C of the Act at the time on account of the same being beyond the time as stipulated under Section 149(1)(b) of the Act.

6. Mr Lalchandani disagreed with the aforesaid submission and argued that, in terms of the fourth proviso to Section 153A(1) of the Act, no notice for the relevant assessment year or years could be issued unless the AO had in his possession books of account or other documents or evidence which revealed that income represented in the form of an asset has escaped assessment. Thus, the extended period of limitation beyond the six years preceding the assessment year relevant to previous year in which a search was conducted, would be applicable only in cases where the AO had evidence, which discloses that the escaped income was represented by an asset. He contended that, in the present case, the income which is alleged to have escaped assessment is on account of an expenditure, which the AO had disallowed and not on account of any asset which represent such income. REASONS & CONCLUSION

7. At the outset, it is relevant to refer the relevant extract of Section 149 of the Act, as was in force at the material time. The same is set out below: “149. Time limit for notice: – (1) No notice under section 148 shall be issued for the relevant assessment year,— (a) if three years have elapsed from the end of the relevant assessment year, unless the case falls under clause (b); Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 4 of 17 (b) if three years, but not more than ten years, have elapsed from the end of the relevant assessment year unless the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income chargeable to tax, represented in the form of— (i) an asset; (ii) expenditure in respect of a transaction or in relation to an event or occasion; or (iii) an entry or entries in the books of account, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more: Provided that no notice under section 148 shall be issued at any time in a case for the relevant assessment year beginning on or before 1st day of April, 2021, if a notice under section 148 or section 153A or section 153C could not have been issued at that time on account of being beyond the time limit specified under the provisions of clause (b) of sub-section (1) of this section or section 153A or section 153C, as the case may be, as they stood immediately before the commencement of the Finance Act, 2021: Provided further that the provisions of this sub-section shall not apply in a case, where a notice under section 153A, or section 153C read with section 153A, is required to be issued in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A, on or before the 31st day of March, 2021:”

8. A plain reading of the first proviso to Section 149(1) of the Act indicates that the issuance of a notice under Section 148 of the Act is proscribed if a notice under Sections 148, 153A or 153C of the Act could not have been issued at that time on account of the time limit specified under Clause (b) of Section 149(1) of the Act, or under Section 153A or Section 153C, as in force at that time. Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 5 of 17

9. We also consider it apposite to refer to the following observations made by the Supreme Court in Union of India & Anr. v. Rajeev Bansal: 2024 SCC OnLine SC 2693: “49. The first proviso to Section 149(1)(b) requires the determination of whether the time limit prescribed under section 149(1)(b) of the old regime continues to exist for the assessment year 2021-2022 and before. Resultantly, a notice under Section 148 of the new regime cannot be issued if the period of six years from the end of the relevant assessment year has expired at the time of issuance of the notice. This also ensures that the new time limit of ten years prescribed under section 149(1)(b) of the new regime applies prospectively. For example, assessment year 2012-2013, the ten year period would have expired on 31 March 2023, while the six year period expired on 31 March 2019. Without the proviso to Section 149(1)(b) of the new regime, the Revenue could have had the power to reopen assessments for the year 2012-2013 if the escaped assessment amounted to Rupees fifty lakhs or more. The proviso limits the retrospective operation of Section149(1)(b) interests of the assesses. to protect *** *** ***

54. The proviso to Section 149(1)(b) of the new regime uses the expression "beyond the time limit specified under the provisions of clause (b) of sub section (1) of this section, as they stood immediately before the commencement of the Finance Act, 2021." Thus, the proviso specifically refers to the time limits specified under section 149(1)(b) of the old regime. The Revenue accepts that without application of Taxation and other Laws (Relaxation and Amendment of Certain Provisions) Act, 2020, the time limit for issuance of reassessment notices after 1 April 2021 expires for assessment years 2013-2014, 2014-2015, 2015-2016, 2016-2017, and 2017-2018 in the following manner: (i) for the assessment years 2013-2014 and 2014-2015, the six year period expires on 31 March 2020 and 31 March 2021 respectively; and Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 6 of 17 (ii) for the assessment years 2016-2017 and 2017-2018, the three year period expires on 31 March 2020 and 31 March 2021 respectively.” (Emphasis supplied)

10. The aforesaid observations in Union of India & Ors. v. Rajeev Bansal (supra) were made in the context of time limits for issuing notice under Section 148 of the Act under the provisions as were in force prior to

31.03.2021, as imputed by virtue of the first proviso to Section 149(1) of the Act. This principle would be equally applicable for proscribing the issuance of a notice under Section 148 of the Act, if the proceedings for reassessment could not be initiated under the provisions of Section 153A or 153C of the Act, or under Section 153A or Section 153C of the Act as referred to in the first proviso to Section 149(1) of the Act. There is no cavil that the impugned notice would be unsustainable if such a notice could not be issued under the provision of Section 153A of the Act as was applicable in respect of a search conducted prior to 31.03.2021. It thus requires us to determine the period of limitation within which a notice under Section 153A could be issued in respect of AY 2016-17.

11. It is the petitioner’s case that the time limit for issuance of such notice is confined to the six assessment years preceding the assessment year relevant to the previous year in which search was conducted. However, the Revenue contends that by virtue of Explanation 1 to Section 153A(1) of the Act, the Revenue can travel back ten years from the end of the assessment year relevant to the previous year in which the search under Section 132 was conducted or a requisition under Section 132A of the Act was made. Plainly, the said controversy is required to be addressed by referring to Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 7 of 17 Section 153A of the Act. Section 153A(1) of the Act is set out below: “153A. Assessment in case of search or requisition.– (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003 [but on or before the 31st day of March, 2021], the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and of the relevant assessment year or years: Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years: Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub- section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate: Provided also that the Central Government may by rules made by it and published in the Official Gazette (except in cases where any assessment or reassessment has abated under the second proviso), specify the class or classes of cases in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 8 of 17 assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years: Provided also that no notice for assessment or reassessment shall be issued by the Assessing Officer for the relevant assessment year or years unless— (a) the Assessing Officer has in his possession books of account or other documents or evidence which reveal that the income, represented in the form of asset, which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in the relevant assessment year or in aggregate in the relevant assessment years; (b) the income referred to in clause (a) or part thereof has escaped assessment for such year or years; and (c) the search under section 132 is initiated or requisition under section 132A is made on or after the 1st day of April, 2017. Explanation 1.—For the purposes of this sub-section, the expression “relevant assessment year” shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. Explanation 2.—For the purposes of the fourth proviso, “asset” shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account.” It is apparent from the above that Section 153A of the Act refers to

12. time periods within which the assessments could be reopened. In terms of Section 153A(1) of the Act, the assessments can be reopened for a block of six years preceding the assessment year relevant to the previous year in which search under Section 132 of the Act is conducted or requisition is made under Section 132A of the Act as well as the relevant assessment year or years. Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 9 of 17

13. As is apparent from the plain language of Section 153A(1) of the Act, the AO has the jurisdiction to issue a notice in respect of each of the assessment years falling within six assessment years as well as for the relevant year or years as referred to in Clause (b) of Section 153A(1) of the Act. However, the fourth proviso to Section 153A(1) of the Act proscribes issuance of any notice for assessment or reassessment in respect of a relevant assessment year unless the conditions as stipulated in the fourth proviso are satisfied.

14. The expression “relevant assessment year” Explanation 1 to sub-section (i) of Section 153A of the Act to mean a year is defined under that falls beyond the period of six assessment years preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.

15. Mr. Maratha’s contention that the extended period of limitation under Section 153A of the Act would be applicable for the purpose of the proviso to Section 149(1) of the Act notwithstanding that the conditions, as stipulated in the fourth proviso to Section 153A of the Act are not satisfied, is unmerited. Once, we accept that a notice under Section 148 of the Act cannot be issued if such a notice could not be issued under Section 153A of the Act; it would be necessary to determine the period of limitation for issuance of a notice under Section 153A of the Act. Since a block of six assessment years and a further period not exceeding the block of ten assessment years is contemplated under Section 153A of the Act, it follows Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 10 of 17 that it would be necessary to determine whether the extended period of ten years is applicable in the facts of the present case. This necessitates considering the reasons as recorded for issuance of the impugned notice. The relevant extract of the reasons for reopening the reassessment, as furnished to the petitioner, is set out below: Information:- “2.1 In the case, the search proceedings and post-search investigations of Idemia India and other group entities revealed that these entities are engaged in massive profit shifting outside India. It has been unearthed that Idemia India and its group entities have deployed various mechanisms through which it is shifting profit to their Associated Enterprises (AEs) especially Idemia France SAS ·and Idemia Germany GmBH. Investigation have revealed various tax-avoiding arrangements operated by the group entities like export sales made to AEs at very low markup, import purchases made from AEs at unjustified markup, management fees paid to AEs without any actual services received, Purchase of RAW materials from AEs, R&D services provided to AEs at low mark-up, transaction with Non- Filers etc. A summary of the modus operandi is as under: A. transactions Expenses Debit to Non- Filers: It was observed that Smart Chip Pvt Ltd had undertaken the nature of contract, rent, various professional charges with various parties who have not either never filed the ITR or not filed in the year in which transaction occurred. The details of transactions are tabulated below: *** *** In this regard, summons notices were issued to the above non-filers to verify the genuineness of the transactions by investigation wing. However, no response has been received from the parties till date. In the absence of any compliance by the party and in view of the fact that above parties are *** Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 11 of 17 the above, assessc's non-filer till date, the genuineness of contract/rent payments made by Smart Chip could not be verified. In view of income aggregating ₹4,46,21,363/- has escaped assessment by way of various transactions during the FY 2015-16 to FY 2020-21 in the nature of contract, rent, professional charges with various parties who have not either never filed the ITR or not filed in the year in which transaction. Hence the genuineness of expenses of ₹4,46,21,363/- with non-filers from FY 2015-16 to 2020-21 needs to be verified. DISALLOWANCE OF PERSONAL EXPENSES B. It is noticed that during the course of search proceedings, some incriminating evidences were seized from the premises of Mr. Matthew David Foxton (34, Jor Bagh, New Delhi- 110003) annexurized as Annexure A-2 in Premise TDR-9, wherein some instances of personal expenses of the key persons of Smart Chip Pvt. Ltd. were claimed in the books of accounts of Smart Chip. The incriminating evidences found are discussed as under: *** *** *** On perusal of the above, it can be noted that gold items worth Rs.2,42,646/were being purchased in FY 2015-16. Further, it con be noticed that Smart Chip has been regularly incurring expenses for the personal benefit of directors and key managerial personnel for example purchase of iPhones, Sarees, Purfume, Hotel bills, credit card payments, etc. Further, it has also been observed that the company is also regularly incurring expenses for alcohols for officers, IPL tickets for bank officials, travel bills of government officers for availing favours from them. These expenses incurred to illegally obtain undue favours are in infraction of law and cannot be allowed as deduction. Furthermore, such personal expenses cannot also be said to have been incurred wholly and exclusively for the purpose of business and needs to be examined. C. Disallowance of expenses paid to VIHAAN INFRASYSTEMS LTD. Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 12 of 17 It is noticed that some incriminating evidences were seized from the premises of Mr. Matthew David Foxton (34, Jor Bagh, New Delhi-110003) annexurized as A-2 in Premise TDR-9, wherein some instances of unduly routing of money to Vihaan Infrasystems Ltd. in the garb of contractual manpower services and other support services and the said expense cost was being claimed in the books of the Smart Chip. The extracts of incriminating evidences as found during the course of search are discussed as under: *** *** *** On perusal of the above observations as noted from the Memo of KPMG Paris seized during the course of search, Vihaan Infrasystems Ltd. provided significant manpower services to Smart Chip along with other support services such as data management, training, IT services, business support rent etc. In this regard, the details of expenses incurred and paid by Smart Chip to Vihaan Infrasystems Ltd. in FY 2015-16 relevant to AY 2016-17 amounting to Rs.8,70,00,000 /-. Various incriminating facts were noted from perusal of the seized memo which raised significant doubts over the genuineness of the payments made by Smart Chip to Vihaan Infrasystems Ltd.: • Smart Chip is the major contributor to the total revenue of Vihaan Infrasystems Ltd. and in some financial years, the expenses paid by Smart Chip to Vihaan Infrasystems Ltd. even exceeded total revenue of Vihaan Infrasystems Ltd.; • Mr. Sanjeev Shriya, his family members and Mr. Alok Mukherjee were shareholders and key managerial persons of Vihaan Infrasystems Ltd. in the past years and can be said to have significant influence over the affairs of Vihaan Infrasystems Ltd. and thus, it can be observed that Vihaan Infrasystems Ltd. was used to book non- genuine expenses in the books of Smart Chip and divert money for the benefit of specific persons; • Common address, website of Vihaan Infrasystems Ltd. and Smart Chip and other group companies; Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 13 of 17 • Vihaan Infrasystems Ltd. presented as a group company / related company of Idemia Group entities; • Mr. Sanjeev Kumar Jain, holding substantial shares in Vihaan Infrasystems Ltd., was the former employee of Smart Chip and having close relationship/connivance with Mr. Sanjeev Shriya; • The fees charged by Vihaan Infrasystems Ltd. was much higher as compared to other contractual manpower company; • No proper documentation and proof of service existed in respect of expense transactions with Vihaan Infrasystems Ltd. • Discrepancies in employee's attendance record found which further establishes the non-receipt of any actual services and non-genuineness of the transaction with Vihaan lnfrasystems Ltd. Further, the above observations in the seized Memo were also corroborated with detailed analysis in the Memo including list of shareholders as on 31.03.2016, Sanjeev Kumar Jain profile, extracts of Memorandum of Association of Vihaan Infrasystems Ltd. signed in 2004, Archived version of Vihaan Infrasystems Ltd. website, Linkedln profile of Vihaan Infrasystems Ltd., consent form signed by Smart Chip's landlord providing permission to Vihaan Infrasystems Ltd. to use their office space and Vihan noted as related party, links of Vihaan Infrasystems Ltd. with Aadharshila and Smart Chip, related party disclosures in the other companies of Mr. Sanjeev Shriya (Goldrock Investment) showing Vihaan Infrasystems Ltd. as related party in its Annual report for FY 20 16-17, domain name verification of Vihaan Infrasystems Ltd. wherein Smart Chip shown as registrant organization, proofs that Smart Chip's address noted as address of Vihaan Infrasystems Ltd. on Government's website, MCA etc, analysis of invoices raised by Vihaan Infrasystems Ltd., physical verification of premises of Vihaan lnfrasystems Ltd., and various other analysis. All the above incriminating evidences clearly showed that Vihaan Infrasystems Ltd. was merely a conduit entity which Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 14 of 17 was used to unduly transfer money from Smart Chip and book non-genuine expenses in the books of Smart Chip. The evidences establishes that no genuine services were provided by Vihaan Infrasystems Ltd. to Smart Chip. This finding is in fact based on the internal report prepared by Idemia Group with the help of KPMG Paris. Hence, the payments made by Smart Chip to Vihaan Infrasystems Ltd. are found to be non- genuine and nowhere wholly and exclusively related to the business of the Smart Chip. Thus, in view of the above, it is clearly corroborated that Smart Chip has been regularly making payments to Vihaan Infrasystems Limited without any actual receipt of any services and thus, claim of expenses of Rs.8,70,00,000/- cannot be said to be wholly and exclusively incurred for the purpose of business during the FY 20 15-16 relevant to AY 2016-17 and treated as escaped assessment and needs to be examined. As discussed above, assesse's income of Rs.9.21 Crores by way of expenses debited to non -filers and personal expenses & payment made to Vihaan Infrasystems Limited for F.Y. 2015-16 relevant to A.Y. 2016-17 in the head of business expenses has escaped assessment and needs to be examined. *** *** ***

2. Evidently, warrant was issued in the name of the assessee and the case of the assessee was covered under Search u/s 132 ofthe Income Tax Act 1961 on 21.03.2023.

3. Hence, in light of the provisions of Explanation-2 to Section 148 and first proviso to Section 148A, I am satisfied that I have ‘information’ which suggests that income chargeable to tax has escaped assessment in the case of the assessee for the year under consideration and it is a fit case to issue notice u/s 148 r.w.s 149 r.w.s 151(ii) of the Income Tax Act 1961 as amended by the Finance Act 2022.

4. In view of the above, the assessee has misrepresent the amount of Rs.9.21 Crorcs [Rs.0.49 Crore expenses debited to non-filers + Rs.0.024 Crores as personal expenses + Rs.8.70 Crores as expenses debited to Vihaan Infrasystems Ltd. represented in the form of an entry and expenditure] in its ITR filed for F. Y. 2015- 16 relevant to A. Y. 2016-17 by way of various tax-avoiding Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 15 of 17 arrangements and shifting profits to their Associated Enterprises (AEs) outside India. Therefore, as specified u/s 149(l)(b) of the Income-tax Act, 1961 read with explanation thereto which suggests that income exceeding Rs.50 lakh chargeable to tax has escaped assessment in this case which is represented in the form of an entry and expenditure.”

16. It is apparent from the above that the AO believed that the petitioner’s income had escaped assessment for AY 2016-17 on essentially three grounds. First, that the petitioner had deducted expenses relating to amounts paid to certain persons who had not filed their income tax returns and the AO thus doubted the genuineness of the said transactions. Second, that the petitioner had booked expenses, which according to the AO, were personal expenses of its directors and had not been incurred wholly and exclusively for the purpose of the petitioner’s business. And third, that the petitioner had paid certain amounts as expenses for availing contractual manpower services and the AO doubted the genuineness of the said payments.

17. It is clear from the above that there is no allegation that the income which has escaped assessment was represented in the form of an asset. Therefore, the conditions as stipulated in Clause (a) of the fourth proviso to Section 153A(1) of the Act are not satisfied. The AO does not have the possession any books of account, other documents or evidence, which reveals that the petitioner’s income that is represented in the form of an asset has escaped assessment.

18. In terms of Explanation 2 to Section 153A(1) of the Act, the term ‘asset’ is defined to include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank accounts. Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 16 of 17

19. The AO seeks to disallow expenses on account of doubting the genuineness for the reason that the same were not incurred wholly or exclusively for the purpose of the petitioner’s business. Absent any further material to establish that such expenses had resulted in the acquisition of any asset, the conditions stipulated in the fourth proviso to Section 153A(1) of the Act would remain unsatisfied.

20. In the aforesaid view the period of limitation for issuing a notice under Section 153A of the Act, in the given facts of this case, would necessarily have to be confined to a period of six assessment years immediately preceding the assessment year relevant to the previous year in which the search under Section 132 of the Act was conducted.

21. The search in question was conducted in financial year 2022-23; thus, the relevant block of six assessment years would be the six assessment years preceding AY 2023-24, being the assessment year relevant to the previous year in which the search was conducted. Accordingly, AY 2016-17 falls beyond the block of six years.

22. In view of the above, the impugned notice as well as the proceedings initiated pursuant thereto are set aside. The petition is allowed in the aforesaid terms. Pending applications also stand disposed of. APRIL 23, 2025 ‘gsr’ VIBHU BAKHRU, J TEJAS KARIA, J Signature Not Verified Digitally Signed By:TARUN RANA Signing Date:01.05.2025 14:53:48 W.P. (C) 3801/2025 Page 17 of 17