INCOME TAX OFFICER versus VIKRAM SUJITKUMAR BHATIA

[2023] 2 S.C.R.

INCOME TAX OFFICER

VIKRAM SUJITKUMAR BHATIA

(Civil Appeal No. 911 of 2022)

BAPRIL 06, 2023

[M. R. SHAH AND B. V. NAGARATHNA, JJ.]

Income Tax Act, 1961: s.153C – Assessment of income of anyother person – Initiation of search u/s.132 prior to the amendmentto s.153C – Applicability of the amended s.153C – On facts, searchCu/s.132 conducted on the premises on 04.09.2013 and s.153C as itstood then was applicable – W.e.f. 01.06.2015, s.153C amendedvide Finance Act, 2015 – Books of account or documents or assetsseized by the Assessing Officer of the person other than searchedon 25.04.2017, subsequent to the amendment of s.153 – IssuanceDof notice u/s.153C on 04.05.2018 – Held: Proviso to s.153C createsa deeming fiction wherein any reference made to the date of initiationof search is deemed to be reference made to the date when theAssessing Officer of the non-searched person receives the books ofaccount or documents or assets seized etc – Thus, even though thesearch u/s.132 was initiated prior to the amendment to s.153C w.e.f.E01.06.2015, the books of account or documents or assets were seizedby the Assessing Officer of the non-searched person only on25.04.2017, which is subsequent to the amendment, thus, when thenotice u/s.153C was issued on 04.05.2018, the provision of the lawexisting as on that date, i.e., the amended s.153C would be applicableF– Moreover, the object and purpose of s.153C is to address thepersons other than the searched person – Thus, the order passedby 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 searchesconducted prior to 01.06.2015 is held to be unsustainable –Amendment brought to s.153C applicable to searches conducted u/Gs.132 before 01.06.2015, i.e., the date of the amendment – FinanceAct, 2015.

s.153C (amended by Finance Act, 2015)– Object/Purpose of– Stated.

Interpretation of Statutes: Taxing Statute – Interpretation ofmachinery provision – Held: Courts, while interpreting machineryprovisions of taxing statute, must give effect to its manifest purposeby construing it in such manner so as to effectuate the object andpurpose of the statute – s. 153C of the Act is 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 theIncome Tax Act, 1961 as inserted vide Finance Act, 2005, andthe effect of the said proviso is that it creates deeming fictionwherein any reference made to the date of initiation of search isdeemed to be reference made to the date when the AssessingOfficer of the non-searched person receives the books of accountor documents or assets seized etc. Thus, in the instant case, eventhough the search under Section 132 was initiated prior to theamendment to Section 153C w.e.f. 01.06.2015, the books ofaccount or documents or assets were seized by the AssessingOfficer of the non-searched person only on 25.04.2017, which issubsequent to the amendment, therefore, when the notice underSection 153C was issued on 04.05.2018, the provision of the lawexisting as on that date, i.e., the amended Section 153C shall beapplicable. [Para 10.3][777-E-F]

1.2. Section 153C of the Act is machinery provision. TheCourts, while interpreting machinery provisions of taxingstatute, must give effect to its manifest purpose by construing itin such manner so as to effectuate the object and purpose ofthe statute. [Para 10.6][781-B]

1.3. Even the unamended s.153C pertains to theassessment of income of any other person. The object and purposeof Section 153C is to address the persons other than the searchedperson. Even as per the unamended Section 153C, the proceedingagainst other persons (other than the searched person) was onthe basis of the seizure of books of account or documents seizedor requisitioned “belongs or belong to” person other than thesearched person. However, it appears that as in the case of PepsicoIndia Holdings Private Limited, the Delhi High Court interpreted

Athe words “belong to” restrictively and/or narrowly and whichled to situation where, though incriminating material pertainingto third party / person was found during search proceedingsunder Section 132, the Revenue could not proceed against sucha third party, which necessitated the legislature / Parliament toclarify by substituting the words “belongs or belong to” to theBwords “pertains or pertain to” and to remedy the mischief thatwas 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 materialshave been found in the form of books of account or documents orCassets relating to them from the premises of the searched person,still they may not be subjected to the proceedings under Section153C solely on the ground that the search was conducted priorto the amendment is accepted, in that case, the very object andpurpose of the amendment to Section 153C, which is by way ofsubstitution of the words “belongs or belong to” to the wordsD“pertains or pertain to” shall be frustrated. Any interpretation,which may frustrate the very object and purpose of the Act/Statuteshall be avoided by the Court. If the interpretation as canvassedon behalf of the respective respondents is accepted, in that case,even the object and purpose of Section 153C namely, forEassessment of income of any other person (other than thesearched person) shall be frustrated. [Para 10.8][785-G-H; 786-A-E]

1.4 The impugned common judgment and order passed bythe High Court is held to be unsustainable, and is quashed andFset aside. The amendment brought to s. 153C of the Act, 1961vide Finance Act, 2015 shall be applicable to searches conductedunder Section 132 of the Act, 1961 before 01.06.2015, i.e., thedate of the amendment. [Para 11][786-F-G]

Pepsico India Holdings Private Limited vs. AssistantGCommissioner of Income Tax, 2014 SCC OnLine Del4155; Shamrao v. Parulekar vs. District Magistrate,(1952) 2 SCC 1 : 1952 SCR 683, Zile Singh vs. State ofHaryana, (2004) 8 SCC 1; Commissioner of IncomeTax - III vs. Calcutta Knitwears, Ludhiana (2014) 6

SCC 444; Government of Andhra Pradesh vs. HindustanMachine Tools Ltd., (1975) 2 SCC 274; Lily Thomasvs. Union of India (2013) 7 SCC 653; Controller ofEstate Duty vs. M.A. Merchant, 1989 Supp (1) SCC499; 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.

Case Law Reference

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 911 of2022.

From the Judgment and Order dated 02.04.2019 of the High Courtof Gujarat at Ahmedabad in SCA No. 18777 of 2018.

With

Civil Appeal Nos. 912, 913, 914, 915, 916, 917, 918, 919, 920, 921,922, 923, 924, 925, 926, 927, 928, 929, 930, 931, 932, 933, 934, 935, 936,937, 938, 939, 940, 941, 942, 943, 944, 945, 946, 947, 948, 949, 950, 951,952, 953, 954, 955, 956, 957, 958, 959, 960, 961, 962, 963, 964, 965, 966,967, 968, 969, 970, 971, 972, 973, 974, 975, 976, 977, 978, 979, 980, 981,982, 983, 984, 985, 986, 987, 988, 989, 990, 991, 992, 993, 994, 995, 996,997, 998, 999, 1000, 1001, 1002, 1003, 1004, 1005, 1006, 1007, 1008,1009, 1010, 1011, 1012, 1013, 1014, 1015, 1016, 1017, 1018, 1019, 1020,1021, 1022, 1023, 1024, 1025 and 1026 of 2022.

K.M. Nataraj, ASG, Zoheb Hossain, Ms. Gargi Khanna, Ms.Aakanksha Kaul, Manish, Bijan Ghosh, Navanjay Mahapatra, RajBahadur Yadav, Mrs. Anil Katiyar, Advs. for the Appellant.

R. K. Patel, Tushar Hemani, Ketan H. Shah, Saurabh Soparkar,Sr. Advs., Ms. Manisha T. Karia, Darshan R. Patel, Ms. Sukhda Kalra,Adarsh Kumar, Ms. Nidhi Nagpal, Ms. Vaibhavi Parikh, Ms. Aditi Sheth,Ms. Anushree Prashit Kapadia, Ms. Priyanka Rathi, Haresh Raichura,

AAman K. Shah, Ram Bhadauria, Ms. Saroj Raichura, Kalp Raichura,Bandish Soparkar, Pradhuman Gohil, Mrs. Taruna Singh Gohil, Ms. RanuPurohit, R. Vishnu Kumar, Alapati Sahithya Krishna, Purvish JitendraMalkan, Sudhir Mehta, Ms. Khushboo Vinodray Malkan, Jitendra Malkan,Ms. Dharita P Malkan, Ms. Deepa Gorasia, Alok Kumar, Ms. NandiniChhabra, Ms. Shailee Mehta, Ms. Bhavna Sarkar, Hardik Vora, SameerBSingh, Vijay Kumar Singh, Sahil Lochab, Ms. Neelam Singh, SachinSingh, Darshan Gandhi, Jimi Patel, Subodh S. Patil, Chitranshul A. Sinha,Siddhartha Jha, Bharat Kumar Sharma, Ketan Shah, Aman Shah, RoshanSanthalia, Advs. for the Respondent.

The Judgment of the Court was delivered byCM. R. SHAH, J.

1. Feeling aggrieved and dissatisfied with the impugned commonjudgment and order dated 02.04.2019 passed by the High Court of Gujaratin Special Civil Application No. 18777 of 2018 and other connectedDmatters, as well as the impugned judgment(s) and order(s) passed bythe High Court of Gujarat in other special civil applications relying uponits earlier decision in the aforesaid case, whereby the High Court hasquashed the notice under Section 153C of the Income Tax Act, 1961(hereinafter referred to as “Act, 1961”) issued to the respondent –assessee - respondents herein and set aside consequent AssessmentEOrders (where assessment stood completed) by holding that Section153C of the Act, 1961 (as amended by Finance Act, 2015) would notapply to searches under Section 132 of the Act, 1961 initiated before thedate of amendment, the Revenue has preferred the present appeals.

2. At the outset, it is required to be noted that the question of lawFthat arises for the consideration of this Court is :-

Whether amendment brought to Section 153C of the Income TaxAct, 1961 vide Finance Act, 2015 would be applicable to searchesconducted under Section 132 of the Act, 1961 before 01.06.2015,i.e., the date of amendment?G

3. For the sake of convenience, the Civil Appeal arising out of theimpugned judgment and order passed by the High Court in Special CivilApplication No. 12825 of 2018 is considered and treated as the leadmatter and the facts in the said writ petition are narrated, which in nutshellare as under:-

3.1 The original writ petitioner, an individual filed his Return ofIncome for the Assessment Year (A.Y.) 2012-13 on 11.09.2012 declaringtotal income of Rs. 44,73,820/- as business income from partnershipfirm and other income. search came to be conducted on variouspremises of H.N. Safal Group on 04.09.2013. panchnama came to beprepared on 07.09.2013. On the basis of the seized material, the AssessingOfficer initiated proceedings against the assessee under Section 153Cof the Act, 1961 by issuing notice dated 08.02.2018.3.2 The assessee filed his reply dated 01.05.2018 and alsosubmitted his return of income. Vide letter dated 14.5.2018, the AssessingOfficer furnished the satisfaction note recorded by him and also attachedtherewith the satisfaction of the Assessing Officer of the searched person.From the satisfaction recorded, though it was found that no documentbelonging to the original writ petitioner - assessee was found during thecourse of search, however, hard-disk was seized, which contained anexcel sheet with the data of the computer of the searched person, whereinthere were references to the petitioner’s name. On receiving the details,the original writ petitioner raised objections to the proceedings underSection 153C of the Act, 1961 contending, inter alia, that on the basis ofthe excel sheet data of the computer of the searched person whereinthere were only references to the original writ petitioner’s name, theAssessing Officer could not have initiated proceedings against him underSection 153C of the Act, 1961, inasmuch as the condition precedent forinvoking Section 153C of the Act as it stood on the date of the search,namely, that the Assessing Officer should be satisfied that any money,bullion, jewellery or other valuable article or thing or books of account ordocuments seized or requisitioned “belongs or belong to” the personother than the searched person, was not satisfied. It was also contendedthat for the purpose of initiating action under Section 153C of the Act,1961, independent satisfaction has to be recorded, by the AssessingOfficer of the searched person as well as by the Assessing Officer ofthe person other than the searched person. It was submitted that, however,on perusal of the satisfaction note recorded by the Assessing Officerof the original writ petitioner, it was evident that the Assessing Officerhad merely reproduced the satisfaction of the Assessing Officer of thesearched person and had not recorded the requisite satisfaction ascontemplated under Section 153C of the Act, 1961.

3.3 The Assessing Officer by an order dated 23.07.2018 rejectedthe objections. Feeling aggrieved and dissatisfied with the rejection of

Athe objections against initiation of proceedings under Section 153C ofthe Act, 1961, the original writ petitioner filed the present writ petitionbefore the High Court.

3.4 Similar notices under Section 153C of the Act, 1961 werechallenged by other persons – persons other than the searched personsBby way of different writ petitions. In the cases of some of the writpetitioners, on the basis of the proceedings under Section 153C of theAct, 1961, the assessments were completed, which were also permittedto be challenged as the question involved was common.

3.5 By the impugned judgment and order though the High CourtChas observed that Section 153C of the Act, 1961 is machinery provisionfor assessment of income of 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 conductedprior to 01.06.2015. The High Court has further observed that byamendment brought in Section 153C of the Act, 1961 by Finance, Act,D2015 w.e.f. 01.06.2015, new class of assesses are sought to be broughtwithin the sweep of Section 153C of the Act, which affects thesubstantive rights of the assessees and, therefore, cannot be said to be amere change in the procedure. The High Court has also observed thatsince the amendment expands the scope of Section 153C of the Act,E1961 by bringing in an assessee if books of account or documentspertaining to him or containing information relating to him have beenseized during the course of search, within the fold of that section, thisquestion assumes significance, inasmuch as in the facts of the presentcase, as on the date of search, it was only if such material belonged to aperson other than the searched person, that the Assessing Officer of theFsearched person could record such satisfaction and forward the materialto the Assessing Officer of such other person. However, subsequent tothe date of search, the amendment has been brought into force andbased on the amendment, the petitioners who were not included withinthe ambit of Section 153C of the Act, 1961 as on the date of the search,Gare now sought to be brought within its fold on the ground that thesatisfaction note and notice under Section 153C of the Act, 1961 havebeen issued after the amendment came into force. Therefore, byobserving that the amended Section 153C of the Act, 1961, shall not bemade applicable retrospectively and therefore, no notice could have beenissued under Section 153C of the Act, 1961 post-amendment with respectH

to the searches conducted prior to 01.06.2015, by the impugned commonjudgment and order, the High Court has allowed the writ petitions andset aside the notice as well as the respective assessment orders. Theimpugned common judgment and order passed by the High Court is thesubject matter of present appeals.

4. Shri K.M. Nataraj, learned ASG appearing on behalf of theRevenue has vehemently submitted that while passing the impugnedcommon judgment and order and quashing and setting aside the noticeunder Section 153C of the Act, 1961 issued against the original writpetitioners – the persons other than the searched persons, the High Courthas not properly appreciated and considered the object and purpose,which necessitated the amendment in Section 153C of the Act, 1961.He has taken us to the Section 153C of the Act, 1961 as it stood beforethe amendment vide Finance Act, 2015 and Section 153C after beingamended by the Finance Act, 2015, which read as under:-

“Section 153C as it stood before the amendment vide Finance-Act, 2015 read as:

153-C. Assessment of income of any other person.—(1)Notwithstanding anything contained in Section 139, Section 147,Section 148, Section 149, Section 151 and Section 153, wherethe Assessing Officer is satisfied that any money, bullion,jewellery or other valuable article or thing or books of accountor documents seized or requisitioned belongs or belong to aperson other than the person referred to in Section 153-A,then, the books of account or documents or assets seized orrequisitioned shall be handed over to the Assessing Officerhaving jurisdiction over such other person and that AssessingOfficer shall proceed against each other person and issue suchother person notice and assess or reassess income of suchother person in accordance with the provisions of Section 153A,

Provided that in case of such other person, the reference tothe date of initiation of the search under Section 132 or makingof requisition under Section 132-A in the second proviso to sub-section (1) of Section 153-A shall be construed as referenceto the date of receiving the books of account or documents orassets seized or requisitioned by the Assessing Officer havingjurisdiction over such other person:

Provided further that the Central Government may by rulesmade by it and published in the Official Gazette, specify theclass or classes of cases in respect of such other person, inwhich the Assessing Officer shall not be required to issue noticefor assessing or reassessing the total income for six assessmentyears immediately preceding the assessment year relevant tothe previous year in which search is conducted or requisition ismade except in cases where any assessment or reassessmenthas abated.

(2) Where books of account or documents or assets seized orrequisitioned as referred to in sub-section (1) has or have beenreceived by the Assessing Officer having jurisdiction over suchother person after the due date for furnishing the return ofincome for the assessment year relevant to the previous yearin which search is conducted under Section 132 or requisitionis made under Section 132-A and in respect of such assessmentyear—

(a) no return of income has been furnished by such otherperson but no notice under sub-section (2) of Section 142has been issued to him, or

(b) return of income has been furnished by such otherperson but no notice under sub-section (2) of Section 143has been served and limitation of serving the notice undersub-section (2) of Section 143 has expired, or

(c) assessment or reassessment, if any, has been made,

before the date of receiving the books of account or documentsor assets seized or requisitioned by the Assessing Officer havingjurisdiction over such other person, such Assessing Officershall issue the notice and assess or reassess total income ofsuch other person of such assessment year in the mannerprovided in Section 153-A.”

Section 153C of the act after being amended by Finance Act,2015 reads thus:-

153-C. Assessment of income of any other person.—(1)Notwithstanding anything contained in Section 139, Section 147,Section 148, Section 149, Section 151 and Section 153, wherethe Assessing Officer is satisfied that,—

(a) any money, bullion, jewellery or other valuable article orthing, seized or requisitioned, belongs to; or

(b) any books of account or documents, seized orrequisitioned, pertains or pertain to, or any informationcontained therein, relates to,

person other than the person referred to in Section 153-A,then, the books of account or documents or assets, seized orrequisitioned shall be handed over to the Assessing Officerhaving jurisdiction over such other person and that AssessingOfficer shall proceed against each such other person and issuenotice and assess or reassess the income of the other personin accordance with the provisions of Section 153A, if, thatAssessing Officer is satisfied that the books of account ordocuments or assets seized or requisitioned have bearing onthe determination of the total income of such other person forsix assessment years immediately preceding the assessmentyear relevant to the previous year in which search is conductedor requisition is made and for the relevant assessment year oryears referred to in sub-section (1) of Section 153-A:

Provided that in case of such other person, the reference tothe date of initiation of the search under Section 132 or makingof requisition under Section 132-A in the second proviso to sub-section (1) of Section 153-A shall be construed as referenceto the date of receiving the books of account or documents orassets seized or requisitioned by the Assessing Officer havingjurisdiction over such other person:

Provided further that the Central Government may by rulesmade by it and published in the Official Gazette, specify theclass or classes of cases in respect of such other person, inwhich the Assessing Officer shall not be required to issue noticefor assessing or reassessing the total income for six assessmentyears immediately preceding the assessment year relevant tothe previous year in which search is conducted or requisition ismade and for the relevant assessment year or years as referredto in sub-section (1) of Section 153-A except in cases whereany assessment or reassessment has abated.

(2) Where books of account or documents or assets seized orrequisitioned as referred to in sub-section (1) has or have beenreceived by the Assessing Officer having jurisdiction over suchother person after the due date for furnishing the return ofincome for the assessment year relevant to the previous yearin which search is conducted under Section 132 or requisitionis made under Section 132-A and in respect of such assessmentyear—

(a) no return of income has been furnished by such otherperson and no notice under sub-section (1) of Section 142has been issued to him, or

(b) return of income has been furnished by such otherperson but no notice under sub-section (2) of Section 143has been served and limitation of serving the notice undersub-section (2) of Section 143 has expired, or

(c) assessment or reassessment, if any, has been made,

before the date of receiving the books of account or documentsor assets seized or requisitioned by the Assessing Officer havingjurisdiction over such other person, such Assessing Officershall issue the notice and assess or reassess total income ofsuch other person of such assessment year in the mannerprovided in Section 153-A.”

4.1 It is submitted by Shri Nataraj, learned ASG that the amendmentin Section 153C was necessitated in view of the observation of the DelhiHigh Court in the case of Pepsico India Holdings Private LimitedVs. Assistant Commissioner of Income Tax, 2014 SCC OnLineFDel 4155 whereby the High Court has observed that the words “belongsor belong to” should not be confused with the words ‘relates to or refersto,’ the former being much narrower than the latter. It is submitted thatit was held that therefore, the provision could not have been invokedunless the documents / material ‘belong to’ the third party (other thanGthe searched person). That in such situation, where though incriminatingmaterial pertaining to third party was found during search proceedingsunder Section 132, the Revenue could not proceed against such thirdparty in view of the observations of the Delhi High Court. Therefore, assuch, the said observation of the Delhi High Court was coming in theway of suppressing the very mischief which the legislature intended to

suppress. That therefore, vide Finance Act, 2015, w.e.f. 01.06.2015,Section 153C has been amended by way of substitution to replace thewords “belongs or belong to” with the words “pertains or pertain to”insofar as books of account and documents are concerned.

4.2 It is further submitted that there is difference between thewords or phrases “belongs or belong to” and “pertains or pertain to”. Itis submitted that the words “pertains or pertain to” are of much widerimport than “belongs or belong to”. That, therefore, the legislature hasexpanded the scope of operation of Section 153C to include the situationwhere during search proceedings under Section 132 of the Act, 1961, ifincriminating documents / materials pertaining to third party are found,the Revenue can proceed against such third party.

4.3 It is next submitted by Shri Nataraj, learned ASG appearingon behalf of the Revenue that while interpreting the amendment to Section153C by Finance Act, 2015, the following principles / tests need to bekept in mind:-

(i)effect of amendment by substitution;

(ii)legislative intent;

(iii)Section 153C of the Act, 1961 is machinery provision;

(iv)interpretation which makes the statute or part of it “deadletter” to be avoided;

(v)power to legislate includes power to legislate retrospectively.

4.4 Elaborating the above, it is submitted that so far as the effectof amendment to Section 153C is concerned, Section 153C has beenamended by way of “substitution”, vide Finance Act, 2015, w.e.f.01.06.2015 whereby the words “belongs or belong to” have beensubstituted by “pertains or pertain to”. That it is well settled principleof interpretation that any amendment made by way of substitution relatesback to the date of the Parent Act. Reliance is placed on the decision ofthis Court in the case of Shamrao V. Parulekar Vs. DistrictMagistrate, (1952) 2 SCC 1 :1952 SCR 683. That in the said decision,it is observed and held that an amendment by substitution has the effectof wiping out the earlier provision from the statute book and replacing itwith the amended provision as if the unamended provision never existed.Therefore, the statute, which in this case is Section 153C of the Act,1961 would have to be read as if the amended provision existed from the

Avery inception. Shri Nataraj, learned ASG has also placed reliance onthe decision of this Court in the case of Zile Singh Vs. State of Haryana,(2004) 8 SCC 1 (paras 24 and 25).

4.5 It is contended that even while interpreting the amendment toSection 153C by Finance Act, 2015, the legislative intent behind theBamendment is required to be considered. That while interpreting statutethe Court must bear in mind the intention with which the legislation waspassed and the mischief it sought to suppress. That the interpretationwhich best expresses the intention of the legislature should be preferred.That in the present case, the intention of the legislature was to bringwithin the scope of Section 153C those persons against whomCincriminating material is found at another person’s premises during thesearch proceedings under Section 132. That, however, the narrow scopegiven to the words “belongs or belong to” frustrated this purpose and,therefore, the amendment was necessitated. It is submitted that bearingthe said legislative intent and the mischief sought to be suppressed inDmind, any interpretation other than that the amended Section 153C willapply to all pending and future proceedings, irrespective of whether thesearch under Section 132 of the Act, 1961 was before or after theamendment, would fail to advance the object of the legislation. In supportof the above submission, Shri Nataraj, learned ASG has relied upon thedecisions of this Court in the cases of Zile Singh (supra) (paras 14, 15,E18 and 20) and Girdhari Lal & Sons Vs. Balbir Nath Mathur, (1986)2 SCC 237.

4.6 Relying upon above two decisions, it is contended that theobject and purpose of the amendment to remove the mischief and defectfor which the amendment was necessitated is required to be consideredFand borne in mind. That as observed and held that once the Parliament’sintention is ascertained and the object and purpose of the legislation isknown, it then becomes the duty of the Court to give the statute apurposeful or functional interpretation.

4.7 It is further contended by Shri Nataraj, learned ASG thatGSection 153C of the Act, 1961 is machinery provision. He submittedthat the High Court in the impugned judgment and order has also observedthat Section 153C is machinery provisions. While interpreting amachinery provision of taxing statute, it is the duty of the Court to giveeffect to its manifest purpose. The interpretation that defeats the purposeHof the statute should be avoided. That despite the observation by the

High Court that Section 153C of the Act, 1961 is machinery provision,the High Court has failed to give effect to the object behind it. Relianceis placed on the decision of this Court in the case of Commissioner ofIncome Tax - III Vs. Calcutta Knitwears, Ludhiana (2014) 6 SCC444 (paras 32 and 34).

4.8 It is next submitted by Shri Nataraj, learned ASG that as perthe settled position of law, the statute must be read as whole and anyinterpretation which makes the statute or part of it “dead letter” hasto be avoided. That the construction adopted shall be in consonancewith other provisions of the statute. That as per the settled law, thecourts should endeavour to harmonise statutes in conflict. One provisioncannot be used to defeat the object and purpose of another. It is submittedthat in this background, perusal of Section 153C would show that if thecontention of the respondents that the amended Section 153C would notbe applicable to searches conducted before the amendment is accepted,then the purpose behind the words “if that Assessing Officer is satisfiedthat the books of account or documents or assets seized or requisitionedhave bearing on the determination of the total income of such otherperson for six assessment years immediately preceding the assessmentyear relevant to the previous year in which search is conducted orrequisition is made and for the relevant assessment year or years referredto in sub-section (1) of section 153A” would be defeated. That it isalways presumed that the legislature would not take away with onehand what it gives with the other. In support of the above, reliance isplaced on the decision of this Court in the case of Commissioner ofIncome Tax Vs. Hindustan Bulk Carriers, (2003) 3 SCC 57 (paras17 to 21).

4.9 It is submitted that even otherwise the power to legislateincludes the power to legislate retrospectively. That it is well settled thatthe legislature is well competent to legislate retrospectively. That though,retrospectivity of an enactment may not be presumed, the same can bedone through express enactment or by necessary implication. Therefore,if the legislature is competent and the intention of the legislature to expandthe scope of the statute can be gathered, whether expressly or bynecessary implication, the same shall be given effect to. In support ofthe above submission, reliance is placed on the decision of this Court inthe case of Government of Andhra Pradesh Vs. Hindustan MachineTools Ltd., (1975) 2 SCC 274 (para 10) and Lily Thomas Vs. Unionof India (2013) 7 SCC 653 (para 21).

A4.10 It is further submitted by Shri Nataraj, learned ASG that theHigh Court has erred in holding that the respondents have “vestedright” and the amendment to Section 153C of the Act, 1961 affects suchvested substantive right of the respondents. That no such substantiverights are vested in the respondents. Once the conditions enumerated inSection 153C are satisfied, no liability is fastened ipso facto. It isBsubmitted that the authorities issued show cause notice and thereafterproceedings were initiated in accordance with law. Therefore, the HighCourt has erred in quashing the proceedings at the initial stage of showcause notice by holding that substantive rights of the respondents areaffected.C

4.11 Making above submissions, it is vehemently submitted thatthe High Court has committed grave error in holding that Section 153Cas amended by the Finance Act, 2015 w.e.f. 01.06.2015, though amachinery provision, will only apply to search proceedings initiated afterthe amendment in Section 153C.D4.12 Making above submissions, it is prayed that the presentappeals be allowed and the impugned common judgment and order passedby the High Court be quashed and set aside.

5. While opposing the present appeals, the counsel appearing onbehalf of the respective assessees have vehemently submitted that theEcontroversy in the present group of appeals is with respect to the pointof applicability of the extant law in search cases, i.e., whether Section153C of the Act, 1961 as amended with effect from 01.06.2015 wouldbe applicable to cases where search is initiated prior to that date.

5.1 It is submitted that the issue has arisen because with effectFfrom 01.06.2015, i.e., after the date of the search, but before the issuanceof Section 153C notice, the law has been amended vide the FinanceAct, 2015 to expand the scope of third parties covered by the search toinclude new set of assessees. It is submitted that on the basis of thisamendment, notices under Section 153C of the Act, 1961 were issued toGassessees, who were not included within the scope of the provision as itstood on the date of the search.

5.2 It is further submitted on behalf of the respective assesseesthat it is the case on behalf of the Department that as Section 153C ofthe Act, 1961 is procedural and machinery provision, the amendment,though made with effect from 01.06.2015, is retrospective and, thus,H

applicable to the cases where search was conducted prior to amendmentbut the notices under Section 153C of the Act, 1961 have been issuedafter the amendment. It is also submitted on behalf of the Departmentthat the amendment does not take away vested rights, and hence can beapplied retrospectively. It is further contended on behalf of the Departmentthat the date of the search is not relevant to Section 153C of the Act,1961 and the amended provision would apply as both the satisfactionnote and assumption of jurisdiction were post 01.06.2015. In relation tothe aforesaid contentions of the Department, it is submitted on behalf ofthe respective assessees that machinery provision that affectssubstantive rights cannot be held to be retrospective. That though Section153C of the Act, 1961 is machinery provision, the amendment cannotbe held to be retrospective.

5.3 It is next submitted that as rightly observed by the High Courtthough the provisions are machinery provisions, the amendment bringsinto its fold persons not otherwise covered and hence affects thesubstantive rights and, therefore, cannot be made applicableretrospectively. In support of their submission that the amendment toSection 153C by Finance Act, 2015 shall not be made applicableretrospectively and with respect to the search carried out prior to01.06.2015, reliance is placed on the decision of this Court in the case ofController of Estate Duty Vs. M.A. Merchant, 1989 Supp (1) SCC499. It is submitted that in the said decision, this Court had refused tointerfere with the vested rights by allowing reopening of an assessmentcompleted prior to the date w.e.f. which the new section in the EstateDuty Act came into force.

5.4 It is contended that in the present case, the amendment toSection 153C by Finance Act, 2015 brings into the fold of Section 153Cof the Act, 1961, assessees, who were not so far covered by it, i.e.,persons to whom books of account/documents pertain or relate to, andnot just persons to whom it belong. That this widening, thus, affectssubstantive rights, as new assessees may now be proceeded againstand hence the decision of this Court in the case of M.A.Merchant(supra) has rightly been applied by the High Court.5.5 It is further contended that it is well settled that even procedurallaws grant substantive rights and amendments affecting such rights havebeen held to be prospective. That reopening has been held to be questionof power and not procedure as observed and held by this Court in the

Acase of State of Tamil Nadu Vs. Star Tobacco Co., (1974) 3 SCC249.

5.6 It is next contended that the amendment to Section 153C ofthe Act, 1961 has added new class of assessees and not merely changedthe procedure for the existing assessees, hence it cannot be givenBretrospective effect. That the High Court has specifically observed andheld that the amendment to Section 153C of the Act, 1961 is not merelya change in procedure provision affecting the assessees already covered.A new class of assessees are sought to be brought under Section 153Cof the Act, 1961, which affects the substantive rights of the assessees.Subsequent to the date of the search, the assessees, who were notCincluded within the ambit of Section 153C of the Act, 1961 as on thedate of the search are now sought to be brought within its fold.

5.7 It is submitted that before 01.06.2015, the Assessing Officercould have only recorded satisfaction as to whether the seized materialbelongs to the other person. That in the present case, since the hardDdisk, which was found from the searched persons, did not belong to therespondents, on the date of the search, therefore, the jurisdiction underSection 153C of the Act did not exist. It is submitted that as rightlyobserved by the High Court that if on the date of the search in 2013, thematerial were forwarded by the Assessing Officer of the searched personEon the basis that it belongs to the respondents - assessees, challengeagainst issue of notice under Section 153C of the Act, 1961 would havebeen successful, as the material does not actually ‘belong’ to therespondent. That moreover, having once formed satisfaction andforwarded the material, there is no question of the Assessing Officer ofthe searched person once again forming satisfaction on the basis ofFthe amended provision. Thus, Section 153C of the Act, 1961 as it stoodthen, did not permit any action against the respondent, as admittedly thehard disk belonged to the searched person. Hence, the Assessing Officercould not have invoked Section 153C of the Act, 1961 at all.

5.8 It is further submitted that the amended Section 153C of theGAct, 1961 deals with both procedural and substantive rights, therefore,the prospective rule of construction shall be applicable. That as observedand held by this Court in the case of Zile Singh (supra), it is cardinalprinciple of construction that every statute is prima facie prospectiveunless it is expressly or by necessary implication made to have aHretrospective operation. The rule in general is applicable where the object

of the statute is to affect vested rights or to impose new burdens or toimpair existing obligations. It is submitted that unless there are words inthe statute, which are sufficient to show the intention of the legislatureto affect existing rights, it is deemed to be prospective only. That thedate of search is the relevant date, which has to be taken intoconsideration for applying the amendment. The same is supported bythe CBDT Circular No. 2/2018 dated 15.02.2018 wherein Section 153Awas amended with effect from 01.04.2017. That Para 80.5 of the Circularclearly states that the amended provisions of Section 153A shall applywhere search under Section 132 of the Act, 1961 is initiated or requisitionunder Section 132A has been made on or after 01.04.2017. It is submittedthat while Section 153A was introduced by Finance Act, 2003, thelegislature considered the dates of search and specified that the provisionis applicable to search actions conducted after 31.05.2003. Therefore,Sections 153A and 153C are to be read together and the relevant dateought to be the date of search as clarified by Finance Act, 2003.5.9 It is further submitted on behalf of the assessees that eventhe satisfaction has not been recorded immediately. That the searchedperson had filed application before the Settlement Commission on30.01.2015 and accepted receipt of money on the basis of hard diskfrom petitioners. The copy of the settlement application is required to begiven to Assessing Officer. Accordingly, Assessing Officer of the searchedperson would have information regarding alleged money payment bypetitioners on 30.01.2015, if not before, whereas, documents weretransferred on 25.04.2017. Hence, the documents were transferred after2 years and 3 months after the knowledge about facts, on the basis ofwhich Section 153C proceedings are initiated. It is submitted that thesame is not permissible considering the decision of this Court in the caseof Calcutta Knitwears, Ludhiana (supra).

5.10 Learned counsel appearing on behalf of the assesses in CivilAppeal Nos. 1019, 997, 1016, 1021 and 1023 of 2022 has in addition tothe above, further submitted that before the High Court, the respondents– original writ petitioners had raised various grounds for holding that thenotices issued under Section 153C were bad and illegal. That, however,the High Court has followed the decision in Special Civil Application No.12825 of 2018 and others and has allowed the writ petitions by decidingonly one question in favour of the petitioners and the remaining issuesare left undecided. It is submitted that, therefore, if this Hon’ble Court is

Ato allow the appeals by the Revenue, the matters may be sent back tothe High Court for deciding the validity of the notices and other issuesthat were originally left undecided.

5.11 Making the above submissions, it is prayed by the learnedcounsel appearing on behalf of the respective original writ petitioners –Bassessees that the present appeals be dismissed.

6. We have heard the learned counsel appearing on behalf of therespective parties at length.

7. The question of law that arises for consideration of this Court

“Whether the amendment brought to Section 153C of the IncomeTax Act, 1961 vide Finance Act, 2015 would be applicable tosearches conducted under Section 132 of the Act, 1961 before01.06.2015, i.e., the date of amendment?”

D8. While considering the aforesaid question and the submissionsmade on behalf of the respective parties, few facts, which arenecessary for determination of the question are required to be referredto, which are as under:-

(i)That search under Section 132 of the Act, 1961 wasconducted at the various premises of one H.N. Safal GroupEon 04.09.2013. When the search came to be conducted,Section 153C as it stood then (pre amendment 2015) wasapplicable.

(ii)Section 153C as it stood then provided that “Notwithstandinganything contained in Sections 139, 147, 148, 149, 151 andF153, where the Assessing Officer is satisfied that any money,bullion, jewellery or other valuable article or thing or booksof account or documents seized or requisitioned “belongsor belong to”a person other than the person referred toin Section 153-A, then, the books of account or documentsGor assets seized or requisitioned shall be handed over to theAssessing Officer having jurisdiction over such other personand that Assessing Officer shall proceed against such otherperson and issue such other person notice and assess orreassess income of such other person in accordance withthe provisions of Section 153A. It also further provided that

in case of such other person, the reference to the date ofinitiation of the search under Section 132 or making ofrequisition under Section 132-A in the second proviso to sub-section (1) of Section 153-A shall be construed as referenceto the date of receiving the books of account or documentsor assets seized or requisitioned by the Assessing Officerhaving jurisdiction over such other person.

(iii)During the course of search, various incriminating material/ documents were found and seized. Upon verification ofsuch seized material, it was noticed that certain documentspertained / related to the respondent herein, who is otherthan the searched person. Accordingly, satisfaction to thatextent was recorded by the Assessing Officer of thesearched person with respect to the respondents – assessees(other than the searched person) on 25.04.2017. That thesaid satisfaction note alongwith the incriminating materialwas forwarded to the Assessing Officer of the non-searchedperson on 25.04.2017. That, thereafter, the AssessingOfficer of the respondents – assessees (non-searchedpersons) after verifying the seized material, found certainincriminating material against them and the cash entries,which were not declared in the original return filed.Accordingly, the Assessing Officer of the respondentsrecorded his independent satisfaction and issued noticeunder Section 153C on 04.05.2018.

(iv)At this stage, it is required to be noted that in the meantime,Section 153C came to be amended by Finance Act, 2015w.e.f. 01.06.2015 and the words “belongs or belong to”came to be substituted by the words “pertains or pertainto”.

(v)Thus, at the time when the satisfaction note came to berecorded by the Assessing Officer of the searched personon 25.04.2017 as well as by the Assessing Officer of therespondents – assessees (non-searched persons) on04.05.2018, Section 153C (as amended by Finance Act,2015 w.e.f. 01.06.2015) became applicable. The noticeunder Section 153C against the non-searched persons onthe basis of the material seized during the search conducted

776SUPREME COURT REPORTS

Aat the various premises of H.N. Safal Group (searchedperson) and the assessment orders were the subject matterof appeal before the High Court.

9. In light of the aforesaid facts, the question of law, which arisesfor consideration of this Court is, “Whether amendment brought to SectionB153C of the Income Tax Act, 1961 vide Finance Act, 2015 would beapplicable to searches conducted under Section 132 of the Act, 1961before 01.06.2015, i.e., the date of amendment”, is required to beconsidered.

10. While considering the aforesaid question, the reason and theCobject and purpose of the amendment to Section 153C introduced videFinance Act, 2015 w.e.f. 01.06.2015 is required to be considered.

10.1 As observed hereinabove, in the pre-amended Section 153C,the words used were “belongs or belong to” person other than thesearched person. In the case of Pepsico India Holdings PrivateDLimited (supra), the Delhi High Court interpreted the expression “belongto” and observed and held that there is difference and distinctionbetween “belong to” and “pertain to”. It was observed and held that onthe basis of the registered sale deed seized from the premises of thesearched person, it cannot be said that it “belongs to” the vendor.Therefore, the High Court view gave very narrow and restrictiveEmeaning to the expression / word “belongs to” and held that theingredients of Section 153C have not been satisfied. To remove the basisof the observation made by the Delhi High Court in the case of PepsicoIndia Holdings Private Limited (supra), now, Section 153C came tobe amended w.e.f. 01.06.2015 by substituting the words “belongs orFbelong to” with the words “pertains or pertain to” insofar as the booksof account and documents are concerned. Thus, having found that theobservation made by the Delhi High Court in the case of Pepsico IndiaHoldings Private Limited (supra) led to situation where, thoughincriminating material pertaining to third party was found during the searchGproceedings under Section 132, the Revenue could not proceed againstthe third parties, it was observed that the said observation made by theDelhi High Court in the aforesaid decision was coming in the way ofsuppressing the very mischief which the legislature intended to suppress,which necessitated the amendment in Section 153C. Thus, it is case ofsubstitution of the words by way of amendment.H

10.2 At this stage, the first proviso to Section 153C of the Act,1961 is required to be referred to. The first proviso to Section 153C ofthe Act, 1961 came to be inserted vide Finance Act, 2005 with retrospectiveeffect from 01.06.2003, which provides that the reference to the date ofinitiation of the search under Section 132 or making of requisition underSection 132-A in the second proviso to sub-section (1) of Section 153-Ashall be construed as reference to the date of receiving the books ofaccount or documents or assets seized or requisitioned by the AssessingOfficer having jurisdiction over such other person. Proviso to Section153C as inserted vide Finance Act, 2005 reads as under:-

“Provided that in case of such other person, the reference to thedate of initiation of the search under Section 132 or making ofrequisition under Section 132-A in the second proviso to sub-section(1) of Section 153-A shall be construed as reference to the dateof receiving the books of account or documents or assets seizedor requisitioned by the Assessing Officer having jurisdiction oversuch other person.”

10.3 Thus, as per the proviso to Section 153C as inserted videFinance Act, 2005, and the effect of the said proviso is that it creates adeeming fiction wherein any reference made to the date of initiation ofsearch is deemed to be reference made to the date when the AssessingOfficer of the non-searched person receives the books of account ordocuments or assets seized etc. Thus, in the present case, even thoughthe search under Section 132 was initiated prior to the amendment toSection 153C w.e.f. 01.06.2015, the books of account or documents orassets were seized by the Assessing Officer of the non-searched persononly on 25.04.2017, which is subsequent to the amendment, therefore,when the notice under Section 153C was issued on 04.05.2018, theprovision of the law existing as on that date, i.e., the amended Section153C shall be applicable.10.4 As observed hereinabove, Section 153C has been amendedby way of substitution whereby the words “belongs or belong to” havebeen substituted by the words “pertains or pertain to”. As observed andheld by this Court in the case of Shamrao V. Parulekar (supra) thatamendment by substitution has the effect of wiping the earlier provisionfrom the statute book and replacing it with the amended provision as ifthe unamended provision never existed. In the subsequent decision in

[2023] 2 S.C.R.

Athe case of Zile Singh (supra), it is observed in paras 24 and 25 asunder:-

“24. The substitution of one text for the other pre-existing text isone of the known and well-recognised practices employed inlegislative drafting. “Substitution” has to be distinguished fromB“supersession” or mere repeal of an existing provision.

25. Substitution of provision results in repeal of the earlierprovision and its replacement by the new provision (see Principlesof Statutory Interpretation, ibid., p. 565). If any authority is neededin support of the proposition, it is to be found in West U.P. SugarCMills Assn. v. State of U.P. [(2002) 2 SCC 645], State ofRajasthan v. Mangilal Pindwal [(1996) 5 SCC 60] , KoteswarVittal Kamath v. K. Rangappa Baliga and Co. [(1969) 1 SCC 255]and A.L.V.R.S.T. Veerappa Chettiar v. S. Michael [AIR 1963 SC933] . In West U.P. Sugar Mills Assn. case [(2002) 2 SCC 645] athree-Judge Bench of this Court held that the State GovernmentDby substituting the new rule in place of the old one never intendedto keep alive the old rule. Having regard to the totality of thecircumstances centring around the issue the Court held that thesubstitution had the effect of just deleting the old rule and makingthe new rule operative. In Mangilal Pindwal case [(1996) 5 SCCE60] this Court upheld the legislative practice of an amendment bysubstitution being incorporated in the text of statute which hadceased to exist and held that the substitution would have the effectof amending the operation of law during the period in which itwas in force. In Koteswar case [(1969) 1 SCC 255] three-JudgeBench of this Court emphasised the distinction betweenF“supersession” of rule and “substitution” of rule and held thatthe process of substitution consists of two steps: first, the old ruleis made to cease to exist and, next, the new rule is brought intoexistence in its place.”

10.5 In the said decision, in paragraphs 14, 15, 18 and 20 withGrespect to the presumption against retrospective operation, it is observedand held as under:-

“14. The presumption against retrospective operation is notapplicable to declaratory statutes…. In determining, therefore,the nature of the Act, regard must be had to the substance ratherHthan to the form. If new Act is “to explain” an earlier Act, it

would be without object unless construed retrospectively. Anexplanatory Act is generally passed to supply an obvious omissionor to clear up doubts as to the meaning of the previous Act. It iswell settled that if statute is curative or merely declaratory ofthe previous law retrospective operation is generally intended….An amending Act may be purely declaratory to clear meaningof provision of the principal Act which was already implicit. Aclarificatory amendment of this nature will have retrospective effect(ibid., pp. 468-69).15. Though retrospectivity is not to be presumed and rather thereis presumption against retrospectivity, according to Craies (StatuteLaw, 7th Edn.), it is open for the legislature to enact laws havingretrospective operation. This can be achieved by express enactmentor by necessary implication from the language employed. If it is anecessary implication from the language employed that thelegislature intended particular section to have retrospectiveoperation, the courts will give it such an operation. In the absenceof retrospective operation having been expressly given, the courtsmay be called upon to construe the provisions and answer thequestion whether the legislature had sufficiently expressed thatintention giving the statute retrospectivity. Four factors aresuggested as relevant: (i) general scope and purview of the statute;(ii) the remedy sought to be applied; (iii) the former state of thelaw; and (iv) what it was the legislature contemplated. (p. 388)The rule against retrospectivity does not extend to protect fromthe effect of repeal, privilege which did not amount to accruedright. (p. 392)

XXXXXXXX

18. In recent decision of this Court in National Agricultural Coop.Marketing Federation of India Ltd. v. Union of India [(2003) 5SCC 23] it has been held

that there is no fixed formula for the expression of legislativeintent to give retrospectivity to an enactment. Every legislationwhether prospective or retrospective has to be subjected tothe question of legislative competence. The retrospectivity isliable to be decided on few touchstones such as: (i) the wordsused must expressly provide or clearly imply retrospective

operation; (ii) the retrospectivity must be reasonable and notexcessive or harsh, otherwise it runs the risk of being struckdown as unconstitutional; (iii) where the legislation is introducedto overcome judicial decision, the power cannot be used tosubvert the decision without removing the statutory basis ofthe decision. There is no fixed formula for the expression oflegislative intent to give retrospectivity to an enactment. Avalidating clause coupled with substantive statutory changeis only one of the methods to leave actions unsustainable underthe unamended statute, undisturbed. Consequently, the absenceof validating clause would not by itself affect the retrospectiveoperation of the statutory provision, if such retrospectivity isotherwise apparent.

XXXXXXXX

20. In Bengal Immunity Co. Ltd. v. State of Bihar [(1955) 2 SCR603 : AIR 1955 SC 661] , Heydon case [(1584) 3 Co Rep 7a : 76ER 637] was cited with approval. Their Lordships have said: (SCRpp. 632-33)

“It is sound rule of construction of statute firmlyestablished in England as far back as 1584 when Heydoncase [(1584) 3 Co Rep 7a : 76 ER 637] was decided that—

‘… for the sure and true interpretation of all statutes ingeneral (be they penal or beneficial, restrictive or enlarging ofthe common law) four things are to be discerned andconsidered—

1st. What was the common law before the making of theAct.

2nd. What was the mischief and defect for which thecommon law did not provide.

3rd. What remedy Parliament hath resolved and appointedto cure the disease of the Commonwealth, and

4th. The true reason of the remedy; and then the office ofall the judges is always to make such construction as shallsuppress the mischief, and advance the remedy, and to suppresssubtle inventions and evasions for continuance of the mischief,and pro privato commodo, and to add force and life to the cure

and remedy, according to the true intent of the makers of theAct, pro bono publico.’ “

10.6 It is the case on behalf of the Revenue that Section 153C isa machinery provision, which has been inserted with the purpose ofcarrying out the assessment of persons other than the searched personunder Section 132 of the Act, 1961. Even, in the impugned judgment andorder, the High Court has, at paragraph 19.4 recorded that Section 153Cof the Act is machinery provision. As per the settled position of law,the Courts, while interpreting machinery provisions of taxing statute,must give effect to its manifest purpose by construing it in such mannerso as to effectuate the object and purpose of the statute. In the case ofCalcutta Knitwears, Ludhiana (supra), while interpreting Section158BD (which has been replaced by Section 153C), this Court hasobserved in paras 18, 32 and 34 as under:-

“18. Sections 158-BC and 158-BD of the Act are machineryprovisions. Section 158-BC of the Act provides the procedure forblock assessment and Section 158-BD of the Act provides forassessments in the case of an undisclosed income of any otherperson. The said sections are relevant for the purpose of thiscase and, therefore, they are extracted. They read as under:

“158-BC.Procedure for block assessment.—Whereany search has been conducted under Section 132 or books ofaccount, other documents or assets are requisitioned underSection 132-A, in the case of any person, then—

(a) the assessing officer shall—

(i) in respect of search initiated or books of accounts orother documents or any assets requisitioned after the 30th dayof June, 1995 but before the 1st day of January, 1997 serve anotice to such person requiring him to furnish within such timenot being less than fifteen days;

(ii) in respect of search initiated or books of account orother documents or any assets requisitioned on or after the 1stday of January, 1997 serve notice to such person requiringhim to furnish within such time not being less than fifteen daysbut not more than forty-five days,

as may be specified in the notice return in the prescribedform and verified in the same manner as return under clause

(i) of sub-section (1) of Section 142, setting forth his total incomeincluding the undisclosed income for the block period:

Provided that no notice under Section 148 is required to beissued for the purpose of proceeding under this Chapter:

Provided further that person who has furnished returnunder this clause shall not be entitled to file revised return;

(b) the assessing officer shall proceed to determine theundisclosed income of the block period in the manner laid downin Section 158-BB and the provisions of Section 142, sub-sections (2) and (3) of Section 143, Section 144 and Section145 shall, so far as may be, apply;

(c) the assessing officer, on determination of the undisclosedincome of the block period in accordance with this Chapter,shall pass an order of assessment and determine the tax payableby him on the basis of such assessment;

(d) the assets seized under Section 132 or requisitionedunder Section 132-A shall be dealt with in accordance with theprovisions of Section 132-B.

—158-BD.Undisclosed income of any other person.Where the assessing officer is satisfied that any undisclosedincome belongs to any person other than the person with respectto whom search was made under Section 132 or whose booksof account or other documents or any assets were requisitionedunder Section 132-A, then, the books of account, otherdocuments or assets seized or requisitioned shall be handedover to the assessing officer having jurisdiction over such otherperson and that assessing officer shall proceed under Section158-BC against such other person and the provisions of thisChapter shall apply accordingly.”

XXXXXXXX

32. It is also trite that while interpreting machinery provision,the courts would interpret provision in such way that it wouldgive meaning to the charging provisions and that the machineryprovisions are liberally construed by the courts. In Mahim Patram

(P) Ltd. v. Union of India [(2007) 3 SCC 668] this Court hasobserved that: (SCC p. 680, paras 25-26)

“25. taxing statute indisputably is to be strictly construed.(See J. Srinivasa Rao v. State of A.P. [(2006) 12 SCC 607]) Itis, however, also well settled that the machinery provisions forcalculating the tax or the procedure for its calculation are to beconstrued by ordinary rule of construction. Whereas liabilityhas been imposed on dealer by the charging section, it is wellsettled that the court would construe the statute in such amanner so as to make the machinery workable.

26. In J. Srinivasa Rao [(2006) 12 SCC 607] this Courtnoticed the decisions of this Court in Gursahai Saigal v. CIT[(1963) 48 ITR 1 (SC)] and Ispat Industries Ltd. v. Commr.of Customs [(2006) 12 SCC 583].

‘17. In Gursahai Saigal [(1963) 48 ITR 1 (SC)] the questionwhich fell for consideration before this Court wasconstruction of the machinery provisions vis-à-vis thecharging provisions. The Schedule appended to the MotorVehicles Act is not machinery provision. It is part of thecharging provision.

18. By giving plain meaning to the Schedule appended tothe Act, the machinery provision does not becomeunworkable. It did not prevent the clear intention of thelegislature from being defeated. It can be given anappropriate meaning.’”

XXXXXXXX

34. It is the duty of the court while interpreting the machineryprovisions of taxing statute to give effect to its manifest purpose.Wherever the intention to impose liability is clear, the courts oughtnot be hesitant in espousing commonsense interpretation to themachinery provisions so that the charge does not fail. Themachinery provisions must, no doubt, be so construed as wouldeffectuate the object and purpose of the statute and not defeatthe same (Whitney v. IRC [1926 AC 37 (HL)] , CIT v. MahaliramRamjidas [(1939-40) 67 IA 239 : (1940) 52 LW 234 : (1940) 8ITR 442] , Indian United Mills Ltd. v. Commr. of Excess ProfitsTax [(1955) 27 ITR 20 (SC)] and Gursahai Saigal v. CIT [(1963)

A48 ITR 1 (SC)]; CWT v. Sharvan Kumar Swarup & Sons [(1994)6 SCC 623]; CIT v. National Taj Traders [(1980) 1 SCC 370];Associated Cement Co. Ltd. v. CTO [(1981) 4 SCC 578]). FrancisBennion in Bennion on Statutory Interpretation, 5th Edn., LexisNexis in support of the aforesaid proposition put forth as anillustration that since charge made by the legislator in proceduralBprovisions is excepted to be for the general benefit of litigants andothers, it is presumed that it applies to pending as well as futureproceedings.”10.7 In the case of Girdhari Lal & Sons (supra), it is observedand held by this Court that once the primary intention is ascertained andCthe object and purpose of the legislation is known, it then becomes theduty of the Court to give the statute purposeful or functionalinterpretation. It is further observed that the primary and foremost taskof court in interpreting statute is to ascertain the intention of thelegislature, actual or imputed. Having ascertained the intention, the CourtDmust then strive to so interpret the statute as to promote or advance theobject and purpose of the enactment. It is further observed that theascertainment of the legislative intent is basic rule of statutoryconstruction and that rule of construction should be preferred whichadvances the purpose and object of legislation and that though theconstruction, according to the plain language, should ordinarily be adopted,Esuch construction should not be adopted where it leads to anomalies,injustices or absurdities. On interpretation of the statute, it is observed inparas 17 to 21 in the case of Hindustan Bulk Carriers (supra) asunder:-

“17. If the choice is between two interpretations, the narrowerFof which would fail to achieve the manifest purpose of thelegislation, we should avoid construction which would reducethe legislation to futility, and should rather accept the bolderconstruction, based on the view that Parliament would legislateonly for the purpose of bringing about an effective result.(See Nokes v. Doncaster Amalgamated Collieries [(1940) 3 AllGER 549 : 1940 AC 1014 : 109 LJKB 865 : 163 LT 343 (HL)]referred to in Pye v. Minister for Lands for NSW [(1954) 3 AllER 514 : (1954) 1 WLR 1410 (PC)] .) The principles indicated inthe said cases were reiterated by this Court in Mohan KumarSinghania v. Union of India [1992 Supp (1) SCC 594 : AIR 1992HSC 1].

18. The statute must be read as whole and one provision ofthe Act should be construed with reference to other provisions inthe same Act so as to make consistent enactment of the wholestatute.

19. The court must ascertain the intention of the legislature bydirecting its attention not merely to the clauses to be construedbut to the entire statute; it must compare the clause with otherparts of the law and the setting in which the clause to be interpretedoccurs. (See R.S. Raghunath v. State of Karnataka [(1992) 1SCC 335 : AIR 1992 SC 81].) Such construction has the meritof avoiding any inconsistency or repugnancy either within sectionor between two different sections or provisions of the same statute.It is the duty of the court to avoid head-on clash between twosections of the same Act. (See Sultana Begum v. Prem ChandJain [(1997) 1 SCC 373 : AIR 1997 SC 1006] .)

20. Whenever it is possible to do so, it must be done to construethe provisions which appear to conflict so that they harmonise. Itshould not be lightly assumed that Parliament had given with onehand what it took away with the other.

21. The provisions of one section of the statute cannot be usedto defeat those of another unless it is impossible to effectreconciliation between them. Thus construction that reducesone of the provisions to “useless lumber” or “dead letter” is nota harmonised construction. To harmonise is not to destroy.”

10.8 Insofar as the submission on behalf of the respectiverespondents – assessees that by way of amendment to Section 153C byFinance Act, 2015, it brings into its fold, the assessees – persons, whowere not so far covered by it and, therefore, it affects the substantiverights of the assessees and, hence, it should not be made applicableretrospectively, is concerned, the submission seems to be attractive butdeserves to be rejected. As observed hereinabove, even the unamendedSection 153C pertains to the assessment of income of any other person.The object and purpose of Section 153C is to address the persons otherthan 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 seizedor requisitioned “belongs or belong to” person other than the searched

Aperson. However, it appears that as in the case of Pepsico IndiaHoldings Private Limited (supra), the Delhi High Court interpretedthe words “belong to” restrictively and/or narrowly and which led to asituation where, though incriminating material pertaining to third party/ person was found during search proceedings under Section 132, theRevenue could not proceed against such third party, which necessitatedBthe legislature / Parliament to clarify by substituting the words “belongsor belong to” to the words “pertains or pertain to” and to remedy themischief that was noted pursuant to the judgment of the Delhi HighCourt. Therefore, if the submission on behalf of the respective respondents– assessees that despite the fact that the incriminating materials haveCbeen found in the form of books of account or documents or assetsrelating to them from the premises of the searched person, still they maynot be subjected to the proceedings under Section 153C solely on theground that the search was conducted prior to the amendment isaccepted, in that case, the very object and purpose of the amendment toSection 153C, which is by way of substitution of the words “belongs orDbelong to” to the words “pertains or pertain to” shall be frustrated. Asobserved hereinabove, any interpretation, which may frustrate the veryobject and purpose of the Act / Statute shall be avoided by the Court. Ifthe interpretation as canvassed on behalf of the respective respondentsis accepted, in that case, even the object and purpose of Section 153CEnamely, for assessment of income of any other person (other than thesearched person) shall be frustrated.

11. In view of the above and for the reasons stated above, theimpugned common judgment and order passed by the High Court is heldto be unsustainable and the question, i.e., “Whether the amendmentFbrought to Section 153C of the Income Tax Act, 1961 vide Finance Act,2015 would be applicable to searches conducted under Section 132 ofthe Act, 1961 before 01.06.2015, i.e., the date of amendment?”, isanswered in favour of the Revenue and against the assessees and isanswered accordingly. Therefore, it is observed and held that theamendment brought to Section 153C of the Act, 1961 vide Finance Act,G2015 shall be applicable to searches conducted under Section 132 of theAct, 1961 before 01.06.2015, i.e., the date of the amendment. Theimpugned common judgment and order passed by the High Court,therefore, deserves to be quashed and set aside and is accordinglyquashed and set aside. However, as before the High Court respectiveHassessment orders were challenged mainly on the aforesaid issue, which

is now answered in favour of the Revenue as above, we reserve theliberty in favour of the respective assessees to challenge the assessmentorders before CIT (A) on any other grounds which may be availableand it is observed that if said appeals are preferred within four weeksfrom today, the same be considered in accordance with law and on theirown merits, on any other grounds.

Present appeals are accordingly allowed in terms of the above.However, in the facts and circumstances of the case, there shall be noorder as to costs.

Nidhi Jain(Assisted by : Abhishek Pratap Singh and Tamana, LCRAs)

Appeals allowed.