Abhisar Estates P. Ltd. vs Deputy Commissioner of Income Tax

PER VIKAS AWASTHY, JM:

This appeal by the assessee is directed against the order of Principal Commissioner of Income Tax (Appeals)-25, New Delhi (hereinafter referred to as 'the PCIT(A)') dated 29.09.2025, for AY 2017-18.

Shri G.S. Alag, appearing on behalf of the assessee assailing validity of the notice issued u/s.153C of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') dated 27.05.2022 and the consequent assessment order dated 05.03.2024 passed u/a.153C of the Act submits that, in light of the amendment by way of insertion of sub-section (3) to section 153C of the Act, the assessment in the case of the assessee could not have been made under the provisions of section 153C of the Act after 01.04.2021. Narrating facts of the case, he submits that a search and seizure action u/s.132 of the Act was carried out in the case of Alankit Group on 18.10.2019. After receipt of the seized and alleged incriminating material, the Assessing Officer (AO) of the assessee recorded satisfaction on 10.05.2022 (at pages 2 to 4 of the paper book). Thereafter, notice u/s.153C of the Act was issued to the assessee on 27.05.2022. The ld. AR submits that, as per the first proviso to section 153C(1) of the Act, the date on which the books of account or documents or assets seized are received by the AO having jurisdiction over the assessee (other person) that date shall be construed as the date of search u/s.132 of the Act in the case of other person. Where the date of receipt of books of account or documents, etc. by the AO of the other person is not available, the date on which satisfaction is recorded by the AO of the other person shall be treated as the date of search. In support of his submissions, the ld. AR placed reliance on the decision of Tribunal in the case of Geetanjali Bhayana vs. DCIT (183 taxmann.com 95-Delhi-Trib.). He further submitted that where the deemed date of search is on or after 01.04.2021, assessment u/s.153C of the Act cannot be initiated in view of the newly inserted sub-section (3) to section 153C of the Act w.e.f. 01.04.2021. In support of his arguments, he again placed reliance on the decision of Tribunal in the case of Geetanjali Bhayana vs. DCIT (supra).

Per contra, Ms. Richa Gaharwar, representing the Department strongly supported the assessment order and the order of the CIT(A) and submitted that the assessment in the case of assessee u/s.153C of the Act was made consequent to incriminating documents found during the course of search and seizure action in the case of Alankit Group. From the search material, it was evident that the assessee had made cash payment of Rs.4,91,830/- for which no cogent explanation was furnished. Accordingly, the AO made an addition of Rs.4,91,000/- under section 69A of the Act.

Both sides heard, orders of the authorities below examined. The short issue for consideration in the present appeal is whether the notice issued u/s.153C of the Act and the consequent assessment made thereunder are valid in the facts and circumstances of the case. The relevant dates, i.e., the date of search in the case of Alankit Group (18.10.2019); the date of satisfaction note (10.05.2022); and the date of notice u/s. 153C of the Act (27.05.2022), are not in dispute. The first proviso to section 153C(1) of the Act mandates that, in the case of “other person,” the the date of search shall be the date of receiving books of account or documents or assets seized or requisitioned by the AO having jurisdiction over such other person. In the present case, the date of receipt of books or seized material by the AO of the assessee does not emanate from the record. Therefore, the date of recording satisfaction shall be deemed to be the date of receipt of books or seized material by the AO of the assessee [Re: Ojjas Healthcare Pvt. Ltd., 161 taxmann.com 160 (Delhi)]. Thus, in the present case, the relevant date would be 10.05.2022.

Now, as the date of search is after 01.04.2021, the provisions of section 153C of the Act would not apply in light of sub section (3) to section 153C of the Act inserted by the Finance Act, 2021. For the sake of ready reference, the newly inserted sub section (3) by the Finance Act, 2021 is reproduced herein below: -

In light of sub section (3) to section 153C of the Act, no assessment can be made u/s.153C of the Act after 01.04.2021. The Hon’ble Madras High Court in the case of Hargovind vs. ACIT, 180 taxmann.com 197, after placing reliance on the decision rendered in the case of CIT vs. Jagdish Singh, 155 taxmann.com 155 (SC) held as under:

Similar view has been taken by the Coordinate Bench of the Tribunal in the case of Geetanjali Bhayana (supra) following the decision in the case of Hargovind vs. ACIT (Supra).

Thus, in facts of the case and the decisions discussed, we find merit in the jurisdictional issue raised by the assessee. Thus, we hold that the notice issued u/s.153C of the Act dated 28.05.2022 and the subsequent assessment proceeding arising from the said notice are bad in law, hence, are quashed.

In the result, appeal of the assessee is allowed.