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Judgment
PER S. RIFAUR RAHMAN, AM :
These appeals are filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-25, New Delhi [“Ld. CIT(A)”, for short] dated 20.01.2026 for the Assessment Years 2017-18 to 2020-21.
Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take up the assessee’s appeal being ITA No.1992/Del/2026 for AY 2017-18 as lead case to adjudicate the issues under consideration.
At the time of hearing, the ld. AR of the assessee pressed the legal issue vide ground no.1 of grounds of appeal that "That the notice issued and the assessment order passed under section 153C of the Income Tax Act, 1961 (‘the Act’) by the Assessing Officer (‘Assessing Officer') are fundamentally flawed, being without jurisdiction, barred by limitation, and passed in violation of the statutory framework governing such proceedings, thereby rendering them legally unsustainable.”
With regard to above ground, ld. AR of the assessee submitted that AO has recorded the reasons to initiate proceedings for issue of notice u/s 153C of the Income-tax Act, 1961 (for short ‘the Act’) on 12.05.2023. He submitted that no doubt, the original search was conducted on the Alankrit Group on 18.10.2019, however, the AO of the searched person has recorded the satisfaction on 12.05.2023. For the sake of brevity, the satisfaction note is reproduced below :-
He submitted that after recording the above satisfaction and on receipt of relevant material from the AO of the searched person, the proceedings were initiated by the AO by issue of notice u/s 153C of the Act and completed the assessment u/s 153C of the Act. He submitted that as per the amended provisions and in specific, he brought to our notice section 153C (3) of the Act which is squarely applicable in this case and he submitted that the AO should have initiated proceedings u/s 148 and not u/s 153C of the Act. The facts are exactly similar to the appeals filed by the assessee for AYs 2018-19 to 2020-21 as well and he submitted that this issue is squarely covered in favour of the assessee.
On the other hand, ld DR of the Revenue relied on the orders of the authorities below.
Considered the rival submissions and material available on record. We observe that the assessment year 2017-18 under consideration clearly falls outside the scope of application of section 153C of the Act, for the reason that the date of search for the unsearched parties are the date on which the documents were handed over to the Assessing Officer of such other person or from the date on which the satisfaction was recorded by the Assessing Officer of the other person. In the given case, we noticed that the original search was conducted in Alankrit Group on 18.10.2019. The proceedings were initiated based on the material found in the above search in the case of the assessee recording the satisfaction only on 12.05.2023. Since the satisfaction was recorded subsequently, as held in the case of Hon’ble Delhi High Court in the case of PCIT vs. Ojjus Medicare (P.) Ltd. (2024) 161 taxmann.com 160 (Delhi) that the searched AY for the unsearched person would be the date of handing over of the searched material for recording of satisfaction, that being the case, the year of search in the present case of the assessee would be AY 2023-24 of amended search proceedings would apply. The facts in the present case is exactly similar to the facts in the case of coordinate Bench in Lekh Raj vs. DCIT (2026) 187 taxmann.om 1104 (Delhi-Trib.) and the coordinate Bench held as under :-
“7.We have heard submissions made by rival sides and have examined the orders of authorities below. We have also considered the decision on which ld. Counsel for the assessee has vehemently placed reliance to buttress her arguments. The assessee in appeal has assailed validity of the assessment order passed u/s 153C r.w.s. 143(3) of the Act. It is an undisputed fact that addition has been made in the hands of the assessee on protective basis consequent to search in the case of Navin Mahipal Group on 16.09.2019. The satisfaction note in case of the assessee was drawn by the AO on 28.09.2021. As per the first proviso to section 153C(1), the date of search in the case of person other than the searched person shall be the date on which books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person are received by the AO of other person. Thus, in the case of a person other than the searched person, the relevant date would be the date on which relevant documents or seized material is received by the AO of the person other than the searched person. The CIT(A) in Para 14 of the impugned order has recorded that:
“it does not emanate from record as to when the seized material was handed over to AO, it is seen that the case of the appellant was centralised u/s 127 of the Act from Faridabad to New Delhi on 21.01.2021. Therefore, the date 21.01.2021 may be taken as the date on which the material was handed over to the AO, that is to say, that the material was handed over to the AO in F.Y. 2020-21.” We are of the considered view that in absence of specific date of handing over the seized material to AO of the assessee, the date of issue of order u/s 127 of the Act has been wrongly assumed by the CIT(A) as the date on which seized material was received by the AO of assessee. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Ojjus Medicare(P.) Ltd (supra) has held that where the date of handing over of documents is not available, date of issuance of satisfaction note by the Assessing Officer u/s 153C of the Act would be pertinent for the purpose of first proviso to section 153C of the Act. In the present case, the AO had recorded satisfaction on 28.09.2021. Since, the date of handing over of seized material is not emanating from the records, the date of recording of satisfaction i.e., 28.09.2021 shall be considered as the date of receiving seized material by the AO of the assessee.
8.Section 153C was amended by the Finance Act, 2021 with effect from 01.04.2021 whereby sub-section(3) was inserted. The relevant subsection is reproduced hereinbelow:
“(3)Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.” By virtue of above amendment to section 153C, no assessment u/s 153C can be made in the case of other person under section 153C of the Act if the date of search falls beyond 01.04.2021. As a corollary, any notice issued for making assessment u/s 153C of the Act in the case of a non-searched person after 01.04.2021 would be non est.
9.Thus, applying the amended provisions of section 153C of the Act and the law explained by the Hon’ble Jurisdictional High Court in the case of Ojjus Medicare(P.) Ltd. (supra), to facts of the instant case, we find that the notice u/s 153C of the Act issued by the AO to assessee and thereafter, assessment order passed u/s 153C is unsustainable and is liable to be quashed on the ground of jurisdiction. We hold accordingly.
10.In the result, impugned order is set-aside and appeal of the assessee is allowed.”
Similarly in ITA No.111/Del/2026 for AY 2017-17 in the case of M/s. Shivdham Buildtech Pvt. Ltd., the coordinate Bench, wherein the Accountant Member is also the party to it, had held as under :-]
“19.Considered the rival submissions and material placed on record. The assessee in appeal has assailed validity of the assessment order passed u/s 153C r.w.s. 143(3) of the Act. It is an undisputed fact that addition has been made in the hands of the assessee on protective basis consequent to search in the case of Alankit Group on 18.10.2019. The satisfaction note in case of the assessee was drawn by the AO on 11.10.2022. As per the first proviso to section 153C(1), the date of search in the case of person other than the searched person shall be the date on which books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person are received by the AO of other person. Thus, in the case of a person other than the searched person, the relevant date would be the date on which relevant documents or seized material is received by the AO of the person other than the searched person.
20.We are of the considered view that in absence of specific date of handing over the seized material to AO of the assessee, the date of issue of order u/s 127 of the Act has been wrongly assumed by the CIT(A) as the date on which seized material was received by the AO of assessee. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Ojjus Medicare (P.) Ltd (supra) has held that where the date of handing over of documents is not available, date of issuance of satisfaction note by the Assessing Officer u/s 153C of the Act would be pertinent for the purpose of first proviso to section 153C of the Act. In the present case, the AO had recorded satisfaction on 11.10.2022. Since, the date of handing over of seized material is not emanating from the records, the date of recording of satisfaction i.e., 11.10.2022 shall be considered as the date of receiving seized material by the AO of the assessee.
21.Section 153C was amended by the Finance Act, 2021 with effect from 01.04.2021 whereby sub-section(3) was inserted. The relevant sub-section is reproduced hereinbelow:
“(3)Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1 day of April, 2021.”
22.By virtue of above amendment to section 153C, no assessment u/s 153C can be made in the case of other person under section 153C of the Act if the date of search falls beyond 01.04.2021. As a corollary, any notice issued for making assessment u/s 153C of the Act in the case of a non-searched person after 01.04.2021 would be non-est.
23.Thus, applying the amended provisions of section 153C of the Act and the law explained by the Hon’ble Jurisdictional High Court in the case of Ojjus Medicare (P.) Ltd. (supra), to the facts of the instant case, we find that the notice u/s 153C of the Act issued by the AO to assessee and thereafter, assessment order passed u/s 153C is unsustainable and is liable to be quashed on the ground of jurisdiction. In this regard, we also find force from the decisions of coordinate Benches in the case of Geetanjali Bhayana (supra) and Lekh Raj (supra). We hold accordingly.”
Respectfully following the aforesaid decision, we are of the opinion that the reassessment proceeding has to be adopted under substituted provisions i.e. u/s 147 r.w.s. 148 and the relevant provisions of section 153C(3) of the Act apply in the present case. Therefore, we are inclined to allow Ground No.1 raised by the assessee.
The other grounds raised by the assessee are not adjudicated at this stage and the same are kept open.
According, the assessee’s appeal being ITA No.1992/Del/2026 for AY 2017-18 is allowed.
Since the facts in AYs 2018-19 to 2020-21 are exactly similar to Assessment Year 2017-18, our above findings in AY 2017-18 are applicable mutatis mutandis in Assessment Years 2018-19 to 2020-21. Accordingly, the appeals filed by the assessee for AYs 2018-19 to 2020-21 are allowed.
In the result, all the appeals filed by the assessee are allowed.