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Judgment
PER MANISH AGARWAL, AM:
Both theses appeals are filed by assessee against two separate orders, both dated 28.03.2025 passed by Ld. Commissioner of Income Tax (A)-24, New Delhi [“Ld. CIT(A)”] u/s 250 of the Income Tax Act, 1961 [“the Act”] arising out of assessment orders both dated 31.03.2023 passed u/s 153C r.w.s. 144 of the Act pertaining to Assessment Year 2015-16 and 2016-17 respectively.
Brief facts of the case are that a search and seizure operation was carried out at various premises of M/s Dengen Products (India) LLP on 08.12.2018 and certain spiral bound diaries were found and seized and statements of various persons were recorded. It was found that some incriminating material found and seized contained some entries related to the assessee thus the AO of the searched person has recorded his satisfactions and handed over the relevant material/documents alongwith the satisfaction note to the AO of the assessee on 02.11.2022. Thereafter the AO of the assessee recorded his satisfaction note on 14.11.2022 and initiated the proceedings u/s 153C of the Act for AYrs 2010-11 to AY 2020-21 and, notice u/s 153C was issued on 14.11.2022 for AY 2015-16 i.e. the year before us. In compliance to the notice issued u/s 153C, assessee filed return on 18.01.2023 declaring total income of Rs.8,29,500/- i.e. the same income as was declared in the return filed u/s 139(1) of the Act. Thereafter, notice u/s 143(2) followed by statutory notices u/s 142(1) were issued alongwith detailed questionnaire from time to time to the assessee. As the assessee has failed to file any submission, the AO assessed the income of the assessee at 48,56,800/- vide assessment order dated 31.03.2023 passed u/s 153C r.w.s. 144 of the Act by making total additions of Rs. 40,27,300/-.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 28.03.2025, dismissed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking various grounds of appeal as stated in appeal memo.
In revised Ground of appeal No. 4, the assessee has challenged the legality of the order passed /s 153C of the Act being barred by imitations and also is invalid order.
Before us, Ld.AR for the assessee submits that proceedings u/s 153C of the Act were initiated in the case of the assessee on the basis of the documents found and seized during the course of search on third person and such material was handed over to the AO of the assessee on 02.11.2022 through email which fact is evident from the letter written by the AO of the assessee to the AO of the person searched requesting for the complete records, placed at page 4 of supplementary paper book. The AO of the Assessee thereafter recorded his satisfaction on 14.11.2022 and issued the notice u/s 153C of the Act for AYrs 2013-14 to 2019-20. Ld.AR submits as per the judgement of Hon’ble Jurisdictional High Court in the case of PCIT Vs. Ojjus Medicare Pvt. Ltd. reported in (2024) 465 ITR 101(Delhi), the date of search should be taken the date when the AO of the person searched handed over the material to the AO of the assessee which in the present case is 02.11.2022 relevant to AY 2023-24. As per the Finance Act, 2021, amendment was made w.e.f. 01.04.2021, according to which no proceedings could be initiated u/s 153C of the Act for the search conducted u/s 132 of the Act on or after 01.04.2021 and thus provisions of section 153C of the Act could not be applied and as per the ld. AR proceedings u/s 148 of the Act should have been initiated. For this reliance is placed on the judgement of hon’ble Madras High court in the case of Harigovind v. ACIT reported in [2025] 180 taxmann.com 197 (Madras). He thus, submits that the assessment order passed u/s 153C of the Act is invalid order.
Ld. AR further submits that from the perusal of the satisfaction note recorded by the AO of the assessee available at pages 17-20 of the paper book, it could be observed that no satisfaction was recorded that the said documents pertained to assessee and the entries contained therein “have a bearing on the determination of total income of assessee” as provided in section 153C of the Act. For this reliance is placed on the judgement of hon’ble jurisdictional High court in the case of Saksham Commodities Ltd Vs. ITO reported in 464 ITR 1(Del.).
In the last, Ld. AR stated that as submitted above, seized material was handed over to the AO of the assessee by the AO of person searched on 02.11.2022 which falls in AY 2023-24 therefore, Six (06) preceding AYs for which the proceedings u/s 153C could be initiated were from AY 2017-18 to 2022-23 and AY 2023-24 would be the search year. This being so, the AY 2015-16 and 2016-17 i.e. the assessment years before us, falls outside the period of 06 years. Ld. AR thus prayed that both the Assessment years under appeal are out of the period of Six years for which the proceedings were initiated u/s 153C of the Act and the order so passed is barred by limitations. Even otherwise as per ld. AR the AO is not entitled to pass the order u/s 153C for A.Y. 2014-15 by virtue of amendment made in section 148 of the Act and thus, the assessment orders passed u/s.153C of the Act for the search conducted after 01.04.2021 are invalid orders be quashed.
On the other hand, ld. CIT DR submits that the assessment was carried out based on the entries found noted in the documents seized from the possession of the third person and accordingly the AO has recorded his satisfaction and initiated the proceedings u/s 153C of the Act which are valid proceedings. As per ld. CIT DR, search was conducted on 08.12.2018 wherein certain documents containing the transaction carried out by the assessee were found thus for the purpose of initiating the proceedings us/ 153C of the Act in the case of assessee, the date of search in the case of M/s Dengen Products (India) LLP has to be considered. Ld. CIT DR thus submits that the AO has rightly initiated the proceedings u/s 153C of the Act which deserves to be held as valid proceedings. It is thus prayed for the confirmation of the initiation of proceedings u/s 153C of the Act in the present case. Alternatively, he submits that even if the date of satisfaction note recorded by AO of person searched is taken as date of search, the extended period as per 4th Proviso to section 153A(1) of the Act come into play and accordingly, the AO has rightly invoked the provisions of section 153C for the year under appeal which falls with the period of Ten years.
Heard the parties at length and perused the material available on record. Claim of the assessee is that the AO of the person searched has recorded his satisfaction after 01.04.2021 when the material was handed over to the AO of the assessee thus, the date of search should be reckoned from that date only. Assessee further claimed that the law was amended w.e.f. 1.4.2021 by Finance Act, 2021, and as per the amended law, no assessment order could be passed u/s 153C of the Act for the search actions carried out u/s 132 of the Act on or after 01.04.2021 and the assessment should have been completed u/s 148 of the Act as per the amended provisions. Before going further, we examine the provisions of section 153C of the Act, which reads as under:
153C.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, where the Assessing Officer is satisfied that,—
(a)any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or
(b)any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in subsection (1) of section 153A
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:
Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, 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 assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (
2)Where books of account or documents or assets seized or requisitioned as referred to in subsection (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year—
(a)no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or
(b)a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-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 documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.
(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.”
As per first proviso to Section 153C(1), the date of initiation of search u/s 132 or making requisition u/s 132A in terms of second proviso to Sub Section (1) of Section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. As observed above, in the present case, the AO of the assessee has received the seized material from the AO of the person searched on 02.11.2022 thus the date of search in the case of assessee should be 02.11.2022. This view is supported by the judgement of Hon’ble Jurisdictional High Court in the case of PCIT Vs. Ojjus Medicare Pvt. Ltd. (supra), the headnote reads as under:
“Section 153C of the Income-tax Act, 1961 - Search and seizure - Assessment of any or person (Block assessment) - Assessment years 2010-11 to 2013-14 - Whether first proviso to section 153C, and which has been consistently recognized to also embody commencement point for reckoning six or ten assessment years’, shifts relevant date from date of initiation of search or a requisition made to date of receipt of books of account or documents and assets seized by jurisdictional Assessing Officer of non-searched person - Held, yes Whether furthermore where date of handing over of documents was not available, date of issuance of satisfaction Note by Assessing Officer under section 153C would be pertinent for purpose of First Proviso to section 153C -Held, yes - Whether significant difference between computation of relevant assessment year for identification of six assessment years and to construct a block of ten assessment years is that while six assessment years’ hinge upon phrase “immediately preceding” assessment year pertaining to search year, ten assessment years’ are liable to be computed or reckoned from end of assessment year relevant to year of search - Held, yes - Whether thus, in instant case where satisfaction note were issued between 1-4-2021 and 31-3-2022, relevant assessment year would be 2022-23 and assessment years’ 2010-11, 2011-12 and 2012-13 would clearly fall outside block period of ten assessment years as provided under section 153C read with section 153A - Held, yes [Paras 85, 86, 96 and 97] [In favour of assessee].”
Thus, the date when the seized material was handed over to the AO of the assessee by the AO of person searched i.e. 02.11.2022 is to be taken as the date of search which falls in AY 2023-24. Therefore, proceedings u/s 153C could be initiated for preceding Six (06) assessment years i.e. from AYs 2017-18 to 2022-23 and AY 2023-24 would be treated as the search year. Therefore, the assessment years before us i.e. AYs 2015-16 and 2016-17 are outside the period of Six years and no proceedings could be initiated for these years as no separate satisfaction was recorded by the AO for extending the period to Ten Years. Therefore, the assessment order passed u/s 153C of the Act for AYrs. 2015-16 and 2016-17 are outside the period of Six years and thus, are barred by limitations.
Now coming to the sub-section (3) of section 153C of the Act which provides that provisions of section 153C are not applicable to the search initiated on or after 1st day of April, 2021. Since in the present case, date of search is to be taken as 05.04.2022 i.e. the date when the satisfaction note was recorded by the AO of the person searched and relevant seized material was handed over to the AO of the Assessee and such date (02.11.2022) has fallen after 01.04.2021, therefore, as per sub-section (3) of section 153C, subsequent assessment order passed us/ 153C of the Act is invalid and without jurisdiction. The Hon’ble Madras High Court after considering these facts under identical circumstances, in the case of Harigovind v ACIT (supra) has held as under:
35.“A reading of the second proviso to Section 153A(1) would show that the 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, 153C(1) 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. Therefore, any pending proceedings shall be abated as per the above proviso.
36.On the strength of the above second proviso to Section 153A(1), the respondents had strongly contended that the first proviso to Section 153C is only with regard to the abatement of proceedings and not for anything else.
37.On the other hand, the petitioners had contended that it is not only for abatement but for all the other purposes. According to the petitioner, if a particular date is determined for the purpose of abatement of proceedings, then the same would be applicable for all the purposes, including the date of initiation of proceedings under Section 153C against the other person.
38.Even a reading of Section 153C makes it clear that determination of total income of such other person for 6 assessment years immediately preceding the assessment year relevant to the previous year, in which the search was conducted or requisition was made and for the relevant assessment year or years, referred in sub Section (1) of Section 153C of the Act.
39.As far as the other person is concerned, the six years period would be calculated, the date on which the requisition was made and that would be the date, for the purpose of determination of assessment of income. On the other hand, as far as the searched person is concerned, this 6 years period would vary and the same would be calculated from the date of search made in the premises of searched person. Therefore, for the purpose of initiation and determination of income for 6 assessment years, two different dates have been fixed by the Statute, i.e., for the searched person, it was taken the date of search, whereas, for the other person, it was taken the date, on which the requisition is made to the JAO of the other person.
40.Thus, as far as the searched person is concerned, the date of initiation of search is the date, on which the search was conducted in his premises. The said date would be the date of initiation of search for searched person for all purposes. As far as the other person is concerned, the date of initiation of search would be the date, on which the materials, books of accounts, etc., are handed over to the JAO of the other person and this date would be considered as the date of initiation of search for other person for all purposes. Thus, there cannot be two different date of initiation of search, either for the searched person or for the other person.
41.The provisions of Sub-Section (3) of Section 153C states that "153C(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 requisition under Section 132A on or after the 1st day of April, 2021" which means, if the search is initiated subsequent to 01.04.2021, the provision of Section 153C will not apply and accordingly, no proceedings can be initiated against the other person.
42.According to the petitioner, the date of handing over of the seized materials, i.e., 25.11.2022, is the date of initiation of search. If the said contention of the petitioner is accepted, obviously, the issuance of impugned notices dated 07.02.2023 by the 2nd respondent is without any authority and contrary to Sub-Section (3) of Section 153C of the Act and thus, the same is liable to be quashed.
43.In terms of Sub-Section (1) of Section 153C of the Act, for the purpose of calculating the six years period, the date of handing over of the materials to the petitioner's JAO has to be construed as the date of initiation of search for other person. Further, in terms of first proviso to Sub-Section (1) of Section 153C, for the purpose of abatement also, the date of handing over of the materials to the petitioner's JAO has to be construed as the date of initiation of search for the other person. In such view of the matter, this Court is unable to comprehend the submissions made by the learned counsel for respondents that yet another date is available for the purpose of initiation of search in respect of the other person.
44.Certainly, there cannot be two different dates for initiation of search for the other person. Hence, for all practical purpose, the initiation of search would be the same date and it is apparent upon reading the provisions of Section 153C of the Act. In the provision of Section 153C(1) of the Act, the date of initiation of search is mentioned as the date of handing over of materials and as per the first proviso, the same date would apply for the purpose of abatement also. When such being the case, no other date will come into picture for the purpose of determination of initiation of search for other person. At this juncture, it would be apposite to refer the judgement rendered by the Hon'ble Apex Court in Jasjit Singh (supra), wherein, it was held on the aspect as to whether the first proviso to Section 153C would apply only for the purpose of abatement of pending proceedings or otherwise.
45.When a similar contention was raised before the Hon'ble Supreme Court in the aforesaid case of Jasjit Singh (supra), the same was recorded in the said judgement as "..The revenue argued that the proviso to Section 153C(1), is confined in its application to the question of abatement". However, while deciding the said issue, the Hon'ble Apex Court had arrived at a conclusion and rendered its judgement by stating that ".the revenue's argument is insubstantial and without merit".. When such being the case, it is clear that the Hon'ble Apex Court had rejected the contention of the revenue that "the first proviso to Section 153C(1), is confined in its application to the question of abatement", which means, as per the law laid down by the Hon'ble Apex Court, the said provision is not only for the purpose of abatement but also for all the other practical purposes.
46.For ready reference, the relevant portion of the judgement rendered in the case of Jasjit Singh (supra) is extracted hereunder:
"9.It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement.
10.This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Section 132 - would take his own time to forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually "relate back" as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee's prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts.
[**Emphasis supplied]
47.A reading of the above shows that the Hon'ble Apex Court had rejected the contention of the respondent and hence, it is clear that the first proviso to Sub-Section (1) of Section 153C is not only for the purpose of abatement but also for all other purposes, viz., initiation of search for other person in terms of Section 153C(3) of the Act. In such case, the date of initiation of search for the petitioner is the date, on which the documents were handed over to the JAO of the petitioner, i.e., 25.11.2022 is the date of initiation of search for the petitioner.
48.In terms of Sub-Section (3) of Section 153C, the provision of Section 153C will not apply for any search, which is initiated on or after 01.04.2021.
49.As stated above, in this case, the date of handing over of seized material to the petitioner's JAO is on 25.11.2022 and the said date is the date of initiation of search for the petitioner. Thus, in the present case, it is crystal clear like cloudless sky that the initiation of search was subsequent to 01.04.2021, for which, the provisions of Section 153C will not apply. Therefore, the impugned notices dated 07.02.2023 is unsustainable and the same were issued without authority and against the provisions of Sub-Section (3) of Section 153C of the Act.
50.In such view of the matter, all the impugned notices are liable to be quashed and accordingly, all the impugned notices dated 07.02.2023 issued by the 2nd respondent are quashed.”
The facts of the aforesaid case of hon’ble Madras High court are squarely applicable to the facts of the present case. Thus, by respectfully following the judgement of Hon’ble Madras High court in the case of Harigovind vs ACIT (supra), we set aside the notice issued u/s 153C on the assessee as the date of handing over the material i.e. 02.11.2022 would be taken as the date of initiation of search u/s 132 of the Act in the case of assessee. The notices issued u/s 153C dt. 14.11.2022 are without any authority and contrary to the provisions of sub-section (3) of section 153C of the Act and thus the consequent order passed u/s 153C of the Act is quashed. The grounds of appeal Nos. 1 to 4 of both the appeal are allowed.
Since we have allowed the legal grounds of appeal No. 1 to 4 of the assessee, the remaining Grounds of appeal including other legal grounds of appeal are left open and not adjudicated.
In the result, both appeals of the assessee in ITA No. 3427/Del/2025 and 3428/Del/2025 for AYs 2015-16 and 2016-17 are allowed.