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Judgment
PER SANJAY AWASTHI, ACCOUNTANT MEMBER:
This appeal arises from order dated 28.02.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A)-26, Delhi.
In this case, a search and seizure action was carried out on 23.03.2021 in the case of Shri Parasmal Jain/M/s Balar Marketing Pvt. Limited. Thereafter, on the basis of documents seized during the course of search, the AO of searched person held, through satisfaction dated 24.06.2022, that there was information pertaining to the assessee. The allegedly incriminating material was handed over to the AO of non-searched person. Thereafter, the AO of the assessee arrived at a “satisfaction” dated 02.02.2023 that the incriminating information pertaining to the assessee was available and would have a bearing on the determination of his income. It is seen that on the same date i.e. 02.02.2023, a notice u/s 153C of the Act was issued. The Ld. AO made an addition of Rs.35,00,000/- on account of unexplained cash credit u/s 68 of the Act and an addition of Rs.70,000/- on account of estimated commission paid on alleged accommodation entry.
The aggrieved assessee approached the CIT(A) where he could not succeed and a detailed finding of fact has been recorded in the impugned order to this extent.
The assessee has approached the ITAT with as many as 15 grounds of appeal through which the addition on merits and allegedly an illegal assumption of jurisdiction have been put forth as grievances.
It is seen from the records that on 15.07.2026 the assessee has also filed three additional grounds of appeal which are focused on an allegation of illegal assumption of jurisdiction. For the sake of reference, the additional grounds deserve to be reproduced as under: -
“1.That the notice dated 02.02.2023 issued by Ld. Assessing Officer ("Ld. AO") under Section 153C(1) of the Income-tax Act, 1961 (“the Act") is void ab initio for the want of jurisdiction as the date of initiation of search as per 1st proviso thereto is 24.06.2022 viz., the date of issuance of satisfaction note vide PCIT vs. Ojjus Medicare (P.) Ltd. (2024) 465 ITR 101 (Delhi).
II. That the issuance of impugned notice dated 02.02.2023 grossly contravenes Section 153C(3) of the Act, which renders the said provision inapplicable in relation to search initiated on or after 01.04.2021 read with 1st proviso to Section 153C(1) of the Act vide Harigovind v. ACIT (2025) 180 taxmann.com 197 (Madras) and Shanmugasundaram Manoharan v. DCIT [2025] 181 taxmann.com 786 (Chennai Trib.).
III. That Section 153C of the Act being a machinery provision is to effectuate the object and purpose of the statute and amendment brought therein with a cutoff date shall be applicable to a search prior to the date of amendment as per the law decided by Hon'ble Supreme Court in ITO v. Vikram Sujitkumar Bhatia (2023) 45 ITR 417.”
Before us the Ld. AR took up additional ground of appeal no.2 first and stated that while the search and seizure action was carried out on 23.03.2021, but the seized material was handed over to the AO of the assessee vide “satisfaction” dated 24.06.2022. It was also submitted that the AO of the assessee issued a notice u/s 153C of the Act on 02.02.2023, after recording a satisfaction on the same date. It was the submission that with the change in law w.e.f. 01.04.2021 and the decision of the Hon’ble Madras High Court in the case of Harigovind reported in 485 ITR 509, it has been held that initiation of proceedings u/s 153C of the Act after 01.04.2021 are bad in law. It was the submission that since this ground went to the root of the matter hence, it deserves to be decided before proceeding any further with the adjudication. The Ld. AR also pleaded that the additional grounds of appeal deserve to be admitted since the facts needed to adjudicate the same were already on record and following the decision of the Hon’ble Apex Court in the case of NTPC Limited reported in 229 ITR 383, such grounds were purely legal in nature and deserved to be admitted for adjudication.
The Ld. DR, on the other hand, relied on the finding given in the impugned order and stated that the search and seizure operation took place before 01.04.2021 and therefore there was no infirmity in the assumption of jurisdiction.
We have heard the rival contentions and have gone through the records before us. It needs to be mentioned that the additional grounds of appeal are admitted for adjudication following the case of NTPC (supra).
Coming to the merits of the additional ground it is observed that the satisfaction note u/s.153C of the Act in the case of the assessee was recorded on 24.06.2022 and also on 02.02.2023 for issuing the notice u/s.153C of the Act dated 02.02.2023. By virtue of Section 153C(3) of the Act, which was effective from 01.04.2021, where in case of a search initiated after 01.04.2021 the proceedings u/s 153C of the Act are not valid and applicable, but the provisions of section 148 of the Act are applicable. In the case of the assessee since the satisfaction note was recorded on 24.06.2022 or 02.02.2023 i.e. after 01.04.2021, the deemed date of search in the case of the assessee being person other than the searched person, shall be the date of recording of satisfaction note in view of the decision of the Hon’ble Apex court in the case of Jasjit Singh reported in 458 ITR 437 and the assessment framed u/s.153C of the Act pursuant to the satisfaction note recorded on or after 01.04.2021, is bad in law.
The Hon’ble Madras High Court in the case of Harigovind Vs. ACIT (supra) held that in terms of sub-section (1) of section 153C of the Act for the purpose of calculation of six years period, the date of handing over the materials to the AO has to be construed as the date of initiation of search for the person other than the searched person. The Hon’ble Madras High Court further held that in terms of first proviso to sub section (1) of section 153C of the Act for the purpose of abatement also the date of handing over of the materials to the AO has to be construed as the date of initiation of search for the other person (other than searched person). The Hon’ble Madras High Court did not agree with the submissions made by the revenue that another date is available for the purpose of initiation of search in respect of other person (other than searched person). The Hon’ble Madras High Court further held as under :-
“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 CO 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 1324 on or after the 1" 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 BCOpauthority 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 Odate 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 CIT Vs. Jasjit Singh reported in [2023] 458 ITR 437 (SC), 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 CIT Vs. Jasjit Singh, 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 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 CIT Vs. Jasjit Singh 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 o 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" us 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.
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.
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.”
Considering the discussion above and the fact that no contravening judgment of any High Court has been placed before us, we respectfully follow the judgment in the case of Harigovind of the Hon’ble Madras High Court (supra) and hold that the incriminating material handed over through “satisfaction” dated 24.06.2022 and issuance of notice u/s 153C of the Act after recording of satisfaction on the same date being 02.02.2023, the assessments framed u/s 143(3) r.w.s. 153C of the Act for AY 2020-21 is bad in law and hereby quashed. Thus, additional ground of appeal no.2 is allowed.
Since the assessee has succeeded on the jurisdictional ground, we do not deem it fit to adjudicate on any other issue in this matter.
In the result, the appeal is allowed.