The Income Tax Appellate Tribunal's ruling in Alok Agarwal & Sons HUF v. DCIT redefines the jurisdictional boundaries for search-based assessments under Section 153A of the Income-tax Act, 1961. By anchoring its decision on the Fourth Proviso, the Tribunal has clarified that the Rs.50 lakh threshold for extending the assessment period to ten years must be assessed cumulatively, not per individual year. This doctrinal clarification will significantly impact how Assessing Officers initiate and justify extended assessments following search operations.
Background & Facts
The Dispute
The assessee, Alok Agarwal & Sons HUF, was subjected to an assessment under Section 153A for Assessment Years 2014-15 to 2016-17, following a search conducted on the Alankit Group on 18.10.2019. The Assessing Officer relied on satisfaction recorded on 10.05.2022 to justify initiating these assessments, which fell outside the normal six-year window under Section 153A. The additions proposed for these years totaled Rs.35,75,427, below the Rs.50 lakh threshold.
Procedural History
- 18.10.2019: Search conducted on the Alankit Group
- 10.05.2022: AO recorded satisfaction for initiating Section 153A assessment
- 09.08.2025: Ld. CIT (A) upheld the assessment for AYs 2014-15 to 2016-17
- 29.01.2026: ITAT Delhi heard the appeal and allowed it
Relief Sought
The assessee sought quashing of the assessments for AYs 2014-15 to 2016-17, arguing that the aggregate undisclosed income did not meet the Rs.50 lakh threshold under the Fourth Proviso to Section 153A, rendering the assessments ultra vires.
The Legal Issue
The central question was whether the Rs.50 lakh threshold under the Fourth Proviso to Section 153A must be satisfied cumulatively across multiple assessment years, or whether each individual year must independently exceed this amount to justify an extended assessment period.
Arguments Presented
For the Appellant
The appellant relied on Akshat Mittal v. ITO and Pratishtha Garg v. ITO, both from the Delhi High Court, to argue that the Fourth Proviso requires the total undisclosed income - when aggregated - to exceed Rs.50 lakhs. The appellant emphasized that the satisfaction note recorded only Rs.34,71,289 in undisclosed assets, which was below the threshold. It further contended that the AO’s reliance on a provisional satisfaction note, without a reasoned projection of likely income exceeding Rs.50 lakhs, was legally unsustainable.
For the Respondent
The Revenue relied on the findings of the lower authorities, asserting that the initiation of assessment under Section 153A was valid based on the satisfaction recorded by the AO. It did not dispute the quantum of undisclosed income but argued that the AO’s opinion, even if provisional, was sufficient to trigger extended assessment powers under the Act.
The Court's Analysis
The Tribunal examined the Fourth Proviso to Section 153A, which permits extended assessment for up to ten years only if the undisclosed income "amounts to or is likely to amount" to Rs.50 lakhs. It critically analyzed the Delhi High Court’s decision in Principal Commissioner of Income Tax Central-1 v. Ojjus Medicare Pvt. Ltd., which held that the Rs.50 lakh threshold is a cumulative requirement, not per assessment year.
"The precondition of INR 50 lakhs or more constitutes a sine qua non for initiating action for the extended ten year block, the aforesaid satisfaction and the reasons in support thereof would have to be borne out from the Satisfaction Note itself."
The Tribunal accepted this interpretation, noting that the phrase "likely to amount" explicitly acknowledges the provisional nature of the AO’s opinion at the stage of satisfaction recording. It held that the AO must record reasons demonstrating that the aggregate undisclosed income, when fully assessed, is likely to exceed Rs.50 lakhs - not merely that individual years show smaller amounts. Here, the satisfaction note recorded only Rs.34,71,289, with no reasoned projection of aggregate liability exceeding the threshold. The Tribunal found no material to support a conclusion that the income was "likely to amount" to Rs.50 lakhs.
The Tribunal further distinguished Jasjit Singh and Harigovind, which dealt with different factual matrices and did not address the cumulative threshold requirement under the Fourth Proviso.
The Verdict
The assessee won. The Tribunal held that Section 153A assessments for AYs 2014-15 to 2016-17 were invalid because the aggregate undisclosed income did not meet the Rs.50 lakh threshold under the Fourth Proviso. The assessments were quashed, and the Revenue was directed to reassess only if a fresh satisfaction note, grounded in reasoned projection of aggregate income exceeding Rs.50 lakhs, is recorded.
What This Means For Similar Cases
Aggregate Income, Not Per-Year Threshold
- Practitioners must now challenge Section 153A assessments where the total undisclosed income across years is below Rs.50 lakhs, regardless of the number of years opened
- The burden shifts to the Revenue to demonstrate, through documented reasoning, that the aggregate undisclosed income is "likely to amount" to Rs.50 lakhs
- Merely citing multiple years with small additions will not suffice
Satisfaction Note Must Contain Reasoned Projection
- AO satisfaction notes must explicitly link the discovered assets to a projected aggregate income exceeding Rs.50 lakhs
- Vague or speculative statements like "likely to be substantial" are insufficient
- Failure to record reasons in the satisfaction note renders the initiation ultra vires
Extended Assessment Period Requires Strict Compliance
- The ten-year window under Section 153A is not a default extension - it is a conditional power
- Assessments initiated without meeting the Fourth Proviso’s threshold are void ab initio
- Taxpayers may now file writ petitions to quash assessments based on this precedent, especially where the aggregate is under Rs.50 lakhs
