The Income Tax Appellate Tribunal, Delhi, has clarified a critical procedural safeguard in search and seizure cases under the Income Tax Act, holding that the ten-year block period for assessment under Section 153C begins not from the date of physical search, but from the date the Assessing Officer records satisfaction upon receiving seized documents. This ruling reinforces statutory compliance and curbs retrospective expansion of tax liability beyond legislatively prescribed limits.
Background & Facts
The Dispute
The dispute arose from assessment orders issued under Section 153C of the Income Tax Act, 1961, for Assessment Years 2012-13, 2019-20, 2020-21, and 2021-22. The Assessing Officer (AO) made additions of Rs. 68 lakh under Section 68, relying on a part-payment receipt dated 21.05.2011 for a property transaction, which was seized during a search conducted on 14.10.2020 at the residence of Sh. Narendra Mantri. The AO treated this document as evidence of unexplained income belonging to the assessee, Rajesh Gandhi and Ramesh Gandhi, despite the transaction occurring nearly a decade earlier.
Procedural History
- 14.10.2020: Search conducted under Section 132 at the residence of Sh. Narendra Mantri; property receipt seized.
- 27.05.2022: Notice under Section 153C issued to the assessee for A.Y. 2012-13.
- 03.02.2023: AO passed assessment order under Section 153C read with Section 144, making additions.
- 28.11.2024: Ld. CIT(A) set aside the order and remanded it for fresh assessment.
- 29.01.2026: ITAT Delhi heard appeals and delivered a common order.
Relief Sought
The assessee sought quashing of the assessment orders for A.Y. 2012-13 on the ground that they were barred by limitation under Section 153C, as the ten-year block period could not extend back to 2012-13 given the date of satisfaction was 27.05.2022. For A.Y. 2019-20 to 2021-22, the assessee contended that subsequent reassessments made no adverse additions, rendering the appeals infructuous.
The Legal Issue
The central question was whether the ten-year block period under Section 153C begins from the date of physical search under Section 132, or from the date the Assessing Officer records satisfaction upon receiving seized documents belonging to the non-searched person.
Arguments Presented
For the Appellant/Petitioner
The assessee relied on CIT v. Jasjit Singh (2023) 458 ITR 437 and PCIT v. Ojjus Medicare (P) Ltd [2024] 465 ITR 101 (Delhi) to argue that the commencement date for the block period under Section 153C is the date of recording of satisfaction by the AO, not the date of search. The notice under Section 153C was issued on 27.05.2022, making the relevant financial year 2022-23 and the assessment year 2023-24. Counting backward ten years from 2023-24, the earliest assessable year is 2014-15. Hence, A.Y. 2012-13 was beyond the statutory limit. The assessee further contended that no satisfaction note was furnished, and its absence rendered the proceedings void.
For the Respondent/State
The Revenue relied on the orders of the lower authorities and argued that the search conducted on 14.10.2020 triggered the applicability of Section 153C for all prior years, including 2012-13. It did not dispute the absence of a formal satisfaction note but maintained that the seizure of documents during search was sufficient to initiate proceedings. No independent legal argument was advanced to counter the precedents cited by the assessee.
The Court's Analysis
The Tribunal examined the legal fiction introduced by the First Proviso to Section 153C(1), which deems the date of receipt of documents by the jurisdictional AO as the date of search for the non-searched person. The Court emphasized that this provision was enacted to prevent arbitrary extension of assessment periods and to ensure procedural fairness.
"The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C(1), which significantly shifts the reference point... to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non-searched person."
The Tribunal relied on the binding precedent of the Supreme Court in CIT v. Jasjit Singh, which held that the date of satisfaction - not the date of physical search - is the operative trigger for computing the block period. The Court further cited its own coordinate bench’s recent decision in Dy. CIT v. Abhi Capital Services Ltd., which had quashed assessments for A.Y. 2011-12 and 2012-13 on identical facts.
The Tribunal noted that the Revenue failed to produce any satisfaction note, and the assessment order itself did not mention such a record. In the absence of this mandatory procedural step, the AO’s jurisdiction could not be presumed. The Court concluded that the jurisdictional trigger for Section 153C was 27.05.2022, making A.Y. 2023-24 the relevant year, and the block period ran from 2014-15 to 2023-24. A.Y. 2012-13 fell outside this window.
The Verdict
The assessee prevailed. The Tribunal held that Section 153C proceedings cannot extend beyond a ten-year block period computed from the date of satisfaction, not the date of search. The assessment orders for A.Y. 2012-13 were quashed as time-barred. Appeals for A.Y. 2019-20 to 2021-22 were dismissed as infructuous due to no adverse additions in the reassessments.
What This Means For Similar Cases
The Date of Satisfaction Is Jurisdictional
- Practitioners must verify the date of recording of satisfaction in every Section 153C notice, not merely the search date.
- If no satisfaction note is produced or referenced, the assessment is void ab initio.
- Challenge assessments for years prior to ten years from the satisfaction date, regardless of when the search occurred.
Procedural Compliance Is Non-Negotiable
- The absence of a satisfaction note cannot be cured by subsequent submissions or assumptions.
- AO’s failure to record satisfaction in writing renders the entire proceeding ultra vires.
- Always request a copy of the satisfaction note under Section 133A or through RTI if not furnished.
Block Period Calculation Must Be Precise
- Count backward exactly ten years from the assessment year corresponding to the financial year of satisfaction.
- For a satisfaction note dated 15.03.2024, the relevant AY is 2024-25; the block period is 2015-16 to 2024-25.
- Do not rely on search dates - this is a common misconception perpetuated by outdated practice.
