The Income Tax Appellate Tribunal, Delhi, has clarified a critical jurisdictional threshold under Section 153C of the Income Tax Act, 1961, holding that the ten-year assessment block for non-searched persons begins from the date the Assessing Officer receives seized documents - not from the date of the search conducted at a third party’s premises. This ruling reinforces procedural fairness and statutory intent, directly impacting how tax authorities initiate assessments against persons not subject to search.
Background & Facts
The Dispute
The Revenue initiated assessment proceedings against the assessee, Mohan Kumar Garg, under Section 153C of the Income Tax Act, 1961, following a search operation conducted at the premises of Alankit Group on 18.10.2019. Documents and books of account belonging to the assessee, a non-searched person, were seized during this operation and subsequently transferred to the Assessing Officer (AO) of the assessee. The AO recorded satisfaction under Section 153C on 15.03.2023 and issued a notice on 16.03.2023. Based on this, the AO completed assessments for Assessment Years (AY) 2010-11 and 2011-12 on 28.03.2023, determining undisclosed income of Rs. 3,53,30,940/- against a declared income of Rs. 3,86,040/-. The assessee challenged these assessments before the Commissioner of Income Tax (Appeals), who allowed the appeal, holding that the block period could not extend back to AY 2010-11 and 2011-12.
Key Facts
- Search conducted at Alankit Group on 18.10.2019
- Seized materials relating to the assessee handed over to the AO on 18.10.2019
- AO recorded satisfaction under Section 153C on 15.03.2023
- Notice under Section 153C issued to assessee on 16.03.2023
- Assessment orders for AY 2010-11 and 2011-12 passed on 28.03.2023
- Assessee’s declared income for AY 2010-11: Rs. 3,86,040/-; AO’s determination: Rs. 3,53,30,940/-
- Assessee’s total income for AY 2011-12: Rs. 1,25,000/-; AO’s addition: Rs. 2,10,00,000/-
Procedural History
- 18.10.2019: Search conducted at Alankit Group premises
- 18.10.2019: Seized documents transferred to AO of assessee
- 15.03.2023: AO recorded satisfaction under Section 153C
- 16.03.2023: Notice issued to assessee under Section 153C
- 28.03.2023: Assessment orders for AY 2010-11 and 2011-12 passed
- 28.10.2025: CIT(A) allowed assessee’s appeal, quashing assessments
- 01.06.2026: Hearing before ITAT Delhi
- 15.06.2026: ITAT Delhi pronounced order dismissing Revenue’s appeals
Relief Sought
The Revenue sought to set aside the CIT(A)’s order and uphold the assessments for AY 2010-11 and 2011-12, arguing that the block period should commence from the date of search (18.10.2019). The assessee sought confirmation that the block period commenced only from the date of receipt of documents by the AO (15.03.2023), rendering AY 2010-11 and 2011-12 beyond the permissible ten-year window.
The Legal Issue
The central question was whether the ten assessment years under Section 153C of the Income Tax Act, 1961 must be computed from the date of search conducted at a third party’s premises, or from the date the jurisdictional Assessing Officer receives the seized books of account and documents pertaining to the non-searched person, as provided by the first proviso to Section 153C(1).
Arguments Presented
For the Appellant (Revenue)
The Revenue contended that the term "search" in Section 153C refers to the date of physical search at the third party’s premises (18.10.2019), and that the block of ten assessment years must be reckoned from that date. It argued that the first proviso merely addressed procedural delays in transmission of documents and did not alter the substantive trigger for the assessment period. The Revenue relied on the legislative intent to prevent evasion by allowing a broad retrospective scope, and cited administrative convenience as justification for treating the search date as the operative date.
For the Respondent (Assessee)
The assessee argued that the first proviso to Section 153C(1) creates a legal fiction that the date of receipt of documents by the jurisdictional AO is deemed the date of search for the non-searched person. This interpretation, the assessee submitted, is consistent with the Supreme Court’s ruling in CIT v. Jasjit Singh and the Delhi High Court’s decision in Ojjus Medicare Pvt Ltd, both of which emphasized that the prejudice to a non-searched person - often unaware of the search - must be minimized. The assessee further contended that the AO’s satisfaction recorded on 15.03.2023 was the only legally valid trigger for the assessment period, making AY 2010-11 and 2011-12 outside the ten-year window.
The Court's Analysis
The Tribunal undertook a detailed analysis of the statutory language of Section 153C, particularly the first proviso, which states: "...the previous year in which the books of account, documents or assets are received by the Assessing Officer shall be deemed to be the previous year in which the search was conducted." The Court emphasized that this proviso is not a mere procedural clarification but a substantive legal fiction designed to protect non-searched persons from retrospective application of assessment powers.
"The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court... as well as the decision of the Supreme Court in CIT v Jasjit Singh."
The Tribunal noted that the Supreme Court in CIT v. Jasjit Singh (458 ITR 437) explicitly rejected the Revenue’s argument that the date of search should be deemed to relate back to the date of seizure. The Court held that such an interpretation would cause disproportionate prejudice to persons who had no involvement in the search and were unaware of the proceedings against them.
The Tribunal further relied on the Delhi High Court’s ruling in Ojjus Medicare Pvt Ltd (2024), which clarified that the ten-year block is computed backward from the assessment year relevant to the previous year in which the documents were received by the AO - not from the date of the actual search. The Tribunal observed that the AO’s satisfaction on 15.03.2023 was the only legally recognized event that triggered the assessment jurisdiction under Section 153C for the assessee. Consequently, the relevant previous year was 2022-23, making AY 2023-24 the assessment year relevant to the deemed search. The ten-year block therefore extended from AY 2014-15 to 2023-24, rendering AY 2010-11 and 2011-12 beyond the permissible scope.
The Tribunal concluded that the CIT(A) correctly applied the law and that the Revenue’s appeal was without merit.
The Verdict
The Revenue’s appeals were dismissed. The ITAT Delhi upheld the CIT(A)’s order quashing the assessments for AY 2010-11 and 2011-12. The Tribunal held that the block period under Section 153C begins from the date of receipt of seized materials by the jurisdictional AO, which in this case was 15.03.2023, making AY 2023-24 the relevant assessment year. Consequently, the assessments for AY 2010-11 and 2011-12 were held to be without jurisdiction and invalid. The Tribunal directed that the assessments for these years be treated as null and void, with no further action permitted under Section 153C for those periods.
What This Means For Similar Cases
Block Periods Cannot Be Extended Beyond Statutory Window
- Practitioners must now verify the date of receipt of seized documents by the AO, not the search date, when challenging the scope of Section 153C assessments
- Assessments for years beyond the ten-year window from the date of document receipt are void ab initio
- Revenue authorities must ensure satisfaction under Section 153C is recorded promptly to avoid jurisdictional challenges
Non-Searches Are Not Subject to Retroactive Application
- Tax authorities cannot use the search of a third party to resurrect assessments for periods far removed from the actual receipt of documents
- The legal fiction under the first proviso protects taxpayers from arbitrary retrospective action
- Any assessment initiated more than ten years before the date of document receipt is legally unsustainable
Procedural Compliance Is Non-Negotiable
- The date of recording satisfaction under Section 153C is the critical trigger for jurisdiction
- Delays in transmission of documents do not extend the assessment window
- Practitioners should raise jurisdictional objections at the earliest opportunity, even before filing appeals
