The Delhi Income Tax Appellate Tribunal has clarified a critical procedural requirement under the Income Tax Act, establishing that the six-year block period for assessment of non-searched persons under Section 153C must be calculated from the date the Assessing Officer receives seized documents, not the date of the search. This ruling resolves long-standing ambiguity and invalidates assessments initiated under Section 143(3) when the relevant year falls within the correct Section 153C block.
Background & Facts
The Dispute
The dispute arose from the Assessing Officer’s initiation of assessment proceedings for Assessment Year 2017-18 under Section 143(3) of the Income Tax Act, despite the fact that documents seized during a search conducted on 22.10.2016 on a third party (Hans Group) later revealed unaccounted transactions involving the assessee, Sukhija Restaubar Private Limited. The AO treated the search date as the reference point for computing the six-year block under Section 153C, thereby excluding AY 2017-18 from the block and proceeding under the regular assessment provisions.
Procedural History
- 22.10.2016: Search conducted under Section 132 on third party; documents seized.
- 26.09.2018: Seized documents, including digital evidence, handed over to the jurisdictional AO of the assessee.
- 2020: AO issued notice under Section 143(2) and passed assessment order under Section 143(3) for AY 2017-18, adding undisclosed income.
- 2024: Assessee appealed before CIT(A)-30, raising additional ground that assessment should have been under Section 153C.
- 17.01.2025: CIT(A) allowed the appeal, holding that the terminal date for the six-year block is 26.09.2018, making AY 2017-18 part of the Section 153C block.
- 27.01.2026: Revenue appealed to ITAT Delhi.
Relief Sought
The assessee sought quashing of the assessment order under Section 143(3) and recognition that the correct legal framework for AY 2017-18 was Section 153C, given that the year fell within the six-year block computed from the date of receipt of seized documents.
The Legal Issue
The central question was whether the six-year block period for assessment under Section 153C for a non-searched person commences from the date of the search or from the date the jurisdictional Assessing Officer receives the seized books of accounts or documents.
Arguments Presented
For the Appellant (Revenue)
The Revenue contended that the date of search (22.10.2016) must be the reference point for computing the six-year block under Section 153C, as per the literal reading of the statute and the legislative intent behind the 2017 amendments. It argued that the proviso to Section 153C(1) was intended only to prevent abatement of proceedings, not to alter the starting point of the block. It further claimed that allowing the receipt date to govern would create administrative chaos and delay justice.
For the Respondent (Assessee)
The assessee relied on CIT v. Jasjit Singh (2023) 458 ITR 437 (SC) and PCIT v. Ojjus Medicare Pvt. Ltd. (2024) 161 Taxmann.com 160 (Delhi HC), arguing that the first proviso to Section 153C(1) creates a legal fiction: the date of receipt of documents by the jurisdictional AO is deemed the operative date for computing the block. It emphasized that using the search date would impose disproportionate hardship on third parties who had no control over the delay in document transfer, violating principles of fairness and statutory intent.
The Court's Analysis
The Tribunal undertook a detailed statutory interpretation of Section 153C, particularly the first proviso to subsection (1), which states that the six-year period shall be reckoned from the date of receipt of books of accounts or documents by the jurisdictional AO of the non-searched person. The Court held that this proviso was not merely procedural but substantive, designed to protect third parties from retrospective exposure.
"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'... the prejudice caused to the third party... is disproportional."
The Tribunal emphasized that the Supreme Court in Jasjit Singh explicitly rejected the Revenue’s argument that the proviso only addressed abatement. The Court noted that the legislative history, including the Finance Act, 2017, confirmed Parliament’s intent to shift the reference point to the date of receipt to ensure fairness. The Delhi High Court’s decision in Ojjus Medicare and Pavitra Realcon further reinforced this view.
The Tribunal also relied on its own recent decision in Akansha Gupta v. ACIT, which held that the date of recording the satisfaction note under Section 153C is the deemed date of receipt. In this case, the satisfaction note was recorded on 26.09.2018, making AY 2017-18 fall squarely within the block (2013-14 to 2018-19). The AO’s reliance on Section 143(3) was therefore jurisdictionally defective.
The Court concluded that the CIT(A) correctly applied binding precedents and that the Revenue’s appeal lacked legal merit.
The Verdict
The assessee won. The ITAT Delhi held that the six-year block period under Section 153C for non-searched persons begins from the date the jurisdictional Assessing Officer receives the seized documents or records, not the date of the search. The assessment under Section 143(3) for AY 2017-18 was quashed as jurisdictionally invalid.
What This Means For Similar Cases
The Terminal Date Is Non-Negotiable
- Practitioners must now verify the date of receipt of seized documents by the AO, not the search date, when determining whether a year falls within the Section 153C block.
- Any assessment initiated under Section 143(3) for a year falling within the correct Section 153C block is void ab initio.
Additional Grounds Are Permissible in Tax Appeals
- The ITAT admitted the additional ground raised before it, relying on National Thermal Power Corporation v. CIT (1998), affirming that purely legal issues based on undisputed facts can be adjudicated even if not raised below.
- Practitioners should consider raising such grounds in appeals to challenge jurisdictional defects.
Documentation Is Critical for Compliance
- Taxpayers and their representatives must maintain records of when seized materials were received by the jurisdictional AO.
- Revenue authorities must record the date of receipt in satisfaction notes; failure to do so may invalidate proceedings.
Precedent Binding Across Jurisdictions
- The ITAT reaffirmed that decisions of the Supreme Court and Delhi High Court on Section 153C are binding on all benches, including coordinate benches.
- Revenue officers must update internal guidelines to reflect this interpretation.
