s.153C search date is satisfaction date; assessments beyond ten-year block period quashed for lack of jurisdiction

ITAT Delhi-AT held that for purposes of s.153C, the "date of search" for a non-searched person is the date on which the AO of such person records satisfaction and receives seized material pertaining to that person. Applying this principle, the satisfaction was recorded on 24.06.2022, making AY 2023-24 the relevant year and restricting the block period to AYs 2014-15 to 2023-24. Since the impugned assessments related to AYs 2010-11 to 2013-14, they fell outside the permissible block of ten years. Consequently, the AO lacked valid jurisdiction under s.153C. The ITAT affirmed the CIT(A)'s order and quashed the impugned assessments.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether, for assessments under section 153C, the block period of ten assessment years is to be reckoned from the date of search or from the date of receipt of seized books of account, documents or assets by the Assessing Officer of the non-searched person in terms of the first proviso to section 153C.

1.2 Whether, on the facts, the Assessing Officer had valid jurisdiction under section 153C to frame assessments for Assessment Years 2010-11 to 2013-14, having regard to the computation of the ten-year block period.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Point of commencement for reckoning the six/ten-year block under section 153C

Legal framework

2.1 The Court examined section 153C of the Income-tax Act, 1961, particularly the first proviso, dealing with the assessment of a person other than the searched person, and the commencement of the block period of six/ten assessment years. The Court relied on the interpretation of section 153C(1) and its first proviso as laid down by the Supreme Court in "CIT v. Jasjit Singh" and by the Delhi High Court in "Ojjus Medicare Pvt. Ltd.", along with reference to "SSP Aviation Ltd.", "RRJ Securities Ltd." and "ITO v. Vikram Sujitkumar Bhatia".

Interpretation and reasoning

2.2 The Court noted that the issue of the relevant date for computation of the block period in the case of a non-searched person under section 153C is no longer res integra.

2.3 Referring to "CIT v. Jasjit Singh", the Court recorded that the Parliamentary intent behind the first proviso to section 153C(1) was to address not only abatement of pending assessments but also the date from which the period of years is to be reckoned for the third party (non-searched person). The Supreme Court rejected the Revenue's contention that the proviso is confined only to abatement, and emphasised that reckoning the period from the date of seizure would cause disproportionate prejudice to third parties due to delay in transmission of material by the Assessing Officer of the searched person.

2.4 The Court further referred to the Delhi High Court's exposition in "Ojjus Medicare Pvt. Ltd." that the first proviso to section 153C introduces a legal fiction, deeming the commencement date for computation of the six/ten-year block to be the date of receipt of books of account, documents or assets by the jurisdictional Assessing Officer of the non-searched person.

2.5 The Court highlighted that, as per "Ojjus Medicare Pvt. Ltd.", the first proviso to section 153C shifts the reference point from that used in section 153A(1). While under section 153A the block of years is computed with reference to the assessment year relevant to the previous year in which search is conducted, in the case of section 153C, the relevant date is substituted by the date/year in which the seized material is handed over to the jurisdictional Assessing Officer of the non-searched person.

2.6 Applying the above judicial dicta, the Court held that the law now stands settled that, for section 153C assessments, the commencement date for computation of the six/ten assessment years is the date of receipt of books of account/documents/assets belonging or pertaining to the non-searched person by the jurisdictional Assessing Officer of such non-searched person. In substance, the date of recording of satisfaction under section 153C in the case of the non-searched person is treated as the "date of search" for that non-searched person.

Conclusions

2.7 The Court concluded that the block period under section 153C for a non-searched person must be computed with reference to the date of satisfaction/receipt of seized material by the jurisdictional Assessing Officer of that person, and not by reference to the date of search conducted on the third party.

Issue 2: Validity of section 153C jurisdiction for AYs 2010-11 to 2013-14

Interpretation and reasoning

2.8 On facts, the search on the third party (Alankit Group) took place on 18.10.2019 during the previous year 2019-20, relevant to Assessment Year 2020-21.

2.9 The jurisdictional Assessing Officer of the assessee (non-searched person) recorded satisfaction under section 153C on 24.06.2022 and issued notice under section 153C on 09.09.2022.

2.10 Applying the legal position that the commencement date for the block is the date of receipt/satisfaction under section 153C, the Court held that the assessment year relevant to the previous year in which such "deemed search" (i.e., satisfaction/receipt) occurred is AY 2023-24.

2.11 The Court reasoned that, in terms of the first proviso to section 153C, the ten assessment years that can be covered are the ten assessment years immediately preceding the assessment year relevant to the previous year in which the deemed search took place. Consequently, the ten-year block runs from AY 2023-24 back to AY 2014-15, making AY 2014-15 the last assessment year within which jurisdiction under section 153C can be assumed.

2.12 The impugned years under appeal were AYs 2010-11 to 2013-14. The Court held that these years fall outside the permissible block of ten assessment years computed in accordance with section 153C as interpreted by the Supreme Court and the Delhi High Court.

2.13 As those assessment years are beyond the legally permissible block period, the Assessing Officer could not validly assume jurisdiction under section 153C for AYs 2010-11 to 2013-14. The assessments for these years were therefore without legal sanction and beyond jurisdiction.

Conclusions

2.14 The Court upheld the decision of the appellate authority in holding that the assessments made under section 153C for AYs 2010-11 to 2013-14 were beyond the block period prescribed and hence invalid.

2.15 The impugned assessment orders were quashed on the ground of lack of valid assumption of jurisdiction under section 153C, and it was held unnecessary to examine the additions on merits.

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