2025 (12) TMI 272 - AT - Income Tax

Deemed search date under s.153C is AO satisfaction date; assessments beyond six-year block held invalid

ITAT Delhi-AT held that, for a non-searched person covered under s.153C, the 'deemed date of search' is the date on which the AO of such person records ... Computation of block periods for assessment u/s 153C - six/ten assessment years computation - satisfaction recorded for assessee (non-searched person) - HELD THAT:- We find that this issue of the date of search for persons covered under section 153C and the calculation of ten preceding assessment years from the end of the relevant assessment year, is no longer res-integra. As well settled in the case of CIT Vs. Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] held that on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision u/s 153C was enacted. The revenue argued that the proviso [to Section 153(C)(1)] is confined in its application to the question of abatement. It is quite plausible that the AO seized of the materials would take his own time to forward the papers and materials belonging to the third party, to the concerned AO. In that event if the date would virtually ‘relate back’ as is sought to be contended by the revenue, (to the date of seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is disproportionate. In the instant case of the assessee (non-searched person), as the satisfaction note was recorded on 17.02.2022, the deemed date of search would become the date of recording of satisfaction i.e., 17.02.2022. The assessment year relevant to the previous year in which the search is deemed to have been executed would be AY 2023-24. Impugned A.Y 2011-12 and AY 2012-13 would, therefore, fall beyond the period of six/ten assessment years as reckoned with reference to the date of recording of satisfaction by the assessing officer of the non-searched person. We therefore, have no hesitation in upholding the decision of the CIT(A) and quashing the impugned assessment order having been made without legal and valid assumption of jurisdiction. Accordingly, the assessment of the A.Ys under consideration for AY 2011-12 and AY 2012-13 are considered as beyond the block period of 10 assessment years and hence invalid. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether, for the purposes of section 153C, the block of six/ten assessment years is to be computed from the date of initiation of search under section 132 or from the date of receipt of seized books of account/documents/assets and recording of satisfaction by the Assessing Officer of the non-searched person. 1.2 Whether the assessments framed under section 153C for the assessment years 2011-12 and 2012-13 are within the permissible block period and hence based on a valid assumption of jurisdiction. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1 & 2: Computation of block period under section 153C and validity of jurisdiction for A.Ys. 2011-12 and 2012-13 (a) Legal framework (as discussed) 2.1 The Court examined section 153C and its first proviso, particularly the expression governing the commencement date for computation of the six/ten year block for a 'non-searched person'. 2.2 The Court relied on the law declared by the Supreme Court in relation to section 153C, holding that the first proviso was enacted not only to deal with abatement, but also to fix the date from which the period of years for which returns may be required from a third party (non-searched person) is to be reckoned. It was noted that reckoning the period from the date of seizure could cause disproportionate prejudice to such third parties. 2.3 The Court further relied on the Delhi High Court's exposition that the first proviso to section 153C introduces a legal fiction whereby the 'commencement date' for computation of the six/ten-year block is deemed to be the date of receipt of books of account, documents, or assets by the jurisdictional Assessing Officer of the non-searched person, in substitution of the date of search referred to in section 153A. (b) Interpretation and reasoning 2.4 The Court noted that the Assessing Officer of the searched party drew the satisfaction note on 14.02.2022 and handed over the seized materials to the Assessing Officer of the non-searched person on 17.02.2022, and that the satisfaction under section 153C in the case of the assessee (non-searched person) was recorded on 17.02.2022. 2.5 Applying the above judicial precedents, the Court held that, in the case of a non-searched person, the date of recording of satisfaction and receipt of seized material by the jurisdictional Assessing Officer is to be treated as the 'deemed date of search' for the purposes of section 153C. 2.6 On this basis, the Court reasoned that the previous year in which such deemed search occurred is the previous year relevant to assessment year 2023-24, and that the block of six/ten assessment years must be reckoned backwards from assessment year 2023-24. 2.7 The Court accepted the assessee's contention that, reckoned from assessment year 2023-24, the last assessment year for which jurisdiction could be assumed under section 153C would be assessment year 2014-15, and that assessment years 2011-12 and 2012-13 therefore fall outside the permissible block period. 2.8 The Court rejected the Revenue's position (as reflected in the grounds of appeal) that the block period should be computed from the date of initiation of search at the third party, holding that such a contention stands negated by the settled legal position as laid down by the Supreme Court and the Delhi High Court. (c) Conclusions 2.9 The Court held that, for a non-searched person, the block period under section 153C is to be computed from the date of receipt of seized material and recording of satisfaction by the jurisdictional Assessing Officer, which is deemed to be the date of search. 2.10 As the deemed date of search in the present case is 17.02.2022, corresponding to assessment year 2023-24, the assessments for assessment years 2011-12 and 2012-13 fall beyond the permissible block of ten assessment years and are therefore outside the jurisdiction conferred by section 153C. 2.11 Consequently, the impugned assessment orders for assessment years 2011-12 and 2012-13 were quashed as having been made without legal and valid assumption of jurisdiction, and the Court found it unnecessary to examine the merits of the additions.