2026 (1) TMI 1201 - AT - Income Tax

Validity of proceedings under Section 153C: supply of seized electronic chats fixes search date, rendering subsequent notice and assessment invalid.

Section 153C(3) was applied to determine that the statutory regime post-1 April 2021 treats the date of search for a connected assessee as the date when ... Validity of proceedings u/s 153C - period of limitation - timing of handing over seized materials - materials in the form of soft copy of WhatsApp Chats were supplied by the Ld. AO of the searched person to the Ld. AO of the assessee - HELD THAT:- As perused the provisions of Section 153C(3) of the Act which provides that nothing contained in this section shall apply in relation to search initiated u/s 132 of the Act or books of account, other documents or any assets requisitioned u/s 132A of the Act on or after 1st April, 2021. Therefore, the date of search on the assessee for the purpose of Section 153C of the Act is the date when the materials in the form of soft copy of WhatsApp Chats were supplied by the Ld. AO of the searched person to the Ld. AO of the assessee i.e. on 26.09.2022. Therefore, the notice issued u/s 153C of the Act dated 13.12.2022, as well as the assessment framed u/s 153C of the Act dated 20.03.2023, are invalid and nullity. The case of the assessee find support from the decisions of Shalimar Town Planners (P.) Ltd. [2024 (3) TMI 1331 - SC ORDER] and in case of Jasjit Singh [2023 (10) TMI 572 - SUPREME COURT] - Similarly, in case of Harigovind [2025 (11) TMI 103 - MADRAS HIGH COURT] has decided the issue in favour of the assessee. Thus we are inclined to quash the notice issued u/s 153C. Decided in favour of assessee. Issues: (i) Whether the delay of 326 days in filing the appeal should be condoned. (ii) Whether the proceedings and assessment initiated under Section 153C of the Income-tax Act, 1961 by notice dated 13.12.2022 are valid in view of Section 153C(3) and the date on which the seized materials were handed over to the Assessing Officer of the assessee.Issue (i): Whether the delay in filing the appeal should be condoned.Analysis: The facts show the assessee is a non-resident whose tax matters were handled by an accountant in India; the appellate order was uploaded to the portal and was not communicated to the assessee in time due to the accountant's failure to check the portal. The delay was explained as unintentional, bona fide and without mala fide intent. The legal standard permitting a pragmatic and liberal approach to condone delay, favouring substantial justice over technicality, was applied.Conclusion: The delay of 326 days is condoned.Issue (ii): Whether the notice dated 13.12.2022 and consequent assessment framed under Section 153C are valid in law given the timing of handing over seized materials and Section 153C(3).Analysis: The seized digital materials (soft copy of WhatsApp chats) were handed over to the Assessing Officer of the assessee by email on 26.09.2022. Section 153C(3) excludes application of Section 153C in relation to searches initiated on or after 01.04.2021. The first proviso to Section 153C(1) dictates that the date of handing over materials is the relevant date for initiation for the other person. Applying those principles and binding precedents construing the proviso and the date for reckoning initiation, the notice dated 13.12.2022 and the assessment framed thereafter fall within the scope excluded by Section 153C(3).Conclusion: The notice dated 13.12.2022 issued under Section 153C and the consequent assessment are invalid and are quashed.Final Conclusion: The appeal succeeds with delay condoned and the impugned notice and assessment under Section 153C set aside, resulting in the assessee obtaining the relief claimed.Ratio Decidendi: For the purposes of Section 153C, the date of initiation of search in respect of the other person is the date on which seized materials are handed over to the Assessing Officer of that other person, and where that date falls on or after 01.04.2021 Section 153C does not apply under Section 153C(3).