2026 (1) TMI 1371 - AT - Income Tax

Block period computation for assessment beyond six years in search cases: seized document handover date fixes block, preventing extended assessment

Block period computation in search-linked assessments is determined by the date the non-searched person received seized books/documents or, where ... Block period computation for assessment u/s 153C - calculation of assessment year beyond the six year block but not later than 10 assessment years - monetary threshold of Rs. 50 lacs as per the 4th proviso of sub-section (1) of the Section 153A - reliance on seized / incriminating material for making additions - HELD THAT:- As decided in Ojjus Medicare (P) Ltd. [2024 (4) TMI 268 - DELHI HIGH COURT] that the block period was to be computed from date of receipt by the AO of the non-searched person of books or documents or assets seized or requisitioned, where date of handing over of documents was not available, date of issuance of satisfaction note by the AO u/s 153C would be pertinent for the purpose of first proviso to section 153C(1). In this case search was conducted on the Alankit Group on 18.10.2009, but the seized documents were handed over to the AO of the assessee on 22.06.2022. For the assessee, the relevant search assessment year would be AY 2023-24. The Assessment year 2015-16 falls in the 9th year. But the mandatory monetary threshold of Rs. 50 lacs as per the 4th proviso of sub-section (1) of the Section 153A. Under the 4th proviso to section 153A(1), a notice for an assessment year beyond the six year block but not later than 10 assessment years can only be issued if the AO has evidence that income represented in the form of an asset amounting to Rs. 50 lacs or more has escaped assessment in the AY’s 7th to 10th years under consideration. We note that AO also noted escaped income is Rs. 8,84,540/- which is below the threshold limit of Rs. 50 lacs. CIT(A) rightly allowed the appeal of the assessee on the jurisdictional issue. Decided in favour of assessee. Issues: (i) Whether the additions to the assessee's income were based on seized/incriminating material and thus sustainable; (ii) Whether the block periods for assessment under section 153C of the Income-tax Act, 1961 are to be computed from the date of receipt of seized books/documents by the jurisdictional AO of the non-searched person (and the effect of the monetary threshold in the proviso to section 153A on assessments beyond the six-year period).Issue (i): Whether the additions were based on seized/incriminating material and therefore sustainable.Analysis: The Tribunal examined the assessment additions and the connection claimed by the AO to seized material. The assessment recorded escaped income of Rs. 8,84,540/-, and the CIT(A) analyzed whether those additions were supported by incriminating seized documents sufficient to sustain assessment beyond the regular period. The Tribunal considered the threshold requirement under the relevant proviso to section 153A and the factual finding of the AO regarding the amount of escaped income.Conclusion: The additions were not sustained for the purpose of extending the assessment period; conclusion is in favour of the assessee.Issue (ii): Whether block periods under section 153C are to be computed from the date of receipt of seized books/documents by the jurisdictional AO and whether the monetary threshold in the proviso to section 153A precludes issuance of notice beyond six years where escaped income is below Rs. 50 lakhs.Analysis: The Tribunal considered the jurisdictional High Court decision relied upon by the assessee regarding computation of block period from date of receipt by the non-searched person's AO and the applicability of the proviso to section 153A limiting issuance for years beyond six years unless escaped income in the later years meets the monetary threshold. The facts show seized documents were handed over to the assessee's AO on 22.06.2022 making AY 2015-16 fall within the 7th10th year block, but the AO quantified escaped income at Rs. 8,84,540/-, which is below the Rs. 50,00,000 threshold in the proviso. The Tribunal upheld the CIT(A)'s conclusion that the proviso's threshold requirement was not met and that the extended period could not be validly invoked.Conclusion: The interpretation and application of the proviso operate against sustaining assessments beyond the six-year period on the facts; conclusion is in favour of the assessee.Final Conclusion: The Tribunal upholds the CIT(A)'s order allowing the assessee's appeal on the jurisdictional ground that the monetary threshold for extending the assessment period was not met, and accordingly the Revenue's appeal is dismissed.Ratio Decidendi: Where escaped income quantified by the AO for the relevant later assessment years is below the monetary threshold specified in the proviso to section 153A, notices/assessments for years beyond the six-year block cannot be sustained under the extended provisions; block-period computation from receipt of seized material by the jurisdictional AO is relevant but cannot overcome the proviso's monetary threshold requirement.