Ten year limitation for search assessments: Section 153C notice held time barred as the challenged year falls outside the computed ten year block.

Question concerned whether a notice under Section 153C was time barred in view of a search on 04.03.2022. The court applied Section 153A(1)(b) and Explanation 1 to Section 153A, holding that the ten year block is computed backwards from the end of the assessment year relevant to the previous year in which the search is conducted (search assessment year AY 2022 23), so the ten year period ran back to AY 2013 14 and excluded AY 2012 13. Applying that computation, the Section 153C notice for AY 2012 13 was held barred by limitation and was quashed; writ allowed.

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Issues: Whether the notice issued under Section 153C of the Income-tax Act, 1961 for Assessment Year 2012-13 is barred by limitation in view of a search conducted on 04.03.2022 and the computation rules in Section 153A(1)(b) and Explanation 1 to Section 153A.

Analysis: The Court analysed Section 153A(1)(b) and Explanation 1 to Section 153A of the Income-tax Act, 1961 and authoritative High Court decisions interpreting the computation of the six-year and ten-year blocks applicable on search. Section 153A(1)(b) requires computation of six assessment years immediately preceding the assessment year relevant to the previous year in which the search is conducted, whereas Explanation 1 fixes the manner of computing the ten assessment years from the end of the assessment year relevant to the previous year in which the search is conducted. Applying these provisions to a search on 04.03.2022 (falling in financial year 2021-22), the search assessment year is AY 2022-23 and the ten-year block runs backwards from the end of AY 2022-23 (31.03.2023), making AY 2013-14 the tenth year. Thus AY 2012-13 falls outside the ten-year period. The Court considered and followed prior High Court authorities reaching the same computation and rejected submissions seeking a different computation that would include AY 2012-13 within the ten-year period.

Conclusion: The notice dated 31.03.2022 issued under Section 153C of the Income-tax Act, 1961 for Assessment Year 2012-13 is barred by limitation and is quashed and set aside; the writ petition is allowed.

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