2026 (3) TMI 1577 - HC - Income Tax

Extended ten-year search limitation includes the search year, rendering the reassessment notice time-barred.

The extended ten-year limitation under the search-assessment framework was construed by giving full effect to the statutory formula in Explanation 1 to ... Validity of reopening of assessment on the ground of limitation - Limitation for reassessment after search - Computation of six and ten assessment years under Explanation 1 to Section 153A - two distinct and independent computational regimes - search action was carried out in the case of third party HELD THAT: - The Court held that the statute prescribes two distinct computational regimes for the six-year block and the extended ten-year block. For six assessment years, the governing expression is 'immediately preceding', which excludes the search assessment year. For the extended period, Explanation 1 to Section 153A adopts a different formula, namely computation 'from the end of the assessment year' relevant to the previous year in which the search is conducted. That language was treated as deliberate and incapable of being collapsed into the six-year model. Consequently, the assessment year relevant to the previous year of search must be included as the first year in the ten-year reckoning. Since the search in the present case fell in Financial Year 2023-24, Assessment Year 2024-25 was the first year of the ten-year block and Assessment Year 2015-16 the tenth year. Assessment Year 2014-15, therefore, fell beyond the permissible ten-year period. The Court also followed its earlier view taking the same interpretation and rejected the Revenue's contention that the search year must be excluded while computing the ten-year period. [Paras 8, 9] The impugned notice under Section 148 for Assessment Year 2014-15, and all consequential proceedings, were quashed as time-barred. Final Conclusion: The Court held that, for computing the extended ten-year period in search-related reassessment, the search assessment year is to be included. On that interpretation, Assessment Year 2014-15 lay beyond the statutory limit, and the notice under Section 148 was quashed on the ground of limitation. Issues: Whether the notice issued under section 148 of the Income-tax Act, 1961 for Assessment Year 2014-15 was barred by limitation in the context of a search conducted on 08.02.2024 and the computation of the ten-year block under the search-assessment scheme.Analysis: The search took place during Financial Year 2023-24, so the assessment year relevant to the previous year of search had to be identified first for applying the statutory time limits. The language of section 153A(1)(b) provides a six-year block by using the phrase 'immediately preceding', while Explanation 1 to section 153A employs a different formula, namely 'from the end of the assessment year relevant to the previous year in which search is conducted'. That distinction was treated as deliberate and mandatory, requiring the search assessment year to be counted in the ten-year block. The same computational principle was held to govern the extended limitation framework, and the Court followed the earlier view that the search year is included while computing the ten-year period.Conclusion: The notice under section 148 for Assessment Year 2014-15 was beyond the permissible ten-year period and was barred by limitation.Ratio Decidendi: For computing the extended ten-year period under Explanation 1 to section 153A, the assessment year relevant to the previous year in which search is conducted must be included in the reckoning, because the statute uses a different formula from the six-year block and that language must be given full effect.