Section 153C or Section 147? ITAT Delhi Clarifies Correct Route for Search Cases of ‘Other Person’ After 01.04.2021

1. Overview of the Ruling

In Kishor Kumar Aggarwal Vs ACIT (ITAT Delhi), the Delhi Bench of the Income Tax Appellate Tribunal examined whether proceedings initiated under Section 153C could validly continue where:

  • The search under section 132 took place before 01.04.2021, but
  • The books/documents seized were handed over to the Assessing Officer (AO) of the non‑searched assessee after 01.04.2021.

The Tribunal concluded that, for a person other than the one actually searched, the decisive date is the date on which the seized material is received by that assessee’s jurisdictional AO, in terms of the first proviso to section 153C(1). Since in this case the seized documents reached the assessee’s AO on 17.11.2022, the Tribunal held that the restriction introduced by section 153C(3) (effective from 01.04.2021) applied.

As a result, the Tribunal held that recourse should have been taken to section 147 / section 148, and not to section 153C. On this jurisdictional defect alone, both appeals were allowed and the additions themselves were left unexamined on merits.

2. Factual Matrix in Brief

2.1 Search Operation and Seized Material

A search under section 132 was carried out on 26.10.2020 in the cases of:

  • Sanjay Jain
  • Girdhari Lal Construction Pvt. Ltd.
  • Inderjit Mehata Constructions Pvt. Ltd.
  • BCC Cement Pvt. Ltd.
  • and their key persons

During this search, certain material was found and seized. Subsequently, the Revenue formed a view that some of this material belonged to, or related to, Kishor Kumar Aggarwal, who was not one of the searched persons.

2.2 Transfer of Documents and Initiation of Proceedings

  • The seized documents relevant to the assessee were received by his jurisdictional AO on 17.11.2022.
  • The AO recorded reasons / satisfaction and decided to initiate proceedings under section 153C on **19.06.2023`.
  • Assessments were completed under section 153C on **29.03.2024`.
  • The CIT(A) by orders dated 27.02.2026 upheld the impugned additions and partly allowed the appeals.

When the matter reached the Tribunal, the assessee concentrated on a pure legal challenge—namely, whether the AO had any authority to invoke section 153C in light of the post‑2021 amendment in section 153C(3).

3.1 Assessee’s Jurisdictional Challenge

The assessee argued that the search date in 2020 could not, by itself, determine the validity of proceedings initiated under section 153C after 01.04.2021 in the case of a non‑searched person.

Relying on the first proviso to section 153C(1), the assessee submitted:

  • For a person other than the searched person, the “search year” is tied to the date when the seized books/documents/assets are received by the AO having jurisdiction over such other person.
  • Here, the documents reached the jurisdictional AO on 17.11.2022, falling in FY 2022‑23, relevant to AY 2023‑24.

This timing became crucial because the Finance Act, 2021 introduced section 153C(3) with effect from 01.04.2021, which states that section 153C shall not apply to any search initiated or requisition made on or after **01.04.2021`. The assessee’s argument was:

Once the effective date for the ‘other person’ falls after 01.04.2021 as per the statutory scheme, the case is governed by section 153C(3), and hence, section 153C cannot be validly invoked. The only permissible route, if any, is under section 147 read with section 148, subject to satisfaction of all conditions.

3.2 Revenue’s Stand

The Department relied on the orders of the AO and the CIT(A) and defended the action under section 153C, implicitly treating the 2020 search as the relevant benchmark. No independent legal counter was successfully established that could alter the effect of the proviso to section 153C(1) combined with the new section 153C(3).

4.1 Determining the ‘Search Year’ for Non‑Searched Person

The Tribunal first noted that AY 2019‑20 under consideration clearly lay outside the span for which section 153C could now be pressed into service, once the correct legal position on the relevant date was applied.