Delhi High Court strikes down reassessment notice for AY 2015-16 as time-barred under ten-year limit

Background of the writ petition

In Pankaj Jain Vs ACIT, the Delhi High Court examined the validity of a reassessment notice issued under Section 148 of the Income Tax Act 1961 for Assessment Year (AY) 2015–16. The impugned notice was dated 30.08.2024.

The assessee had also questioned the constitutional validity of Explanation 2 to Section 148, but during the course of hearing, the challenge was restricted solely to one core issue:

Whether the notice dated 30.08.2024 issued under Section 148 for AY 2015–16 was barred by limitation.

Counsel for the assessee relied on prior Delhi High Court authorities, particularly:

  • Dinesh Jindal v. Assistant Commissioner of Income Tax, Central Circle 20, Delhi & Others: Neutral Citation: 2024:DHC:4554-DB
  • The Pr. Commissioner of Income Tax – Central-1 v. Ojjus Medicare Pvt. Ltd : Neutral Citation : 2024:DHC:2629-DB

The Court focused exclusively on the limitation aspect and examined the interaction between Section 149, Section 153A, and Section 153C in the context of search-based reassessment initiated after 01.04.2021.

Reassessment after search conducted on or after 01.04.2021

The Court reaffirmed a key legal principle: where reassessment proceedings are traceable to a search initiated on or after 01.04.2021, the limitation has to be tested with reference to the pre–Finance Act, 2021 regime, by virtue of the First Proviso to Section 149(1).

In effect, even though the procedure in Section 153A and Section 153C has been rendered inapplicable prospectively for searches after 31.03.2021, the time-frame within which reassessment can be lawfully initiated must still satisfy the timelines that were embedded in:

  • Section 149
  • Section 153A
  • Section 153C

as they stood prior to 01.04.2021.

Role of Section 153C in the case of a non-searched person

Where the reassessment pertains to a person other than the searched person, the earlier scheme under Section 153C mandated that:

  • The Assessing Officer (AO) of the searched person must record a satisfaction that books of account, documents or assets seized during the search either:
    • belong to the other person (non-searched assessee), or
    • contain information related to such other person; and
  • The AO of the searched person must hand over such seized material to the AO having jurisdiction over the non-searched assessee.

Under that framework, the starting point for computing the block period of six or ten years in the case of a non-searched assessee was legally tied to the date on which the books/documents/assets were received by the AO of that other person, not the bare date of search.

This position stands consistently recognized and reinforced in several decisions, including:

  • SSP Aviation
  • RRJ Securities
  • CIT v. Jasjit Singh & Ors.: 2023 SCC OnLine SC 1265
  • Vikram Sujitkumar Bhatia
  • Ojjus Medicare Pvt. Ltd.

Ten-year block under Section 153A and Section 153C

The Court reiterated the earlier reasoning from Ojjus Medicare Pvt. Ltd on how the six-year and ten-year blocks are computed in the context of search assessments:

  1. For the six-year block:

    • One must identify the financial year in which the relevant event (search or deemed date under Section 153C) occurs.
    • Then determine the assessment year (AY) relevant to that previous year.
    • The six assessment years immediately preceding that relevant AY form the block.