ITAT Ahmedabad Holds Section 153C Assessment Time-Barred: ₹4 Crore Addition and Penalty Annulled

1. Background of the Dispute

The Ahmedabad Bench “C” of the Income Tax Appellate Tribunal in DCIT vs Falguni Suryakant Thakar (IT(SS)A No. 94/Ahd/2025; ITA No. 1563/Ahd/2025 & CO No. 87/Ahd/2025, order dated 30.12.2025, AY 2009-10) dealt with a crucial jurisdictional issue under Section 153C of the Income Tax Act 1961.

The controversy stemmed from a search conducted on 06.03.2018 under Section 132 in the SSS (Satyam–Sangani–Shaligram) Group. During this search, a laptop belonging to one of the key persons of the group allegedly contained a ledger entry indicating that the assessee had purportedly made a cash payment of ₹4 crore for acquiring a flat (unit A2 in the project “Satyam Santossa Greenland Phase A-B”).

Relying on this seized digital record, the Revenue initiated proceedings against the assessee, invoked Section 153C, completed an ex-parte assessment for AY 2009-10, and made an addition of ₹4 crore under Section 69 as unexplained investment. A penalty of ₹1,34,49,260 was also levied under Section 271(1)(c).

The core question before the Tribunal was whether the very assumption of jurisdiction under Section 153C for AY 2009-10 was valid, particularly in light of the limitation scheme as amended by the Finance Act 2017, and the judicial interpretation of the expression “relevant assessment year” for a person other than the one searched.

2. Key Facts and Chronology

2.1 Status of the Assessee and Return Filing

  • The assessee is an individual.
  • No original return of income under Section 139 was filed for AY 2009-10.

2.2 Search in SSS Group and Seizure of Material

  • A search under Section 132 took place on 06.03.2018 in the SSS (Satyam, Sangani, Shaligram) Group.
  • From the laptop of Shri Viral Patel (alleged key person handling cash transactions of M/s. Satyam Developers Ltd.), a ledger was found purportedly reflecting cash investment of ₹4 crore by the assessee for the above-mentioned unit.

2.3 Satisfaction and Initiation of Section 153C Proceedings

The following sequence of events is critical:

  1. 18.02.2021 – The Assessing Officer (AO) of the searched person recorded satisfaction that certain seized material “related to” or “pertained to” the assessee.
  2. 10.11.2021 – The jurisdictional AO of the assessee (non-searched person) recorded his own satisfaction for initiating proceedings under Section 153C for AYs 2008-09 to 2017-18.
  3. 15.11.2021 – Notices under Section 153C were issued to the assessee.

The assessment order, however, did not specify the exact date on which the seized material was received by the AO of the assessee.

2.4 Ex-parte Assessment and Penalty

  • The assessee did not file the return in response to the Section 153C notice.
  • Notices under Section 142(1) were issued but remained uncomplied.
  • A final show cause notice dated 24.12.2021 was also not responded to.
  • An ex-parte assessment under Section 144 read with Section 153C was completed for AY 2009-10, making an addition of ₹4 crore under Section 69 as unexplained investment.
  • Penalty proceedings under Section 271(1)(c) were initiated and culminated in a penalty order dated 27.06.2022 imposing ₹1,34,49,260.

3. Findings of the CIT(A): Jurisdiction under Section 153C Fails

The assessee challenged the very initiation of proceedings under Section 153C for AY 2009-10 before the CIT(A). The CIT(A) examined the legal framework post Finance Act 2017 and, through a detailed analysis, concluded that the notice under Section 153C dated 15.11.2021 was barred by limitation for AY 2009-10.

3.1 Interplay of Section 153A and Section 153C

  • Section 153C operates in tandem with Section 153A.
  • Under Section 153A(1)(a), notice can be issued for six assessment years and the “relevant assessment year” as defined.
  • The fourth proviso to Section 153A(1), inserted by the Finance Act 2017 w.e.f.