ITAT Delhi strikes down Section 153C proceedings where “relevant date” falls after 01.04.2021

1. Overview of the Decision

The Delhi Bench of the Income Tax Appellate Tribunal, in the case of Shivdham Buildtech Pvt. Ltd Vs JCIT, set aside assessment orders passed under Section 153C for Assessment Years (AYs) 2015-16, 2016-17 and 2017-18.

The Tribunal concluded that:

  • The very assumption of jurisdiction under Section 153C was invalid, because the relevant date for invoking Section 153C—i.e., the date of recording of satisfaction in the absence of proof of handing over of seized material—fell on 11.10.2022, which is after 01.04.2021; and
  • By virtue of Section 153C(3) (inserted by the Finance Act, 2021 with effect from 01.04.2021), the machinery under Section 153C is barred where the relevant date is on or after 01.04.2021;
  • For AYs 2015-16 and 2016-17, even otherwise, the assessments were beyond the permissible block of assessment years and hit by limitation.

Consequently, all three appeals filed by the assessee were allowed and the entire assessments framed under Section 153C read with Section 143(3) were quashed.

2. Core Question before the Tribunal

2.1 Primary jurisdictional issue

The central legal question was:

Whether, for a person other than the searched person, proceedings under Section 153C could be lawfully initiated when the relevant date—being the date of handing over of seized material to the Assessing Officer (AO) of such other person, or, in its absence, the date of recording of the satisfaction note—fell after 01.04.2021, in view of Section 153C(3)?

Closely linked to this, the Tribunal examined:

  • Whether the assessments for AYs 2015-16 and 2016-17 were outside the permissible six / ten years and therefore barred under the scheme of Section 153C; and
  • Whether the assessment for AY 2017-18, initiated by notice dated 14.10.2022 under Section 153C, was void on account of the Finance Act, 2021 amendments, requiring the Revenue instead to proceed under the reassessment provisions (Section 147/Section 148).

3. Factual Matrix

3.1 Search and seized material

  1. A search under Section 132 was carried out on Alankit Group on 18.10.2019, covering:

    • Shri Alok K Agarwal
    • Shri Ankit Agarwal
    • Alankit Limited
    • Alankit Assignments Limited
    • Certain connected persons and key employees

  2. During this search, some documents were stated to pertain to Shivdham Buildtech Pvt. Ltd (the assessee), who was not the person searched.

  3. For this “other person”, the AO recorded a satisfaction note under Section 153C on 11.10.2022.

  4. Based on this satisfaction note, a notice dated 14.10.2022 was issued to the assessee under Section 153C.

  5. Assessments were completed under Section 153C read with Section 143(3) for AYs 2015-16, 2016-17 and 2017-18.

The assessee challenged these assessments before the Commissioner of Income-tax (Appeals), but remained unsuccessful. Thereafter, appeals were filed before the ITAT Delhi.

At the Tribunal, the assessee raised additional legal grounds under Rule 11 of the Income Tax (Appellate Tribunal) Rules, challenging:

  • The very jurisdiction to issue notice under Section 153C dated 14.10.2022;
  • Applicability of the amended reassessment framework introduced by Finance Act, 2021; and
  • Limitation and availability of AYs covered by Section 153C.

The additional grounds were pure questions of law, requiring no fresh factual investigation. The Departmental Representative did not object to their admission.

Relying on NTPC Ltd. v. CIT (1998) 229 ITR 0383 (SC), the Tribunal admitted these additional grounds, as they went to the root of the matter—i.e., the validity of jurisdiction.

4.1 Relevant date for “other person”

Under the first proviso to Section 153C(1), in case of a person other than the searched person, the “date of search” for computing the block of assessment years and limitation is deemed to be the date on which:

  • The books of account, documents or assets seized or requisitioned are handed over to the AO having jurisdiction over such other person.

Courts have clarified that:

  • If the date of actual handing over of seized material is not traceable or not recorded, then the date of recording the satisfaction note in the case of the other person is to be treated as the relevant date.

This principle is firmly supported by:

  • PCIT v. Ojjus Medicare Pvt. Ltd. (Delhi High Court)
  • CIT v. Jasjit Singh (Supreme Court)

4.2 Insertion of Section 153C(3)

The Finance Act, 2021 overhauled the entire reassessment scheme. With effect from 01.04.2021:

  • Sections 147 to 151 were substituted with a new regime;
  • A new Section 153C(3) was inserted, which explicitly provides:

“(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.”

Read with the first proviso to Section 153C(1), courts and Tribunals have interpreted this to mean: