Section 153C Limitation: Commencement Point Is Receipt of Seized Material by Jurisdictional AO — ITAT Delhi Dismisses Revenue's Appeals

Overview of the Dispute

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, recently pronounced a significant ruling in DCIT Vs Blue Bell Infosolutions Pvt Ltd, dismissing all three appeals filed by the Revenue for Assessment Years 2010-11, 2012-13, and 2015-16. The central question before the Tribunal was a jurisdictional one — specifically, from which date the limitation period under Section 153C of the Income-tax Act, 1961 must be computed when proceedings are initiated against a non-searched person.

The Tribunal affirmed the findings of the Commissioner of Income Tax (Appeals) [CIT(A)], holding that the assessment proceedings were barred by limitation, and that the Assessing Officer's assumption of jurisdiction was legally unsustainable in the facts and circumstances of the case.

Background and Factual Matrix

The Search and Subsequent Proceedings

A search operation was carried out on the Alankit Group and associated persons on 18 October 2019. Blue Bell Infosolutions Pvt Ltd, the assessee in the present case, was not among the searched persons but was subjected to proceedings under Section 153C of the Income-tax Act, 1961 as a non-searched entity.

The critical sequence of events is as follows:

  1. Search conducted on the Alankit Group — 18 October 2019
  2. Satisfaction note recorded by the AO of the searched person — 1 June 2022
  3. Seized books, documents, and assets handed over to the jurisdictional AO of the assessee (non-searched person) — subsequent to the satisfaction note
  4. Assessment completed under Section 144 read with Section 153C — 29 March 2024
  5. Income assessed — Rs. 19,75,946/-

Assessee's Position Before CIT(A)

The assessee challenged the validity of the assessment proceedings before the CIT(A), contending that the relevant Assessment Years fell entirely outside the permissible block period prescribed under Section 153C. The assessee argued that:

  • Where the escaped income is less than Rs. 50 lakh, a notice under Section 153C can be issued only for up to six Assessment Years counted backwards from the end of the Assessment Year relevant to the previous year in which the seized books of account, documents, or assets were received by the jurisdictional AO of the non-searched person.
  • The limitation clock does not start ticking from the date of the original search on the searched person's premises; instead, it commences from the date the jurisdictional AO of the non-searched person actually receives the seized material.

Issues Crystallised by CIT(A)

The CIT(A) distilled two distinct legal questions arising from the facts:

  1. What is the correct date for reckoning the six Assessment Years that can be opened for assessment or reassessment following a search or handing over of seized material to the AO of the non-searched person?
  2. Whether reassessment is permissible in the present case when the Assessment Years in question fall beyond six years but within ten years from the date of search or the date of handing over of seized material?

What Section 153C Provides