Case Law Details
Umapathy Srinivasa Gowda Vs DCIT (ITAT Bangalore)
Section 153C Proceedings Invalid Where Deemed Date of Search for ‘Other Person’ Falls After 1-4-2021; ITAT Bangalore Quashes Assessments
The Income Tax Appellate Tribunal (ITAT), Bangalore Bench, disposed of seven appeals filed by Shri Umapathy Srinivasa Gowda relating to Assessment Years (AYs) 2013-14 to 2019-20 arising from assessment orders passed under Section 153C of the Income-tax Act, 1961 pursuant to search proceedings. Since the appeals involved common issues and arguments, they were heard together and decided through a common order.
The assessee, an individual engaged in the film business as a producer, did not file a return for AY 2013-14. Following a search under Section 132 conducted on 3 January 2019 in the cases of Shri T. Vijayakumar, Shri C.R. Manohar and others, and a connected search at the residence of Shri Sanjeev Sudeep, incriminating material relating to the assessee was found and seized. After the Assessing Officer of the searched person recorded satisfaction and forwarded the material, a notice under Section 153C dated 6 December 2021 was issued to the assessee. The assessee filed returns in response, notices under Section 143(2) were issued, and assessments under Section 153C were completed. For AY 2013-14, the returned income of ₹7,08,670 was assessed at ₹15,80,904, resulting in an addition of ₹8,72,230. Assessments for AYs 2014-15 to 2019-20 were also completed under Section 153C on 31 March 2023.
Before the Commissioner of Income-tax (Appeals), the assessee challenged the validity of the proceedings, contending that the assumption of jurisdiction under Section 153C was invalid, statutory notices and sanctions were defective, satisfaction under Sections 153A and 153C was improperly recorded, the search was contrary to Section 132, the notice under Section 153C was barred by limitation, and the assessment violated principles of natural justice as copies of relied-upon material were not furnished and cross-examination was not permitted. The CIT(A) rejected these contentions and upheld the validity of the proceedings under Section 153C.
The assessee also challenged various additions and disallowances. For AYs 2013-14 to 2016-17, expenditure disallowances of ₹9,16,673, ₹16,34,911, ₹14,30,793 and ₹19,47,586 respectively were confirmed. The CIT(A) also upheld additions under Section 69 of ₹35,00,000 for AY 2015-16 and ₹3,66,01,597 for AY 2016-17 after holding that the assessee failed to explain credits and cash deposits in bank accounts or produce supporting documents. Appeals for all years were dismissed by appellate orders dated 27 November 2025.
Before the Tribunal, the principal legal issue was whether the notices issued under Section 153C after insertion of Section 153C(3) with effect from 1 April 2021 were without jurisdiction. The assessee argued that although the search on the searched persons was conducted on 3 January 2019, the satisfaction in his case was recorded only on 26 November 2021 and notice under Section 153C was issued on 6 December 2021. According to the assessee, for an “other person” covered by Section 153C, the relevant date is the date on which the Assessing Officer having jurisdiction over such person receives the seized material and records satisfaction. Since this date fell after 1 April 2021, Section 153C(3), introduced by the Finance Act, 2021, barred initiation of proceedings under Section 153C.
The assessee relied upon Smt. Geetanjali Bhayana v. DCIT, Harigovind v. Assistant Commissioner of Income Tax (Non-Corporate), Shanmugasundaram Manoharan v. DYCIT, and the Supreme Court decision in CIT v. Jasjit Singh, submitting that these authorities held that for an “other person” the relevant date is the date on which the Assessing Officer receives the seized material and records satisfaction.
The Department contended that Section 153C, as amended by the Finance Act, 2017, linked jurisdiction to the previous year in which the search was conducted and that the expression “search is conducted” referred to the actual search under Section 132 and not to the later recording of satisfaction. It argued that Section 153C(3) referred only to the original search initiated under Section 132 or requisition under Section 132A and therefore did not apply merely because satisfaction in the case of the “other person” was recorded after 1 April 2021. The Department also submitted that since the Assessing Officer of both the searched person and the assessee was the same, there was constructive receipt of the seized material and no separate physical transmission was necessary. Reliance was placed on Super Malls (P.) Ltd. v. Principal Commissioner of Income Tax.
The Tribunal examined the statutory framework comprising Section 153C(1), the first proviso to Section 153C(1), and Section 153C(3). It observed that Section 153C(1) provides the mechanism for assessment of the “other person”, while the first proviso deems the date of initiation of search, for such person, to be the date on which the seized books of account, documents or assets are received by the Assessing Officer having jurisdiction over that person. It further noted that Section 153C(3), inserted by the Finance Act, 2021 with effect from 1 April 2021, provides that Section 153C does not apply to searches initiated on or after that date and that the legislative scheme after the Finance Act, 2021 shifted searches initiated on or after 1 April 2021 to the reassessment regime under Sections 147, 148 and 148A.
The Tribunal considered the Revenue’s submission that the deeming fiction was confined only to computation of the block assessment period but observed that the scope of the deeming provision had already been settled. It referred to Commissioner of Income-tax-7 v. RRJ Securities Ltd., SSP Aviation Ltd. v. DCIT, and CIT v. Ojjus Medicare (P.) Ltd., which explained that for an “other person” the relevant assessment years are reckoned from the date on which the seized material is received by the Assessing Officer having jurisdiction over such person.
The Tribunal further noted that the application of this deeming provision to the sunset clause in Section 153C(3) had been accepted in Harigovind v. ACIT (Non-Corporate), where the Madras High Court held that there cannot be two different dates of initiation of search and that if the deemed date of receipt of seized material falls after 1 April 2021, Section 153C(3) renders Section 153C inapplicable even though the search on the third party had taken place before the cut-off date. The Tribunal also referred to Smt. Geetanjali Bhayana v. DCIT, Abhisar Estates, and decisions of the Chennai Bench adopting the same view.
The Tribunal observed that the Department could not point to any High Court or Tribunal decision taking a contrary view that, for an “other person”, the actual date of search on the searched person governs the operation of Section 153C(3). It held that the Revenue’s reliance on the principle restricting legal fictions was unsupported by judicial authority and inconsistent with the statutory language providing the deemed date of initiation.
Applying these principles, the Tribunal found that satisfaction in the assessee’s case was recorded on 26 November 2021, after 1 April 2021. Accordingly, for the purposes of Section 153C, the deemed date relevant to the assessee fell after the cut-off date prescribed in Section 153C(3). The Tribunal held that the proceedings initiated under Section 153C were without jurisdiction and that the consequential assessment orders could not be sustained. Since the proceedings themselves were held to be invalid, the remaining grounds relating to additions and disallowances were treated as academic and were not adjudicated. All seven appeals were allowed.
Cases Discussed
- Smt. Geetanjali Bhayana v. DCIT, [2026] 183 taxmann.com 95 [Delhi]
- Harigovind v. ACIT (Non-Corporate) (Madras HC), 2025 LiveLaw (Mad) 492 [2025] 180 taxmann.com 197 (Madras)/[2026] 308 Taxman 188 (Madras)/[2026] 485 ITR 509 (Madras) [28-10-2025]
- Shri Harigovind & Another v. Assistant Commissioner of Income Tax & Others (Madras HC), W.P. Nos. 23014 of 2023 and connected matters, [2025] 180 taxmann.com 197 (Madras)/[2026] 308 Taxman 188 (Madras)/[2026] 485 ITR 509 (Madras) [28-10-2025]
- CIT v. Ojjus Medicare (P.) Ltd. (Delhi HC), TS-5183-HC-2024(Del) [2024] 161 taxmann.com 160 (Delhi)/[2024] 465 ITR 101 (Delhi) [03-04-2024]
- CIT v. Jasjit Singh (SC), [2023] 155 taxmann.com 155 [SC]
- Super Malls (P.) Ltd. vs. Principal Commissioner of Income Tax, 8 New Delhi (SC), [2020] 115 taxmann.com 105 (SC)
- Commissioner of Income-tax-7 vs. RRJ Securities Ltd. (Delhi HC), [2015] 62 taxmann.com 391 (Delhi)/[2016] 380 ITR 612 (Delhi)/[2016] 282 CTR 321 (Delhi) [30-10-2015]
- SP Aviation Ltd. v. DCIT (Delhi HC), [2012] 20 taxmann.com 214 (Delhi)/[2012] 207 Taxman 260 (Delhi)/[2012] 346 ITR 177 (Delhi)/[2012] 252 CTR 291 (Delhi) [29-03-2012]
- CIT v. Mother India Refrigeration Industries (P.) Ltd. (SC), (1985) 155 ITR 711 (SC)
- State of Bombay v. Pandurang Vinayak (SC), AIR 1953 SC 244
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