Blue Water Enterprises Vs DCIT (ITAT Delhi)
Delhi ITAT Quashes ₹12.62 Crore Addition: Section 153C Limitation Runs From Date Seized Material Is Handed Over to AO of “Other Person”; 10-Year Period Cannot Apply Without Specific Satisfaction
The Delhi ITAT allowed the appeals of Blue Water Enterprises and quashed assessments made under Section 153C for AYs 2012-13 and 2013-14 as being barred by limitation.
A search u/s 132 was conducted in the Rakesh Jain Group on 02.11.2017. Documents relating to Blue Water Enterprises were subsequently found, and the AO of the assessee received the seized material and recorded satisfaction for initiating Section 153C proceedings on 10.08.2021. Based on the seized material, the AO alleged unexplained cash payments aggregating to about ₹12.62 crore for purchase of shops and made additions.
The Tribunal held that, in the case of a person other than the searched person, the relevant date for computing the six-year period u/s 153C is the date on which the seized documents/material are handed over to the AO of such other person. Since this occurred on 10.08.2021, falling in AY 2022-23, the six preceding assessment years were AYs 2016-17 to 2021-22. Consequently, AYs 2012-13 and 2013-14 fell outside the permissible six-year period. The ITAT relied upon the Supreme Court ruling in Jasjit Singh, Delhi High Court’s PCIT v. Ojjus Medicare Pvt. Ltd., and the very recent Delhi High Court ruling in PCIT v. Annex Infrarealty Pvt. Ltd., dated 28.07.2026.
Importantly, the Revenue alternatively argued that the assessments were saved by the extended 10-year period. The Tribunal rejected this contention. It held that invocation of the extended period required the AO to record the specific satisfaction contemplated by the fourth proviso to Section 153A(1) regarding escaped income of ₹50 lakh or more. No such satisfaction for extending the limitation from six to ten years had been recorded.
Accordingly, the Section 153C notices were held to be invalid and beyond limitation, and the consequential assessment orders were quashed. Once the jurisdictional ground succeeded, the Tribunal treated all other grounds—including those relating to the substantive additions-as academic. The identical ruling was applied to AY 2013-14, and both appeals were allowed.
Key takeaway: For a Section 153C assessment of a non-searched person, the six-year clock is linked to the handover/receipt of seized material by that person’s AO, and an old assessment year cannot be brought within the 10-year window merely because the alleged addition exceeds ₹50 lakh-specific statutory satisfaction for invoking that extended period must be recorded.
