B.H. Trading Vs DCIT (ITAT Delhi)
Delhi ITAT: Section 153C Cannot Be Invoked Where “Search” of Other Person Is Deemed Initiated After 1 April 2021 – Notice and Assessment Quashed
A search under Section 132 was conducted on the Sushil Goel Group on 30.01.2020. During the search, an image recovered from the mobile phone of Sanjay Goel contained certain transaction details in which the assessee B.H. Trading was referred to as “BH.” Sanjay Goel subsequently identified “BH” as B.H. Trading Company. Based on the seized material, the AO recorded satisfaction under Section 153C on 04.02.2022 and issued notice under Section 153C on 04.04.2022.
The assessee challenged the very jurisdiction under Section 153C. It argued that, following the Supreme Court decision in CIT v. Jasjit Singh, in the case of a person other than the searched person, the relevant date for Section 153C is not necessarily the original date of search but the date when the seized material is handed over/satisfaction is recorded for the other person. Here, that event occurred only on 04.02.2022, i.e. after 1 April 2021.
The Tribunal noted that the material facts were undisputed: although the original search took place on 30.01.2020, the satisfaction in the assessee’s case was recorded only on 04.02.2022, and the Section 153C notice was issued on 04.04.2022.
The ITAT relied upon the Supreme Court’s ruling in Jasjit Singh that, for an “other person” under Section 153C, the relevant date for reckoning the search period is linked to the handing over of the seized material to the AO having jurisdiction over such other person, rather than mechanically relating it back to the date of the original search.
More importantly, the Tribunal followed the Madras High Court decision in Harigovind v. ACIT, which, after considering Jasjit Singh, held that Section 153C does not apply where the search in the case of the “other person”, determined on this basis, is initiated on or after 01.04.2021. In such cases, the reassessment has to proceed under the post-2021 reassessment regime rather than Section 153C.
Accordingly, the ITAT held that the Section 153C notice dated 04.04.2022 was without jurisdiction and quashed both the notice and the consequential assessment. All other grounds became academic. The same ruling was applied mutatis mutandis to Baboo Ram Hari Chand, and both appeals were allowed.
Key takeaway: For an “other person” covered by Section 153C, the crucial date is the deemed date of initiation of search determined with reference to handing over of seized material/satisfaction—not merely the date of search on the searched person. If that relevant date falls on or after 1 April 2021, Section 153C cannot be invoked; proceedings must conform to the post-2021 reassessment regime.
Cases Discussed:
- B.H. Trading Co. (ITAT Delhi), ITA No. 3601/Del/2025 (AY 2020-21)
- Baboo Ram Hari Chand vs. DCIT (ITAT Delhi), ITA No. 3602/Del/2025 (AY 2020-21)
- Harigovvind vs. ACIT (Madras HC), 485 ITR 509 (Madras)
- CIT vs. Jasjit Singh (Supreme Court), 458 ITR 437 (SC)
FULL TEXT OF THE ORDER OF ITAT DELHI
These appeals filed by the different Assessees are directed against the respective orders of the Ld. First Appellate Authority relevant to assessment year 2020-21. Since common issue have been raised in both the appeals, hence, the appeals were heard together and are being disposed of by this common order for the sake of convenience by dealing with facts of ITA No. 3601/Del/2021 (AY 2020-21) – B.H. TRADING CO. Assessee by Sh. Pratap Gupta, CA Department by Dr. Rajinder Kaur, CIT(DR)
2. At the outset, Ld. Counsel for the assessee argued that Ld. CIT(A) erred in confirming the action of the AO in assuming jurisdiction for framing assessment u/s. 153C of the Income Tax Act, 1961 (hereinafter referred as Act) which is bad in law, illegal and against the facts and circumstances of the case.
3. The brief facts of the case are that assessee filed its original return of income on 23.12.2020. A search operation was conducted on Shri Sushil Goel and group on 30.1.2020. During the search operation Shri Sushil Goel and his family were found involved in the business of sale and purchase of foreign currency as well as his group persons and entities operated hawala operating networks on domestic as well as international levels. They assisted various people in arranging hawala/ telegraphic transfers for all types and in many countries particularly in Dubai, Middle East, China and Hong Kong. During the course of search and seizure action on Sushil Goel group of cases, an image was found from the mobile of Sh. Sanjay Goel in which some amounts were mentioned. The amounts were the purchase/ commission paid amounts from certain parties. In this image the name of the assessee firm is reflecting as ‘BH’. During the course of the post search proceedings Sh. Sanjay Goel in his statement dated 31.01.2020 has identified the beneficiary of transaction ‘BH’ as BH Trading Company. In his statement Sh. Sanjay Goel has also accepted that ‘from BH companies we buy tobacco’. The Assessing Officer after going through the contents of incriminating documents recorded satisfaction note dated 04.02.2022 and issued notice under section 153C of the Act on 04.04.2022 requiring the assessee to file return of income for relevant assessment year 2020-21 and in response to the same, the assessee filed the return of income on 20.02.2023. According to the Ld. Counsel for the Assessee as per first proviso to section 153C, the period of six assessment years relevant for issuance of notice u/s. 153C would be reckoned from the date of recording of satisfaction note in the case of the person other than the person searched in view of the decision of the Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh reported in 458 ITR 437 (SC) wherein search conducted at 3rd party premises and seized material were handed over, the date of handing over of the seized material was to be construed as date of initiation of search action, the other person in terms of provisions of section 153C of the Act. It was further argued that in the present case the satisfaction note in terms of section 153C was recorded on 4.2.2022 which falls in FY 2021-22 and as such the block of six years would be counted from FY 2021-22. Accordingly, the FY 2015-16 to 2020-21 /AYrs 2016-17 to 2021-22 would fall within the block of six years. However, the block of seven years from AYs 2014-15 to 2020- 21 has been taken for assessment u/s. 153C. Ld. Counsel further argued that as there is amendment in the provisions of sub-section 3 of section 153C whereby as per first proviso there is a bar for invoking the provisions of section 153C of the Act with effect from 1 April 2021 thus, the the AO issued notice u/s. 153C of the Act is bad in law whereas assessment should have been framed u/s. 148 read with section 143(3) of the Act. For this proposition, Ld. Counsel for the assessee relied on the decision of the CIT vs. Jasjit Singh (Supra) and the also the decision of the Hon’ble Madras High Court in the case of Harigovvind vs. ACIT 485 ITR 509 (Madras).
4. When these facts were confronted to the Ld. CIT (DR) she could not controvert the above fact situation, but she relied on the assessment order and the order of the learned CIT.
5. We have heard the rival contentions and gone through the facts and circumstance of the case. We noted that the search was conducted on Sushil Goel group of cases under Section 132 of the Act on 30.01.2020. In the present case satisfaction note was recorded by the AO of searched person and of the assessee on 4.2.2022 i.e. after 1.4.2021 and notice u/s. 153C was issued on 4.4.2022 i.e. for non existing provision of section 153C read with section 153A. There is no dispute about these facts. Admittedly, assessment was also framed by the AO of the assessee u/s. 153C of the Act for the assessment year 2020-21 on 31.3.2023. The above proposition is very clear and squarely covered by the decision of the Hon’ble Supreme Court in the case of Jasjit Singh that when initiation of search capacity in the case of other person other than the searched person. The Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh held that searched in the other person other than the searched person is to be considered to have been initiated when the seized material was handed over to the assessee’s AO and satisfaction note was not drawn. Hon’ble Supreme Court of India in the case of CIT vs. Jasjit Singh (supra) observed as under:-
“9. It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under section 153C was enacted. The revenue argued that the proviso [to Section 153©(1)] is confined in its application to the question of abatement.
10. This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the AO seized of the materials – of the search party, under section 132 – would take his own time to forward the papers and materials belonging to the third party, to the concerned AO. In that even if the date would virtually “relate back” as is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is disproportionate. For instance, if the papers are in fact assigned under section 153C after a period of four years, the third party assessee’s prejudice in writ large as it would have to virtually preserve the records for at least 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of section 153-C supports the interpretation which this Court adopts.
6. Further, Hon’ble Madras High Court in the case of Harigovind vs. ACIT (Supra) has considered this issue and held that in case where search is initiated after 1st April 2021 the provisions of section 153C will not apply and assessment can only be framed in terms of section 148 of the Act. Hon’ble Madras High Court considered decision of Honorable Supreme Court in the case of CIT versus Jasjit Singh (supra) and has held as under:-
47. A reading of the above shows that the Hon’ble Apex Court had rejected the contention of the respondent and hence, it is clear that the first proviso to Sub-Section (1) of Section 153C is not only for the purpose of abatement but also for all other purposes, viz., initiation of search for other person in terms of section 153C(3) of the Act. In such case, the date of initiation of search for the petitioner is the date, on which the documents were handed over to the JAO of the petitioner, i.e., 25.11.2022 is the date of initiation of search for the petition.
48. In terms of Sub-Section (3) of Section 3 of Section 153C, the provision of Section 153C will not apply for any search, which is initiated on or after 1.4.2021.
49. As stated above, in this case, the date of handing over of seized material to the petitioner’s JAO is on 25.11.2022 And the said date is the date of initiation of search for the petitioner. Thus, in the present case, it is crystal clear like cloudless sky that the initiation of search was subsequent to 1.4.2021, for which, the provisions of section 153C will not apply. Therefore, the impugned notices dated 7.2.2023 is unsustainable and the same were issued without authority and against the provisions of sub-section (3) of Section 153C of the Act.
50. In such view of the matter, all the impugned notices are liable be quashed and accordingly, all the impugned notices dated 7.2.2023 issued by the 2nd respondent are quashed.”
7. As the issues are covered, in the present case notice under section 153C of the Act dated 4.4.2022 is without jurisdiction and hence the same is quashed and its consequent assessment is also quashed. As regards other pleadings are concerned the same have become academic. Resultantly, the ITA No. 3601/Del/2025 (AY 2020-21) in respect of BH Trading Co. is allowed
8. As regards ITA no. 3602/Del/2025 (AY 2020-21) in respect of Baboo Ram Hari Chand vs. DCIT is concerned, our decision taken in ITA No. 3601/Del/2002 as aforesaid, will apply mutatis mutandis to this appeal also. Accordingly, on similar lines, as aforesaid, the ITA No. 3602/Del/2025 is also allowed.
9. In the result, both the appeals of the assessees are allowed in the aforesaid manner.
Order pronounced in the Open Court on 14-08-2026.
