DCIT Vs Maxxfun Buildmart Pvt Ltd. (ITAT Delhi)
Section 153C Block Period Must Be Reckoned from Receipt of Seized Material by Non-Searched Person’s AO; AY 2010-11 Notice Quashed
A search was conducted on the Alankit Group and connected persons on 18 October 2019. Based on documents allegedly pertaining to the assessee, a non-searched entity, the assessee’s AO recorded satisfaction on 27 June 2022 and issued notice under section 153C on 29 June 2022 for AY 2010-11.
The AO alleged that the assessee had undertaken sham transactions of ₹85 lakh against unaccounted cash. He made an addition of ₹85 lakh under section 68 and a further addition of ₹2.55 lakh, representing 3% commission, under section 69C.
The CIT(A) annulled the assessment by following the Delhi High Court’s decision in PCIT v. Ojjus Medicare Pvt. Ltd., holding that AY 2010-11 fell beyond the maximum ten-year period available under sections 153C and 153A. The Revenue challenged this decision before the ITAT.
The Tribunal held that, for a non-searched person, the First Proviso to section 153C creates a legal fiction under which the six-year or ten-year block period must be computed with reference to the date on which the seized books, documents or assets are received by the jurisdictional AO of that person—not from the date of the original search.
Since the satisfaction was recorded and seized material received in FY 2022-23, the corresponding assessment year for computing the block was AY 2023-24. Consequently, AY 2010-11 fell beyond the permissible ten-year period.
Accordingly, the ITAT held that the section 153C notice and consequential assessment were void ab initio. The CIT(A)’s annulment of the assessment, including the additions of ₹85 lakh and ₹2.55 lakh, was upheld, and the Revenue’s appeal was dismissed.
List of Cases Discussed / Relied Upon
- The Principal Commissioner of Income Tax Central-I, v. Ojjus Medicare Pvt. Ltd. — Delhi High Court, ITA 52/2024, judgment pronounced on 03.04.2024, (2024) 465 ITR 101 (Del-HC).
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal is directed against the impugned order dated 24.11.2025 (wrongly mentioned as 06.03.2026 in Form-36) passed in appeal No CIT(A), Delhi- 29/10129/2009-10 by the Id. Commissioner of Income Tax(Appeals), Delhi (hereinafter referred to as the “CIT(A) u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2010-11, wherein Id CIT(A) has allowed assessee’s appeal and annulled the impugned assessment order dated 05.03.2024 passed u/s 153C r.w.s. 153A of the Act in pursuance of notice dated 29.06.2022 for A.Y. 2010-11 being beyond the block period of 10 years. Delay if any, stands condoned.
2.(i) According to the brief facts, the assessee is a non filer, the proceedings u/s 153C of the Act were initiated against the assessee on the basis of search carried out on the Alankit Group, Shri Alok K. Agarwal, his son Ankit Agarwal and some of the close associates and key employees of Shri Alok K. Agarwal on 18.10.2019. During the course of search and seizure, some incriminating documents were found in the name of assessee. Notice dated 29.06.2022 u/s 153C of the Act was issued against the assessee requiring it to file return within 30 days. The assessee filed its return of income for the year under consideration on 12.07.2022 at nil income.
(ii) Statutory notices u/s 143(2) and 142(1) of the Act were issued and served upon the assessee. Assessee raised objection on 11.12.2023 against the notice u/s 153C of the Act, contending that the proceedings u/s 153C could not be undertaken since assessing officer did not record any satisfaction note. However, the objections of assessee were disposed of by observing that the satisfaction note dated 27.06.2022 was recorded by the Assessing Officer of the assessee. The assessing officer further observed that assessee has undertaken bogus/ sham transactions of Rs. 85,00,000/- in lieu of unaccounted cash & added u/s 68 of the Act and further added Rs. 2,55,000/- as commission @ 3% of Rs. 85,00,000/- in the total income of the assessee, vide, assessment order dated 05.03.2024 passed u/s 153C of the Act.
3. Aggrieved, assessee filed an appeal before Id CIT(A), who followed the decision dated 03.04.2024 passed by the Delhi High Court in The Principal Commissioner of Income Tax Central-I, v. Ojjus Medicare Pvt. Ltd., (2024) 465 ITR 101 (Del-HC) and held that the impugned assessment order dated 05.03.2024 passed u/s 153C r.w.s. 153A of the Act in pursuance of notice dated 29.06.2022 for the present A.Y. 2010-11, is bad and allowed assessee’s appeal.
4. Aggrieved, revenue has preferred this second appeal on the following grounds:
“1. Whether the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the Addition of Rs.85,00,000/- made u/s 68 of the Income Tax Act.
2. Whether the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the Addition of Rs. 2,55,000/- made u/s 69C of the Income Tax Act.
3. Whether the computation of the block period under Sections 153C and 153A of the Income Tax Act, as interpreted by the Hon’ble High Court in the case of Ojjus Medicare Pvt. Ltd., aligns with the legislative intent and procedural flexibility outlined in CBDT Circular No. 2/2018 dated 15 February 2018.
4. Whether on the facts and under the circumstances of the case and in law, the Hon’ble High Court was justified in holding that block periods for assessment u/s 153C of the Income-tax Act, 1961, have to be calculated from the date of receipt of the books of accounts, documents or assets seized, by the jurisdictional AO of the non-searched person, even when the position of law is clarified after the amendment introduced by Finance Act, 2017, that the block period of 6AYs and 10AYs as mentioned in Section 153C and Section 153A have same meaning and have to be calculated from the “assessment year relevant to the previous year in which search is conducted”?”
5. Perused the records. Heard Id CIT(DR) for the appellant revenue and Id representative for the respondent assessee.
6. The main point for determination on the basis of grounds raised under appeal is as to whether Id CIT(A) has erred in deleting the additions of Rs. 85,00,000/- made on account of unaccounted cash u/s 68 and Rs. 2,55,000/- made on account of 3% commission of Rs. 85,00,000/- u/s 69C of the Act, ignoring the true legislative intent in reckoning 10 years block period and also ignoring CBDT Circular No. 2/2018 dated 15.02.2018?
7. Ld CIT(DR) for the appellant revenue has submitted that the impugned additions made by the assessing officer were based on the accommodation entries and were in accordance with the true legislative intent and CBDT Circular No. 2/2018 dated 15.02.2018. Prays to allow revenue’s appeal.
8. Ld AR has submitted that the notice u/s 153C was issued on 29.06.2022, which relates to the financial year 2022-23, pertaining to the A.Y. 2023-24. The present case of A.Y. 2010-11 under consideration is beyond the 10 years block period. The assessment order passed in consequence thereof is void ab initio. Ld AR supports the impugned order.
9. The issue in hand is no more res integra. Hon’ble Delhi High Court in Ojjus Medicare Pvt Ltd (supra) has held as under:
“29. The relevant portions of the Explanatory Notes to the provisions of the 2017 Amending Act, as set out in Circular No. 2/2018 are set out hereinbelow:
“Explanatory Notes to the provisions of the Finance Act, 2017
“80. Rationalisation of provisions of the Income Declaration Scheme, 2016 and consequential amendment to section 153A and 153C
… 80.4 However, in order to protect the interest of the revenue in cases where tangible evidence(s) are found during a search or seizure operation (including section 132A cases) and the same is represented in the form of undisclosed investment in any asset, section 153A of the Income-tax Act relating to search assessments has been amended to provide that notice under the said section can be issued for an assessment year or years beyond the sixth assessment year already provided up to the tenth assessment year if-
(i) the Assessing Officer has in his possession books of accounts or other documents or evidence which reveal that the income which has escaped assessment amounts to or is likely to amount to fifty lakh rupees or more in one year or in aggregate in the relevant four assessment years(falling beyond the sixth year);
(ii) such income escaping assessment is represented in the form of asset;
(iii) the income escaping assessment or part thereof relates to such year or years.
80.5 Applicability: The amended provisions of section 153A of the Income-tax Act shall apply where search under section 132 of the Income-tax Act is initiated or requisition under section 132A of the Income-tax Act is made on or after the 1st day of April 2017.
80.6 Section 153C of the Income-tax Act has also been amended to provide a reference to the relevant assessment year or years as referred to in section 153A of the Income-tax Act.
80.7 Applicability: These amendments take effect from 1st April.”
119. We thus record our conclusions as follows:
A. Prior to the insertion of Sections 153A, 153B and 153C, an assessment in respect of search cases was regulated by Chapter XIVB of the Act, comprising of Sections 158B to 158B1 and which embodied the concept of a block assessment. A block assessment in search cases undertaken in terms of the provisions placed in Chapter XIVB was ordained to be undertaken simultaneously and parallelly to a regular assessment. Contrary to the scheme underlying Chapter XIVB, Sections 153A, 153B and 153C contemplate a merger of regular assessments with those that may be triggered by a search. On a search being undertaken in terms of Section 153A, the jurisdictional AO is enabled to initiate an assessment or reassessment, as the case may be, in respect of the six AYs’ immediately preceding the AY relevant to the year of search as also in respect of the “relevant assessment year”, an expression which stands defined by Explanation 1 to Section 153A. Of equal significance is the introduction of the concept of abatement of all pending assessments as a consequence of which curtains come down on regular assessments.
B. Both Sections 153A and 153C embody non-obstante clauses and are in express terms ordained to override Sections 139, 147 to 149, 151 and 153 of the Act. By virtue of the 2017 Amending Act, significant amendments came to be introduced in Section 153A. These included, inter alia, the search assessment block being enlarged to ten AYs’ consequent to the addition of the stipulation of “relevant assessment year” and which was defined to mean those years which would fall beyond the six year block period but not later than ten AYs’. The block period for search assessment thus came to be enlarged to stretch up to ten AYs’. The 2017 Amending Act also put in place certain prerequisite conditions which would have to inevitably be shown to be satisfied before the search assessment could stretch to the “relevant assessment year”. The preconditions include the prescription of income having escaped assessment and represented in the form of an asset amounting to or “likely to amount to” INR 50 lakhs or more in the “relevant assessment year” or in aggregate in the “relevant assessment years”.
C. Section 153C, on the other hand, pertains to the non-searched entity and in respect of whom any material, books of accounts or documents may have been seized and were found to belong to or pertain to a person other than the searched person. As in the case of Section 153A, Section 153C was also to apply to all searches that may have been undertaken between the period 01 June 2003 to 31 March 2021. In terms of that provision, the AO stands similarly empowered to undertake and initiate an assessment in respect of a non-searched entity for the six AYs’ as well as for “the relevant assessment year”. The AYs’, which would consequently be thrown open for assessment or reassessment under Section 153C follows lines pari materia with Section 153A.
D. The First Proviso to Section 153C introduces a legal fiction on the basis of which the commencement date for computation of the six year or the ten year block is deemed to be the date of receipt of books of accounts by the jurisdictional AO. The identification of the starting block for the purposes of computation of the six and the ten year period is governed by the First Proviso to Section 153C, which significantly shifts the reference point spoken of in Section 153A(1), while defining the point from which the period of the “relevant assessment year” is to be calculated, to the date of receipt of the books of accounts, documents or assets seized by the jurisdictional AO of the non searched person. The shift of the relevant date in the case of a non-searched person being regulated by the First Proviso of Section 153C(1) is an issue which is no longer res integra and stands authoritatively settled by virtue of the decisions of this Court in SSP Aviation and RRJ Securities as well as the decision of the Supreme Court in Jasjit Singh. The aforesaid legal position also stood reiterated by the Supreme Court in Vikram Sujitkumar Bhatia. The submission of the respondents, therefore, that the block periods would have to be reckoned with reference to the date of search can neither be countenanced nor accepted.
E. The reckoning of the six AYs’ would require one to firstly identify the FY in which the search was undertaken and which would lead to the ascertainment of the AY relevant to the previous year of search. The block of six AYs’ would consequently be those which immediately precede the AY relevant to the year of search. In the case of a search assessment undertaken in terms of Section 153C, the solitary distinction would be that the previous year of search would stand substituted by the date or the year in which the books of accounts or documents and assets seized are handed over to the jurisdictional AO as opposed to the year of search which constitutes the basis for an assessment under Section 153A.
F. While the identification and computation of the six AYs’ hinges upon the phrase “immediately preceding the assessment year relevant to the previous year” of search, the ten year period would have to be reckoned from the 31st day of March of the AY relevant to the year of search. This, since undisputedly, Explanation 1 of Section 153A requires us to reckon it “from the end of the assessment year”. This distinction would have to necessarily be acknowledged in light of the statute having consciously adopted the phraseology “immediately preceding” when it be in relation to the six year period and employing the expression “from the end of the assessment year” while speaking of the ten year block.
G. Insofar as the thresholds put in place by virtue of the Fourth Proviso to Section 153A are concerned and the argument of the writ petitioners of the condition of INR 50 lakhs being an unwavering precondition, we find ourselves unable to sustain that submission bearing in mind the indubitable fact that proceedings for search assessment commence upon the issuance of a notice and the AO at that stage having really not had the occasion to undertake a detailed or in depth examination of the evidence collected or come to a definitive opinion with respect to the total income which may have escaped assessment. Since the computation and assessment of income that is likely to have escaped assessment would at this stage be provisional, it would be incorrect to strike down initiation of action on a mere ex facie examination of the Satisfaction Note. We also in this regard bear in mind the Fourth Proviso using the expression “amounts to or is likely to amount”. The usage of the phrase “likely to” is indicative of the Legislature being conscious of the provisional character of the opinion that the AO may have formed at that stage.
H. However, and at the same time, even if the identified asset at that stage be quantified as less than INR 50 lakhs, the AO must for reasons to be duly recorded, be of the opinion that the ultimate computation of escaped income is likely to exceed INR 50 lakhs. The aforesaid satisfaction would have to be based on an assessment of the material gathered and the potentiality of the same being indicative of the escaped assessment exceeding INR 50 lakhs. The formation of opinion in this respect would have to be based not on mere ipse dixit but reflective of a fair assessment of the quantum of income likely to have escaped assessment as distinct from mere speculation and conjecture.
I. We further hold that since the precondition of INR 50 lakhs or more constitutes a sine qua non for initiating action for the extended ten year block, the aforesaid satisfaction and the reasons in support thereof would have to borne out from the Satisfaction Note itself. We are also of the opinion that the precondition of INR 50 lakhs is not liable to be viewed as being the qualifying criteria for each “relevant assessment year” that may be thrown open and that the said condition would stand satisfied if the escaped income cumulatively or in the aggregate meets the minimum benchmark of INR 50 lakhs.
J. The contention of finality and closure addressed with respect to AYs’ 2010-11 and 2011-12 on the basis of the statutory timeframes prescribed for assessment or reassessment and as those provisions stood prior to 01 April 2017 is misconceived, since it proceeds on the assumption that once the period of assessment or reassessment were to come to an end, it would inevitably lead to the creation of a vested right in favour of the assessee. The aforesaid argument proceeds on the incorrect premise of the reassessment provisions controlling or cabining the power conferred by Sections 153A and 153C. Acceptance of the aforesaid contention would amount to ignoring the plain and evident intent of the Legislature for Sections 153A and 153C operating above and beyond the reassessment powers.
K. The submission of closure and finality also fails to bear in consideration the indubitable fact that a search is an eventuality which is inherently unpredictable, a circumstance which would defy prophecy and it consequently being wholly irrational to read the time frames pertaining to reassessment as regulating or controlling the period within which an assessment predicated on that event may be initiated. It would be wholly illogical to conceive of a connection between the statutory time frames which are otherwise embodied in the Act and search assessments. In fact the acceptance of this submission would amount to virtually erasing the non obstante clause contained in Sections 153A and 153C.
L. The legislative intent of those provisions having retroactive application is clearly evidenced from the statue declaring that they would apply to all searches conducted between 31 May 2003 to 31 March 2021, and the Fourth Proviso in unambiguous terms extending the applicability of those provisions to all searches conducted post 01 April 2017 and Sections 153A and 153C superseding the provisions for reassessment, otherwise appearing in the Act.
M. The argument of closure also fails to take note of the accepted distinction between the liability to tax under the Act and the right to assess and enforce a liability created pursuant thereto. While a statute may denude an authority of the power to enforce a liability and in that limited sense conferring finality upon an assessment, the said position would prevail only till such time as that halo of impregnability is not statutorily removed. As was eloquently observed by the Supreme Court, the deprivation of a power to enforce would not lead to the creation of a vested right. As was pertinently observed, the liability to the State exists and operates de hors a consideration of time and in the absence of the statute itself imposing a time limit. The only limitations which are introduced while enacting Sections 153A and 153C was of the period within which the search had been conducted.
L. DISPOSTIF
120. In view of the aforesaid discussion, the writ petitions placed in Lists I and II and pertaining to AYs’ 2010-11, 2011-12, 2012-13 and 2013-14, all of which fall beyond the maximum ten year block period shall stand allowed. The impugned notices pertaining to the aforenoted AYs’ shall consequently stand quashed.
121. From the petitions placed in List III, we allow WP(C) Nos. 400/2024, 384/2024 and 383/2024 since the impugned notices pertain to AYs’ 2010-11, 2011-12 and 2012-13 and thus beyond the maximum block of ten years. However, WP (C) 694/2024 pertains to AY 2016-17 which would fall within the eighth year of the “relevant assessment year”. The asset which is spoken of in the impugned notice is valued at INR 25,20,000. While we allow the said writ petition and quash the impugned notice, we accord liberty to the AO to examine whether the income which has allegedly escaped assessment is likely to amount to INR 50 lakhs or more in light of the principles enunciated in this judgment. In case the AO comes to conclude that the initiation of action would meet the prerequisites placed by virtue of the Fourth Proviso to Section 153A as interpreted by us, it would be open to it to commence proceedings afresh if otherwise permissible in law. All other rights and contentions of the petitioner assessee are kept open.
122. ITA 52/2024 shall for reasons aforenoted stand dismissed.
123. All pending applications shall stand disposed of.”
10. Hon’ble Delhi High Court, vide para 29 onwards, also considered the relevant portions of the explanatory notes to the provisions of the 2017, Amending Act, as set out in Circular No. 02/2018 dated 15.02.2018. In the instant case, the said escaped income is above INR 50 lakhs. The commencement date for computation of 10 years shall be the date of receipt of books of accounts of the non-searched person by the jurisdictional Assessing Officer by virtue of legal fiction introduced in the first proviso to section 153C of the Act. As per assessee’s synopsis, the notice dated 29.06.2022 was issued to the assessee (non-searched person) after recording satisfaction by assessee’s AO on 27.06.2022 on receipt of books of accounts of assessee. In such circumstances, the F.Y. shall be the year 2022-23 and the relevant A.Y. shall be A.Y. 2023-24 for reckoning the 10 years period. The notice dated 29.06.2022 issued u/s 153C of the Act for the A.Y 2010-11 would surely fall beyond the ambit of ten A.Ys as provided u/s 153C r.w.s. 153A of the Act. Respectfully following Ojjus Medicare Pvt Ltd (supra), the impugned assessment order dated 05.03.2024 passed u/s 153C of the Act for the year under consideration (A.Y. 2010-11) in pursuance of notice dated 29.06.2022, being beyond the period of 10 years, is void ab initio. Thus, Id CIT(A) has rightly annulled the assessment order passed in pursuance thereof. The impugned order is thus sustained and the aforesaid point is accordingly determined in negative against the revenue and in favour of the respondent assessee.
11. In the result, the revenue’s appeal is dismissed.
Order pronounced in the Open Court on- 18.08.2026
