Color Bar Cosmetics Pvt. Ltd. Vs DCIT (ITAT Delhi)
ACTUAL SEARCH WAS BEFORE SUNSET, BUT DEEMED SEARCH CAME TOO LATE—NOTICE u/s 153C & ₹1.70-CRORE PROTECTIVE ADDITION QUASHED
The Delhi ITAT has held that, for a person other than the searched person, the date on which seized material is handed over to his jurisdictional AO constitutes the deemed date of search. Where that date falls after 01.04.2021, the statutory bar contained in section 153C(3) applies & no notice can be issued u/s 153C, even though the actual search on the searched group occurred before the cut-off date. The notice & consequential assessment containing a protective addition of ₹1.70 crore were accordingly quashed.
Facts of the case
A search & seizure action u/s 132 was conducted on 03.02.2021 in the cases of Shri Samir Modi & Smt. Shivani Modi Group.
Certain material allegedly relating to Color Bar Cosmetics Pvt. Ltd. was found during that search. The Department therefore proposed to initiate proceedings against the assessee as a person other than the searched person.
The AO of the searched person recorded satisfaction u/s 153C on 03.11.2022. Thereafter, the jurisdictional AO of the assessee recorded his satisfaction on 04.11.2022.
Based upon these satisfaction notes, notice u/s 153C was issued to the assessee on 07.11.2022.
The assessment was completed u/s 153C r.w.s. 143(3) on 07.03.2024. As against the returned income of ₹30,51,78,810, the total income was determined at ₹32,21,78,810 after making a protective addition of ₹1.70 crore u/s 69.
The CIT(A) upheld the assessment & the addition by order dated 23.12.2025.
Challenges raised by the assessee
Before the ITAT, the assessee challenged the validity of the proceedings as well as the addition on merits.
It contended that the statutory conditions for assuming jurisdiction u/s 153C were not fulfilled, no incriminating material belonging or pertaining to it was found, the addition travelled beyond the permissible scope of section 153C & the protective addition contradicted the AO’s own findings regarding the alleged source of investment.
The assessee also alleged violation of natural justice because it was not permitted to cross-examine the person whose statement formed the basis of the adverse inference.
In addition, the assessee raised purely legal additional grounds challenging the notice in view of the first proviso to section 153C(1) r.w.s. 153C(3). Since these grounds went to the root of jurisdiction & arose from facts already on record, the Tribunal admitted them.
Actual search date v. deemed search date
The actual search upon the Modi Group was conducted on 03.02.2021, before the cut-off date of 01.04.2021.
However, the assessee argued that this was not the relevant date for proceedings against a person other than the searched person.
Under the first proviso to section 153C(1), references to the date of initiation of search in the relevant provisions are to be construed, in the case of such other person, as references to the date on which the seized books, documents or assets are received by his jurisdictional AO.
Thus, the date of handing over the seized material constitutes the deemed date of search for the other person.
The satisfaction note of the searched person’s AO was recorded on 03.11.2022, while the assessee’s AO recorded satisfaction on 04.11.2022. The seized material must necessarily have been handed over on or after 03.11.2022.
Accordingly, the deemed date of search in the assessee’s case clearly fell after 01.04.2021.
Statutory sunset under section 153C(3)
Section 153C(3) provides that section 153C shall not apply in relation to searches initiated u/s 132 or requisitions made u/s 132A after 31.03.2021.
The assessee contended that because its deemed date of search fell in November 2022, the old section 153C machinery was unavailable. If the Department considered that income had escaped assessment, it could proceed only under the reassessment provisions introduced by the Finance Act, 2021, subject to fulfilment of the applicable conditions.
Reliance was placed upon the Delhi High Court’s judgment in PCIT v. Ojjus Medicare Pvt. Ltd. [2024] 465 ITR 101 (Delhi), holding that the date of receipt of seized material by the other person’s AO is relevant for determining the commencement point.
The assessee also relied upon Harigovind v. ACIT [2025] 180 taxmann.com 197 (Mad), wherein the Madras High Court applied the deemed date principle & held that proceedings u/s 153C could not be initiated where that date fell after 01.04.2021.
ITAT quashes the notice & assessment
The Tribunal noted that the AO of the searched person recorded satisfaction on 03.11.2022 & the assessee’s AO recorded satisfaction on 04.11.2022. It could therefore safely be concluded that the seized material was handed over after 03.11.2022.
Following the jurisdictional Delhi High Court’s judgment in Ojjus Medicare, the ITAT held that the date of handing over seized material constituted the deemed date of search in the assessee’s case.
Since that date was unquestionably after 01.04.2021, section 153C(3) prohibited issuance of notice u/s 153C.
The Tribunal accordingly quashed the notice dated 07.11.2022 as well as the consequential assessment order dated 07.03.2024. The protective addition of ₹1.70 crore fell with the assessment itself.
Since the proceedings were quashed for want of jurisdiction, all remaining legal & factual grounds were treated as academic & left unadjudicated. The assessee’s appeal was allowed.
Author’s comments
This decision highlights the unusual dual-date mechanism under section 153C. The actual search date governs the searched person, but the receipt of seized material by the jurisdictional AO determines the deemed date for the other person.
Here, the search took place barely two months before the statutory sunset. Yet the seized material crossed over to the assessee’s AO only in November 2022. By then, the section 153C route had closed & the Department was required to travel, if at all, through section 148.
A protective addition may protect the Revenue on merits, but it cannot protect an assessment born under an unavailable provision. Once section 153C had set, ₹1.70 crore could not rise with it.
Cases Discussed
- PCIT v. Ojjus Medicare Pvt. Ltd. [2024] 465 ITR 101 (Delhi)
- Harigovind v. ACIT [2025] 180 taxmann.com 197 (Madras)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, DELHI BENCH
This appeal by the assessee is directed against the order dated 23.12.2025 of the Ld. Commissioner of Income Tax (Appeal)-, New Delhi-26, [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the assessment order dated 07.03.2024 passed under section 153C r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by the DCIT, Central Circle-14, New Delhi, (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Y.) 2019-20.
2. The Assessee has raised the following grounds of appeal:
“1. That on the facts and in law, the impugned assessment order dated 07.03.2024 passed u/s 153C r.w.s. 143(3) of the Income-tax Act, 1961 (“the Act”) for Assessment Year 2019-20, making an addition of Rs. 1,70,00,000/- (“First impugned order”), and the consequent order dated 23.12.2025 passed by the Learned Commissioner of Income-tax (Appeals)- 26 [“CIT(A)”] u/s 250(6) ofthe Act (“Second impugned order”), affirming the assessment order, are ex facie illegal, untenable, and bad in law.
2. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) has wrongly upheld the assessment framed u/s 153C of the Act vide order dated 07.03.2024, whereby the total income has been determined at Rs. 32,21,78,810/- as against the returned income of Rs. 30,51,78,810/-.
3. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the action of the Ld. AO in assuming jurisdiction u/s 153C of the Act was without satisfying the mandatory statutory conditions.
4. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) improperly sustained the protective addition of Rs. 1,70,00,000/- made by the Ld. AO, which is beyond the scope and ambit of assessment permissible u/s 153C of the Act and is therefore unsustainable in law.
5. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) wrongly affirmed the addition of Rs. 1,70,00,000/- in gross disregard of established jurisprudence regarding protective and substantive additions.
6. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the additions made by the Ld. AO were beyond the settled scope of jurisdiction u/s 153A r.w.s. 153C of the Act, when admittedly no incriminating material was found or seized from the premises of the appellant.
7. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) improperly sustained the additions made by the Ld. AO in gross violation of the principles of natural justice, without providing an opportunity of cross-examination of the person whose statement formed the basis of adverse inference against the appellant.
8. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) wrongly upheld the protective addition of Rs. 1,70,00,000/- u/s 69 of the Act, even though, as per the findings of the AO himself, the alleged unaccounted investments did not pertain to or belong to the appellant.
9. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) failed to appreciate that the protective addition of Rs. 1,70,00,000/- u/s 69 of the Act was contrary to the AO’s own findings regarding the source of the alleged unaccounted investment in the property.
10. That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) improperly sustained the initiation of penalty proceedings u/s 271AAC of the Act by the Ld. АO.
11.That on the facts and in the circumstances of the case and in law, the Ld. CIT(A) wrongly affirmed the levy of interest 234B, 234C, and 234D of the Act by the Ld. АО.
12. The aforesaid grounds of appeal are without prejudice to each other, and the appellant craves leave to add, amend, alter, vary, or withdraw any of the above grounds at or before the time of hearing.”
2.1 The Assessee has also raised the following additional grounds of appeal:
“ I. That the notice dated 07.11.2022 issued by the Ld. Assessing Officer under section 153C(1) of the Income-tax Act, 1961 is void ab initio for want of jurisdiction, as the date of initiation of search as per the first proviso to section 153C(1) is 03.11.2022, being the date of issuance of the satisfaction note, as held in PCIT vs. Ojjus Medicare (P.) Ltd. [2024] 465 ITR 101 (Delhi).
II. That the issuance of the impugned notice dated 07.11.2022 grossly contravenes section 153C(3) of the Act, rendering the said provision inapplicable in relation to searches initiated on or after 01.04.2021, read with the first proviso to section 153C(1) of the Act, as held in Harigovind vs. ACIT [2025] 180 taxmann.com 197 (Madras) and Smt. Geetanjali Bhayana vs. DCIT [2026] 183 taxmann.com 95 (Delhi – Trib.).
III. That section 153C of the Act, being a machinery provision, is to be construed so as to effectuate the object and purpose of the statute, and amendments brought therein with a cut-off date shall apply even to searches prior thereto.
IV. That on the facts and circumstances of the present case, the impugned assessment proceedings u/s.153C of the Act is void ab initio as separate satisfaction notes u/s.153C of the Act have not been prepared for each of the assessment years 201112 to 2021-2022 which itself would render the impugned proceedings void-ab initio vide DCIT vs. Sunil Kumar Sharma., [2024] 159taxmann.com 179 (Karnataka High Court).”
3. Brief facts are that the AO issued a notice dated 7.11.2022 u/s 153C of the Act pursuant to receipt of incriminating material found during the course of search conducted u/s 132 of the Act on 3.02.2021 on Sh. Samir Modi & Smt. Shivani Modi Group of cases. In this case, satisfaction note by the AO of the searched person was recorded on 3.11.2022 and by the AO of the assessee on 4.11.2022 after which the impugned notice dated 7.11.2022 u/s 153C was issued. Subsequently, assessment was completed on 7.3.2024. Vide order u/s 153C r.w.s. 143(3) after making an addition of Rs. 1,70,00,000/- at total assessed income of Rs. 32,21,78,810/-.
3.1 Aggrieved, the assessee preferred an appeal before the CIT(A), who dismissed the same vide order dated 23.12.2025. Further, aggrieved, the assessee is in appeal before the Tribunal. Additional grounds of appeal have been filed raising legal issues regarding validity of proceedings u/s 153C of the Act. Since the additional grounds are purely legal in nature. These are admitted after hearing both the parties.
4. Before us, Ld. AR has made elaborate arguments and filed written submissions with regard to the additional grounds. He has argued that the date of search in assessee’s case was the date of handing over of seized material (i.e. 4.11.2022) by the AO of the searched person to the AO of the assessee and that being after 1.4.2021, no notice u/s 153C could have been issued to the assessee, in view of provisions of section 153C(3) of the Act. Relevant extracts of the written submissions are reproduced as under:
“As per first proviso to Section 153C(1), the date of initiation of search u/s 132 or making requisition u/s132A in terms of second proviso to Sub Section (1) of Section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. As observed above, in the present case, the AO of the assessee has recorded the satisfaction on 04.11.2022 after taking the seized material thus the date of search in the case of appellant should be 04.11.2022. This view is supported by the judgement of Hon’ble Jurisdictional High Court in the case of Ojjus Medicare (P.) Ltd. (supra), the headnote reads as under:
“Section 153C of the Income-tax Act, 1961 – Search and seizure-Assessment of any or person (Block assessment) – Assessment years 2010-11 to 2013-14- Whether first proviso to section 153C, and which has been consistently recognized to also embody commencement point for reckoning six or ten assessment years’, shifts relevant date from date of initiation of search or a requisition made to date of receipt of books of account or documents and assets seized by jurisdictional Assessing Officer of non-searched person Held, yes – Whether furthermore where date of handing over of documents was not available, date of issuance of satisfaction Note by Assessing Officer under section 153C would be pertinent for purpose of First Proviso to section 153C- Held, yes – Whether significant difference between computation of relevant assessment year for identification of six assessment years and to construct a block of ten assessment years is that while six assessment years’ hinge upon phrase “immediately preceding” assessment year pertaining to search year, ten assessment years’ are liable to be computed or reckoned from end of assessment year relevant to year of search – Held, yes – Whether thus, in instant case where satisfaction note were issued between 1-4-2021 and 31-32022, relevant assessment year would be 2022-23 and assessment years’ 2010-11, 2011-12 and 2012-13 would clearly fall outside block period of ten assessment years as provided under section 153C read with section 153A-Held, yes [Paras 85, 86, 96 and 97] [In favour of assessee].”
Now coming to the sub-section (3) of section 153C of the Act which provides that provisions of section153C are not applicable to the search initiated on or after 1st day of April, 2021. Since in the present case, date of search is to be taken as 04.11.2022 i.e. the date when the satisfaction note was recorded by the AO of the assessee and, such date (04.11.2022) had fallen after 01.04.2021, therefore, as per sub-section (3) of section153C, provisions of section 153C would not be applicable and the initiation of proceedings u/s 153C and subsequent assessment order passed us/153C of the Act is invalid and without jurisdiction.
Consequently, in view of the statutory bar contained in section 153C(3), no proceedings under section 153C could have been initiated against the appellant. The Assessing Officer could have proceeded, if at all, only in accordance with the provisions of section 148 of the Act, as amended by the Finance Act, 2021.
In these facts and circumstances, it is respectfully submitted that the initiation of proceedings under section 153C and the consequent assessment order passed under section 153C of the Act are invalid, without jurisdiction, and liable to be quashed.”
4.1 Ld. AR has further relied upon various decisions of the coordinate benches in similar circumstances wherein proceedings u/s 153C were quashed in the light of the decision of the Hon’ble jurisdictional High Court in the case PCIT vs. Ojjus Medicare Pvt. Ltd. [2024] 405 ITR 101 (Del), and that of the Hon’ble Madras High Court in the case Harigovind vs. ACIT [2025] 180 taxmann.com 197 (Madras),
4.2 Ld. DR, on the other hand, has strongly relied on the orders of the lower authorities.
5. We have heard the rival submissions and perused the material available on record. Admittedly, the satisfaction was recorded by the AO of the searched person on 3.11.2022 pursuant to which the AO of the assessee recorded his satisfaction u/s 153C on 4.11.2022. It can, therefore, be safely concluded that the seized material was handed over after 3.11.2022. In view of the decision of the Hon’ble Jurisdictional High Court in the case of Ojjus Medicare (supra), the deemed date of search in case of the assessee is the date of handing over of seized material which is clearly after 1.4.2021. Therefore, in view of provisions of subsection (3) of section 153C, no notice could have been issued to the assessee after 1.4.2021 as has also been held by the Hon’ble Madras High Court in the case of Harigovind vs. ACIT (supra).
Accordingly, we hereby quash the notice u/s 153C dated 7.11.2022 and the consequent assessment order dated 7.3.2024.
5.1 Since the proceedings have been quashed, other legal and factual grounds are rendered academic in nature and hence need no adjudication.
6. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 09.09.2026
