Deemed Search After 1 April 2021 Invalidates Section 153C Notice: ITAT Delhi

By CA Vijayakumar Shetty Income Tax Judiciary September 30, 2026

TaxGuru Citation: 2026 taxguru.in 14307
Case Name: BSC Paints Pvt. Ltd. Vs DCIT (ITAT Delhi)
Appeal Number: Only available for paid members
Date of Judgement/Order: Only available for paid members
Related Assessment Year: 2019-20
Courts: All ITAT, ITAT Delhi

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BSC Paints Pvt. Ltd. Vs DCIT (ITAT Delhi)

Seized Material Reached Other Person’s AO After 1 April 2021: Section 153C Notices Quashed Despite Earlier Search

For proceedings against a person who was not searched, the relevant date can be the date on which the seized material is handed over to that person’s Assessing Officer. Applying the Delhi High Court rulings in Ojjus Medicare and Harigovind, the Delhi ITAT quashed Section 153C notices issued to BSC Paints Pvt. Ltd. for AYs 2019–20 and 2020–21. The search on the third party had taken place before 1 April 2021, but the evidence before the Tribunal did not establish that the material had reached the assessee’s AO before that date.

The decision in BSC Paints Pvt. Ltd. v. DCIT, ITA Nos. 2824 and 2825/Del/2025, was pronounced on 29 September 2026. It turns on the deemed date of search for the “other person” and the restriction in Section 153C(3).

Search in October 2020, Notice in December 2022

The assessee company had originally filed its return for AY 2019–20 declaring income of ₹11,31,580. An assessment under Section 143(3) accepted that income. Subsequently, the Department conducted a search on 26 October 2020 in the case of Sanjay Jain and others. Alleging that BSC Paints was a beneficiary of bogus purchases from entities connected with the searched persons, the Department initiated proceedings against the company under Section 153C.

The assessee’s case was transferred to Central Circle 30, New Delhi, by an order under Section 127 dated 22 December 2022. A Section 153C notice followed on 30 December 2022, and the AO passed assessments on 29 March 2023. The CIT(A) upheld the assessments. Before the Tribunal, the assessee challenged the jurisdiction to issue the notices as well as the additions on merits.

The Legal Objection: When Did the “Other Person’s” Search Begin?

The assessee argued that, although the physical search on Sanjay Jain had taken place in October 2020, the statutory reference point for BSC Paints as an “other person” was the handing over of the seized material to its jurisdictional AO. It relied on the Delhi High Court’s decision in PCIT v. Ojjus Medicare Pvt. Ltd., [2024] 465 ITR 101 (Delhi), concerning the deemed search date under the first proviso to Section 153C(1).

The assessee further relied on Harigovind v. ACIT, [2025] 180 taxmann.com 197, for the effect of Section 153C(3) where the deemed date falls on or after 1 April 2021. Its case was that the material could have been handed over to the relevant AO only after the transfer of jurisdiction on 22 December 2022. On that footing, the Section 153C notice issued eight days later was outside the provision’s permitted reach.

The satisfaction note produced before the Tribunal was undated. This made proof of the actual date of handing over particularly important.

Revenue Relied on the 2020 Search Date

The Department contended that the search itself was conducted before 1 April 2021, and therefore the Section 153C proceedings remained valid. The DR furnished an AO’s report containing transaction details and a copy of the assessee’s ledger account.

The Tribunal noted, however, that the report did not provide the relevant date of handing over of the seized material. The Department was given an opportunity to establish that the deemed search date for the assessee fell before 1 April 2021, but it did not produce the necessary documents.

Tribunal’s Finding

The ITAT considered the chronology decisive. BSC Paints’ case came under the Central Circle’s jurisdiction through the 22 December 2022 transfer order. The Section 153C notice was issued on 30 December 2022 on the basis of an undated satisfaction note. In the absence of records demonstrating an earlier handover, the Tribunal held that it could be safely presumed that the material had not been handed over before 1 April 2021 for initiating Section 153C proceedings.

Following Ojjus Medicare and Harigovind, the Tribunal held the notices invalid and liable to be quashed. The facts and legal issue were identical for AY 2020–21, so the same decision applied to that appeal. Both assessee appeals succeeded.

The assessee had also raised objections about the DIN and approval under Section 153D, but its counsel expressly did not press those grounds. The Tribunal did not examine the other legal grounds or the merits of the disputed purchase additions once it quashed the Section 153C proceedings.

Author’s Comment

The case shows why the date of the original search alone may be insufficient in proceedings against a person other than the searched person. The file must establish when the seized material was handed over to the AO having jurisdiction over that other person. A satisfaction note without a date, coupled with a much later jurisdiction transfer and notice, can leave the Department unable to establish a date essential to its case.

The order does not decide whether BSC Paints’ purchases were genuine. Its conclusion is jurisdictional: on the record produced, the Revenue could not demonstrate a pre-1 April 2021 deemed search date for this assessee. For similar disputes, the satisfaction notes, material transfer records, Section 127 order and Section 153C notice should be read together in chronological order.

Cases Discussed

PCIT Vs Ojjus Medicare Pvt. Ltd., [2024] 465 ITR 101 (Delhi High Court) — Relied upon. The Delhi High Court ruling was applied for the proposition that, in the case of an “other person”, the date of search is the date of handing over of seized material under the proviso to Section 153C(1).
Harigovind Vs ACIT, [2025] 180 taxmann.com 197 (Madras High Court) — Relied upon. Applied for the proposition that no notice under Section 153C could be issued where the deemed date of search falls after 1 April 2021 in view of Section 153C(3).

FULL TEXT OF THE ORDER OF ITAT DELHI

These two appeals by the assessee are directed against the orders dated 28.02.2025 of the Ld. Commissioner of Income Tax (Appeals)-30, New Delhi [hereinafter referred to as the ‘Ld. CIT(A)] arising out of the assessment orders dated 29.03.2023 passed under section 153C r.w.s. 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) by Assessing Officer, DCIT, CC-30, New Delhi (hereinafter referred to as the ‘AO’) pertaining to Assessment Year (A.Ys.) 2019-20 and 2020-21 respectively. Due to common facts and circumstances involved, both the appeals are being disposed of vide a common order.

2. The grounds of appeal in ITA No. 2824/Del/2025 for A.Y. 2020-21 filed by the assessee are reproduced as under:

“1. On the facts and circumstances of the case and in law, the notice u/s 153C issued by the assessing officer is bad-in-law, barred by limitation and without jurisdiction and, therefore, the said notice along with the assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.

2. On the facts and circumstances of the case and in law, the notice u/s 153C issued by the assessing officer is illegal and without jurisdiction. The assessing officer has not complied with the provisions of section 153C and other allied provisions for issuance of such notice. Accordingly, the notice u/s 153C along with the assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.

3. On the facts and circumstances of the case and in law, the satisfaction note(s) recorded u/s 153C of the Act are bad-in-law and without jurisdiction and, accordingly, the assessment proceedings initiated on the foundation of such satisfaction note(s) and also the consequent assessment order passed are liable to be quashed and CIT(A) erred in not holding so.

4. On the facts and circumstances of the case and in law, the addition of Rs. 2,99,37,891/- made by the assessing officer on account of disallowance of purchases u/s 37 of the Act, is beyond the scope/jurisdiction of provisions of section 153C read with section 153A of the Income Tax Act, 1961 and CIT(A) erred in not holding so.

5. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition made by the assessing officer of Rs. 2,99,37,891/- on account of disallowance of purchases u/s 37 of the Act.

6. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is non-est as it does not have DIN on the body of the assessment order and CIT(A) erred in not holding so.

7. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 153D of the Income Tax Act, 1961 and CIT(A) erred in not holding so.

2.1 The grounds of appeal in ITA No. – 2825/Del/2025 filed by the assessee are reproduced as under:

4. On the facts and circumstances of the case and in law, the addition of Rs. 2,61,30,000/- made by the assessing officer on account of disallowance of purchases u/s 37 of the Act, is beyond the scope/jurisdiction of provisions of section 153C read with section 153A of the Income Tax Act, 1961 and CIT(A) erred in not holding so.

5. On the facts and circumstances of the case and in law, the ld. CIT(A) erred in confirming the addition made by the assessing officer of Rs. 2,61,30,000/- on account of disallowance of purchases u/s 37 of the Act.

2.2 The assessee has raised the additional grounds of appeal which are reproduced below:

2. On the facts and circumstances of the case and in law, the notice u/s 153C issued by the assessing officer is illegal and without jurisdiction. The assessing officer has not complied with the provisions of section 153C and other allied provisions for issuance of such notice. Accordingly, the notice /s 153C along with the assessment order passed on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so.

4. On the facts and circumstances of the case and in law, the assessment order passed by the assessing officer is contrary to the provisions of section 153D of the Income Tax Act, 1961 and CIT(A) erred in not holding so.”

3. As the grounds of appeal and facts involved are identical, both the appeals are being disposed off by a common order and A.Y. 2019-20, (ITA No.- 2824/Del/2025) is taken as the lead case.

3.1 Brief facts are that the company had filed its original return for A.Y. 2019-20 declaring income of Rs. 11,31,580/-. An order u/s 143(3) was passed accepting assessee’s returned income. Subsequently, a search action u/s 132 of the Act was conducted on Sh. Sanjay Jain, an entry operator and his associates and beneficiaries on 26.10.2020. Since, the assessee was one of the beneficiaries, having made bogus purchases of Rs. 3,83,20,500/- from these entities, its case was also centralised and proceedings u/s 153C were initiated. A notice u/s 153C was issued on 30.12.2022 pursuant to which assessment was finalised at an income of Rs. 2,72,61,580/- vide order dated 29.03.2023.

Aggrieved, the assessee preferred an appeal before the CIT(A), who dismissed the appeal vide his order dated 28.02.2025.

Further, aggrieved, the assessee has filed present appeal before the Tribunal.

3.2 As the additional grounds raised by the assessee are purely legal in nature, after hearing both the parties, these are hereby admitted, in view of settled position of law in this regard. We, first, take up the legal grounds relating to validity of section 153C proceedings.

4. Before us, the Ld. AR has, at the outset, submitted that Ground no. 6 & 7 pertaining to DIN and 153D are not being pressed. With regard to the remaining legal grounds, it has been submitted by him that the notice u/s 153C was issued on 30.12.2022, and the proceedings initiated after 1.4.2021 are invalid and liable to be quashed.

In support of his contentions, the Ld. AR has placed on record, the following documents:

(i) Copy of the Satisfaction Note recorded by the AO of the searched person which is undated.

(ii) Copy of notice issued u/s 153C for A.Y. 2019-20 dated 30.12.2022.

Ld. AR has argued that though the satisfaction note is undated, it is clear from the assessment order that the assessee’s case was centralized vide order u/s 127 dated 22.12.2022, with the present AO and, therefore, the handing order of seized material and recording of satisfaction u/s 153C would have taken place only after 22.12.2022.

Ld. AR has further placed reliance on the decision of the Hon’ble jurisdictional High Court in the case of PCIT vs. Ojjus Medicare Pvt. Ltd. (2024) 465 ITR 101 (Del.), wherein it has been affirmed that the date of search in the case of ‘other person’ is the date of handing over of seized material as per the proviso of sub-section (1) of section 153C of the Act.

Further, in the case of Harigovind vs. ACIT (2025) 180 taxmann.com 197, it has been held that no notice u/s 153C could be issued if the date of deemed search is after 1.4.2021, in view of provision of section 153C(3) of the Act. Accordingly, Ld. AR has argued that the order u/s 153C dated 30.12.2022 is invalid in view of the factual matrix of the case and in the light of legal position as above.

4.1 Ld. DR, on the other hand, argued that the date of search being before 1.4.2021, the proceedings have been validly initiated. He filed, a written submission enclosing a report of the AO, wherein only the details of transactions and a copy of the ledger account of assessee have been furnished and no comments on the relevant dates of handing over of seized material etc. have been furnished.

5. We have heard the rival submissions and perused the material available on record. We note that pursuant to the search conducted on 26.10.2020, case of the assessee, being a beneficiary, was centralized with Central Circle 30, New Delhi vide order u/s 127 dated 22.12.2022.

Thereafter, notice u/s 153C was issued on 30.12.2022 based on satisfaction recorded by the AO, which is undated. In view of the fact, that the AO acquired the jurisdictional over the case of the assessee on or after 22.12.2022, it can be safely presumed that the condition of handing over of seized material before 1.4.2021 was not satisfied in the instant case for initiating proceedings u/s 153C of the Act.

Further, Ld. DR was given an opportunity to controvert the above factual position but he could not bring requisite documents to prove his contentions regarding the date of deemed search being prior to 1.4.2021.

5.1 In view of above facts and circumstances, the provisions of section 153C and the judicial pronouncements in the case of Ojjus Medicare (supra) and Harigovind (supra), we hold that the notice u/s 153C dated 30.12.2022 was invalid and hence the same is liable to be quashed. Since the proceedings u/s 153C have been quashed, rest of the legal and factual grounds are rendered academic and hence not being adjudicated upon.

6. In the result, appeal of the assessee is allowed.

7. In ITA No. 2825/Del/2025 for 2020-21, issues involved and the facts and circumstances are identical and hence above order shall apply mutatis mutandis to this appeal also.

Order pronounced in the open court on 29.09.2026