Search Assessment Year Counts Towards Section 153A Ten-Year Limit: ITAT Panaji

Salgaocar Mining Industries Private Limited Vs DCIT (ITAT Panaji)

Summary: The Panaji Bench “DB” of the Income Tax Appellate Tribunal, sitting as a virtual court, allowed the appeals of Salgaocar Mining Industries Private Limited and Salitho Ores Private Limited for Assessment Year 2008–09. The common order dated 8 September 2026 was passed by Accountant Member Manish Borad and Judicial Member Vinay Bhamore in ITA Nos. 301/PAN/2025 and 303/PAN/2025. The Tribunal held that the Assessing Officer lacked jurisdiction to issue the section 153A notice for AY 2008–09 because that year fell outside the ten-assessment-year limit calculated under Explanation 1 to section 153A(1). Salgaocar Mining Industries’ appeal was treated as the lead case, and the same decision was applied to Salitho Ores because the facts and issues were identical.

Salgaocar Mining Industries was engaged in iron ore mining. It filed its original return on 30 September 2008 declaring income of Rs.99,35,41,100. The scrutiny assessment under section 143(3), completed on 28 December 2010, determined income of Rs.1,53,28,46,068. The CIT(A) granted substantial relief, and the Revenue’s subsequent appeals before the Tribunal and High Court were dismissed. According to the common order, the order giving effect dated 16 December 2013 assessed total income at Rs.1,01,66,34,621. These earlier proceedings formed the background to the later search assessment, rather than the jurisdictional issue ultimately decided by the Tribunal.

A search and seizure action under section 132 took place on 27 July 2017. A notice under section 153A was issued on 28 August 2019, and the company filed a return on 11 September 2019 declaring income of Rs.99,45,65,010. The Assessing Officer relied on documents and evidence concerning overseas special purpose vehicles, including material relating to Suit No.821 of 2015 before the Singapore High Court. The Revenue alleged that iron ore was sold to British Virgin Islands entities at lower prices and subsequently sold to Chinese customers at higher prices, enabling profits to be retained offshore. It attributed control of these arrangements to the company’s late managing director, Anil Vasudev Salgaocar, with Darshan Jhaveri acting in relation to the overseas entities.

By the assessment order dated 18 June 2021 under section 153A read with section 143(3), the Assessing Officer determined total income at Rs.11,29,17,29,949. The order records an addition of Rs.10,27,50,95,328 on account of alleged under-invoicing of iron ore exports and also refers to Rs.1,01,66,34,621 sustained in the earlier assessment proceedings. The CIT(A)-2, Panaji, dismissed the company’s appeal on 29 July 2025. In the reasoning reproduced by the Tribunal, the CIT(A) relied on the offshore arrangements, statements, bank entries and the Singapore High Court’s decision dated 28 February 2023, reported as [2023] SGHC 47. Those conclusions concerning profit diversion and the corporate veil were findings of the lower authorities, not independent findings on merits by the Tribunal in this appeal.

The assessee challenged the search assessment on several grounds. Apart from the ten-year jurisdictional objection, it disputed the conditions for extending assessment beyond six years, ownership of the alleged overseas assets, the existence and location of incriminating material, the assessment-completion limitation, and the absence of a Document Identification Number in the assessment order. It also objected to reliance on statements without cross-examination, disputed the evidentiary basis and quantification of under-invoicing, and argued that the same income had already been assessed under the Black Money Act, 2015. Alternative grounds concerned business loss and the separate identity and tax liability of the foreign entities. The Tribunal took up grounds 3 and 4 first, with no objection from the Departmental Representative.

The decisive question was the meaning of “relevant assessment year” in Explanation 1 to section 153A(1). Section 153A(1)(b) refers to six assessment years immediately preceding the assessment year relevant to the previous year of search. The extended regime introduced by the Finance Act, 2017 also permits proceedings for specified older years, subject to the fourth proviso’s conditions, including evidence of escaped income represented in the form of an asset amounting, or likely to amount, to Rs.50 lakh or more, singly or in aggregate in the relevant years, and a search initiated on or after 1 April 2017. Explanation 1 defines the extended period by reference to ten assessment years “from the end of” the assessment year relevant to the previous year of search. The assessee maintained that the different statutory expressions required different computational starting points.

For the search on 27 July 2017, the relevant previous year was FY 2017–18 and the corresponding assessment year was AY 2018–19. The assessee submitted that 31 March 2019, the end of that assessment year, was the anchor point for counting the ten years backwards. Counting AY 2018–19 as the first year placed AY 2009–10 in the tenth position, leaving AY 2008–09 outside the permissible period. It relied on A.R. Safiullah v. ACIT, Jayantibhai Karamshibhai Maniya v. ITO, PCIT v. Ojjus Medicare Private Limited, R.B. Jewellers Private Limited v. Union of India, and DCIT v. Sai Kanaka Mahalakshmi Finance Private Limited. It also cited CIT v. Smt. Godavari Devi Saraf in support of following non-jurisdictional High Court authority where no jurisdictional High Court decision governed the issue.

The Revenue argued that the search assessment year should be excluded for both the six-year and ten-year computations. According to its written submissions, the Finance Act, 2017 intended a six-plus-four historical assessment block, and including the search assessment year would reduce the reach of the extended regime. It invoked the Notes on Clauses, legislative purpose, harmonious construction and an analogy with the forward-running limitation under section 149. It further submitted that the favourable High Court decisions were not binding jurisdictional rulings and relied on Bhavin Kishorebhai Zinzuwadia v. ACIT and Indian National Congress v. DCIT. These were the Revenue’s arguments for sustaining jurisdiction; the Tribunal did not accept its proposed computation.

In rejoinder, the assessee emphasised that the enacted provision contained the words “the end”, which were absent from the Notes on Clauses relied on by the Revenue. It argued that explanatory material could not displace the final statutory language and that backward calculation under section 153A and forward calculation under section 149 could use the same financial endpoint without conflict. It distinguished Indian National Congress and Bhavin Kishorebhai Zinzuwadia on the basis that the precise issue of different anchor points had not arisen for decision there. It referred to Nilay Desai v. DCIT and Ashish Khurana v. ACIT as later Gujarat High Court decisions following Jayantibhai Karamshibhai Maniya. Other authorities cited in this context concerned reading judicial observations in the setting of the actual question decided.

The Tribunal followed the Madras, Gujarat, Delhi and Calcutta High Court decisions and the Visakhapatnam Tribunal decision in Sai Kanaka Mahalakshmi Finance. It reproduced the reasoning in A.R. Safiullah that the statute prescribes one method for computing the six preceding assessment years and another for the ten-year outer limit. It also noted Jayantibhai Karamshibhai Maniya’s acceptance of that distinction, Ojjus Medicare’s approval of Safiullah, and the application of the limitation principle in R.B. Jewellers. Applying that reasoning to the present search, the Tribunal set out a ten-year chart beginning with AY 2018–19 and ending with AY 2009–10. AY 2008–09 was therefore outside the statutory block, and the Assessing Officer had no jurisdiction to issue the impugned section 153A notice.

The Tribunal declared the notice for AY 2008–09 bad in law, quashed the reassessment proceedings and the consequential assessment order dated 18 June 2021, and allowed grounds 3 and 4. Since the assessment had been quashed on that jurisdictional basis, the remaining grounds were treated as academic and were not adjudicated. The same conclusion applied mutatis mutandis to Salitho Ores Private Limited’s appeal, which was also allowed. The operative relief thus rests on the assessment year falling outside the permissible ten-year period; it does not constitute a merits determination accepting or rejecting the allegations of offshore profit diversion, the ownership of foreign assets, the DIN challenge, the cross-examination objection or the other unresolved grounds.

Cases Discussed

• Ashish Khurana v. ACIT — R/Special Civil Application No.3994 of 2026 (Gujarat High Court), 2026. Cited in the assessee’s rejoinder as following Jayantibhai Karamshibhai Maniya on the computation issue.
• Nilay Desai v. DCIT — R/Special Civil Application No.1093 of 2026 (Gujarat High Court), 2026. Cited in the rejoinder as a subsequent application of the Gujarat High Court’s interpretation.
• Jayantibhai Karamshibhai Maniya v. ITO — [2026] 182 taxmann.com 493 (Gujarat High Court), 5 January 2026. Followed for the distinct computation of the six-year and ten-year periods.
• Vaibhav Maruti Dombale v. Assistant Registrar, Income-tax Appellate Tribunal — [2025] 481 ITR 103 (Bombay High Court). Cited by the assessee for reading a precedent by reference to what it actually decides.
• Bhavin Kishorebhai Zinzuwadia v. ACIT — Special Civil Application No.22170 of 2019 (Gujarat High Court), 2 December 2024. Relied upon by the Revenue; the assessee distinguished the issue actually decided from the present anchor-point dispute.
• PCIT v. Ojjus Medicare Private Limited — [2024] 465 ITR 101 (Delhi High Court), 3 April 2024. Followed for its approval of the statutory ten-year computation explained in Safiullah.
• Indian National Congress v. DCIT — W.P.(C) No.4264/2024 with CM Nos.17433/2024 and 17435/2024 (Delhi High Court), 22 March 2024. Cited by the Revenue and distinguished in the assessee’s rejoinder on the question actually considered.
• CIT v. Brandix Mauritius Holdings Ltd. — [2024] 158 taxmann.com 247 (Supreme Court). Referred to in the reproduced CIT(A) reasoning concerning the DIN objection and an interim stay; the Tribunal did not adjudicate that objection.
• DCIT v. Sai Kanaka Mahalakshmi Finance Private Limited — [2023] 157 taxmann.com 816 (ITAT Visakhapatnam), 30 November 2023. Followed as a coordinate Bench decision quashing jurisdiction over AY 2008–09 for a search falling in AY 2018–19.
• R.B. Jewellers Private Limited v. Union of India — [2023] 157 taxmann.com 493; WPO No.438 of 2021 (Calcutta High Court), 28 November 2023. Followed for the application of Safiullah’s outer time limit; the order also notes its incriminating-material ground.
• CIT v. Jasjit Singh — [2023] 458 ITR 437 (Supreme Court). Mentioned in the assessee’s explanation of the section 153C issues arising in Bhavin Kishorebhai Zinzuwadia.
• PCIT v. Abhisar Buildwell (P.) Ltd. — [2023] 149 taxmann.com 399 (Supreme Court). Appears in the CIT(A)’s reasoning and the Tribunal’s discussion of R.B. Jewellers concerning incriminating material.
• Lakshmi Anil Salgaocar (suing as administratrix of the estate of Anil Vassudeva Salgaocar) and another v. Darsan Jitendra Jhaveri and others (Kwan Ka Yu Terence, third party) — [2023] SGHC 47; Suit No.821 of 2015 (Singapore High Court), 28 February 2023. The overseas-asset judgment was relied on by the CIT(A); the Tribunal disposed of these appeals on the Indian statutory jurisdictional issue.
• A.R. Safiullah v. ACIT — W.P.(MD) No.4327 of 2021 (Madras High Court), 24 March 2021. Followed for counting the ten-year period from the end of the search assessment year and applying the statutory outer limit strictly.
• Commissioner of Customs (Import), Mumbai v. Dilip Kumar and Company and others — (2018) 9 SCC 1 (Supreme Court). Cited within the reproduced Safiullah judgment concerning recourse to explanatory material when statutory language is clear.
• PCIT v. N.S. Software — [2018] 403 ITR 259 (Delhi High Court). Cited by the assessee before the CIT(A) in support of its objection concerning incriminating material found at another person’s premises.
• CIT v. Calcutta Knitwears — [2014] 362 ITR 673 (Supreme Court). Discussed in the assessee’s rejoinder while distinguishing the satisfaction-note issues in the Revenue’s authorities.
• GTC Industries Ltd. v. ACIT — 65 ITD 380 (ITAT Mumbai). Quoted in the CIT(A)’s reasoning on cross-examination and natural justice; this issue was not decided by the Tribunal in the present appeal.
• CIT v. Sudhir Jayantilal Mulji — [1995] 214 ITR 154 (Bombay High Court). Cited by the assessee for the proposition that a judgment is authority for what it decides.
• CIT v. Sun Engineering Works (P.) Ltd. — [1992] 198 ITR 297 (Supreme Court). Cited in the rejoinder against reading words or observations from a judgment outside their context.
• CIT v. Smt. Godavari Devi Saraf — [1978] 113 ITR 589 (Bombay High Court), 27 September 1977. Relied upon by the assessee on following a non-jurisdictional High Court decision in the absence of a jurisdictional ruling.