ITAT Cancels Section 153C Proceedings as Amended Law Barred Jurisdiction

Shivdham Buildtech Pvt. Ltd Vs JCIT (ITAT Delhi)

Summary : The ITAT Delhi allowed all three appeals after holding that the assessment proceedings initiated under Section 153C were without jurisdiction. The Tribunal observed that where the date of handing over seized material to the Assessing Officer of the other person is unavailable, the date of recording the satisfaction note becomes the relevant date for determining jurisdiction. Since the satisfaction note was recorded on 11.10.2022, after the Finance Act, 2021 amendments became effective from 01.04.2021, proceedings under the unamended Section 153C could not be sustained. For AYs 2015-16 and 2016-17, the Tribunal further held that the assessments were beyond the statutory limitation and therefore invalid. With respect to AY 2017-18, it ruled that the notice issued under Section 153C and the consequent assessment order were legally unsustainable for want of jurisdiction, relying on judicial precedents interpreting the amended provisions. Consequently, the Tribunal quashed all the impugned assessment orders and allowed the assessee’s appeals, reaffirming that jurisdiction under Section 153C must strictly comply with the amended statutory framework.

Core Issue. The principal issue before the Tribunal was whether proceedings under section 153C could validly be initiated against a person other than the searched person when the relevant date under the first proviso to section 153C(1), namely the date of handing over of the seized material or, in its absence, the date of recording of satisfaction, fell after 01.04.2021. The Tribunal also examined whether the assessments for AYs 2015-16 and 2016-17 were beyond the permissible assessment years and barred by limitation under section 153C.

Facts. A search under section 132 was conducted on the Alankit Group on 18.10.2019. During the course of search, certain documents allegedly pertaining to the assessee-company were stated to have been seized. Proceedings under section 153C were initiated against the assessee by issuing notice dated 14.10.2022 after the satisfaction note was recorded on 11.10.2022. The Assessing Officer completed assessments under section 153C read with section 143(3) for AYs 2015-16, 2016-17 and 2017-18. Before the Tribunal, the assessee raised additional legal grounds challenging the very jurisdiction under section 153C, contending that the relevant date under the first proviso to section 153C(1) fell after 01.04.2021 and that, in view of section 153C(3), the proceedings were without jurisdiction. It was further contended that the assessments for AYs 2015-16 and 2016-17 were beyond the permissible period and barred by limitation.

Findings of the ITAT. The Tribunal admitted the additional legal grounds by following the decision of the Supreme Court in NTPC Ltd. v. CIT, holding that pure questions of law going to the root of jurisdiction can be raised at any stage.

For AYs 2015-16 and 2016-17, the Tribunal held that, in the case of a person other than the searched person, the relevant date under section 153C is the date on which the seized material is handed over to the Assessing Officer of such other person. Where such date is not available, the date of recording of satisfaction assumes significance. Applying the law laid down by the Supreme Court in CIT v. Jasjit Singh and the Delhi High Court in PCIT v. Ojjus Medicare Pvt. Ltd., the Tribunal held that the relevant assessment years fell outside the permissible scope of section 153C and that the assessments were also barred by limitation. Consequently, the assumption of jurisdiction was held to be invalid and the assessments for AYs 2015-16 and 2016-17 were quashed.

In respect of AY 2017-18, the Tribunal observed that the Revenue had failed to establish the actual date on which the seized material was handed over to the Assessing Officer having jurisdiction over the assessee. Following the ratio of PCIT v. Ojjus Medicare Pvt. Ltd., it held that, in the absence of such evidence, the date of recording of the satisfaction note, namely 11.10.2022, must be treated as the relevant date for the purposes of the first proviso to section 153C(1). Since this date fell after 01.04.2021, section 153C(3), inserted by the Finance Act, 2021, became applicable. The Tribunal held that the statutory prohibition contained in section 153C(3) clearly provides that section 153C shall not apply where the relevant date falls on or after 01.04.2021. Consequently, the notice issued under section 153C as well as the assessment framed thereunder were held to be void ab initio and without jurisdiction. The Tribunal also observed that this view was fully supported by its earlier decisions in Geetanjali Bhayana v. DCIT and Lekh Raj v. DCIT.

Accordingly, all three appeals were allowed and the impugned assessments were quashed on jurisdictional grounds.

Cases Relied Upon. The Tribunal placed reliance upon CIT v. Jasjit Singh (Supreme Court), PCIT v. Ojjus Medicare Pvt. Ltd. (Delhi High Court), PCIT v. Abhisar Buildwell Pvt. Ltd. (Supreme Court), ITO v. Vikram Sujitkumar Bhatia (Supreme Court), NTPC Ltd. v. CIT (Supreme Court), Harigovind G. Ravindran (HUF) v. ACIT (Madras High Court), Geetanjali Bhayana v. DCIT (ITAT Delhi), Lekh Raj v. DCIT (ITAT Delhi) and Shanmugasundaram Manoharan v. DCIT (ITAT Chennai).

Ratio Decidendi. For a person other than the searched person, the relevant date under the first proviso to section 153C(1) is the date on which the seized material is handed over to the jurisdictional Assessing Officer, and where such date is not available, the date of recording of satisfaction. If such relevant date falls on or after 01.04.2021, section 153C becomes inapplicable by virtue of section 153C(3), rendering the notice and consequential assessment void for lack of jurisdiction. Further, assessments falling beyond the permissible years or prescribed limitation under section 153C are liable to be quashed.

FULL TEXT OF THE ORDER OF ITAT DELHI

1. These appeals are filed by the assessee against the order of the Ld. Commissioner of Income-tax (Appeals)-25, New Delhi [hereinafter referred to as ‘ld. CIT(A)] dated 07.11.2025 for the Assessment Years 2015-16, 2016-17 and 2017-18.

2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order.

3. At the outset, ld. AR for the assessee submitted that assessee has filed additional grounds of appeal in all the three appeals under consideration under Rule 11 of the Income Tax (Appellate Tribunal) Rules and it is purely legal issue and the same is reproduced below:-

1. “That on the facts and circumstances of the case and in law, the notice u/s 153C dated 14.10.2022 issued by Asst. Commissioner of Income Tax, Circle -22 (2) under Section 153C (1) of the Income-tax Act, 1961 (“the Act”) is void ab initio and without jurisdiction. as per the first proviso to Section 153C (1), the date of initiation of search is to be reckoned as 11.10.2022, being the date of recording of the satisfaction note. Accordingly, the impugned notice is invalid in law in view of the ratio laid down in PCIT vs. Ojjus Medicare (P.) Ltd.

2. “That on the facts and circumstances of the case and in law, the issuance of the impugned notice dated 14.10.2022 is in gross violation of Section 153C (3) of the Act. The said provision is rendered inapplicable to searches initiated on or after 01.04.2021, when read in conjunction with the first proviso to Section 153C (1) of the Act. Reliance is placed on Harigovind v. ACIT and Shanmugasundaram Manoharan v. DCIT.

3. “That on the facts and circumstances of the case and in law, Section 153C of the Act, being a machinery provision, must be interpreted in a manner that effectuates the object and purpose of the statute. Any amendment thereto, including the prescribed cut-off date, would apply even to searches conducted prior to the date of amendment, in light of the law laid down by the Hon’ble Supreme Court in ITO v. Vikram Sujitkumar Bhatia.”

4. Since the above grounds of appeal are purely legal, do not require fresh facts to be investigated and go to the root of the matter, ld. AR of the assessee prayed that the same may be admitted in view of the judgement of NTPC Ltd. vs. CIT, (1998) 229 ITR 0383 (SC).

5. On the other hand, ld. DR for the Revenue has no objection of admitting the additional ground of appeal being purely legal issue.

6. In view of the reliance made by the ld. AR for the assessee on the judgment of Hon’ble Supreme Court in the case of NTPC Ltd. (supra) and issue being purely legal, we proceeded to admit the additional ground of appeal being a legal issue.

7. First we take up the additional grounds raised by the assessee in AYs 2015- 16 and 2016-17 as above being the legal issue

8. At the time of hearing, ld. AR submitted his arguments and submitted the written submissions and pleaded to allow the appeals, which is reproduced below for the sake of brevity :-

“A search and seizure operation u/s 132 of the Act was conducted on 18.10.2019 on Alankit Group at the residential and business premises. The search and seizure operation carried out on the premise of Shri Alok Agarwal, Ankit Agarwal, Alankit Limited and Alankit Assignments Limited at 3584, Third Floor, Gali No. 4, Narang Colony, Trinagar, Delhi.

Jurisdictional Background

Submissions on Additional Ground No.1-3

That the search under section 132 of the Income-tax Act, 1961 was conducted on 18.10.2019 on Alankit Group, Sh. Alok K Agarwal, his Son Ankit Agarwal and some of the close associates and key employees and consequently in the case of the assessee satisfaction was recorded on 11.10.2022, which falls in Financial Year 2022-23, corresponding to Assessment Year 2023-24. Pursuant to the said search, proceedings have been initiated under section 153C of the Act.

In the present case, the assessee qualifies as an “other person,” and proceedings have been initiated under Section 153C of the Income-tax Act, 1961. It is a settled legal position that where the date of handing over of seized material to the Assessing Officer (AO) of such other person is either not specified or not ascertainable from the record, the date of recording of satisfaction assumes determinative significance for the purpose of assumption of jurisdiction.

This position stands affirmed by the judgment in PCIT v. Ojjus Medicare Pvt. Ltd.(465 ITR 101, Delhi), wherein it has been categorically held that, in proceedings under Section 153C against an “other person,” the relevant date for assumption of jurisdiction is the date of recording of the Satisfaction Note in the case of such other person, and not the date of search in the case of the searched person.

Accordingly, in the facts of the present case, since the date of transfer of material to the AO of the assessee is neither available nor discernible from the record, the date of recording of satisfaction, i.e., 11.10.2022, is liable to be treated as the effective and relevant date for initiation of proceedings and is the legally relevant date for examining jurisdiction.

However, by virtue of the Finance Act, 2021, the erstwhile reassessment framework underwent a substantial overhaul, whereby the provisions contained in Sections 147 to 151 of the Income-tax Act, 1961 were substituted with effect from 01.04.2021, introducing a new comprehensive regime for reassessment. Simultaneously, the said amendment effectively subsumed the procedure relating to assessment/reassessment in search cases, thereby rendering the provisions of Sections 153A and 153C inapplicable to searches conducted on or after 01.04.2021. Consequently, in such cases, the reassessment proceedings are required to be undertaken strictly in accordance with the new scheme prescribed under Sections 147 and 148 of the Act.

It is well settled that if the date of handing over the seized material to the Assessing Officer of the other person is not known or not mentioned, then the date of recording of satisfaction will be taken as the relevant date for assuming jurisdiction

Where the Satisfaction Note in the case of an “other person” is recorded on or after 01.04.2021, the validity of assumption of jurisdiction must be examined in light of the amended statutory provisions prevailing as on that date.

In this regard, the Hon’ble Tribunal in Smt. Geetanjali Bhayana v. DCIT [2026] 183 taxmann.com 95 (Delhi – Trib.) has categorically held that, for the purposes of proceedings under Section 153C, the relevant date for assumption of jurisdiction in the case of an “other person” is the date of recording of the Satisfaction Note, and not the date of search in the case of the searched person.

The Relevant Extract of the tribunal order in Smt. Geetanjali Bhayana v. DCIT (ITAT) is reproduced for ready reference:

“Where Assessing Officer received seized material from a third-party search and recorded satisfaction on 03-12-2021, such date was to be treated as date of initiation of search under first proviso to section 153C(1), since section 153C(3) bars proceedings for searches initiated on or after 01-04-2021, assessment framed under section 153C was held invalid and without jurisdiction”

Since the Satisfaction Note in the present case was recorded on 11.10.2022, i.e., after 01.04.2021, the initiation of proceedings under the unamended provisions of Section 153C is not legally sustainable. In such circumstances, any action, if at all permissible, ought to have been undertaken in accordance with the amended reassessment provisions.

Accordingly, applying the settled legal position, where the Satisfaction Note is recorded on or after 01.04.2021, the amended statutory regime would govern the field. In the present case, in the absence of compliance with the jurisdictional requirements prescribed under the amended provisions, the assumption of jurisdiction under Section 153C is void ab initio, and consequently, the entire proceedings and additions made thereunder are liable to be quashed.

It is further submitted that this precise legal contention has already been examined and adjudicated upon by the Hon’ble Bench in another case namely, Shri Lekhraj. In that case as well, proceedings under Section 153C were initiated on the basis of a Satisfaction Note recorded after 01.04.2021. The Hon’ble Bench, after considering the legal position in detail, held that recourse to the unamended provisions was impermissible.

While arriving at the said conclusion, the Hon’ble Bench placed reliance on its earlier decision in the case of Geetanjali Bahayana (supra), wherein it was categorically held that once the amended provisions have come into force, any proceedings initiated thereafter must strictly adhere to the amended law, and any deviation would render the proceedings invalid in the eyes of law.

Respectfully following the aforesaid binding precedent, and in view of the identical legal matrix, the Hon’ble Bench was pleased to allow the appeal of the assessee in the case of Shri Lekhraj. On parity of reasoning, the proceedings initiated in the present case under the unamended provisions of Section 153C deserve to be quashed, and the appeal of the assessee is liable to be allowed.”

9. On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities but could not controvert the aforesaid decisions relied on by the assessee.

10. Considered the rival submissions and material available on record. We observed that the assessment years 2015-16 and 2016-17 under consideration clearly falls outside the scope of application of section 153C of the Act, for the reason that the date of search for the unsearched parties are the date on which the documents were handed over to the Assessing Officer of such other person or from the date on which the satisfaction was recorded. Therefore, the contention of the assessee is found to be correct on this count. Further we observed that the impugned assessment order is beyond the limitation prescribed under section 153C of the Act, and therefore, the jurisdiction assumed by the Assessing Officer is not tenable in the light of legal positions in view of the decisions of Hon’ble Supreme Court in the case of CIT vs. Jasjit Singh (2023) 155 taxmann.com155 and Hon’ble Delhi High Court in the case of PCIT vs. Ojjus Medicare (P.) Ltd. For the sake of brevity, we reproduce the Head Note of the aforesaid decisions :-

“CIT vs Jasjit Singh-[2023| 155 taxmann.com 155 (SC)

From Headnote

“On appeal, Tribunal held that period for which assessee were required to file returns, commenced only from date when materials were forwarded to their jurisdictional Assessing officers – High Court upheld said order”

PCIT Vs Ojjus Medicare (P.) Ltd- [2024] 161 taxmann.com 160 (Delhi)

From Headnote

“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”

11. Respectfully following the aforesaid decisions, we are inclined to uphold that any addition or proceedings for AY 2015-16 and 2016-17 are beyond jurisdiction and accordingly all the impugned assessment orders are quashed. Hence, the additional grounds raised by the assessee are allowed.

12. In the result, the appeals for AYs 2015-16 and 2016-17 are allowed.

13. With regard to AY 2017-18, brief facts of the case are, a search and seizure operation u/s 132 of the Act was carried out in the case of Alankit Group, Shri Alok K Agarwal and his son, Ankit Agarwal and some of its close associates and key employees of Alok K Agarwal on 18.10.2019. During the course of search certain documents pertaining to the assessee were found and seized. Accordingly, assessment proceedings u/s 153C of the Act for A.Y. 2017-18were initiated in the case of the assessee. Notice u/s 153C dated 14.10.2022 was issued to the assessee. The AO vide assessment order dated 18.03.2024 passed u/s 153C of the Act made addition of Rs. 8,11,105/- u/s 69 of the Act in respect of the interest component being an expenditure on bogus transaction of accommodation entry is an unexplained expenditure.

14. Aggrieved against the above order, assessee preferred an appeal before the ld. CIT (A) who sustained the addition.

15. Aggrieved against the above order, assessee is in appeal before us raising legal grounds as enumerated above.

16. At the time of hearing, ld. AR of the assessee submitted that the assessment in the case of assessee is liable to be quashed as A.Y. 2017-18 is a case of unabated assessment and no incriminating material was found during the course of search at the place of searched person pertaining to the assessee. He submitted that the Hon’ble Supreme Court of India in the case of Abhisar Buildwell [2023] 454 ITR 212 (SC) has held that in the case of completed/unabated assessment, in the absence of any incriminating material, the Assessing Officer cannot make addition u/s 153C of the Act. The AO can assume jurisdiction u/s 153C of the Act in the year of unabated assessment only where any incriminating material is seized during search. He asserted that, it is evident from assessment order that addition made by the AO is not based on any incriminating material found during the course of search in the case of Alankit Group. Thus, he prayed for quashing the assessment and allowing appeal of the assessee.

17. Ld. AR further submitted that the assessment is also liable to be quashed for the reason that the assessment proceedings were completed u/s 153C of the Act, though the satisfaction note in the case of assessee was recorded only on 11.10.2022. The provisions of section 153C of the Act were amended by the Finance Act, 2021 and, as per the amended provisions, where the satisfaction note is recorded after 01.04.2021, the assessment in the case of non-searched person cannot be made u/s 153C of the Act. After 01.04.2021, the assessment in the case of non-searched person can only be made u/s 148 r.w.s. 147 of the Act. To support his submissions, he placed reliance on the decision rendered in the case of PCIT Vs. Ojjus Medicare(P.) Ltd. [2024] 465 ITR 101 (Delhi) and the decision of Tribunal in the case of Geetanjali Bhayana Vs. DCIT 181 Taxmann.com 95 Delhi (Trib.) and Lekh Raj vs. DCIT in ITA No.3181/Del/2025 and ors. order dated 30.03.2026.

18. On the other hand, ld. DR of the Revenue objected to the submissions of the assessee and relied on the orders of the authorities below.

19. Considered the rival submissions and material placed on record. The assessee in appeal has assailed validity of the assessment order passed u/s 153C r.w.s. 143(3) of the Act. It is an undisputed fact that addition has been made in the hands of the assessee on protective basis consequent to search in the case of Alankit Group on 18.10.2019. The satisfaction note in case of the assessee was drawn by the AO on 11.10.2022. As per the first proviso to section 153C(1), the date of search in the case of person other than the searched person shall be the date on which books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person are received by the AO of other person. Thus, in the case of a person other than the searched person, the relevant date would be the date on which relevant documents or seized material is received by the AO of the person other than the searched person.

20. We are of the considered view that in absence of specific date of handing over the seized material to AO of the assessee, the date of issue of order u/s 127 of the Act has been wrongly assumed by the CIT(A) as the date on which seized material was received by the AO of assessee. The Hon’ble Jurisdictional High Court in the case of PCIT vs. Ojjus Medicare (P.) Ltd (supra) has held that where the date of handing over of documents is not available, date of issuance of satisfaction note by the Assessing Officer u/s 153C of the Act would be pertinent for the purpose of first proviso to section 153C of the Act. In the present case, the AO had recorded satisfaction on 11.10.2022. Since, the date of handing over of seized material is not emanating from the records, the date of recording of satisfaction i.e., 11.10.2022 shall be considered as the date of receiving seized material by the AO of the assessee.

21. Section 153C was amended by the Finance Act, 2021 with effect from 01.04.2021 whereby sub-section(3) was inserted. The relevant sub-section is reproduced hereinbelow:

“(3) Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.”

22. By virtue of above amendment to section 153C, no assessment u/s 153C can be made in the case of other person under section 153C of the Act if the date of search falls beyond 01.04.2021. As a corollary, any notice issued for making assessment u/s 153C of the Act in the case of a non-searched person after 01.04.2021 would be non-est.

23. Thus, applying the amended provisions of section 153C of the Act and the law explained by the Hon’ble Jurisdictional High Court in the case of Ojjus Medicare (P.) Ltd. (supra), to the facts of the instant case, we find that the notice u/s 153C of the Act issued by the AO to assessee and thereafter, assessment order passed u/s 153C is unsustainable and is liable to be quashed on the ground of jurisdiction. In this regard, we also find force from the decisions of coordinate Benches in the case of Geetanjali Bhayana (supra) and Lekh Raj (supra). We hold accordingly.

24. To sum up : all the three appeals filed by the assessee are allowed.

25. Order pronounced in the open court on this 24th day of June, 2026.