ITAT Delhi Quashes Search Assessment as Time-Barred Under Section 153C

Ajay Gupta Vs DCIT (ITAT Delhi)

The ITAT Delhi considered the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals)-30, New Delhi dated 16.06.2025, arising from an assessment completed under Section 144 read with Section 153C of the Income Tax Act, 1961 for AY 2015-16. The assessment order was passed on 16.03.2024.

A search under Section 132 was conducted in the case of M/s. Hans Group on 06.01.2021, during which documents/data relating to the assessee, a person other than the searched person, were seized. A satisfaction note was recorded on 28.06.2022 and notice under Section 153C was issued on 29.06.2022. The assessee’s case had earlier been transferred to DCIT, Central Circle-31, New Delhi under Section 127 by order dated 14.02.2022. The assessee contended that the assessment was barred by limitation under Section 153B(1)(b)(ii).

The assessee relied upon the Supreme Court decision in Super Malls Pvt. Ltd Vs. PCIT 423 ITR 281 and the Bombay High Court decision in Vijay Bihari Kandhari Vs. ACIT in Writ Petition No. 2764 of 2022 dated 17.11.2025. The assessee submitted that where the Assessing Officer of the searched person and the other person is the same, there is no requirement to transmit the seized material to himself. According to the assessee, once the case was transferred to the same Assessing Officer handling the searched person’s case and seized material, the limitation period was required to be reckoned from 14.02.2022.

The CIT(DR), relying upon Jasjit Singh reported in 2023 INSC 882, contended that the relevant date was 28.06.2022, when the satisfaction note was recorded and the seized documents were handed over, making 31.03.2024 the deadline. The assessment dated 16.03.2024 was therefore argued to be within limitation.

The Tribunal, after considering the rival submissions and material on record, held that the assessee’s case records were transferred to DCIT, Central Circle-31 on 14.02.2022 and that on that date the entire seized material came to be handed over to the Assessing Officer of the assessee in terms of Super Malls. Accordingly, limitation was reckoned from 14.02.2022, and the assessment order dated 16.03.2024 was held to be clearly barred by limitation.

The ITAT consequently quashed the search assessment under Section 153C for AY 2015-16 and allowed Ground No. 1. Since the entire assessment was quashed, the remaining legal and factual grounds were left open as academic. The appeal was partly allowed, and the order was pronounced on 16.02.2026.

Recent Cases Discussed

• Vijay Bihari Kandhari Vs. ACIT (Bombay High Court), Writ Petition No. 2764 of 2022 dated 17.11.2025
• Jasjit Singh (Supreme Court), 2023 INSC 882

FULL TEXT OF THE ORDER OF ITAT DELHI

1. This appeal of the assessee is arising out of the order of the ld. Commissioner of Income Tax (Appeals)-30, New Delhi in Appeal No. CIT(A), Delhi-30/10739/2014-15 dated 16.06.2025. The assessment was completed by the ld DCIT, Central Circle-31, New Delhi for AY 2015-16 u/s 144 r.w.s. 153C of the Income Tax Act, 1961 (hereinafter ‘the Act’) vide order dated 16.03.2024.

2. At the outset, the ld counsel for the assessee drew our attention to the first ground that the order passed by the ld AO u/s 144 r.w.s. 153C of the Act is barred by limitation and hence, without jurisdiction. The relevant grounds reads as under:-

“1. That, the notice dated 29.06.2022 issued under Section 153C of the Income Tax Act, 1961 (‘the Act’) and the assessment order dated 16.03.2024 passed under Section 144 r.w.s. 153C of the Act by the Assessing Officer (‘AO’) are illegal, bad in law, barred by limitation and without jurisdiction.”

3. The ld counsel for the assessee explained that search u/s 132 of the Act was conducted on M/s. Hans Group on 06.01.2021. During the course of search incriminating documents were seized in relation to assessee herein also. The AO while completing the assessment in M/s. Hans Group of cases noted that certain seized documents pertained to an information contained thereon relevant to Ajay Gupta i.e. person other than searched person, hence, a satisfaction note was drawn on 28.06.2022 to initiate proceedings u/s 153C r.w.s. 153A of the Act in the case of the assessee for AYs. 2015-16 to 2020-21. The relevant assessment year before us is AY 2015-16. The ld counsel for the assessee stated that the assessee’s case was transferred to the Central Circle-31, New Delhi by the order passed by the ld PCIT u/s 127 of the Act on 14.02.2022. The ld counsel for the assessee further stated that notice u/s 153C of the Act was issued to the assessee by ACIT, Central Circle-31, Delhi dated 29.06.2022. The original return of income was filed by the assessee u/s 139(1) of the Act on 29.09.2015 and in response to the notice u/s 153C of the Act, the assessee stated that the return originally filed may be treated as a return in response to the notice u/s 153C of the Act. Accordingly, the assessment was completed by the ld DCIT, Central Circle-31, New Delhi vide order dated 16.03.2024. According to the ld counsel, the assessment order passed u/s 153C r.w.s. 144 of the Act is barred by limitation. Ld counsel for the assessee stated that in terms of provisions of Section 153B(1)(b)(ii) of the Act, there are two limbs provided in this Clause (ii). Ld counsel for the assessee explained that as per Clause (ii), there are two limbs that provides the time limit for completion of assessment u/s 153C of the Act and the first limb of Clause (ii) of the said provision provides the time limit for completion of assessment within 12 months from the end of the Financial Year in which last authorization of search u/s 132 of the Act is executed. According to the ld counsel, as per this, time limit of assessment u/s 153C of the Act in the assessee’s case should have been completed by 31.03.2022 as date of search u/s 132 of the Act is dated 06.01.2021. The second limb of Clause (ii) of the said provision provides that time limit is 12 months from the end of the FY in which books of account or documents seized are handed over u/s 153C of the Act of that 3^rd party. According to the ld counsel, the order passed u/s 127 of the Act dated 14.02.2022 with the same AO of the searched person as well as other than the searched person i.e. the assessee herein, is the same AO i.e. DCIT, Central Circle-31, Delhi. The ld counsel for the assessee stated that this issue now stands covered by the decision of the Hon’ble Bombay High Court in the case of Vijay Bihari Kandhari Vs. ACIT in Writ Petition No. 2764 of 2022 dated 17.11.2025 wherein, the Hon’ble Bombay High Court considered the decision of the Hon’ble Supreme Court in the case of Super Malls Pvt. Ltd Vs. PCIT 423 ITR 281 wherein, it is held that the requirement of transmitting the documents seized from the searched person would not arise if the AO of the searched person and the other person is one and same. There is no question of transmitting such seized documents to oneself. The ld counsel for the assessee drew our attention to the decision of the Hon’ble Supreme Court in the case of Super Malls (supra) wherein, it is held in para 6 as under:-

“6. This Court had an occasion to consider the scheme of Section 153C of the Act and the conditions precedent to be fulfilled/complied with before issuing notice under Section 153C of the Act in the case of Calcutta Knitwears (supra) as well as by the Delhi High Court in the case of Pepsi Food Pvt. Ltd. (supra As held, before issuing notice under Section 153C of the Act, the Assessing Officer of the searched person must be “satisfied” that, inter alia, any document seized or requisitioned “belongs to” a person other than the searched person.

That thereafter, after recording such satisfaction by the Assessing Officer of the searched person, he may transmit the records/documents/things/ papers etc. to the Assessing Officer having jurisdiction over such other person. After receipt of the aforesaid satisfaction and upon examination of such other documents relating to such other person, the jurisdictional Assessing Officer may proceed to issue a notice for the purpose of completion of the assessment under Section 158BD of the Act and the other provisions of Chapter XIV-B shall apply.

6.1 It cannot be disputed that the aforesaid requirements are held to be mandatorily complied with. There can be two eventualities. It may so happen that the Assessing Officer of the searched person is different from the Assessing Officer of the other person and in the second eventuality, the Assessing Officer of the searched person and the other person is the same. Where the Assessing Officer of the searched person is different from the Assessing Officer of the other person, there shall be a satisfaction note by the Assessing Officer of the searched person and as observed hereinabove that thereafter the Assessing Officer of the searched person is required to transmit the documents so seized to the Assessing Officer of the other person. The Assessing Officer of the searched person simultaneously while transmitting the documents shall forward his satisfaction note to the Assessing Officer of the other person and is also required to make a note in the file of a searched person that he has done so. However, as rightly observed and held by the Delhi High Court in the case of Ganpati Fincap (supra), the same is for the administrative convenience and the failure by the Assessing Officer of the searched person, after preparing and dispatching the satisfaction note and the documents to the Assessing Officer of the other person, to makea note in the file of a searched person, will not vitiate the entire proceedings under Section 153C of the Act against the other person. At the same time, the satisfaction note by the Assessing Officer of the searched person that the documents etc. so seized during the search and seizure from the searched person belonged to the other person and transmitting such material to the Assessing Officer of the other person is mandatory. However, in the case where the Assessing Officer of the searched person and the other person is the same, it is  sufficient by the Assessing Officer to note in the satisfaction  note that the documents seized from the searched person  belonged to the other person. Once the note says so, then the requirement of Section 153C of the Act is fulfilled. In case,  where the Assessing Officer of the searched person and the  other person is the same, there can be one satisfaction note  prepared by the Assessing Officer, as he himself is the Assessing  Officer of the searched person and also the Assessing Officer of the other person. However, as observed hereinabove, he must be conscious and satisfied that the documents seized/recovered from the searched person belonged to the other person. In such a situation, the satisfaction note would be qua the other person. The second requirement of transmitting the documents so seized from the searched person would not be there as he himself will  be the Assessing Officer of the searched person and the other  person and therefore there is no question of transmitting such  seized documents to himself. “

(Emphasis supplied)

4. Hon’ble Supreme Court held that where the AO of the searched person and other than the searched person is the same, it is sufficient by the AO to note in the satisfaction note that the documents seized from the searched person belonged to the other person and once the notice was sent then requirement of Section 153C of the Act is fulfilled. In case where the Assessing Officer of the searched person and the other person is the same there can be one satisfaction note prepared by the Assessing Officer as he himself is the Assessing Officer of the searched person and also the Assessing Officer of the other person. The ld counsel for the assessee before us filed a chart of chronology of dates which reads as under:-

5. From the above chart, the ld counsel explained that once the order u/s 127 of the Act is passed and the assessee’s case is transferred to the AO with whom the searched assessee’s case i.e. in the present case Hans Group are lying including the seized material of the assessee, the requirement as envisaged in provisions of Section 153C of the Act are fulfilled. Hence, he stated that limitation starts with date of 14.02.2022. Ld counsel for the assessee hence stated that the assessee’s case is squarely covered by the decision of the Hon’ble Supreme Court in the case of Super Malls (supra) and the decision of the Hon’ble Bombay High Court supra. When these facts are confronted with the ld CIT DR he stated that the Hon’ble Supreme Court in the case of Jasjit Singh reported in 2023 INSC 882 had held that the date of search of the third party would be the date on which the documents were handed over by the AO of the searched person to the AO of the third party. In the instant case, the date of handing over of seized documents to the AO of the assessee was 28-06-2022 on which date satisfaction note was recorded. Hence considering the limitation as per Clause(ii) of Section 153B of the Act, the AO of the assessee has got time to complete the assessment upto 31.3.2024 and hence the assessment framed on 16.3.2024 is not barred by limitation.

6. We have heard the rival contentions and gone through the material available on record. In the present case admittedly search was conducted on M/s. Hans Group on 06.01.2021, from where certain seized documents/ data pertain to an information contained thereon related to the present assessee Shri Ajay Gupta (person other than searched person) and accordingly initiated proceedings u/s 153C read with Section 153A of the Act in the case of the present assessee for AYs 2015-16 to 2020-21. Now the question arise what is limitation in this case. The case records of the present assessee was transferred to DCIT, Central Circle-31, New Delhi by the ld PCIT vide order passed u/s 127 of the Act dated 14.02.2022, on which date, the entire seized material came to be handed over to the AO of the assessee in terms of decision of the Hon’ble Supreme Court in the case of Super Malls (supra). Hence, reckoning the due date from 14.2.2022, the assessment order passed on 16.03.2024 is clearly barred by limitation.

7. In view of the aforesaid observations, we quash the search assessment framed u/s 153C of the Act for the AY 2015-16 for more than one reason. Accordingly, the ground No. 1 raised by the assessee is allowed for the year under consideration.

8. Since the entire assessment is quashed, the adjudication of other legal and factual grounds raised by the assessee would become academic in nature and hence they are left open.

9. In the result, all the appeal of the assessee is partly allowed.

Order pronounced in the open court on 16/02/2026.