Sambhavnath Rajendra Jain Shwetamber Sangh Vs ACIT (ITAT Delhi)
SEARCH BEFORE 1-4-2021, BUT HANDOVER AFTER IT—FOR THE “OTHER PERSON”, THE DEEMED SEARCH DATE RULES & SECTION 153C CANNOT BE INVOKED
Background
A search & seizure action u/s 132 was conducted on 23 March 2021 in the case of Shri Parasmal Jain/M/s Balar Marketing Pvt. Ltd. Certain documents allegedly containing information relating to the assessee, Shree Sambhavnath Rajendra Jain Shwetamber Sangh, were found during the search.
The AO of the searched person recorded a satisfaction note on 24 June 2022, holding that the seized documents pertained to the assessee, who was a person other than the searched person. The material was thereafter handed over to the AO having jurisdiction over the assessee.
The assessee’s AO recorded his own satisfaction on 2 February 2023 that the seized information pertained to the assessee & would have a bearing on the determination of its income. On the very same date, notice u/s 153C was issued.
The proceedings culminated in an assessment u/s 143(3) r.w.s. 153C, making an addition of ₹35 lakh u/s 68 as unexplained cash credit & a further addition of ₹70,000 towards estimated commission allegedly paid for obtaining an accommodation entry. The CIT(A) confirmed the assessment.
Additional Jurisdictional Grounds
Before the Tribunal, the assessee raised three additional grounds challenging the assumption of jurisdiction u/s 153C. The principal contention was that, although the original search on the searched person had taken place on 23 March 2021, the relevant date for a person other than the searched person was the date on which the seized material was handed over to his AO or the satisfaction was recorded.
Since the relevant satisfaction dates—24 June 2022 & 2 February 2023—fell after 1 April 2021, the assessee argued that section 153C stood excluded by sub-section (3). The proper course, if otherwise permissible, was to proceed under section 148.
The Tribunal admitted the additional grounds by applying the Supreme Court’s ruling in NTPC Ltd. v. CIT. The grounds were purely legal, went to the root of jurisdiction & could be decided on the basis of facts already available on record.
Revenue’s Argument
The Department contended that the search had physically taken place on 23 March 2021, before the cut-off date of 1 April 2021. Therefore, according to the Revenue, the old search-assessment machinery u/s 153C continued to apply notwithstanding that the satisfaction notes & consequential notice were recorded or issued after that date.
The Deemed Search Date
The Tribunal rejected the Revenue’s attempt to use the physical search date applicable to the searched person for proceedings against the assessee.
Section 153C creates a special mechanism for assessing a person who was not himself searched, but whose books, documents or assets were discovered during a search conducted on somebody else. Under the first proviso to section 153C(1), the relevant date for such “other person” is the date on which the seized material is received by his jurisdictional AO.
Thus, there are two distinct statutory dates. For the searched person, the relevant date is the actual date of search. For the other person, it is the date of handing over or receipt of the seized material by his AO. The latter date becomes the deemed date of search for computing the relevant period & for determining the applicable legal regime.
Effect of Section 153C(3)
Section 153C(3), effective from 1 April 2021, provides that section 153C shall not apply in relation to searches initiated or requisitions made on or after that date. Such cases fall under the reassessment mechanism u/s 147 to 151.
The Tribunal relied on the Madras High Court’s judgment in Harigovind v. ACIT, which held that there cannot be two different dates of initiation of search for an “other person”—one for computing the six-year period & another for determining the applicability of section 153C(3).
For all practical purposes, the date of handing over the seized material to the AO of the other person must be regarded as the date of initiation of search in that person’s case.
The Madras High Court had also relied on the Supreme Court’s decision in CIT v. Jasjit Singh, which rejected the Revenue’s argument that the first proviso to section 153C(1) applies only for deciding abatement of pending assessments. The deemed date is relevant not merely for abatement but also for determining the assessment period & other consequences under section 153C.
ITAT’s Findings
In the assessee’s case, the material was handed over pursuant to satisfaction recorded on 24 June 2022, while the assessee’s AO recorded satisfaction & issued notice u/s 153C on 2 February 2023. Both dates were indisputably after 1 April 2021.
Consequently, the deemed search in the assessee’s case stood initiated after the statutory cut-off. By virtue of section 153C(3), proceedings u/s 153C were therefore legally unavailable.
The Tribunal noted that no contrary judgment of any High Court had been cited by the Revenue. It accordingly followed Harigovind & held that the assessment framed u/s 143(3) r.w.s. 153C was bad in law.
Decision
The assessment u/s 153C was quashed. Since the assessee succeeded on the jurisdictional ground, the Tribunal did not adjudicate the merits of the additions of ₹35 lakh & ₹70,000. The appeal was allowed.
Key Takeaway
For a person other than the searched person, the decisive date is not the physical search date, but the date on which the seized material is handed over to his AO. If that deemed date falls on or after 1 April 2021, section 153C(3) shuts the door on section 153C proceedings.
The Department cannot enter through the old section 153C door merely because the search began before the door was statutorily closed—the “other person” gets his own clock.
Cases Discussed
- PCIT vs. Ojjus Medicare (P.) Ltd. [2024] 465 ITR 101 (Delhi)
- Harigovind v. ACIT [2025] 180 taxmann.com 197 (Madras)
- Shanmugasundaram Manoharan v. DCIT [2025] 181 taxmann.com 786 (Chennai Trib.)
- ITO v. Vikram Sujitkumar Bhatia (2023) 45 ITR 417
- National Thermal Power Co. Ltd. v. CIT, 229 ITR 383 (SC)
- CIT v. Jasjit Singh, 458 ITR 437 (SC)
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT, DELHI BENCH
1. This appeal arises from order dated 28.02.2026, passed u/s 250 of the Income Tax Act, 1961 (hereafter as “the Act”), by Ld. CIT(A)-26, Delhi.
1.1 In this case, a search and seizure action was carried out on 23.03.2021 in the case of Shri Parasmal Jain/M/s Balar Marketing Pvt. Limited. Thereafter, on the basis of documents seized during the course of search, the AO of searched person held, through satisfaction dated 24.06.2022, that there was information pertaining to the assessee. The allegedly incriminating material was handed over to the AO of non-searched person.
1.2 The aggrieved assessee approached the CIT(A) where he could not succeed and a detailed finding of fact has been recorded in the impugned order to this extent.
1.3 The assessee has approached the ITAT with as many as 15 grounds of appeal through which the addition on merits and allegedly an illegal assumption of jurisdiction have been put forth as grievances.
1.4 It is seen from the records that on 15.07.2026 the assessee has also filed three additional grounds of appeal which are focused on an allegation of illegal assumption of jurisdiction. For the sake of reference, the additional grounds deserve to be reproduced as under: –
“I. That the notice dated 02.02.2023 issued by Ld. Assessing Officer (“Ld. AO”) under Section 153C(1) of the Income-tax Act, 1961 (“the Act”) is void ab initio for the want of jurisdiction as the date of initiation of search as per 1st proviso thereto is 24.06.2022 viz., the date of issuance of satisfaction note vide PCIT vs. Ojjus Medicare (P.) Ltd. (2024) 465 ITR 101 (Delhi).
II. That the issuance of impugned notice dated 02.02.2023 grossly contravenes Section 153C(3) of the Act, which renders the said provision inapplicable in relation to search initiated on or after 01.04.2021 read with 1st proviso to Section 153C(1) of the Act vide Harigovind v. ACIT (2025) 180 taxmann.com 197 (Madras) and Shanmugasundaram Manoharan v. DCIT [2025] 181 taxmann.com 786 (Chennai Trib.).
III. That Section 153C of the Act being a machinery provision is to effectuate the object and purpose of the statute and amendment brought therein with a cutoff date shall be applicable to a search prior to the date of amendment as per the law decided by Hon’ble Supreme Court in ITO v. Vikram Sujitkumar Bhatia (2023) 45 ITR 417.”
2. Before us the Ld. AR took up additional ground of appeal no.2 first and stated that while the search and seizure action was carried out on 23.03.2021, but the seized material was handed over to the AO of the assessee vide “satisfaction” dated 24.06.2022. It was also submitted that the AO of the assessee issued a notice u/s 153C of the Act on 02.02.2023, after recording a satisfaction on the same date. It was the submission that with the change in law w.e.f. 01.04.2021 and the decision of the Hon’ble Madras High Court in the case of Harigovind reported in 485 ITR 509, it has been held that initiation of proceedings u/s 153C of the Act after 01.04.2021 are bad in law. It was the submission that since this ground went to the root of the matter hence, it deserves to be decided before proceeding any further with the adjudication. The Ld. AR also pleaded that the additional grounds of appeal deserve to be admitted since the facts needed to adjudicate the same were already on record and following the decision of the Hon’ble Apex Court in the case of NTPC Limited reported in 229 ITR 383, such grounds were purely legal in nature and deserved to be admitted for adjudication.
2.1 The Ld. DR, on the other hand, relied on the finding given in the impugned order and stated that the search and seizure operation took place before 01.04.2021 and therefore there was no infirmity in the assumption of jurisdiction.
3. We have heard the rival contentions and have gone through the records before us. It needs to be mentioned that the additional grounds of appeal are admitted for adjudication following the case of NTPC (supra).
3.1 Coming to the merits of the additional ground it is observed that the satisfaction note u/s.153C of the Act in the case of the assessee was recorded on 24.06.2022 and also on 02.02.2023 for issuing the notice u/s.153C of the Act dated 02.02.2023. By virtue of Section 153C(3) of the Act, which was effective from 01.04.2021, where in case of a search initiated after 01.04.2021 the proceedings u/s 153C of the Act are not valid and applicable, but the provisions of section 148 of the Act are applicable. In the case of the assessee since the satisfaction note was recorded on 24.06.2022 or 02.02.2023 i.e. after 01.04.2021, the deemed date of search in the case of the assessee being person other than the searched person, shall be the date of recording of satisfaction note in view of the decision of the Hon’ble Apex court in the case of Jasjit Singh reported in 458 ITR 437 and the assessment framed u/s.153C of the Act pursuant to the satisfaction note recorded on or after 01.04.2021, is bad in law.
3.2 The Hon’ble Madras High Court in the case of Harigovind Vs. ACIT (supra) held that in terms of sub-section (1) of section 153C of the Act for the purpose of calculation of six years period, the date of handing over the materials to the AO has to be construed as the date of initiation of search for the person other than the searched person. The Hon’ble Madras High Court further held that in terms of first proviso to sub section (1) of section 153C of the Act for the purpose of abatement also the date of handing over of the materials to the AO has to be construed as the date of initiation of search for the other person (other than searched person). The Hon’ble Madras High Court did not agree with the submissions made by the revenue that another date is available for the purpose of initiation of search in respect of other person (other than searched person). The Hon’ble Madras High Court further held as under :-
“39. As far as the other person is concerned, the six years period would be calculated, the date on which the requisition was made and that would be the date, for the purpose of determination of assessment of income. On the other hand, as far as the searched person is concerned, this 6 years period would vary and the same would be calculated from the date of search made in the premises of searched person. Therefore, for the purpose of initiation and determination of income for 6 assessment years, two different dates have been fixed by the Statute, i.e.. for the searched person, it was taken the date of search, whereas, for the other person, it was taken the date, on which the requisition is made to the JAO of the other person.
40. Thus, as far as the searched person is concerned, the date of initiation of search is the date, on which the search was conducted in his premises. The said date would be the date of initiation of search for CO searched person for all purposes. As far as the other person is concerned, the date of initiation of search would be the date, on which the materials, books of accounts, etc., are handed over to the JAO of the other person and this date would be considered as the date of initiation of search for other person for all purposes. Thus, there cannot be two different date of initiation of search, either for the searched person or for the other person.
41. The provisions of Sub-Section (3) of Section 153C states that “153C(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 requisition under Section 1324 on or after the 1″ day of April, 2021” which means, if the search is initiated subsequent to 01.04.2021, the provision of Section 153C will not apply and accordingly, no proceedings can be initiated against the other person.
42. According to the petitioner, the date of handing over of the seized materials, i.e., 25.11.2022, is the date of initiation of search. If the said contention of the petitioner is accepted, obviously, the issuance of impugned notices dated 07.02.2023 by the 2nd respondent is without any BCOpauthority and contrary to Sub-Section (3) of Section 153C of the Act and thus, the same is liable to be quashed.
43. In terms of Sub-Section (1) of Section 153C of the Act, for the purpose of calculating the six years period, the date of handing over of the materials to the petitioner’s JAO has to be construed as the date of initiation of search for other person. Further, in terms of first proviso to Sub-Section (1) of Section 153C, for the purpose of abatement also, the date of handing over of the materials to the petitioner’s JAO has to be construed as the date of initiation of search for the other person. In such view of the matter, this Court is unable to comprehend the submissions made by the learned counsel for respondents that yet another date is available for the purpose of initiation of search in respect of the other person.
44. Certainly, there cannot be two different dates for initiation of search for the other person. Hence, for all practical purpose, the initiation of search would be the same date and it is apparent upon reading the provisions of Section 153C of the Act. In the provision of Section 153C(1) of the Act, the date of initiation of search is mentioned as the Odate of handing over of materials and as per the first proviso, the same date would apply for the purpose of abatement also. When such being the case, no other date will come into picture for the purpose of determination of initiation of search for other person. At this juncture, it would be apposite to refer the judgement rendered by the Hon’ble Apex Court in CIT Vs. Jasjit Singh reported in [2023] 458 ITR 437 (SC), wherein, it was held on the aspect as to whether the first proviso to Section 153C would apply only for the purpose of abatement of pending proceedings or otherwise.
45. When a similar contention was raised before the Hon’ble Supreme Court in the aforesaid case of CIT Vs. Jasjit Singh, the same was recorded in the said judgement as
“……..The revenue argued that the proviso to Section 153C(1), is confined in its application to the question of abatement”.
However, while deciding the said issue, the Hon’ble Apex Court had arrived at a conclusion and rendered its judgement by stating that
“…………. the revenue’s argument is insubstantial and without merit”……..”
When such being When such being the case, it is clear that the Hon’ble Apex Court had rejected the contention of the revenue that “the first proviso to Section 153C(1), is confined in its application to the question of abatement”, which means, as per the law laid down by the Hon’ble Apex Court, the said provision is not only for the purpose of abatement but also for all the other practical purposes.
46. For ready reference, the relevant portion of the judgement rendered in the case of CIT Vs. Jasjit Singh is extracted hereunder:
“9. It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement.
10. This Court is of the opinion that the revenue’s argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials of the search party, under Section 132 – would take his own time o forward the papers and materials belonging to the third party, to the concerned A.O. In that event if the date would virtually “relate back” us is sought to be contended by the revenue, (to the date of the seizure), the prejudice caused to the third party, who would be drawn into proceedings as it were unwittingly (and in many cases have no concern with it at all), is dis-proportionate. For instance, if the papers are in fact assigned under Section 153-C after a period of four years, the third party assessee’s prejudice is writ large as it would have to virtually preserve the records for at latest 10 years which is not the requirement in law. Such disastrous and harsh consequences cannot be attributed to Parliament. On the other hand, a plain reading of Section 153-C supports the interpretation which this Court adopts.
47. A reading of the above shows that the Hon’ble Apex Court had rejected the contention of the respondent and hence, it is clear that the first proviso to Sub-Section (1) of Section 153C is not only for the purpose of abatement but also for all other purposes, viz., initiation of search for other person in terms of Section 153C(3) of the Act. In such case, the date of initiation of search for the petitioner is the date, on which the documents were handed over to the JAO of the petitioner, i.e., 25.11.2022 is the date of initiation of search for the petitioner.
48. In terms of Sub-Section (3) of Section 153C, the provision of Section 153C will not apply for any search, which is initiated on or after.
49. As stated above, in this case, the date of handing over of seized material to the petitioner’s JAO is on 25.11.2022 and the said date is the date of initiation of search for the petitioner. Thus, in the present case, it is crystal clear like cloudless sky that the initiation of search was subsequent to 01.04.2021, for which, the provisions of Section 153C will not apply. Therefore, the impugned notices dated 07.02.2023 is unsustainable and the same were issued without authority and against the provisions of Sub-Section (3) of Section 153C of the Act.
50. In such view of the matter, all the impugned notices are liable to be quashed and accordingly, all the impugned notices dated 07.02.2023 issued by the 2nd respondent are quashed.”
3.3 Considering the discussion above and the fact that no contravening judgment of any High Court has been placed before us, we respectfully follow the judgment in the case of Harigovind of the Hon’ble Madras High Court (supra) and hold that the incriminating material handed over through “satisfaction” dated 24.06.2022 and issuance of notice u/s 153C of the Act after recording of satisfaction on the same date being 02.02.2023, the assessments framed u/s 143(3) r.w.s. 153C of the Act for AY 2020-21 is bad in law and hereby quashed. Thus, additional ground of appeal no.2 is allowed.
3.4 Since the assessee has succeeded on the jurisdictional ground, we do not deem it fit to adjudicate on any other issue in this matter.
4. In the result, the appeal is allowed.
Order pronounced in the open court on 09.09.2026
