DCIT Vs Maxxfun Buildmart Pvt Ltd. (ITAT Delhi)
Section 153C Block Period Must Be Reckoned from Receipt of Seized Material by Non-Searched Person’s AO; AY 2010-11 Notice Quashed
A search was conducted on the Alankit Group and connected persons on 18 October 2019. Based on documents allegedly pertaining to the assessee, a non-searched entity, the assessee’s AO recorded satisfaction on 27 June 2022 and issued notice under section 153C on 29 June 2022 for AY 2010-11.
The AO alleged that the assessee had undertaken sham transactions of ₹85 lakh against unaccounted cash. He made an addition of ₹85 lakh under section 68 and a further addition of ₹2.55 lakh, representing 3% commission, under section 69C.
The CIT(A) annulled the assessment by following the Delhi High Court’s decision in PCIT v. Ojjus Medicare Pvt. Ltd., holding that AY 2010-11 fell beyond the maximum ten-year period available under sections 153C and 153A. The Revenue challenged this decision before the ITAT.
The Tribunal held that, for a non-searched person, the First Proviso to section 153C creates a legal fiction under which the six-year or ten-year block period must be computed with reference to the date on which the seized books, documents or assets are received by the jurisdictional AO of that person—not from the date of the original search.
Since the satisfaction was recorded and seized material received in FY 2022-23, the corresponding assessment year for computing the block was AY 2023-24. Consequently, AY 2010-11 fell beyond the permissible ten-year period.
Accordingly, the ITAT held that the section 153C notice and consequential assessment were void ab initio. The CIT(A)’s annulment of the assessment, including the additions of ₹85 lakh and ₹2.55 lakh, was upheld, and the Revenue’s appeal was dismissed.
