Section 153C Assessment Beyond Ten-Year Period Time-Barred: Delhi HC

Consistent Builders Pvt. Ltd. Vs ACIT (Delhi High Court)

An extended period is still a limited period- Beyond the 10th Year: Delhi High Court Quashes Section 153C Assessment

The controversy

An extended assessment period does not give the Department an unrestricted right to reach into earlier years. Even where escaped income exceeds ₹50 lakh, the assessment year sought to be covered must fall within the applicable statutory period.

In this case, the Delhi High Court quashed an assessment order under Section 153C for Assessment Year 2012–13, holding that it fell outside the ten-year period calculated by the Court with reference to the assessment year in which the satisfaction note was recorded.

The judgment applied Principal Commissioner of Income Tax-1 (Central-1) v. Ojjus Medicare Pvt. Ltd., [2024] 465 ITR 101 (Delhi). The Revenue’s submission that a special leave petition had been filed against that decision did not prevent the Court from granting relief.

The dates that decided the dispute

The Assessing Officer recorded the satisfaction note on 25 June 2021, falling in Assessment Year 2022–23.

Acting in furtherance of that satisfaction note, the Department passed an assessment order dated 30 March 2023 under Section 153C, concerning Assessment Year 2012–13.

The company challenged the order through a writ petition under Article 226 of the Constitution. Its principal objection was that the assessment was beyond the period permitted under Section 153A read with Section 153C, as applicable to the dispute.

The issue was therefore one of the statutory reach of the proceedings. The Court was required to determine whether AY 2012–13 could lawfully be brought within the assessment period arising from the satisfaction note recorded in June 2021.

The assessee relied on Ojjus Medicare

At the outset, counsel for the company submitted that the controversy was squarely covered by the Delhi High Court’s judgment in Ojjus Medicare Pvt. Ltd.

The assessee’s case was that, once the relevant period was calculated with reference to AY 2022–23, the year under assessment—AY 2012–13—lay beyond the permissible boundary.

The Revenue’s Senior Standing Counsel could not dispute the factual position. However, he pointed out that the Department had filed an SLP before the Supreme Court against Ojjus Medicare.

The High Court nevertheless proceeded to decide the writ petition by applying the statutory provisions and its earlier judgment. The order records the filing of the SLP; it does not record any stay of the precedent relied upon.

Ten years still has an outer boundary

The High Court observed that the applicable period would be ten years, since the escaped income was more than ₹50 lakh.

It then demonstrated the calculation through a year-by-year table. In the computation adopted in this judgment, AY 2022–23 was counted as the first year. AY 2021–22 was the second, AY 2020–21 the third, and the count continued backwards until AY 2013–14 became the tenth year.

Consequently, AY 2012–13 fell outside that ten-year span.

This is the decisive aspect of the judgment. The Department had invoked the extended period, but the assessment year selected was still beyond its outer limit. The existence of escaped income exceeding ₹50 lakh did not overcome that defect.

The Court held that the impugned assessment was time-barred on a plain reading of Sections 153A and 153C, as well as in light of Ojjus Medicare.

Assessment order quashed

The High Court allowed the writ petition and quashed the assessment order dated 30 March 2023. The pending application was also disposed of.

The relief was final at the High Court level: the assessment was not remanded to the Assessing Officer for reconsideration.

The short judgment did not examine the merits of the additions or discuss the underlying evidence of escaped income. Its conclusion rested on the assessment year being outside the permissible statutory period.

It is therefore important to distinguish the point decided from a dispute about whether an order was completed within its procedural deadline. Here, the Court’s reasoning concerned how far back the Section 153C proceedings could extend.

Author’s comments

In search-related assessments, the year selected for assessment deserves as much scrutiny as the additions proposed. A substantial alleged escapement cannot, by itself, cure an assessment that travels beyond the statutory period.

The practical value of this decision lies in its clear identification of the relevant dates and its express backward calculation. Before contesting additions on merits, practitioners should examine the satisfaction note, the assessment year sought to be covered and the applicable statutory framework.

At the same time, the Court’s counting method should be described accurately as the computation adopted in this judgment, rather than presented as a universal formula for every Section 153C case irrespective of the governing provisions and facts.

The Revenue’s reference to its SLP also did not alter the outcome. On the material recorded, the High Court applied Ojjus Medicare and enforced the limitation boundary.

An extended period is still a limited period—and the Department cannot assess a year lying beyond it.

Cases Discussed:

• Principal Commissioner of Income Tax-1 (Central-1) Vs Ojjus Medicare Pvt. Ltd., [2024] 465 ITR 101 (Delhi) — followed; the Court held that the Section 153C assessment for AY 2012-13 was beyond the permissible limitation period.

FULL TEXT OF THE JUDGMENT OF DELHI HIGH COURT

1. By way of present writ petition preferred under Article 226 of the Constitution of India, the petitioner has challenged order dated 30.03.2023 passed under Section 153C of the Income-tax Act, 1961 (hereinafter referred to as ‘Act of 1961’) in furtherance of the satisfaction note dated 25.06.2021 recorded by the Assessing Officer for assessment year 2012-13.

2. Learned Counsel for the petitioner at the outset argued that the impugned order has been passed beyond the time period prescribed under Section 153A read with Section 153C of the Act of 1961 as prevailing at the relevant time (AY 2012-13).

3. He submitted that the issue involved in the present writ petition is squarely covered by judgment of this Court rendered in the case of Principal Commissioner of Income Tax-1 (Central-1) v. Ojjus Medicare Pvt. Ltd. reported in [2024] 465 ITR 101 (Delhi).

4. Mr. Ruchir Bhatia, learned Senior Standing Counsel for the Department could not dispute the aforesaid position of facts involved. He, however, submitted that an SLP against the said judgment has been filed before Hon’ble the Supreme Court.

5. Heard learned counsel for the parties.

6. It does not need much discussion that as the satisfaction note was recorded on 25.06.2021, i.e. in the assessment year 2022-23, the order passed on 30.03.2023 qua assessment year 2012-13 is clearly beyond the limitation period (which shall be 10 years as the escaped income is more than Rs.50,00,000/-), if calculated backward from assessment year 2022-23.

For ease of understanding, a tabular depiction is made hereunder:

7. The impugned order is, thus, time-barred on a plain reading of Sections 153A and 153C of the Act of 1961 so also in light of Ojjus Medicare Pvt. Ltd. (supra).

8. The writ petition is allowed, the order dated 30.03.2023 is quashed. Pending application stands disposed of.