Section 153C Limitation starts from Date AO receives Documents: Delhi HC

Landcraft Developers Private Limited Vs ACIT (Delhi High Court)

Delhi High Court has quashed a notice issued under Section 153C of the Income Tax Act, 1961, for Assessment Year (AY) 2015-16, ruling that the assessment proceedings initiated against Landcraft Developers Private Limited were barred by limitation. The court emphasized that the period of limitation for passing an assessment order under Section 153C commences from the date on which the Assessing Officer (AO) of the ‘other person’ receives the seized documents.

The petitioner, Landcraft Developers Private Limited, challenged the notice dated December 19, 2023, arguing that the time stipulated for passing an assessment order had elapsed, rendering any subsequent order invalid. The core of the petitioner’s argument rested on Section 153B of the Act, which mandates that an assessment order pursuant to a notice under Section 153C must be passed within twelve months from the end of the financial year in which the notice was issued. The petitioner contended that this period had passed, and therefore, the Revenue should be restrained from proceeding further.

The case was listed for hearing on March 26, 2025, and the Revenue was granted two weeks to file a reply, but no such reply was furnished. Further time was sought by the Revenue’s counsel on May 1, 2025, and granted, but a counter-affidavit was still not filed by the time of the subsequent hearing.

Briefly detailing the facts, the petitioner had filed its income tax return for AY 2015-16 on November 29, 2015, declaring a total income of ₹80,84,170. On October 18, 2019, a search and seizure operation was conducted under Section 132 of the Act on entities belonging to the Alankit Group. During this search, certain assets and documents, alleged to belong to or contain information related to the petitioner, were reportedly found.

Subsequently, the Assessing Officer with jurisdiction over the searched entities recorded a satisfaction note on June 22, 2022. This satisfaction note is crucial to the case as it formally acknowledged that documents found during the search of the Alankit Group belonged to Landcraft Developers Private Limited. The note explicitly detailed the identification of seized assets/papers, specifically mentioning “Annexure A-31 as HP Laptop” obtained from the premises of the Alankit Group. It stated that based on the description of the documents found, the AO was “satisfied that the documents belonging to M/s Landcraft Developers Pvt. Ltd. (PAN- AABCL1391F) i.e. the case belongs to a person other than the person searched. Therefore, this is a fit case to initiate proceedings u/s 153C of the Income Tax Act, 1961.” The note further clarified that these documents contained information relevant to the ‘other person’ (the petitioner) and had a bearing on the determination of its total income. Consequently, these documents were handed over to the AO having jurisdiction over Landcraft Developers Private Limited for necessary action under Section 153C for the relevant assessment years from AY 2010-11 to 2020-21.

The court noted that the satisfaction note clearly recorded that the documents and information relating to the petitioner were handed over to the AO having jurisdiction over the petitioner’s case on June 22, 2022. This date of receipt of documents by the AO of the ‘other person’ (Landcraft Developers Private Limited) became the crucial point for reckoning the period of limitation.

According to Section 153B of the Act, the AO was required to pass an assessment order within a period of twelve months from the end of the financial year in which the documents were received. Since the documents were received on June 22, 2022, the relevant financial year ended on March 31, 2023. Therefore, the last date for completing the assessment was March 31, 2024.

As of the date of filing the petition and the subsequent hearings, no assessment order had been passed. The petition was listed on March 26, 2025, well after the March 31, 2024, deadline.

In light of these facts, the Delhi High Court allowed the petition, setting aside the proceedings initiated pursuant to the impugned notice. The court further clarified that if any assessment order had been passed after the filing of the petition in respect of AY 2015-16 based on the impugned notice, it would also stand quashed.

This judgment reinforces the legal position on the commencement of the limitation period under Section 153C, emphasizing that the twelve-month period for assessment begins when the AO of the ‘other person’ physically receives the seized documents, rather than the date of the search or the recording of the satisfaction note by the AO of the searched person. This interpretation aligns with the legislative intent to ensure timely completion of assessment proceedings following search and seizure operations.

FULL TEXT OF THE JUDGMENT/ORDER OF DELHI HIGH COURT

The Petitioner has filed the present petition impugning a notice dated 19.12.2023 [impugned notice] issued under Section 153C of the Income Tax Act, 1961 [the Act] in respect of Assessment Year [AY] 2015-16. The Petitioner states that the proceedings pursuant to the impugned notice dated 19.12.2023 are barred by limitation, as no assessment order can now be passed, as the time period stipulated for passing an assessment order, has elapsed. The Petitioner’s challenge rests on Section 153B of the Act, which stipulates that an assessment order pursuant to a notice under Section 153C is required to be passed within a period of twelve months from the end of the financial year in which the said notice was issued. The Petitioner claims that since the said period has elapsed, the Revenue is required to be restrained from proceeding further with the impugned notice.

2. The notice in the present petition was issued on 26.03.2025, and the Revenue was granted time to file a reply, if any, within a period of two weeks from the date of the said order. However, no such reply has been furnished.

3. The learned counsel appearing for the Revenue also sought further time on 01.05.2025, which was granted and accordingly, the petition has been listed today. However, the Revenue has not filed its counter affidavit.

4. Briefly stated the relevant facts necessary to address the controversy involved in the present petition are as follows:

4.1. The Petitioner filed its return of income for AY 2015-16 on 29.11.2015, declaring a total income of ₹80,84,170/-. On 18.10.2019, a search and seizure operation were conducted under Section 132 of the Act in respect of entities belonging to the Alankit Group. It is alleged that during the course of search, certain assets/documents were found, which belonged to the Petitioner or contained information relating to the Petitioner.

5. The Assessing Officer [AO], exercising jurisdiction over the searched entities, recorded a satisfaction note on 22.06.2022. The relevant extract of the satisfaction note is set out below:

“PROFORMA FOR RECORDING OF SATISFACTION ABOUT SEIZED ASSETS BELONGING TO PERSON OTHER THAN THE PERSON SEARCHED

(To be filled by the Assessing Officer of searched person)

Copy of relevant Panchnama shall be integral part of satisfaction note.

In view of the above, I am satisfied that these documents also contain information which relates to above referred ‘other person’ and have a bearing on the determination of its total income. Accordingly, these documents are handed over to the AO of other person, for necessary action in the case of the above referred ‘other person’ under section 153C of the I.T. Act 1961 for the relevant assessment years as per the seized documents.”

[ emphasis added]

6. As noted above, the note clearly records that the documents and information relating to the Petitioner were handed over to the AO having jurisdiction over the case of the Petitioner is correct. Thus, the documents in question were received by the AO of the Petitioner on 22.06.2022. In the given facts, the period of limitation, as stipulated under Section 153B of the Act, for passing an assessment order is to be reckoned from the said date.

7. As noted above, in terms of Section 153B of the Act, the AO was required to pass an assessment order within a period of twelve months from the end of the financial year in which the documents were received, that is, from the end of the financial year 2022-23. Therefore, the last date for completion of the assessment was 31.03.2024, which has since passed. The present petition was listed on 26.03.2025, and admittedly, no order of assessment has been passed as of the date of filing of the petition.

8. In view of the above, the present petition is allowed and the proceedings commenced pursuant to the impugned notice are set aside. It is also clarified that, in the event, any assessment order has been passed after filing of this petition in respect of AY 2015-16 pursuant to the impugned notice, the same would also stand quashed.

9. The petition is allowed in the aforesaid terms.