10-Year Rule Includes Search Year: Gujarat HC Clears Confusion on Income Tax Time Limits

The Gujarat High Court has quashed a notice issued under Section 148 of the Income Tax Act holding that the reassessment was barred by limitation and provided crucial clarity on how the 10-year extended limitation period is to be computed in search-related cases. The bench of Justice A.S. Supehia and Justice Pranav Trivedi has observed that the six-year block is governed by the expression “six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted”, which mandatorily excludes the search assessment year, as it only covers years preceding it. In contrast, the ten-year block, introduced through Explanation 1 to Section 153A, uses the phrase “not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted”, thereby changing the entire computation mechanism. The bench stated that the ten-year period must be reckoned from the end of the search assessment year, and consequently, the search year itself becomes the first year in the ten-year block. This distinction is not merely semantic but deliberately structured by the legislature, and any attempt to apply the six-year logic (i.e., exclusion of search year) to the ten-year block would render the statutory phrase “from the end of the assessment year” redundant and defeat legislative intent. The petition was filed by Jaini Tradelink Pvt. Ltd. challenging a reassessment notice dated March 28, 2025, issued by the Income Tax Officer, Ward 2(1)(1), Ahmedabad, for Assessment Year (AY) 2015–16. The notice stemmed from a search operation conducted on May 18, 2024, on the MSK and Madhav Group. During the search, the department allegedly found incriminating material suggesting that certain entities had engaged in accommodation entries involving bogus purchases, and the petitioner was suspected to be one such beneficiary. Based on this, the department reopened the petitioner’s assessment, alleging escapement of income. The petitioner contended that the reassessment notice was time-barred under the statutory framework. As per the law governing search cases, the maximum permissible period is 10 assessment years. When computed correctly, the outer limit extended only up to AY 2016–17, making reopening of AY 2015–16 impermissible. The department had incorrectly calculated the limitation period by excluding the search year, which was contrary to law. The Income Tax Department argued that the search year should be excluded while computing the 10-year period. If calculated accordingly, AY 2015–16 would fall within the permissible time frame. The legislative intent supported a broader interpretation to include such cases within reassessment jurisdiction. The central question before the Court was whether the 10-year limitation period under Sections 153A/153C includes or excludes the “search assessment year” while computing the permissible block period. The court undertook a detailed analysis of the statutory provisions, particularly Sections 153A, 153C, 148, and 149 of the Income Tax Act. The Court emphasized the distinct legislative language used for 6-year block period: “immediately preceding” the search year and 10-year extended period: “from the end of the assessment year” relevant to the search year. The Court held that the 6-year period excludes the search year, as it refers to preceding years. However, the 10-year period must include the search year, since it is computed from the end of that year. The Court clarified that the statute creates two separate computational mechanisms, and they cannot be interpreted identically. Including the search year in the 10-year block is mandatory to give effect to the phrase “from the end of the assessment year.” The Court held that the 10-year block period ranged from AY 2025–26 back to AY 2016–17. Since AY 2015–16 fell outside this range, the reassessment notice was beyond the permissible limitation period. The Court quashed the notice issued under Section 148, and declared the reassessment proceedings invalid in law. Case Details Case Title: Jaini Tradelink Pvt. Ltd. Versus Income Tax Officer,Ward 2(1) (1),Ahmedabad Citation: JURISHOUR-633-HC-2026(GUJ) Case No.: R/Special Civil Application No. 2498 Of 2026 Date: 26/02/2026 Counsel For Petitioner: Vaibhavi K Parikh Counsel For Respondent: Dev D Patel Click Here To Read Order Read More: Bogus Capital Gains | Rajasthan High Court Dismisses Income Tax Appeals Over Denial of Cross-Examination

10-Year Rule Includes Search Year: Gujarat HC Clears Confusion on Income Tax Time Limits

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