The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has quashed assessment proceedings initiated under Section 153C of the Income Tax Act, holding that the provision could not be invoked because the deemed date of search fell after April 1, 2021.
The bench of Anubhav Sharma (Judicial Member) and Renu Jauhri (Accountant Member) has observed that, under the proviso to Section 153C(1), the date on which the seized material is handed over to the Assessing Officer having jurisdiction over the “other person” is treated as the deemed date of search for that person.
Since the deemed date in the present case was after April 1, 2021, the Income Tax Department could not initiate proceedings under Section 153C. The Tribunal held that the Department could have resorted only to reassessment proceedings under Section 148.
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The dispute originated from a search conducted under Section 132 of the Income Tax Act in the cases of the Alankrit Group. During the search, the Department allegedly recovered certain documents concerning the assessee.
Following the recovery, the company’s case was centralised and a notice under Section 153C was issued on December 16, 2022.
For Assessment Year 2014-15, which the Tribunal treated as the lead year, the company had originally filed its income-tax return on September 29, 2014, declaring an income of Rs.3.98 crore.
In response to the Section 153C notice, it again filed a return on January 14, 2023, declaring the same income. However, the Assessing Officer completed the assessment on March 30, 2024, determining its total income at Rs.7.78 crore after making several additions.
The Commissioner of Income Tax (Appeals) dismissed the company’s appeal through an order dated August 29, 2025. The company consequently approached the ITAT.
Sumit Lal Chandani, the counsel on behalf of the company raised several legal objections to the validity of the proceedings. It contended that the statutory conditions required for invoking Section 153C had not been satisfied and that the proceedings were without jurisdiction.
The company argued that a common satisfaction note under Section 153C was recorded on June 22, 2022, for Assessment Years 2014-15 to 2020-21. The Assessing Officer having jurisdiction over the company subsequently recorded satisfaction on December 16, 2022.
It submitted that the date on which the seized material was handed over to the jurisdictional Assessing Officer was required to be treated as the deemed date of search under the proviso to Section 153C(1).
Although the exact date of handing over the seized material was not mentioned in the record, the company argued that it necessarily had to be on or after June 22, 2022, when the satisfaction note was recorded in the searched person’s case.
Consequently, the deemed date of search fell after April 1, 2021. The company maintained that Section 153C(3) barred the issuance of a notice under Section 153C in such circumstances.
Reliance was placed on the Delhi High Court’s ruling in Principal Commissioner of Income Tax v. Ojjus Medicare Pvt. Ltd. concerning the determination of the deemed date of search.
The company also cited the Madras High Court’s decision in Harigovind v. Assistant Commissioner of Income Tax, in which it was held that the date of handing over the seized material to the Assessing Officer was the relevant date of search for the person against whom Section 153C proceedings were proposed.
The Madras High Court had further held that, in view of Section 153C(3), proceedings under that provision could not be initiated where the relevant date fell after April 1, 2021.
The Income Tax Department, on the other hand, relied upon the orders passed by the Assessing Officer and the CIT(A).
After examining the record, the Tribunal found that the relevant deemed date of search necessarily fell between June 22, 2022, when the first satisfaction was recorded, and December 16, 2022, when satisfaction was recorded by the jurisdictional Assessing Officer.
Thus, irrespective of the precise date on which the seized material was handed over, the relevant date was clearly later than April 1, 2021.
The Tribunal held that Section 153C proceedings could not be initiated in view of the express restriction contained in Section 153C(3).
“Thus, in view of provisions of section 153C(3), notice u/s 153C could not be issued as the deemed date of search is after 1.4.2021,” the Tribunal observed.
It consequently declared the proceedings initiated under Section 153C and the resulting assessment order invalid and liable to be quashed.
Apart from the jurisdictional objection, the company had raised several other grounds challenging the assessments. These included alleged absence of incriminating material, defective satisfaction, mechanical approval under Section 153D, non-mention of a Document Identification Number and denial of an opportunity to cross-examine.
The company had also questioned the admissibility of Excel sheets and Tally data allegedly retrieved from electronic devices. It contended that the material could not be relied upon because of non-compliance with Section 65B of the Indian Evidence Act and the applicable CBDT manual.
On the merits, it challenged various additions made under Sections 69A and 69C, including additions for alleged unexplained money and unexplained expenditure.
However, after quashing the notice on the jurisdictional issue, the Tribunal held that all the remaining legal grounds and grounds concerning the additions had become infructuous. It, therefore, did not adjudicate them.
Since the facts and legal issue were identical for Assessment Years 2015-16 to 2020-21, the Tribunal applied its finding to all the connected appeals and quashed the Section 153C proceedings for each of the seven assessment years.
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