The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that where the Assessing Officer (AO) of the searched person and the “other person” is the same pursuant to a transfer of jurisdiction under Section 127, the limitation for completing assessment under Section 153C commences from the date of such transfer and not from the subsequent recording of the satisfaction note. 

The bench of Vimal Kumar (Judicial Member) and Manish Agarwal (Accountant Member) quashed eight assessment orders passed against the assessee for Assessment Years (AYs) 2013-14 to 2020-21 as being barred by limitation. 

The appeals arose from a search and seizure operation conducted under Section 132 of the Income Tax Act on the Alankit Group and its key persons on 18 October 2019. During the search, the Income Tax Department allegedly recovered incriminating material relating to the assessee. Thereafter, the assessee’s case was transferred to the Central Circle under Section 127 of the Act on 20 October 2020.

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Following the transfer, the Department recorded a satisfaction note on 24 December 2021 and issued a notice under Section 153C on 28 December 2021. The Assessing Officer ultimately passed assessment orders on 30 March 2023 for AYs 2013-14 to 2020-21, making various additions. The Commissioner of Income Tax (Appeals) upheld the assessments, prompting the assessee to approach the ITAT. 

The principal controversy before the Tribunal was whether the assessments were completed within the limitation prescribed under Section 153B read with Section 153C of the Income Tax Act.

Sumit Lal Chandani, the counsel for the assessee argued that once the jurisdiction over both the searched person and the “other person” vested in the same Assessing Officer pursuant to the transfer order under Section 127, the seized material was effectively available with that officer. Therefore, the limitation period had to be computed from the date of transfer under Section 127 rather than from the later date when the satisfaction note was recorded.

On this interpretation, the assessment orders passed on 30 March 2023 were beyond the permissible limitation period and liable to be quashed. 

The department opposed the plea by contending that recording of a satisfaction note under Section 153C is a mandatory jurisdictional requirement that cannot be bypassed merely because the same Assessing Officer exercises jurisdiction over both the searched person and the other person.

It relied upon several judicial precedents, including decisions of the Supreme Court, High Courts and coordinate benches, to argue that limitation should be reckoned from the date of recording of the satisfaction note and that the assessments completed on 30 March 2023 were therefore within time. 

The Tribunal carefully examined the sequence of events, namely Search under Section 132 on 18 October 2019; Transfer of jurisdiction under Section 127 on 20 October 2020; Recording of satisfaction note on 24 December 2021; Issuance of notice under Section 153C on 28 December 2021; and Completion of assessment on 30 March 2023. 

The Bench noted that an earlier coordinate bench decision in Ajay Gupta v. DCIT had already considered an identical controversy. In that case, the Tribunal held that once the records and seized material stood transferred to the Assessing Officer having jurisdiction over the other person under Section 127, the limitation period commenced from that transfer date itself.

The Tribunal found the facts of the present case to be materially similar and held that the same principle squarely applied. 

The Tribunal observed that the assessee’s records had already been transferred to the Central Circle on 20 October 2020 under Section 127. Since the Assessing Officer of the searched person and the assessee had become the same after such transfer, the limitation period for completing assessment had to be computed from that date.

Accordingly, the assessment orders passed on 30 March 2023 were held to be barred by limitation.

Having quashed the assessments on this legal ground, the Tribunal declined to examine the remaining grounds challenging the merits of the additions, observing that they had become academic. The same reasoning was extended to all eight appeals covering AYs 2013-14 to 2020-21. 

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