The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has held that proceedings initiated under Section 153C of the Income Tax Act against an “other person” are without jurisdiction where the Assessing Officer recorded satisfaction after April 1, 2021. 

Relying on the Madras High Court’s decision in Harigovind and other judicial precedents, the bench of Prashant Maharishi (Vice President) and Sandeep Singh Karhail (Judicial Member) ruled that the deemed date of initiation of search for an “other person” is the date on which the seized material is received and satisfaction is recorded, not the original date of search on the searched person.

The assessee, an individual engaged in the film production business, was subjected to assessment proceedings under Section 153C following a search conducted on January 3, 2019, in the cases of certain third parties. During the search, the Income Tax Department claimed to have discovered incriminating material relating to the assessee from the premises of another person. Based on the satisfaction recorded by the Assessing Officer, a notice under Section 153C dated December 6, 2021, was issued, requiring the assessee to furnish returns for Assessment Years (AYs) 2013-14 to 2019-20. Assessments were subsequently completed making substantial additions to the assessee’s income across the relevant years. 

Buy Now: INCOME TAX E-COMPILATION – JUNE 2026

The assessee challenged the assessments before the Commissioner of Income Tax (Appeals), contending that the assumption of jurisdiction under Section 153C was invalid. The assessee argued that the statutory notices were defective, the satisfaction was improperly recorded, the proceedings were barred by limitation, and the assessments violated principles of natural justice. The CIT(A), however, rejected these objections and upheld both the jurisdiction and the additions made by the Assessing Officer. 

Before the ITAT, the principal issue was whether Section 153C proceedings could validly continue when the satisfaction for the “other person” was recorded on November 26, 2021, i.e., after the Finance Act, 2021 inserted Section 153C(3), which provides that Section 153C does not apply to searches initiated on or after April 1, 2021. 

The assessee argued that for an “other person,” the relevant date is not the original date of search but the date when the Assessing Officer receives the seized material and records satisfaction. Since that date fell after April 1, 2021, the proceedings under Section 153C were barred, and any action ought to have been initiated under the reassessment provisions instead. The Revenue, however, maintained that the relevant date remained the original search conducted on January 3, 2019, and therefore Section 153C continued to apply. 

The Tribunal undertook a detailed examination of the statutory framework comprising Section 153C(1), the first proviso to Section 153C(1), and Section 153C(3). It observed that the first proviso expressly creates a legal fiction by deeming the date of initiation of search, in the case of an “other person,” to be the date on which the seized material is received by the Assessing Officer having jurisdiction over that person. 

The Bench noted that following the Finance Act, 2021, the legislative scheme changed significantly. Searches initiated up to March 31, 2021, continued to be governed by Sections 153A to 153D, whereas searches initiated on or after April 1, 2021, fell under the substituted reassessment regime contained in Sections 147, 148, and 148A. Consequently, determining the correct “date of initiation of search” assumed central importance in deciding the validity of Section 153C proceedings. 

The Tribunal rejected the Revenue’s argument that the deeming fiction was confined only to determining the block assessment period. Instead, it held that judicial precedents consistently recognized that for an “other person,” the deemed date of initiation governs the applicability of the sunset clause contained in Section 153C(3). 

The Bench extensively relied upon the Madras High Court’s decision in Harigovind v. ACIT, which had held that where the seized material reaches the Assessing Officer of the “other person” after April 1, 2021, proceedings under Section 153C become unsustainable, irrespective of the date on which the original search was conducted on the searched person. It also referred to decisions in Geetanjali Bhayana, RRJ Securities Ltd., SSP Aviation Ltd., and Ojjus Medicare, observing that these authorities uniformly support the proposition that the deemed date governs the operation of Section 153C. 

The Tribunal further observed that the Revenue was unable to produce any contrary High Court or Tribunal decision supporting its interpretation that the original date of search alone controls the applicability of Section 153C(3). 

The Tribunal found that the satisfaction in the assessee’s case had been recorded on November 26, 2021, which was after the statutory cut-off date of April 1, 2021. Therefore, the deemed date relevant for the assessee fell after the commencement of the new reassessment regime.

The Tribunal held that the notices issued under Section 153C were without jurisdiction, the consequential assessment orders for AYs 2013-14 to 2019-20 could not be sustained, and all seven appeals filed by the assessee deserved to be allowed. Since the jurisdictional issue itself was decided in favour of the assessee, the Tribunal held that the remaining grounds challenging the additions had become academic and required no separate adjudication. 

Membership Required to Access Case Details & Order Copy

To view the complete Case Details and Download Order Copy, you must have an active membership. Please subscribe to continue.

Read More: GST Limitation Applies to Issuance of Assessment Order, Not Its Service: Calcutta High Court