High Court Quashes Reopening Notice Issued Beyond 10-Year Limitation in Search Assessment Case

Nilay Desai challenged a notice dated 26.03.2025 issued under Section 148 of the Income Tax Act, 1961 seeking to reopen his assessment for AY 2014-15. The petitioner had filed his return on 28.11.2014 declaring income of Rs. 64,05,260 and was a major partner in the PSY Group engaged in real estate business.

A search under Section 132 was conducted on 08.02.2024 on the PSY Group and its associates, during which a pen drive allegedly containing Tally data with ledger entries relating to various partners, including the petitioner, was recovered from the premises of an associated entity.

The petitioner challenged the notice before the High Court, contending that the reopening for AY 2014-15 was barred by limitation under the ten-year framework applicable to search cases.

Issue Before Court: Whether a notice issued under Section 148 for AY 2014-15 after a search conducted in February 2024 was barred by limitation under the ten-year framework under Section 153A of the Income Tax Act.

HC’s Order: The High Court allowed the petition and quashed the reopening notice. The Court held that the ten-year limitation under Section 153A must be computed “from the end of the assessment year relevant to the previous year in which the search is conducted,” thereby including the search assessment year as the starting point.

Since the search occurred in FY 2023-24, the relevant assessment year was AY 2024-25, and the permissible ten-year block extended only up to AY 2015-16. As the impugned notice sought to reopen AY 2014-15, it fell outside the statutory period and was therefore without jurisdiction. The Court also relied on Jayantibhai Karamshibhai Maniya v. ITO while interpreting the limitation framework under Section 153A.

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