ITAT: For Section 153C, Relevant Date Is AO’s Receipt of Seized Documents, Not Search Date

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has dismissed the Revenue’s appeals against Excel Insurance Outsourcing Pvt. Ltd., holding that for Section 153C proceedings, the relevant date is when the non-searched person’s AO receives the seized documents and records satisfaction, not the original search date.

The case arose from a search conducted on the Alankit Group on 18 October 2019, the Income Tax Department initiated proceedings against Excel Insurance Outsourcing Pvt. Ltd. under Section 153C of the Income-tax Act. The Assessing Officer of the searched party recorded a satisfaction note on 24 June 2022 and transferred the seized material to the assessee’s AO, who subsequently recorded satisfaction on 31st November 2022 and issued a notice under Section 153C on 5 July 2023.

The assessee preferred an appeal before the CIT(A), who allowed the appeal and granted relief to the assessee. The Revenue is aggrieved by the order of CIT(A) and is in appeal before the ITAT.

The assessee submitted before the Tribunal that the relevant date for determining the block period under Section 153C in the case of a non-searched person is the date on which the jurisdictional AO receives the seized documents and records satisfaction and not the date of original search. The satisfaction was recorded in November, 2022 and accordingly the relevant assessment year was AY 2023-24. Thus, the permissible block of ten assessment years would start only from AY 2014-15 onwards, so that AYs 2010-11 and 2011-12 would be outside the permissible period.

The Tribunal agreed with the assessee’s contention. It relied on the Supreme Court’s decision in CIT v. Jasjit Singh (458 ITR 437) and the Delhi High Court’s ruling in Ojjus Medicare Pvt. Ltd. v. DCIT.

According to the Tribunal, the law is now well settled that the first proviso to Section 153C creates a legal fiction under which the date of receipt of documents by the jurisdictional AO of the non-searched person is treated as the relevant date for computing the assessment years that can be reopened.

Applying this principle, the Tribunal held that the deemed date of search in the case of the assessee was 31st November, 2022. Thus, AYs 2010-11 and 2011-12 were beyond the permissible block period of ten years and could not be assessed under Section 153C.

Thus, the Tribunal upheld the order of CIT(A) and quashed the assessment for both the years. Accordingly, the appeals filed by the Revenue are dismissed.