ITAT Hyderabad Quashes Section 153C Assessment Issued After 22-Month Delay

The assessee, an individual engaged in construction, filed his return for AY 2019-20 declaring income of Rs. 4.93 lakh. A search under Section 132 was conducted on 22.11.2018 in the case of Mohd. Abdul Sattar & Others, during which documents allegedly pertaining to the assessee were seized. The assessment of the searched person was completed under Section 153A on 23.04.2021. However, the Assessing Officer recorded satisfaction under Section 153C only on 17.11.2022 and issued notice on 16.12.2022, after a delay of nearly 22 months.

Relying on a seized agreement of sale dated 28.08.2018, the AO alleged cash payment of Rs. 3 crore for purchase of land and added Rs. 1.50 crore (50% share) as unexplained investment under Sections 69/69A. The CIT(A) upheld both the proceedings and the addition.

Issue Before Tribunal: Whether proceedings under Section 153C are valid when the satisfaction note and notice are issued nearly 22 months after completion of the searched person’s assessment.

Tribunal’s Decision: The ITAT quashed the assessment, holding that as per CIT v. Calcutta Knitwears, satisfaction under Section 153C must be recorded during or immediately after completion of the assessment of the searched person. A delay of over 20 months was held to be impermissible and fatal to jurisdiction.

Therefore, the notice dated 16.12.2022 and the assessment order dated 13.03.2024 were declared void ab initio. In view of the legal finding, the grounds on merits relating to the addition of Rs. 1.50 crore were held to be academic.

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