No Proceedings Can Be Initiated Under Section 153C for Searches Conducted On Or After April 1, 2021: ITAT

The Income Tax Appellate Tribunal (ITAT), Delhi Bench, has given relief to Abhisar Estates Pvt. Ltd. by quashing an assessment made under Section 153C of the Income Tax Act for Assessment Year 2017-18.

The case had begun when the tax authorities initiated a search operation on the Alankit Group on October 18, 2019. The documents found during the search revealed that the assessee had made cash payments amounting to Rs 4.91 lakh during the Assessment Year 2017-18, for which it did not give any explanation. In conclusion, the Assessing Officer (AO) made an addition amounting to Rs 4.19 lakh on the assessee’s income under section 69A of the Act.

The aggrieved assessee filed an appeal before the ITAT Delhi, arguing that after the amendment introduced to the Finance Act 2021, Section 153C cannot be pursued for initiating searches linked to dates on or after April 01, 2021. It further explained that since there was no clear record of when the seized documents were received by its AO, the “date of search” should be treated as May 10, 2022, the date when the AO recorded satisfaction.

When the tribunal analysed the case, it endorsed the aforementioned argument. It held that when the exact date of receiving seized material is not available, the date of recording satisfaction must be treated as the date of search. Since May 10, 2022, falls after April 01, 2021, the amended law applies.

After the amendment was introduced to the Finance Act 2021, no proceedings can be initiated under Section 153C for searches conducted on or after 1 April 2021. Therefore, the Tribunal ruled that the notice issued and the assessment made were not valid in law. As a result, the entire assessment was cancelled, and the appeal of the taxpayer was allowed.