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Facts
The assessee engaged in the restaurant business initially filed his return and was selected for scrutiny. An assessment was completed with additions. Subsequently, a search operation on a third party led to proceedings under Section 153C against the assessee, alleging undisclosed salary income from a Singapore-based company.
Held
The Tribunal held that the notices issued under Section 153C were not in compliance with Section 153C(3) of the Act because the search initiation date for the purpose of Section 153C was subsequent to April 1, 2021. The handing over of seized materials to the JAO on 08.09.2022 was considered the date of initiation of search for the assessee, which made the issuance of notices by the AO without authority.
Key Issues
Whether the notices issued under Section 153C are valid when the search was initiated on a third party, and the date of handing over of materials to the AO falls after April 1, 2021, thus making the proceedings non-applicable as per Section 153C(3)?
Sections Cited
153C, 132, 132A, 153A, 143(2), 142(1), 143(3), 139, 147, 148, 149, 151, 153
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S.R.RAGHUNATHA
आदेश / O R D E R
PER BENCH The captioned Appeals being 1608, 1609/Chny/2025 for AYs 2015-16, 2016-17 & 2017-18 preferred by the Assessee and Appeal being for AY 2018-19 preferred by the Revenue are directed against the different orders of the Ld. Commissioner of Income Tax (Appeals) (NFAC) Delhi [CIT(A)] all dated 14.08.2025.
In sum and substance grounds raised by the assessee are culled out as below:
1. • The order of the Ld. CIT(A)-19, in so far as it confirms the assessment order, is erroneous, unlawful, and contrary to the facts of the case. • The Ld. Commissioner of Income Tax (Appeals)-19 has erred both in law and on facts in sustaining the addition of Rs.55,74,960/- towards alleged undisclosed salary income said to have been earned by the appellant from M/s. MuruganIdli Pte Ltd., Singapore, for the Assessment Year 2017-18, in proceedings initiated under Section 153C of the Income-tax Act, 1961. • The ld. CIT(A)-19 failed to appreciate that no incriminating material whatsoever was found during the search that pertained to foreign salary income or that supported the ,1608,1609,1648/Chny/2025 AYs 2015-16,2016-17,2017-18 &2018-19 DY CIT (Vs.) SHANMUGASUNDARAM MANOHARAN addition made. Consequently, the assumption of jurisdiction for making an addition towards alleged undisclosed salary income under Section 153C is invalid and bad in law. Therefore, the addition sustained by the CIT(A)-19 relating to foreign salary income, in the absence of any incriminating evidence found during the search, is wholly unsustainable and deserves to be deleted. • The ld. CIT(A)-19 ought to have appreciated that determination of whether an assessment year is “abated” or “unabated” for the purpose of assessment under Section 153C must be based on the date of issuance of notice under Section 153C, and not the date of the search conducted on another person. In the present case, the search under Section 132 was conducted on 05.02.2020 in the case of a third party, whereas the notice under Section 153C was issued to the appellant only on 08.09.2022. As on the said date, the assessment pertaining to the relevant assessment year had already attained finality and was therefore an unabated/completed assessment.
Brief facts of the case are that the assessee is an individual engaged in the restaurant business under the name and style of M/s. MuruganIdli Shop. He originally filed his return of income on 31.08.2017, declaring a total income of Rs.2,28,59,370/-. The case was selected for scrutiny under CASS, and the assessment was completed with an addition of Rs.2,94,20,693/-, resulting in a total assessed income of Rs.5,22,80,603/-.
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A subsequent rectification order reduced the addition to Rs.22,16,000/-, and the total income was revised to Rs.2,50,75,370/-.
On 05.02.2020, a search and seizure operation was conducted in the case of Shri G. N. Anbuchezian and others. During the search, various incriminating materials were seized, including documents containing details of daily cash transactions involving multiple parties from his Chennai office. Upon examination, it was found that the assessee had entered into a loan transaction with Shri G. N. Anbuchezian, a major financier in the Tamil Nadu film industry.A review of the seized material revealed cash transactions between the assessee and Shri G. N. Anbuchezian, which had a direct impact on determining the assessee’s total income. Consequently, the case was centralized to this office through the Pr. CIT-1, Madurai’s notification order No. 100/2021-22 dated 15.03.2022, and proceedings under Section 153C were initiated. A notice under Section 153C was issued to the assessee on 08.09.2022. In response, he filed his return of income on 12.12.2022, declaring an income of Rs.2,28,59,370/-. Subsequently, a notice under Section 143(2) was issued on 02.02.2023, followed by a notice under Section 142(1) issued on 06.02.2023.A satisfaction note was recorded confirming that the seized materials pertain to Shri S. Manoharan, and not to the person referred to in Section 153A in the group case of Shri G. N. Anbuchezian. These materials have a bearing on the determination of the total income of the assessee, ,1608,1609,1648/Chny/2025 AYs 2015-16,2016-17,2017-18 &2018-19 DY CIT (Vs.) SHANMUGASUNDARAM MANOHARAN :: 5 ::
Shri S. Manoharan. Accordingly, notice under Section 153C was issued for A.Y. 2014-15 to 2020-21.
Before us, the Ld. AR for the assessee raised a jurisdictional ground No.4.
The primary issue requiring adjudication is whether the notice issued under Section 153C on 08.09.2022 complies with the requirements prescribed under Section 153C(3) of the Act? 6. Before us, the Ld. AR for the assessee pointed out that in the present case, the search was conducted on third Party on 05.02.2020 and notices u/s.153C issued on the assessee on 08.09.2022 which does not complies with the provisions of Section 153C(3) of the Act. To bolster the arguments, the ld.AR for the assessee has referred the judgment of the Hon’ble Jurisdictional High Court in the case of Harigovind vs. Assistant Commissioner of Income-tax Non-corporate [2025] 180 taxmann.com 197 (Madras)[28-10-2025], wherein in similar situation the Hon’ble High Court has quashed the notices issued u/s.153C, where search was conducted at third-party premises and seized materials were handed over to assessee's Assessing Officer on 25.11.2022, same was to be construed as date of initiation of search against assessee and since initiation of search was subsequent to 01.04.2021, provisions of section 153C would not apply. 7. Per contra, the ld. DR Mr. Shiva Srinivas, CIT relied upon the merits of the case and also adopted the same arguments as taken by the Sr. Standing Counsel in the case referred supra.
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We have considered the rival submissions and examined the judgment of the jurisdictional High Court cited above. It emerges that a search and seizure operation was carried out on 05.02.2020 in the case of Shri G. N. Anbuchezian and others. During the course of the search, several incriminating materials were recovered, including documents detailing daily cash transactions involving multiple parties from his Chennai office. Upon scrutiny, it was discovered that the assessee had engaged in a loan transaction with Shri G. N. Anbuchezian, a prominent financier in the Tamil Nadu film industry. The seized material further revealed cash dealings between the assessee and Shri G. N. Anbuchezian, which were directly relevant to the computation of the assessee’s total income. In light of these findings, the case was centralized to this office by the Pr. CIT-1, Madurai, through Notification Order No. 100/2021-22 dated 15.03.2022, and proceedings under Section 153C were initiated. Accordingly, notices under Section 153C were issued to the assessee on 08.09.2022.
In this case, the handing over of seized materials to the Jurisdictional Assessing Officer (JAO) of the assessee was on 08.09.2022. In such case, the said date has to be construed as the date of initiation of search in terms of Section 153C(3) of the Act, which says that nothing contained in Section 153C shall apply in relation to a search initiated under Section 132 or books of account or documents or assets requisitioned under Section 132A on or after the 1st day of April, 2021.
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Regarding the issue in hand, the judgment of the Hon’ble Jurisdictional High Court in the case of Harigovind vs. Assistant Commissioner of Income-tax Non-corporate [2025] 180 taxmann.com 197 (Madras) has held as under:
Now, the main grievance of the petitioner is that no notice under Section 153C of the Act can be issued after 01.04.2021 for all the AYs in terms of Sub-Section (3) of Section 153C.
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Now, the main issue that is required to be decided is as to whether the issuance of notice, under Section 153C on 07.02.2023, is in accordance with the provision of Section 153C(3) of the Act?
According to the petitioner, the initiation of search for the petitioner is the date, on which the materials were handed over by the Assessing Officer of the searched person to the JAO of the petitioner herein. In this regard, a reference was made to the first proviso to Section 153C(1), wherein it was stated that the initiation of search shall be the date, on which the materials were handed over to the concerned JAO, which means, in this case, the date of initiation of search in terms of first proviso to Section 153C(1) is on 25.11.2022, i.e., the date on which the materials were handed over to the JAO of the petitioner.
Further, by referring to Sub-Section (3) of Section 153C of the Act, it was contended by the petitioner that if any search was initiated on or after 01.04.2021, no proceedings can be initiated in terms of Section 153C of the Act.
In the case on hand, according to the petitioner, the search was initiated on 25.11.2022 and hence, as stated above no proceedings can be initiated in terms of Section 153C of the Act. Thus, the impugned notice came to be issued by the 2nd respondent, illegally and in contrary to Sub Section (3) of Section 153C of the Act.
On the other hand, it was contended by the respondents that the first proviso to Section 153C(1) of the Act would apply only with regard to the abatement of the proceedings for a period of 6 years prior to the relevant date and for all other practical purposes, the initiation of search would be either the date, on which the search was conducted on searched person ,1608,1609,1648/Chny/2025 AYs 2015-16,2016-17,2017-18 &2018-19 DY CIT (Vs.) SHANMUGASUNDARAM MANOHARAN under Section 132 or on the date of making of requisition under Section 132A of the Act. Hence, according to the respondents, in this case, the application of Sub-Section (3) of Section 153 would not at all come into picture.
At this juncture, it would be apposite to extract the provisions of Section 153C of the Act, which reads as follows:
153C.Assessment of income of any other person.— (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,— (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and] for the relevant assessment year or years referred to in subsection (1) of section 153A Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132A in the second proviso to sub-section (1) of section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person:
Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing ,1608,1609,1648/Chny/2025 AYs 2015-16,2016-17,2017-18 &2018-19 DY CIT (Vs.) SHANMUGASUNDARAM MANOHARAN or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub- section (1) of section 153A except in cases where any assessment or reassessment has abated.
(2) Where books of account or documents or assets seized or requisitioned as referred to in subsection (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year— (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.
(3) Nothing contained in this Section shall apply in relation to a search initiated under Section 132 or books of account, other documents or any assets requisitioned under Section 132A on or after the 1st day of April, 2021.
A reading of the first proviso to Section 153C(1) would show that the date of initiation of search under Section 132 or making requisition under Section 132A in terms of second proviso to Sub Section (1) of Section 153A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person. The date of initiation of search referred in the second proviso to Section 153A(1) only deals with respect to the abatement of proceedings.
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It would also apposite to extract the provisions of Section 153A(1) of the Act, which reads as follows:
153A. Assessment in case of search or requisition.— (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall— (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years [and for the relevant assessment year or years] referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years Provided that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years and for the relevant assessment year or years:
Provided further that assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section pending on the date of initiation of the search under section 132 or making of requisition under section 132A, as the case may be, shall abate
A reading of the second proviso to Section 153A(1) would show that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years and for the relevant assessment year or years referred to in this sub-section, 153C(1) pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate.
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Therefore, any pending proceedings shall be abated as per the above proviso.
On the strength of the above second proviso to Section 153A(1), the respondents had strongly contended that the first proviso to Section 153C is only with regard to the abatement of proceedings and not for anything else.
On the other hand, the petitioners had contended that it is not only for abatement but for all the other purposes. According to the petitioner, if a particular date is determined for the purpose of abatement of proceedings, then the same would be applicable for all the purposes, including the date of initiation of proceedings under Section 153C against the other person.
Even a reading of Section 153C makes it clear that determination of total income of such other person for 6 assessment years immediately preceding the assessment year relevant to the previous year, in which the search was conducted or requisition was made and for the relevant assessment year or years, referred in sub-Section (1) of Section 153C of the Act.
As far as the other person is concerned, the six years period would be calculated, the date on which the requisition was made and that would be the date, for the purpose of determination of assessment of income. On the other hand, as far as the searched person is concerned, this 6 years period would vary and the same would be calculated from the date of search made in the premises of searched person. Therefore, for the purpose of initiation and determination of income for 6 assessment years, two different dates have been fixed by the Statute, i.e., for the searched person, it was taken the date of search, whereas, for the other person, it was taken the date, on which the requisition is made to the JAO of the other person.
Thus, as far as the searched person is concerned, the date of initiation of search is the date, on which the search was conducted in his premises. The said date would be the date of initiation of search for searched person for all purposes. As far as the other person is concerned, the date of initiation of search would be the date, on which the materials, books of accounts, etc., are handed over to the JAO of the other person and this date would be considered as the date of initiation of search for other person for all purposes. Thus, there cannot be two different date of initiation of search, either for the searched person or for the other person.
The provisions of Sub-Section (3) of Section 153C states that ,1608,1609,1648/Chny/2025 AYs 2015-16,2016-17,2017-18 &2018-19 DY CIT (Vs.) SHANMUGASUNDARAM MANOHARAN :: 12 ::
153C(3).nothing contained in this Section shall apply in relation to a search initiated under Section 132 or books of account, other documents or any assets requisition under Section 132A on or after the 1st day of April, 2021 which means, if the search is initiated subsequent to 01.04.2021, the provision of Section 153C will not apply and accordingly, no proceedings can be initiated against the other person.
According to the petitioner, the date of handing over of the seized materials, i.e., 25.11.2022, is the date of initiation of search. If the said contention of the petitioner is accepted, obviously, the issuance of impugned notices dated 07.02.2023 by the 2nd respondent is without any authority and contrary to Sub-Section (3) of Section 153C of the Act and thus, the same is liable to be quashed. 11. We find the above referred judgment of the Hon’ble jurisdictional High Court is squarely applies in these cases. Hence, respectfully following the judgment of the Hon’ble jurisdictional High Court in the case of Harigovind vs. Assistant Commissioner of Income-tax Non-corporate [2025] 180 taxmann.com 197 (Madras), we set aside /quash all the notices issued u/s.153C on the assessee as the date of handing over of the seized materials, i.e., 08.09.2022, is the date of initiation of search. The issuance of impugned notices u/s153C dated 08.09.2022 by the AO is without any authority and contrary to Sub-Section (3) of Section 153C of the Act and thus, the same is liable to be quashed. Since, the same legal issues arises in all four captioned appeals, therefore, our order will apply mutatis Mutandis in other three appeals. ,1608,1609,1648/Chny/2025 AYs 2015-16,2016-17,2017-18 &2018-19 DY CIT (Vs.) SHANMUGASUNDARAM MANOHARAN 12. In the result, all the appealsbeing 1608, 1609/Chny/2025 for AYs 2015-16, 2016-17 & 2017-18 preferred by the assessee are allowed and appeal being for AY 2018-19 preferred by the revenue revenue is dismissed.
Order pronounced in the open court on 09th day of December, 2025 at Chennai.