DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(2), CHENNAI, CHENNAI vs. SHANMUGASUNDARAM MANOHARAN, MADURAI

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/-.

,1608,1609,1648/Chny/2025 AYs 2015-16,2016-17,2017-18 &2018-19 DY CIT (Vs.) SHANMUGASUNDARAM MANOHARAN :: 4 ::

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.

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.

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.

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:

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.

It would also apposite to extract the provisions of Section 153A(1) of the Act, which reads as follows:

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.

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 ::

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.