Loading judgment…
Facts
The assessee, KJS Jewellers Pvt. Ltd., is in appeal against orders passed by the CIT(A) for Assessment Years 2017-18 to 2021-22. The primary contention revolves around the validity of notices issued under Section 153C of the Income Tax Act, 1961, particularly concerning the date of initiation of search and seizure operations.
Held
The Tribunal held that the notices issued under Section 153C were invalid because the satisfaction note for initiating proceedings was recorded on or after April 1, 2021. Citing the jurisdictional High Court's judgment in 'Hari Govind vs. ACIT', it was determined that if the search initiation or satisfaction note falls on or after April 1, 2021, Section 153C proceedings cannot be initiated. The date of handing over seized materials was considered the date of initiation of search.
Key Issues
Whether the notices issued under Section 153C are valid when the satisfaction note for initiating proceedings was recorded on or after April 1, 2021, considering Section 153C(3) of the Act.
Sections Cited
153C, 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: MS. PADMAVATHY.S & SHRI MANU KUMAR GIRI
आदेश / O R D E R
PER PADMAVATHY.S, A.M: These appeals by the assessee are against the orders of the Commissioner of Income Tax (Appeals), Chennai-20 (in short "CIT(A)") passed u/s. 250 of the Income Tax Act, 1961 (in short "the Act") all dated 10.09.2025 for Assessment Years (AYs) 2017-18 to 2021-22.
ITA No.3334/Chny/2025 – AY 2017-18 2. The assessee is a partnership firm and engaged in the business of retail trading in readymade as well as customized jewellery. The assessee filed the return of income for A.Y 2017-18 on 04.11.2017 declaring total income of to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 2 -:
Rs. 2,75,85,610/-. The case was selected for scrutiny and the A.O completed the assessment u/s. 143(3) of the Act on 28.12.2019 making an addition of Rs.3,87,46,000/- on account of cash deposited during demonetization period. A search u/s. 132 of the Act was initiated on 10.11.2020 in the case of M/s.Mohanlal Jewells Pvt. Ltd. Certain incriminating materials were found and seized during the course of search and a statement of Shri Rajendra Kotari, Accountant was recorded u/s. 132(4) of the Act. On further investigation, it is noticed that in the accounting software where M/s.Mohanlal Jewells Pvt. Ltd had recorded undisclosed purchases and sales transactions, a ledger in the name of the assessee is maintained. Accordingly, a satisfaction note for initiation of the proceedings u/s. 153C of the Act was recorded on 15.03.2023 and notice u/s. 153C of the Act was issued to the assessee on the same day. The assessee in response filed the return of income and the A.O called on the assessee to furnish various details from time to time. After considering the submissions of the assessee, the A.O completed the assessment u/s. 153C of the Act assessing the income of the assessee at Rs. 7,86,50,730/-. Aggrieved, the assessee filed further appeal before the CIT(A), who gave partial relief to the assessee. The assessee is in appeal before the Tribunal against the order of the CIT(A).
The Ld. Authorized Representative (AR) of the assessee submitted that the if the legal contention raised by the assessee in ground No.3 is adjudicated in favour of the assessee then the rest of the grounds would become academic. Accordingly, we first proceed to adjudicate the Ground No.3 which is extracted below - “3. The CIT(A) failed to appreciate that the impugned notice u/s. 153C of the Act is to be set aside for the sole reason that the notice was issued beyond the prescribed date. It is submitted that search action in the case of Mohanlal Jewellers completed on 06.02.2021 whereas the Respondent to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 3 -: received documents etc., only on 30.10.2023 and thereafter recorded his satisfaction notice and issued the impugned notice after the relevant statutory section became in applicable.”
The ld. AR with regard to the ground no.3 submitted that the AO of the assessee recorded satisfaction on 15.03.2023 and issued notice u/s.153C on the same date which is after 01.04.2021. The ld AR in this regard drew our attention to the order u/s.153C where the AO has recorded that – "6. Subsequnetly the satisfaction note for initiation of proceedings u/s.153C was recorded on 15.03.2023 and notice u/s.153C of the I.T.Act 1961 was issued to the assessee firm on 15.03.2023 after taking necessary approval of the competent authority … … … … … …………….."
The Ld. AR submitted that the issue of validity of issue of notice u/s.153C after 01.04.2021 is considered by the Hon'ble Madras High Court in the case of Hari Govind vs. ACIT [2025] 180 taxmann.com 197 (Mad.) and also by the Coordinate Bench in the case of Shanmugasundaram Manoharan vs. DCIT [ITA No.1607 to 1609/Chny/2025 dated 09.12.2025]. The Ld. AR in this regard drew our attention to the following observations of the Coordinate Bench, where it has been held that: 8. 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 to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 4 -: 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.
10. 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:
7. 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 to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 5 -: 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 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 to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 6 -: 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 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 subsection (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. to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 7 -:
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:
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 to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 8 -: 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.
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 to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 9 -: 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 "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.”
The Ld. DR, on the other hand, relied on the orders of the lower authorities.
We have heard both the parities, perused the material available on record. The primary contention of the assessee is that as per the provisions of Section 153C(3) of the Act, if the search is conducted on or after 01.04.2021 to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 10 -: then no notice u/s. 153C shall be issued and therefore the notice issued in assessee's case on 15.03.2023 is invalid. In this regard, we notice the Hon'ble Jurisdictional High Court while considering the identical issue in the case of Hari Govind (supra) has given a detailed finding that the proviso to Section 153C(1) of the Act is applicable to Section 153C(3) also whereby the date of satisfaction note is to be considered as the date of search in case of the other person. It is further held that therefore, if the satisfaction note for the purpose of Section 153C of the Act is dated on or after 01.04.2021 then the provisions of Section 153C will not apply. In this regard it is also relevant to consider the Explanation 2 to Section 148 of the Act as applicable to the year under consideration which reads as under – Explanation 2.—For the purposes of this section, where,— (i) a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A, on or after the 1st day of April, 2021, in the case of the assessee; or (ii) a survey is conducted under section 133A, other than under sub-section (2A) or sub-section (5) of that section, on or after the 1st day of April, 2021, in the case of the assessee; or (iii) the Assessing Officer is satisfied, with the prior approval of the Principal Commissioner or Commissioner, that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, belongs to the assessee; or (iv) the Assessing Officer is satisfied, with the prior approval of Principal Commissioner or Commissioner, that any books of account or documents, seized or requisitioned under section 132 or section 132A in case of any other person on or after the 1st day of April, 2021, pertains or pertain to, or any information contained therein, relate to, the assessee”
A combined reading of the ratio laid down by the Hon'ble High Court and the explanation to section 148 makes it clear that if the satisfaction is recorded on or after 01.04.2021, then no notice can be issued u/s.153C and that only notice u/s.148 is to be issued. In assessee's case, it is an undisputed to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 11 -: fact that the satisfaction note is recorded after 01.04.2021 When we apply the ratio laid down by the Hon'ble Jurisdictional High Court and the decision of the Coordinate Bench, we see merit in the arguments of the Ld. AR that the satisfaction note dated 15.03.2023 is to be considered as the date of search in the case of the assessee which is after 01.04.2021 and therefore the notice u/s. 153C of the Act dated 15.03.2023 is not valid and is liable to be quashed. Consequently, we hold that the proceeding completed by the A.O u/s. 153C of the Act does not survive. to 3338/Chny/2025 – AY 2018-19 to AY 2021-22: 9. During the course of hearing the ld. AR with regard to the legal contention on validity of notice u/s.153C issued after 01.04.2021 submitted the following table with the relevant events and dates.
From the perusal of the above table, we notice that the AO of the assessee has issued notice u/s.153C for all the AYs under consideration on to 3338/Chny/2025 KJS Jewellers Pvt. Ltd. :- 12 -:
15.03.2023. Therefore in our considered view, our decision in AY 2017-18 with regard to impugned issue of validity of the notice u/s.153C after 01.04.2021 is mutatis mutandis applicable to AYs 2018-19 to AY 2021-22 also. Accordingly we hold that the notice u/s. 153C of the Act dated 15.03.2023 is not valid and is liable to be quashed. Consequently, the proceedings completed by the A.O u/s. 153C of the Act also do not survive.
In the result, all the appeals of the assessee for AY 2017-18 to AY 2021-22 are allowed.
Order pronounced on 28th day of January, 2026 at Chennai.