Search Year Must Be Included While Computing 10-Year Block For Reassessment: Gujarat High Court

The Gujarat High Court on 9 March, held that while computing the extended ten-year block period for reassessment in search cases, the assessment year relevant to the previous year in which the search is conducted (search assessment year) must be included in the computation.

The Division Bench comprising Justice A. S. Supehia and Justice Pranav Trivedi quashed the notice issued to Dilipbhai Prabhudas Patel (petitioner) under Section 148 of the Income Tax Act. The Bench held:

"The statutory language necessarily results in inclusion of the search assessment year within the ten-year reckoning. Any interpretation that applies the six-year exclusion model, if made applicable to the ten-year block, would defeat the legislative scheme and render material words redundant. Accordingly, while computing the extended ten-year period under Explanation 1 to Section 153A read with Section 153C of the Act, the assessment year relevant to the previous year of search is to be included in the reckoning."

The petitioner had filed his return for AY 2014-15 declaring income of Rs. 6.89 lakh. A search operation under Section 132 was conducted on 8 February 2024 in the case of the PSY Group, a real estate group allegedly associated with the petitioner.

Following the search, the Income Tax Department issued a notice dated 26 March 2025 under Section 148 seeking to reopen the petitioner's assessment for AY 2014-15 based on documents allegedly found during the search.

Challenging the notice, the petitioner contended that it was barred by limitation. He argued that since the search was conducted during Financial Year 2023-24, the relevant search assessment year would be AY 2024-25.

According to the statutory framework governing search-related reassessments, the extended jurisdiction allows reopening of assessments not later than ten assessment years from the end of the assessment year relevant to the previous year in which the search was conducted.

On this basis, the permissible ten-year block would extend only up to AY 2015-16, making AY 2014-15 fall outside the allowable period.

The Revenue, however, argued that the search assessment year should be excluded while computing the ten-year block, similar to the method used for calculating the six assessment years preceding the search year. If such exclusion were adopted, AY 2014-15 would fall within the ten years, rendering the notice valid.

Examining the statutory scheme, the High Court observed that the language used for computing the six-year block and the ten-year block is materially different. For the six-year period, the statute specifically provides that the six assessment years must be those “immediately preceding” the assessment year relevant to the previous year in which the search is conducted, which clearly excludes the search assessment year from computation.

The Bench stated that Section 153A of the Act prescribes two distinct and independent computational regimes. The six assessment years are those “immediately preceding” the assessment year relevant to the previous year of search, thereby excluding the search year, whereas the ten assessment years under Explanation 1 of Section 153A are to be computed “from the end of the assessment year” relevant to the previous year of search.

The Bench held that where the search was conducted during Financial Year 2023-24, the search assessment year would be AY 2024-25. Counting ten assessment years backwards from that year would extend only up to AY 2015-16. Since the impugned notice sought to reopen AY 2014-15, it clearly fell beyond the outer ten-year limit prescribed by the statute.

Accordingly, the Court quashed the reassessment notice issued to the petitioner as time-barred and without jurisdiction, and allowed the writ petition.

For Petitioner: Senior Advocate, Tushar Hemani, with Advocate Vaibhavi K Parikh

For Respondent: Advocate, Varun K. Patel