Delhi High Court Quashes Section 153C Income Tax Order, Says Satisfaction Note Was Recorded After Limitation Period

The Delhi High Court has quashed a tax assessment against a company, holding that proceedings initiated on the basis of material found during search proceedings were barred by limitation.

The Division Bench of Justices Dinesh Mehta and Aditi Choudhary observed that the satisfaction note in the case was recorded on June 25, 2021, corresponding to AY 2022-23, whereas the impugned order dated March 30, 2023 concerned AY 2010-11.

Petitioner argued that the impugned order had been passed beyond the limitation period prescribed under Sections 153A and 153C of the Income Tax Act, as applicable at the relevant time.

It was further submitted that the issue was squarely covered by the Delhi High Court's judgment in Principal Commissioner of Income Tax-1 (Central-1) v. Ojjus Medicare Pvt. Ltd. (2024).

The Income Tax Department did not dispute the factual position but informed the Court that a Special Leave Petition against the Ojjus Medicare judgment had been filed before the Supreme Court.

The High Court noted that since the satisfaction note was recorded on June 25, 2021, i.e. in AY 2022-23, the limitation period for AY 2010-11 had to be calculated backwards from AY 2022-23.

Since the alleged escaped income exceeded ₹50 lakh, the applicable limitation period was 10 years. The Court noted that, when calculated backwards from AY 2022-23, the tenth year was AY 2013-14.

“It does not need much discussion that as the satisfaction note was recorded on 25.06.2021, i.e. in the assessment year 2022-23, the order passed on 30.03.2023 qua assessment year 2012-13 is clearly beyond the limitation period (which shall be 10 years as the escaped income is more than Rs.50,00,000/-), if calculated backward from assessment year 2022-23.,” the Court held and quashed the impugned order.

For Petitioner: Advocates P. Roychaudhuri and Gagan Gupta

For Respondents: Advocate Ruchir Bhatia, SSC, Anant Mann, JSC and Pratyaksh Gupta, JSC