Limitation Begins On Jurisdiction Transfer When Same AO Handles Searched And Other Person: ITAT Delhi

The New Delhi Income Tax Appellate Tribunal (ITAT) on 29 July held that where the Assessing Officer of the searched person and the “other person” under Section 153C of the Income Tax Act is the same, the limitation period for completing assessment begins from the date of transfer of jurisdiction under Section 127 and not from the date of recording satisfaction.

A Bench of Judicial Member Vimal Kumar and Accountant Member Manish Agarwal quashed the assessment orders passed against Sudhir Agrawal for Assessment Years 2013-14 to 2020-21, holding that the orders passed on 30 March 2023 were barred by limitation as the transfer order under Section 127 was passed on 20 October 2020. It observed:

“Hence, by respectfully following the judicial precedents, the limitation started from 20.10.2020 i.e. date of order u/s 127 of the Act, the assessment order dated 30.03.2023 is held to be barred by limitation.”

The case arose from a search conducted on the Alankit Group on 18 October 2019, during which documents allegedly belonging to Sudhir Agrawal were seized. Subsequently, an order under Section 127 was passed on 20 October 2020 transferring and centralising his case with the same Assessing Officer handling the searched person's case.

A satisfaction note under Section 153C (which permits assessment based on seized material belonging to a person other than the searched person) was recorded on 24 December 2021, followed by a notice issued on 28 December 2021. The Assessing Officer thereafter passed assessment orders for Assessment Years 2013-14 to 2020-21 on 30 March 2023, which were upheld by the Commissioner of Income Tax (Appeals).

Sudhir Agrawal argued that once the searched person and the “other person” came under the jurisdiction of the same Assessing Officer pursuant to the Section 127 order, the seized material stood effectively handed over on that date itself.

He contended that the limitation period under Section 153B of the Income Tax Act (which prescribes the time limit for completing assessments) commenced from 20 October 2020 and not from the subsequent recording of the satisfaction note. Reliance was placed on the Bombay High Court's decision in Vijay Bihari Kandhari and the Tribunal's earlier decision in Ajay Gupta v. DCIT.

The Revenue argued that recording satisfaction under Section 153C was a mandatory jurisdictional requirement and that limitation could commence only from the date of such satisfaction. It relied on decisions including Super Malls (P.) Ltd., Bhupinder Singh Kapur, Indian National Congress and Dilip Prasad Assistant Commissioner of Income Tax v. Alap Somabhai Patel to contend that the assessments were within time.

The Tribunal noted that the issue was covered by its earlier decision in Ajay Gupta where it held that when the Assessing Officer of the searched person and the “other person” is common, the transfer of jurisdiction under Section 127 itself amounts to handing over the seized material for computing limitation.

Applying the same principle, the Bench held that limitation commenced on 20 October 2020, being the date of the Section 127 transfer order, and that the assessment orders passed on 30 March 2023 were barred by limitation.

Accordingly, the ITAT quashed the assessments on the ground of limitation and held that the remaining grounds challenging the additions had become academic. It left those issues open and partly allowed all eight appeals.

Counsel for Appellant: Shri Sumit Lal Chandani, Shri Salil Kapoor, Ms. Ananya Kapoor and Shri Shivam Yadav, Advocates.

Counsel for Revenue: Shri K. Hauthang, CIT-DR