Facts of the Case:
The assessee, an individual, filed an appeal against the order dated 28.03.2025 passed by the Learned Commissioner of Income Tax (Appeals)-25, New Delhi, (“CIT(A)”) for Assessment Year (“AY”) 2020-21. A search and seizure action under section 132 of the Income-tax Act, 1961 (“Act”) was initiated on the Bhatia Group, including the assessee, dated 27.02.2020. Several premises connected with the assessee were searched between 27.02.2020 and 01.03.2020. A panchnama dated 01.03.2020 was drawn in respect of the assessee, and on the same date a prohibitory order under section 132(3) of the Act was passed in respect of an almirah.
No further search action was carried out thereafter, and no material was seized pursuant to the prohibitory order. As per section 132(8A) of the Act, the prohibitory order automatically ceased to be operative after 60 days, i.e., on 30.04.2020. However, the DDIT (Inv.) Unit 1(4), revisited the premises dated 20.11.2020, lifted the prohibitory order, recorded the assessee’s statement under section 132(4) of the Act, and claimed that loose papers were found. Subsequently, the Assessing Officer alleged that a second warrant of authorization under section 132 of the Act was issued and executed dated 21.11.2020.
Notice under section 153A of the Act was issued dated 07.09.2021, treating the date of search as 21.11.2020 and considering AY 2021-22 as the search year. The assessment for AY 2020-21 was framed under section 153A read with section 143(3) of the Act vide order dated 31.03.2022, making additions under sections 69C, 69B, and 69A of the Act on the basis of WhatsApp chats, digital data, and cash allegedly found during search. The CIT(A) confirmed the assessment. Aggrieved by this, the assessee preferred an appeal before the Tribunal.
Contention of Assessee:
The Assessee primarily challenged the jurisdiction and validity of the assessment. It was contended that the last valid panchnama in the assessee’s case was drawn on 01.03.2020, and therefore, as per section 153B(2)(a) of the Act, the search was deemed to have been concluded on that date and therefore AY 2020-21 shall be considered as search year.
The Assessee further contended that for AY 2020-21 assessment must have been conducted under section 143(3) of the Act instead of section 153A of the Act.
The Assessee also contended that if revenue intended to consider the date of lifting of prohibition i.e., 20.11.2020 as the date of second search than in such circumstances, the incriminating material found during the first search could not be used for framing assessment under section 153A pursuant to the second search. The only material that could be relied upon was that found during the second search, and earlier material could be used only by resorting to reassessment under section 147 of the Act.
Contention of Revenue:
The Revenue contended that two separate searches were conducted in the case of the assessee i.e., on 27.02.2020, and 21.11.2020 respectively and accordingly the second search determined the search year as AY 2021-22, and therefore, the assessment for AY 2020-21 was correctly framed under section 153A.
The Revenue further contended that limitation under section 153B of the Act shall be computed from the date of search and accordingly the completion of assessment on 31.03.2022 was within time.
Ruling:
The Hon’ble Tribunal has ruled in favour of the assessee by giving following observations stated hereunder:-
- The Tribunal, after considering the rival submissions and examining the record, held that the first and valid search in the case of the assessee was initiated dated 27.02.2020 and concluded with the drawing of the last panchnama dated 01.03.2020. The Tribunal observed that the prohibitory order passed under section 132(3) of the Act ceased to be operative after 60 days in terms of section 132(8A) of the Act , i.e., on 30.04.2020, and therefore, the search could not be deemed to have continued thereafter.
- The Tribunal categorically held that the lifting of the prohibitory order dated 20.11.2020 did not and could not extend the date of conclusion of search. Consequently, the search year was AY 2020-21. Being the search year, the assessment for AY 2020-21 is required to have been framed under section 143(3) of the Act and not under section 153A of the Act.
- The Tribunal further held that by issuing a fresh warrant dated 21.11.2020, the Department had consciously abated the first search. As a result, incriminating material found during the first search could not be used for framing assessment under section 153A of the Act pursuant to the second search. Such material, if at all, could only be used for initiating proceedings under sections 147/148 of the Act. The Tribunal found that all additions made by the Assessing Officer were based on material seized during the first search and not on material found during the alleged second search.
- The Tribunal also observed that once the search was deemed to have concluded in April 2020, recording of statement under section 132(4) of the Act dated 20.11.2020 was not within the authority of law. On these facts, the Tribunal held that the initiation of proceedings under section 153A of the Act for AY 2020-21 was invalid on both counts, first, because AY 2020-21 was the search year, and second, because the additions were based on material seized during an abated search.
- Accordingly, the Tribunal quashed the assessment order as being bad in law. Since the assessment itself was annulled on legal grounds, the Tribunal refrained from adjudicating the other grounds on merits and kept them open. The appeal of the assessee was allowed.
Editors Note:
The ruling reinforces the principle that search assessments are jurisdiction-sensitive proceedings and strict adherence to statutory architecture under Sections 132, 153A and 153B is mandatory. Where jurisdictional defects exist, entire assessments are liable to be annulled, irrespective of merits of additions.
Professionals handling search assessments should:
- Examine chronology of warrants and panchnamas carefully.
- Identify whether multiple authorizations exist.
- Segregate incriminating material search-wise.
- Challenge jurisdiction where assessment of search year is framed under Section 153A.
Citation:- Amolak Singh Bhatia v DCIT CC-8 (ITA No.3502/Del/2025) of Hon’ble Delhi Tribunal