Introduction
The Delhi Bench “C” of the Income Tax Appellate Tribunal (ITAT), comprising Judicial Member Vikas Awasthy and Accountant Member S. Rifaur Rahman, delivered a significant jurisdictional ruling in IKKI Saree Centre vs. DCIT (ITA Nos.1996 to 1998/DEL/2026). By a common order dated 25.08.2026, the Tribunal allowed the assessee’s appeals for Assessment Years 2018-19, 2019-20 and 2020-21, and quashed the Assessment Orders passed under Section 153C of the Income-tax Act, 1961. The central question was whether Section 153C proceedings could survive after the insertion of sub-section (3) to Section 153C by the Finance Act, 2021, with effect from 01.04.2021. The ITAT held that where the deemed date of search for an unsearched person falls after 01.04.2021, the jurisdictional foundation for a Section 153C assessment is vitiated, and the Assessing Officer must instead follow the reassessment route under Sections 147/148. This commentary analyses the facts, the statutory scheme, and the reasoning of the Tribunal.
Facts
The original search was conducted on the Alankrit Group on 18.10.2019. Subsequently, proceedings were initiated against the assessee, IKKI Saree Centre, as an “other person” under Section 153C of the Act. The assessee contended that the Assessing Officer recorded reasons to initiate proceedings for issuance of notice under Section 153C on 12.05.2023. More importantly, the satisfaction note in the case of the searched person was recorded only on 20.06.2022. According to the assessee, once the satisfaction was recorded after the statutory cut-off date of 01.04.2021, Section 153C could not be invoked at all. The assessee argued that the correct jurisdictional route was Section 148, not Section 153C. The Revenue, on the other hand, relied on the orders of the lower authorities. Aggrieved by the confirmation of additions by the CIT(A)-25, New Delhi vide order dated 08.12.2025, the assessee approached the ITAT.
Reasoning
The ITAT took up ITA No.1996/Del/2026 for AY 2018-19 as the lead case, noting that the issues were common for all three years. The core legal issue was whether the notice issued and the Assessment Order passed under Section 153C were without jurisdiction, barred by limitation, and legally unsustainable.
The Tribunal first examined the deemed date of search in the case of an unsearched person. Under the first proviso to Section 153C(1), where the person is other than the searched person, the date of search is deemed to be the date on which the books of account, documents or assets seized or requisitioned are received by the Assessing Officer having jurisdiction over such other person. Where that specific date is not available on record, the Hon’ble Delhi High Court in PCIT vs. Ojjus Medicare (P.) Ltd. (2024) 161 taxmann.com 160 (Delhi) has laid down that the date of issuance of the satisfaction note by the Assessing Officer under Section 153C would be pertinent for the purpose of the first proviso. In the present case, the satisfaction was recorded on 20.06.2022. Since the date of handing over of the seized material to the assessee’s Assessing Officer was not established from the record, the date of the satisfaction note became the decisive date.
Thereafter, the Tribunal applied the statutory amendment brought in by the Finance Act, 2021. With effect from 01.04.2021, sub-section (3) was inserted in Section 153C, which provides that nothing contained in Section 153C shall apply in relation to a search initiated under Section 132 or assets requisitioned under Section 132A on or after 01.04.2021. The consequence of this amendment is significant: no assessment under Section 153C can be made in the case of an “other person” if the deemed date of search falls beyond 01.04.2021. As a corollary, any notice issued under Section 153C in such a case would be non est and the subsequent Assessment Order would be void.
In the facts of the case, the satisfaction was recorded on 20.06.2022, which is clearly after the statutory cut-off of 01.04.2021. The ITAT observed that the year of search for the unsearched assessee would be AY 2022-23 under the amended search proceedings. Since the deemed date of search fell after 01.04.2021, Section 153C stood clearly excluded. The Tribunal found the facts identical to the coordinate Bench decision in Lekh Raj vs. DCIT (2026) 187 taxmann.com 1104 (Delhi-Trib.), where the satisfaction note was recorded on 28.09.2021. In that case, the Tribunal held that in absence of a specific date of handing over of seized material, the date of recording satisfaction shall be considered the date of receiving the material by the Assessing Officer of the assessee. Since that date fell after 01.04.2021, the notice under Section 153C was held unsustainable and the assessment was quashed on the ground of jurisdiction.
Similarly, the Tribunal relied on the coordinate Bench decision in M/s. Shivdham Buildtech Pvt. Ltd. (ITA No.111/Del/2026), where the satisfaction was recorded on 11.10.2022 following the search in the Alankit Group on 18.10.2019. The same reasoning was adopted: the date of recording satisfaction determines the deemed date of search, and once that date is beyond 01.04.2021, Section 153C cannot be invoked. The Tribunal expressly applied the principles laid down by the Hon’ble Delhi High Court in Ojjus Medicare and followed the coordinate Bench decisions in Lekh Raj and Shivdham Buildtech.
The reasoning is grounded in the principle that jurisdiction is the bedrock of any assessment. If the statutory conditions precedent for assuming jurisdiction are not satisfied, the entire Assessment Order collapses, irrespective of the merits of the additions. The Tribunal’s analysis also underscores the legislative intent behind the insertion of Section 153C(3): after 01.04.2021, search assessments in the hands of non-searched persons must be made only through the reassessment regime under Sections 147/148, which carries its own procedural safeguards. The failure to follow that regime renders the Section 153C proceedings void ab initio.
Conclusion
The ITAT’s decision in IKKI Saree Centre vs. DCIT is a reaffirmation of the jurisdictional limits of Section 153C. For unsearched persons, the date of search is not the date of the original search conducted on the searched group; it is the date on which the seized material is received by the jurisdictional Assessing Officer, or, where that date is unknown, the date of the satisfaction note. Applying this test, the satisfaction recorded on 20.06.2022 fell after the effective date of Section 153C(3). Consequently, the notice issued and the Assessment Orders passed under Section 153C for AYs 2018-19, 2019-20 and 2020-21 were quashed. The Tribunal correctly held that the Assessing Officer ought to have invoked Sections 147/148 if any income was to be brought to tax. This ruling provides meaningful clarity to taxpayers facing Section 153C notices in post-2021 search scenarios.
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