Notice under Section 153C of Income Tax Act issued in 2024 for assessment year 2010-11 held time-barred as limitation period extends only up to AY 2015-16
In a significant ruling on September 30, 2026, the Delhi High Court (Division Bench comprising Justices Dinesh Mehta and Dr. Aditi Choudhary) quashed a notice issued under Section 153C of the Income-tax Act, 1961, pertaining to the assessment year (AY) 2010-11. The petitioner, Shree Aggarsain North Ex Welfare Society, challenged the notice dated February 15, 2024, issued by the Assistant Commissioner of Income Tax, Central Circle-28, Delhi, on the ground that it was beyond the statutory limitation period.
The Court relied on the principle that for notices issued under Sections 153A and 153C of the Income Tax Act, the limitation period is counted backward from the year in which the satisfaction note is recorded. Here, the satisfaction note was recorded on February 7, 2024, which corresponds to AY 2024-25. Given that the escaped income was more than Rs. 50,00,000, a 10-year limitation period applies. Counting 10 years backward from AY 2024-25 restricts the department to issue notices only up to AY 2015-16.
The notice in question, relating to AY 2010-11, clearly exceeded this limitation period. The Court supported its decision by following its earlier ruling in Principal Commissioner of Income Tax-1 (Central-1) v. Ojjus Medicare Pvt. Ltd. ([2024] 465 ITR 101 (Delhi)), which held that even where an SLP is filed against such decisions, the binding effect of the High Court judgment continues until it is stayed or overruled by the Supreme Court.
The bench held that the Income Tax Department cannot circumvent limitation provisions by issuing belated notices under Section 153C based on satisfaction notes recorded in a much later assessment year. Consequently, the Court allowed the writ petition and quashed the notice dated February 15, 2024, as time-barred.
This judgment reiterates the importance of adhering strictly to limitation periods in tax assessments and provides relief to taxpayers against retrospective notices issued after the expiry of the statutory period.
Bottom Line:
Income Tax - Notice under Section 153C of the Income-tax Act, 1961 issued for AY 2010-11 on the basis of satisfaction note recorded on 07.02.2024 held barred by limitation - For purposes of limitation, 10 years counted backward from AY 2024-25 would extend only up to AY 2015-16 - Notice dated 15.02.2024 quashed.
Statutory provision(s):
Income Tax Act, 1961 Sections 153A, 153C; Constitution of India Article 226
