Notice under Section 153C for AY 2016-17 held invalid as limitation counted from satisfaction note date in AY 2023-24; Court follows precedent in Ojjus Medicare case.
In a significant ruling delivered on September 29, 2026, the Delhi High Court (Division Bench comprising Justices Dinesh Mehta and Dr. Aditi Choudhary) quashed an Income Tax notice issued under Section 153C of the Income-tax Act, 1961, for the assessment year (AY) 2016-17, holding it barred by limitation. The petitioner, Preeti Chadha, had challenged the notice dated July 25, 2022, which was issued pursuant to a satisfaction note recorded on June 16, 2022.
The Court emphasized that for the purposes of Sections 153A and 153C, the limitation period of six years must be calculated backwards from the assessment year relevant to the year in which the satisfaction note was recorded-in this case, AY 2023-24. Since the escaped income involved was less than Rs. 50,00,000, the six-year limitation period applied. Counting six years backward from AY 2023-24 limits the eligible years to AY 2017-18 onwards. Consequently, the notice for AY 2016-17 was issued beyond the permissible limitation period and was therefore held invalid.
This judgment aligns with the Court's earlier decision in Principal Commissioner of Income Tax-1 (Central-1) v. Ojjus Medicare Pvt. Ltd. ([2024] 465 ITR 101 Delhi), which clarified the correct calculation of limitation periods in search assessment proceedings. The Senior Standing Counsel for the Income Tax Department acknowledged the binding nature of this precedent, though an appeal is pending before the Supreme Court.
The ruling provides clarity on the limitation framework applicable to notices issued under Sections 153A and 153C and safeguards taxpayers from belated assessments issued beyond statutory timeframes. The writ petition was allowed, and the impugned notice was quashed, disposing of all pending applications.
Bottom Line:
Income Tax - Notice under Section 153C of the Income-tax Act, 1961 issued for AY 2016-17 on the basis of satisfaction note recorded on 16.06.2022 held barred by limitation - For purposes of Sections 153A and 153C, limitation of six years has to be counted backwards from the assessment year relevant to the year in which satisfaction note was recorded - Notice dated 25.07.2022 quashed.
Statutory provision(s):
Income-tax Act, 1961 Sections 153A, 153C; Constitution of India Article 226
Preeti Chadha v. Income Tax Officer, Ward 62(1), Delhi, (Delhi)(DB) : Law Finder Doc Id # 2990671
