High Court Quashes Income Tax Notices Issued Beyond 10-Year Limit Under Section 153C

High Court Quashes Income Tax Notices Issued Beyond 10-Year Limit Under Section 153C

Siddhi Vinayak Cement Private Limited was incorporated in March 2008 and later received various funds through loans and share applications, which were used to purchase land. In October 2011, Nirma Limited (the petitioner) acquired all shares of this company. Several years later, on March 6, 2018, the Income Tax department conducted a search on the “SSS Group,” where they allegedly found incriminating documents involving a third party.

Thereafter, on March 31, 2022, the tax authorities issued notices under Section 153C of the Income-tax Act to Nirma Limited for the Assessment Years 2008-09 to 2018-19. The petitioner challenged these notices arguing that they were barred by the statute of limitations.

Main Issue: Whether the notices issued under Section 153C for Assessment Years 2008-09 to 2011-12 were legally valid given they were initiated more than ten years after the relevant period, based on the date the seized material was handed over to the petitioner’s Assessing Officer.

HC’s Order: The High Court ruled in favor of Nirma Limited, quashing the contested notices for the Assessment Years 2008-09 through 2011-12. Relying on CIT vs. Jasjit Singh, the court clarified that for Section 153C proceedings, the limitation period is calculated from the date the seized documents are actually handed over to the Assessing Officer of the “other person”

As the handing over occurred in March 2022, the tax department could only legally initiate proceedings for the Assessment Year 2012-13 onwards.

The court emphasized that allowing the revenue to “relate back” to the original search date would unfairly force taxpayers to preserve records far beyond the legal requirement, creating “disastrous and harsh consequences” not intended by Parliament.

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