Reassessment Sanction Granted by PCIT Instead of PCCIT After

Reassessment Sanction Granted by PCIT Instead of PCCIT After Three Years Is Void Ab Initio

Issue

Whether a reassessment notice issued under Section 148 and an order passed under Section 148A(d) after the expiry of three years from the end of the relevant assessment year are valid when sanction was granted by the Principal Commissioner of Income Tax (PCIT) instead of the prescribed specified authority (Principal Chief Commissioner or Chief Commissioner) under Section 151(ii).

Facts

Non-Filing & Information: For Assessment Year 2018-19, the assessee did not file a return of income. Based on information, the Assessing Officer (AO) noted that the assessee had sold shares and realized capital gains taxable in India.
Timeline of Reassessment: The AO issued a show-cause notice under Section 148A(b), passed an order under Section 148A(d), and issued a reassessment notice under Section 148 after the expiry of three years from the end of the relevant assessment year (AY 2018-19).
Sanctioning Authority: The sanction for passing the order under Section 148A(d) and issuing the Section 148 notice was granted by the Principal Commissioner of Income Tax (PCIT).
Statutory Defect: Under Section 151(ii) as applicable, where more than three years have elapsed from the end of the relevant assessment year, the competent specified authority to accord sanction is the Principal Chief Commissioner or Chief Commissioner (PCCIT/CCIT), not the PCIT.

Decision

Competent Sanctioning Authority: After the lapse of three years from the end of the relevant assessment year, the authority competent to grant sanction under Section 151(ii) is the PCCIT or CCIT, not the PCIT or CIT.
Non-Retrospectivity of Amendment: The proviso to Section 151 inserted by the Finance Act, 2023, has no retrospective application.
Jurisdictional Failure: Obtaining sanction from an incompetent authority (PCIT instead of PCCIT/CCIT) goes to the root of the AO’s jurisdiction, making the assumption of jurisdiction bad in law and invalidating the entire reassessment proceeding.

Key Takeaways

Strict Statutory Compliance for Sanction: The hierarchy of sanctioning authorities under Section 151 is mandatory; obtaining approval from an officer lower than the specified authority invalidates the notice and subsequent proceedings.
Three-Year Cutoff Rule: Once three years from the end of the relevant assessment year have elapsed, sanction must strictly emanate from the PCCIT/CCIT level.
Incurable Jurisdictional Defect: Improper sanction is a fatal jurisdictional flaw that cannot be cured retrospectively or validated under procedural saving provisions.

HIGH COURT OF GUJARAT

Pankajkumar Kanaiyalal Soni

Income-tax Officer

A.S. Supehia and Pranav Trivedi, JJ.

R/SPECIAL CIVIL APPLICATION NO. 4341 of 2026

MARCH 30, 2026

Tushar Hemani, Sr. Counsel and Ms. Vaibhavi K Parikh for the Petitioner. Ms Maithili D Mehta, Senior Standing Counsel for the Respondent.

JUDGMENT

A.S. Supehia, J. – Heard learned Senior Advocate Mr. Tushar Hemani appearing with Learned Advocate Ms. Vaibhavi K. Parikh for the petitioner and learned Senior Standing Counsel Ms. Maithili D. Mehta, for the respondents.

2. Having regard to the controversy involved, with the consent of the learned advocates for the respective parties, the matter is taken up for final hearing. Rule returnable forthwith.

3. By this petition under Article 226 of the Constitution of India, the petitioner has challenged the notice dated 09.07.2021 issued under Section 153C of the Income Tax Act, 1961 (hereinafter referred to as “the Act” for short) for the Assessment Year 2010-11 (hereinafter referred to as “the assessment year under consideration” for short) by the Income Tax Officer, Ward 4(3)(2), Ahmedabad (hereinafter referred to as “the respondent” for short). The petitioner has also challenged the assessment order dated 20.02.2026 passed under Section 144 read with Section 153C read with Section 250 of the Act and demand notice dated 20.02.2026 issued under Section 156 of the Act for the Assessment Year 2010-11.

3.1 The petitioner is an individual and it is the case of the petitioner that a search and seizure action under section 132 of the Act was carried out on 06.03.2018 in the case of third parties (i.e. Satyam, Sangani, Shaligram Group Companies). During the course of such search action, residential premise of one Mr. Viral K. Patel, the Accountant of the company, was also covered. It is the case of the petitioner that there was an allegation by the Respondent that on verification of digital data found during the course of search it was revealed that the petitioner had purchased a unit in a project namely “Satyam Sentossa Greenland Phase A-B” and the property was registered on 31.12.2009 for Rs. 89,01,000/- out of which, Rs. 63,50,000/- has been paid in cash.

3.2 Thereafter, the satisfaction note recorded by the “Assessing Officer of the person searched” as well as satisfaction note recorded by “Assessing Officer of the petitioner” were prepared and supplied. The satisfaction notes broadly assert that the petitioner purchased a property which was registered on 31.12.2009 for Rs. 89,01,000/- out of which, Rs. 63,50,000/- has been paid in cash and that the digital data seized from the searched person contains information “having bearing” on determination of income of the petitioner for the Assessment Year 2010-11.

3.3 The petitioner vide communication dated 12.01.2026 raised objections against the initiation of proceedings under section 153C of the Act for the assessment year under consideration and requested the respondent to drop the proceedings. The respondent vide order dated 02.02.2026 disposed off the objections holding the proceedings under section 153C of the Act to be justified. The respondents thereafter passed the impugned assessment order dated 20.02.2026 framing assessment pursuant to the impugned notice making addition to the tune of Rs. 63,50,000/- for the assessment year 2010-11 which in turn resulted into demand of Rs. 70,52,650/-.

4. The Petitioner has challenged the said notice and assessment order under section 153C of the Act principally on the ground of limitation.

5. Learned Senior Advocate Mr. Tushar P. Hemani for the petitioner submitted that the respondents have acted illegally and without jurisdiction while issuing Notice and passing Assessment Order under Section 153C of the Act as the same is barred by limitation. It was further contended that the impugned notice is time-barred under the statutory scheme governing search assessment. It is submitted that in the present case, search action in question was carried out in the case of third party on 06.03.2018 and the assessing officer forwarded the satisfaction note on 09.07.2021 to the Jurisdictional Assessing Officer (JAO) who received the same on the same date i.e. 09.07.2021, hence, the relevant previous year would be 2021-22 and the relevant assessment year would be 2022-23, and therefore, assessment year 202223 will become the first assessment year. Thus, it is submitted that the reopening of the assessment for assessment year 2010-11 is time barred as the same falls outside the period of 10 years.

5.1 It is further submitted that the assessment year under consideration i.e. 2010-11 has become time-barred as the same fall outside the period of ten years permissible under the ‘relevant year’. The table showing the calculation is mentioned in the petition and the same is reproduced as under:

Number	Assessment Years
1^st Year	Assessment Year 2022-23
2^nd year	Assessment Year 2021-22
3^rd year	Assessment Year 2020-21
4^th year	Assessment Year 2019-20
5^th year	Assessment Year 2018-19
6^th year	Assessment Year 2017-18
7^th year	Assessment Year 2016-17
8^th year	Assessment Year 2015-16
9^th year	Assessment Year 2014-15
10^th year	Assessment Year 2013-14

5.2 It is further contended that keeping in mind the assessment year 2022-23 as the first year, the reopening of the assessment for Assessment Year 2010-11 have become time barred as the same fall outside the period of ten years permissible under the ‘relevant year’.

5.3 In support of his submissions, learned Senior Advocate Mr. Hemani has placed reliance on the judgment of this court in the case of Delhi High Court in the case of Dinesh Jindal v. Asstt. CIT 469 ITR 32 (Delhi)/Writ Petition (Civil) No. 12091 of 2023 decided on 27.05.2024. Reliance is also placed on the judgment of Delhi High Court in the case of Pr. CIT (Central-1) v. Ojjus Medicare (P.) Ltd. 465 ITR 101 (Delhi). Finally, he has also placed reliance on the judgment of Madras High Court, Bench at Madurai, passed in A.R. Safiullah v. ACIT [Writ Petition (MD) No. 4327 of 2021, dated 24.03.2021].

5.4 Thus, it is urged that the impugned Notice issued under Section 153C of the Act and impugned Order passed for assessment year 2010-11 under Section 153C of the Act and consequent demand notice issued under section 156 of the Act and all other consequential proceedings may be quashed and set aside.

6. Per contra, learned Senior Standing Counsel Ms. Maithili D. Mehta for the respondent Department opposed the petition. We have heard them at length. The following submissions are made by Ms. Maithili D. Mehta appearing on behalf of the revenue.

6.1 It was submitted that the satisfaction note of the searched person’s Assessing Officer dated 09.07.2021 was received by the JAO of the petitioner on 09.07.2021. Therefore, the relevant Assessment Year during which the material was received by the JAO of petitioner is A.Y. 2022-23 (relating to F.Y. 2021-22). In this regard reliance is placed on the decisions of the Apex Court in case of CIT v. Jasjit Singh (SC), and the decision of this Court in case of Bhavin Kishorebhai Zinzuwadia v. Asstt. CIT [2024] (Gujarat).

6.2 It is submitted that the counting of the block assessment year would be from year in which incriminating material is received by the Jurisdictional Assessing Officer (for short “the JAO”) and hence the reopening of the assessment would be within the period of ten years.

6.3 An attempt is also made to distinguish the judgment of the Delhi High Court in the case of Ojjus Medicare (P.) Ltd (supra), by submitting that two methods cannot be adopted for computation of the six-year block period as mentioned in Section 153C of the Act and for calculation of the ten-year block period by excluding the previous year from computation of ten years. Thus, it is urged that this Court may take a different view, disagreeing with the judgment of the Delhi High Court, and it is urged that the action of the respondent may be upheld for reopening the assessment year 2010-11.

6.4 It was further submitted that applying the decision in case of Bhavin Kishorbhai Zinzuwadia(supra), wherein this court has accepted the calculation of ten assessment years for the purpose of Section 153C of the Act excluding the search year / the year in which the incriminating material is received by the JAO of the other person.

6.5 Thus, it is urged that the action of the respondent in issuing the impugned notice and passing of the impugned order for the assessment year 2010-11 under Section 153C of the Act may be upheld and the present petition may be dismissed.

ANALYSIS AND OPINION:

7. We have heard the learned advocates for the respective parties at length. We have also perused the case laws cited, considered the provisions threadbare and have also perused the material on record.

8. The sole issue that arises for consideration in the present petition is that –

(i)

Whether the notice issued by the respondent for the Assessment Year 2010-11 is barred by limitation;

(a)

Dealing with this issue, uncontroverted facts are that the search took place on 06.03.2018. On 09.07.2021, the material was received by the JAO of the petitioner from the Assessing Officer of the searched party which undisputable falls in the Financial Year 2021-22. Therefore, the date of receipt of seized material / documents / digital data would be treated as the date of search for the purpose of initiation of proceedings under Section 153C of the Act. Keeping that legal principle in mind, ten years that could be covered subject to fulfilling other conditions emanating from the statute, would be as under:

Number	Assessment Years
1^st year	Assessment Year 2022-23
2^nd year	Assessment Year 2021-22
3^rd year	Assessment Year 2020-21
4^th year	Assessment Year 2019-20
5^th year	Assessment Year 2018-19
6^th year	Assessment Year 2017-18
7^th year	Assessment Year 2016-17
8^th year	Assessment Year 2015-16
9^th year	Assessment Year 2014-15
10^th year	Assessment Year 2013-14

(b)

The only difference between the calculation as per the revenue and the petitioner is the inclusion or exclusion of the year in which the JAO of the petitioner has received the seized material / documents / digital data. Revenue contends that while calculating the period of ten years, the year in which seized material / documents / digital data is received is to be excluded and calculation starts from assessment year immediately preceding the previous relevant year to the assessment year in which material was received whereas the petitioner’s contention is that the calculation of the period of ten years would include the year in which material is received.

(c)

The short controversy turns upon whether, while computing the ten-year block, the assessment year relevant to the previous year in which material is received by the JAO of the petitioner (hereinafter “the search assessment year”) is to be included in the reckoning, unlike the computation of six assessment years which expressly excludes it.

(d)

With reference to the relevant assessment year, it is necessary to refer to the provisions of Section 153A(1)(b) of the Act which reads as under :

“Section 153A(1)(b)

(The Assessing Officer shall) assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and for the relevant assessment year or years.”

The key expression that flows from reading of the section is “six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted” and “for the relevant assessment year or years.” is phrased independently, disjointed from earlier phrase.

(e)

In juxtaposition, the Fourth Proviso permits assessment beyond six years subject to specified conditions and refers to “relevant assessment year” as stated in Explanation 1 that defines “relevant assessment year” as:

“For the purpose of this sub-section, the expression “relevant assessment year” shall mean an assessment year preceding the assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made.”

(f)

The key expression that flows from reading of the section is “not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted”.

Thus, the computational framework of Section 153A of the Act, including Explanation 1, applies pari materia to the proceedings under Section 153C of the Act.

A plain reading of Section 153A of the Act reveals that the Parliament has consciously adopted two different phraseologies:

Six-Year Block	Ten-Year Block
“six assessment years immediately preceding”	“not later than ten assessment years from the end of the assessment year”

This linguistic distinction is deliberate and must be given full effect. Under Section 153A(1)(b) of the Act, the anchor point is “the assessment year relevant to the previous year in which search is conducted”. Therefore, six years must be “immediately preceding” that assessment year. The phrase “immediately preceding” necessarily excludes the search assessment year itself. In contrast thereto, Explanation 1 introduces a materially different formulation: “not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted”. This computation mechanism does not use the phrase “immediately preceding” but instead, requires reckoning from the end of the assessment year relevant to the previous year of search. Thus, the assessment year relevant to the previous year of search becomes the reference year and the ten-year period is counted from the end of that assessment year. This necessarily includes the search assessment year within the ten-year framework and resultantly, the search year becomes the first year in the reckoning of the ten-year block.

(g)

If Parliament intended identical computation for both six and ten years, it would have used identical language. Instead, it has consciously used different phraseology, for six years “immediately preceding” and for ten years “from the end of the assessment year”. Legally, it is well settled that while interpreting plain language of a Statute, the Court must give meaning to every word used by the Legislature. To compute ten years by excluding the search year (as is done for six years) would render the phrase “from the end of the assessment year” otiose and merge two distinct statutory schemes into one that would violate settled principles of statutory interpretation. The scheme of Section 153A reflects calibrated expansion in as much as ordinary search assessment would be computed as six years immediately preceding the search year whereas exceptional extended jurisdiction up to ten years is not a mere arithmetic extension of the six-year model; it is governed by a separately structured computational rule. The Legislature, in its wisdom, has consciously created:

(i)

A backward-looking “preceding” model (six years), and

(ii)

A reckoning “from the end of the assessment year” model (ten years).

Thus, it can be concluded that Section 153A of the Act prescribes two distinct and independent computational regimes. The six assessment years are those “immediately preceding” the assessment year relevant to the previous year of search, thereby excluding the search year whereas the ten assessment years under Explanation 1 are to be computed “from the end of the assessment year” relevant to the previous year of search. The statutory language necessarily results in inclusion of the search assessment year within the ten-year reckoning. Any interpretation that applies the six-year exclusion model, if made applicable to the ten-year block, would defeat the legislative scheme and render material words redundant. Accordingly, while computing the extended ten-year period under Explanation 1 to Section 153A read with Section 153C of the Act, the assessment year relevant to the previous year of search is to be included in the reckoning.

(h)

Even otherwise, this issue is no more res integra as the same is covered by the judgement of this Court in the case of Jayantibhai Karamshibhai Maniya v. ITO (Gujarat). This Court has taken a view, after considering the earlier judgement in the case of Bhavin Kishorebhai Zinzuwadia (supra), that while calculating the period of ten years under Section 153C of the Act, keeping in mind the language of Explanation 1 to Section 153A of the Act, the search year or the year in which seized material is received by the JAO of the petitioner is required to be taken into consideration. Relevant extract of the said judgement can be usefully referred to as under:

” 9.2 The provisions of Sections 153A / 153C of the Act find place in the proviso to Section 149 of the Act and, hence, the limitation as provided in Sections 153A / 153C of the Act gets triggered upon the initiation of assessment proceedings emanating from a search under Sections 132 / 132A of the Act. We may, at this stage, mention that the Delhi High Court as well as the Madras High Court has already considered the implications of Explanation (1) to Section 153A of the Act to the limitation and the expression “relevant assessment year” used therein in Explanation (1) to Section 153A of the Act. The Delhi High Court, in the case of Ojjus Medicare (P.) Ltd. (supra), after considering an array of judgments of other High Courts as well as of the Supreme Court and upon a threadbare consideration and analysis of the statutory provisions of Sections 153A, 148 and 149 of the Act, has held thus:

” 88 Section 153A replicates the basis on which the six AYs’ are to be identified and computed with the solitary distinction being that in the case of the searched person, the six AYs’ are liable to be computed from the AY pertaining to the FY in which the search was conducted. The starting point for the purpose of identifying the six AYs’ in the case of section 153A would thus turn upon the year of search as opposed to the handover of material which is spoken of in the First Proviso to section 153C. If one were to therefore assume that a search took place on a person between 01 April 2021 to 31 March 2022, the pertinent AY would become AY 2022-23 and the corresponding six AYs’ would by as follows:

Computation of the six-year block period as provided under section 153C of the Act	No of years
AY 2021-22	1
AY 2020-21	2
AY 2019-20	3
AY 2018-19	4
AY 2017-18	5
AY 2016-17	6

89. That takes us then to the issue of identifying the “relevant assessment year” for the purposes of computing the ten year block. Explanation 1 to section 153A specifies the manner in which the entire ten AY period is to be computed. While the computation of six AYs follows the position as enunciated and identified above, Explanation I prescribes that the ten AYs’ would have to be computed from the end of the AY relevant to the FY in which the search was conducted or requisition made The ten AY period consequently is to be reckoned from the end of the AY pertaining to the previous year in which the search was conducted as distinct from the preceding year which is spoken of in the case of the six relevant AYs.

90. Viewed in that light, and while keeping the period of 01 April 2021 to 31 March 2022 as the constant, the relevant AY would be AY 2022-23. The ten AYs would have to be computed from 31 March 2023with the said date indubitably constituting the end of the AY relevant to the previous year of search. Viewed in light of the above, the block period of 10 AYs would be as follows.-

Computation of the six-year block period as provided under section 153C read with Section 153Aof the Act	No of years
AY 2022-23	1
AY 2021-22	2
AY 2020-21	3
AY 2019-20	4
AY 2018-19	5
AY 2017-18	6
AY 2016-17	7
AY 2015-14	8
AY 2014-15	9
AY 2013-14	10

91 Tested on the aforesaid precepts, it would be manifest that AY 2022-23 would form the first year of the block of ten AYs’ terminating in AY 2013-14. We, in this regard also bear in consideration the following instructive passages as appearing in the decision handed down by a learned Judge of the Madras High Court in A. R. Safiullah. We deem it appropriate to extract the following paragraphs from that decision:-

“9 Explanation-I is clear as to the manner of computation of the ten assessment years. It clearly and firmly fixes the starting point. It is the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. There cannot be any doubt that since search was made in this case on 10.04.2018, the assessment year is 2019-20. The end of the assessment year 2019-20 is 31.03.2020. The computation of ten years has to run backwards from the said date i.e. 31.03.2020. The first year will of course be the search assessment year itself. In that event, the ten assessment years will be as follows:

1^st Year	2019-20
2^nd Year	2018-19
3^rd Year	2017-18
4^th Year	2016-17
5^th Year	2015-16
6^th Year	2014-15
7^th Year	2013-14
8^th Year	2012-13
9^th Year	2011-12
10^th Year	2010-11

The case on hand pertains to AY 2009-10. It is obviously beyond the ten year outer ceiling limit prescribed by the statute. The terminal point is the tenth year calculated from the end of the assessment year relevant to the previous year in which search is conducted. The long arm of the law can go up to this terminal point and not one day beyond. When the statute is clear and admits of no ambiguity, it has to be strictly construed and there is no scope for looking to the explanatory notes appended to statute or circular issued by the department.

10. In the case on hand, the statute has prescribed one mode of computing the six years and another mode for computing the ten years. Section 153A(1)(b) states that the assessing officer shall assess or reassess the total income of six years immediately preceding the assessment year relevant to the previous year in which search is conducted. Applying this yardstick, the six years would go up to 2013-14. The search assessment year, namely, 2019-20 has to be excluded. This is because, the statute talks of the six years preceding the search assessment year. But, while computing the ten assessment years, the starting point has to be the end of the search assessment year. In other words, search assessment year has to be including in the latter case. It is not for me to fathom the wisdom of the parliament. I cannot assume that the amendment introduced by the Finance Act, 2017 intended to bring in four more years over and above the six years already provided within the scope of the provision. When the law has prescribed a particular length, it is not for the court to stretch it. Plasticity is the new mantra in neuroscience, thanks to the teachings of Norman Doidge. It implies that contrary to settled wisdom, even brain structure can be changed. But not so when it comes to a provision in a taxing statute that is free of ambiguity Such a provision cannot be elastically construed.

11. One other contention urged by the standing counsel has to be dealt with. It is pointed out that the petitioner has invoked the writ jurisdiction at the notice stage. Since the petitioner has demonstrated that the subject assessment year lies beyond the ambit of the provision, the respondent has no jurisdiction to issue the impugned notice Once lack of jurisdiction has been established, the maintainability of the writ petition cannot be in doubt.”

In our considered opinion, the decision in A.R Safiullah correctly expounds the legal position and the interpretation liable to be accorded to the identification of the ten AYs which are spoken of in sections153A and 153C.”

9.3

Thus, it is precisely held hereinabove that the statute prescribes different modes of computation for six years and ten years. We reiterate that the provisions of Section 153A(1)(b) of the Act stipulate that the Assessing Officer shall assess or reassess the total income of six years immediately preceding the assessment year relevant to the previous year in which the search is conducted. However, the ten assessment year period, consequently, is to be reckoned from the end of the assessment year pertaining to the previous year in which the search was conducted, as distinct from the preceding year which is spoken of in the case of the six relevant assessment years. Thus, the contention with regard to the computation of six years as well as ten years under the provisions of Section 153A of the Act has already been gone into by the Delhi High Court as well as the Madras High Court, and we have no convincing reason to take a divergent view from the view expressed hereinabove. Applying the aforesaid computation to the facts of the present case, taking the date of the search as 09.05.2024 during the Financial Year 2024-25, the Assessment Year 2025-26 will become the first assessment year and, in the same manner, the Assessment Year 2016-17 will become the tenth assessment year. Thus, the year under consideration, namely, Assessment Year 201516, for which the impugned notice has been issued under Section 148 of the Act, would fall beyond the period of ten years prescribed under the statute as it stood immediately before the commencement of the Finance Act, 2021, and hence, on this count, the impugned notice can be said to be barred by limitation. “

9. In the facts of the present case, admittedly the seized material is received by the JAO of the petitioner on 09.07.2021, therefore impugned notice under section 153C of the Act dated 09.07.2021 and impugned assessment order dated 20.02.2026 passed under section 153C of the Act for A.Y. 2010-11 is barred by limitation as the same falls beyond the permissible period of ten years.

10. The present petition is allowed. We, therefore, quash and set aside the notice dated 09.07.2021 issued under Section 153C of the Act and assessment order dated 20.02.2026 passed under section 153C of the Act and consequential demand notice dated 20.02.2026 issued under section 156 of the Act for assessment year 2010-11 on the ground of limitation. RULE is made absolute accordingly, with no order as to cost.