Where Same Assessing Officer Handles Searched Person and Third Party, Section 153C Assessment Time Limit Expires on September 30, 2021

By | September 7, 2026
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Where Same Assessing Officer Handles Searched Person and Third Party, Section 153C Assessment Time Limit Expires on September 30, 2021
Issue
Whether Section 153C assessment proceedings for AYs 2014-15 to 2019-20 were time-barred and liable to be quashed when the Assessing Officer of the searched person and the third-party assessee was the same, and the assessment was not completed by the extended outer deadline of September 30, 2021.
Facts
  • A search and seizure operation under Section 132 was conducted on August 21, 2019, in the case of one ORL.
  • During the search, certain documents and information belonging/pertaining to the assessee (a third party) were seized.
  • Based on the seized materials, notices under Section 153C were issued to the assessee for Assessment Years 2014-15 to 2019-20.
  • The Assessing Officer (AO) for the searched person (ORL) and the AO for the third party (assessee) was one and the same authority.
  • Under the first limb of clause (ii) of the third proviso to Section 153B(1), the statutory time limit to complete the assessment was 12 months from the end of the financial year in which the search took place (i.e., March 31, 2021).
  • By virtue of TOLA and Notification No. S.O. 966(E) dated February 27, 2021, this time limit stood extended up to September 30, 2021.
  • The AO failed to complete the assessment by September 30, 2021, and was still seeking replies to show-cause notices past the deadline.
  • The High Court quashed the Section 153C proceedings as time-barred, against which the Revenue filed a Special Leave Petition (SLP) before the Supreme Court.
Decision
  • No Extra Time for Single AO: Held that the second limb of clause (ii) of the third proviso to Section 153B(1)—which extends time based on the transfer of records—applies only when the AO of the searched party and the AO of the third party are different individuals.
  • No Period Extension for Internal Transfers: Held that there is no statutory provision granting additional time for completion of assessment with reference to the transfer of records from the Investigation Wing to the AO.
  • Assessment Time-Barred: Held that since the AO was identical for both parties, the assessment under Section 153C was required to be completed on or before September 30, 2021, rendering the pending proceedings time-barred.
  • SLP Dismissed: Held that no ground for interference with the High Court order was made out, and the Revenue’s SLP was accordingly dismissed in favor of the assessee [Para 2].
Key Takeaways
  • Strict Computation of Time Limits: When the same AO possesses jurisdiction over both the searched entity and the third party, the time limitation starts immediately without any benefit of extended time available for inter-AO record transfers.
  • Investigation Wing Transfers Do Not Reset Limitation: The handover of seized documents from the Investigation Wing to the Assessing Officer does not constitute a “transfer of record” under Section 153B to extend statutory limitation periods.
  • Hard Deadlines under TOLA: Even after accounting for COVID-19 statutory extensions under TOLA (up to September 30, 2021), failure to pass an assessment order before the extended deadline invalidates the entire reassessment.
SUPREME COURT OF INDIA
Assistant Commissioner of Income-tax
v.
Vijay Bihari Kandhari*
Manoj Misra and Vijay Bishnoi, JJ.
SLP (CIVIL) DIARY NO (S). 44084 of 2026†
AUGUST  24, 2026
S. Dwarakanath, A.S.G., Sudarshan Lamba, AOR, S. Vijay Adithya, Nikhil Aradhe, Ishaan Sharma and Ms. Riddhi Jad, Advs. for the Petitioner.
ORDER
1. Delay condoned.
2. We do not find a good ground to interfere with the impugned judgment in exercise of our jurisdiction under Article 136 of the Constitution of India. Accordingly, the special leave petition is dismissed.
3. Pending application(s), if any, shall stand disposed of.