Limitation Starts from Date of Seizure, Not Search: Madras High Court Upholds S. 153C Income Tax Notice as Valid [Read Order]

The Madras High Court has held that the limitation period for issuing notices under section 153C to a third party commences from the date when materials are seized or requisitioned, not from the date of the search.

M/s. KLP Projects Private Limited (petitioner) filed writ petitions against notices dated 30.12.2024 and an order dated 13.03.2025 issued by the Assistant Commissioner of Income Tax. The petitioner sought a Writ of Certiorari to quash these notices and the order for Assessment Years (AY) 2017-18 and 2018-19. The petitioner argued that the proceedings were barred by limitation.

The case arose from a search conducted by the Income Tax Department on 10.11.2020. Materials were collected from the petitioner, identified as the "other person" under Section 153C, on 30.06.2022.

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The department issued a show-cause notice under Section 153C on 30.12.2024 and another notice under Section 142(1) on 28.02.2025. The petitioner filed objections on 03.03.2025, contending that the notice was time-barred, but these were rejected by the department.

The petitioner’s counsel argued that the limitation period of six years under Section 153C should be calculated from the date of the show-cause notice. The petitioner citied the Supreme Court’s judgment in CIT vs. Jasjit Singh.

The counsel submitted that the petitioner had previously settled a similar matter with the Interim Board for Settlement (IBS) following a search on 09.11.2017. The counsel submitted that reopening the issue was unfair, referencing the Delhi High Court’s decision in Omaxe Ltd. vs. Assistant Commissioner of Income Tax.

The respondent argued that the limitation period begins from the date the materials were handed over to the Assessing Officer, as per the first provision of Section 153C(1). The counsel also emphasized that the materials were received on 30.06.2022. The counsel submitted that the notice was issued on 30.12.2024 well within the six-year limitation period.

The bench comprising Justice Krishnan Ramasamy, observed that Section 153C governs the assessment of income of a person other than the one searched. The court observed that the first provision to Section 153C(1) clearly states that the limitation period starts from the date the Assessing Officer receives the seized materials, which in this case was 30.06.2022.

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The court observed that the notice issued on 30.12.2024 was within the permissible time frame. The court further observed that even if settlement arrived at IBS settlement the department can initiate new proceedings based on fresh evidence. The court found the petitioner’s cited judgments inapplicable to the facts of the case.

The court upheld the validity of the impugned notice and order and granted the petitioner liberty to file a reply to the show-cause notice within 30 days from the receipt of the court’s order. The writ petitions of the petitioner were dismissed.

To Read the full text of the Order CLICK HERE

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