When a search happens at someone else's premises but the documents found there point to you, when does your assessment clock actually start ticking — the day of the search, or the day your own tax officer gets hold of the papers? ITAT Delhi has now weighed in, and the answer changed the outcome of a ₹4 lakh addition entirely.
Section 153C Limitation Clock Starts on Receipt of Seized Material, Not the Search Date: ITAT Delhi
The Delhi bench of the Income Tax Appellate Tribunal (ITAT), in DCIT v. N.K. Malhotra (HUF), has reaffirmed a limitation principle that has real consequences for anyone assessed under Section 153C of the Income Tax Act — the provision used to reopen assessments of a person who wasn't themselves searched, but whose documents turned up during someone else's search.
How the Case Arose
The assessee, N.K. Malhotra (HUF), had filed its original return for Assessment Year 2014-15 declaring income of ₹3,28,070. The assessee itself was never searched. Instead, a search and seizure operation was carried out under Section 132 on 18 October 2019 against the Alankit Group, and documents allegedly relating to the assessee were found in the course of that search.
From there, the timeline stretched out considerably. The satisfaction note by the searched person's Assessing Officer (AO) — the officer who concluded the seized documents belonged to someone else and needed to be forwarded — was recorded on 24 June 2022, nearly three years after the search. The satisfaction note by the assessee's own AO followed on 10 October 2022, and a notice under Section 153C was issued to the assessee on 16 November 2022. The assessment order eventually came on 16 March 2024, making additions of ₹3,94,066 under Section 69A (unexplained money) and ₹11,822 under Section 69C (unexplained expenditure).
The Real Question: When Does the Clock Start?
Section 153C assessments operate within defined time blocks — a standard six-year block, extendable to ten years in certain cases. The dispute here was about the reference point for counting those years for a person who wasn't the one searched. Two competing dates were in play: the date of the actual search (18 October 2019), or the date the assessee's own jurisdictional AO actually received the seized material (10 October 2022, when that AO's satisfaction note was recorded) — nearly three years apart.
This isn't a trivial distinction. If the six-year (or ten-year) block is measured from the search date, AY 2014-15 might fall within the assessable period. If it's measured from when the assessee's AO actually received the documents, the same assessment year could fall entirely outside that window.
The Tribunal's Ruling
The ITAT held that for a person who was not themselves searched, the limitation clock starts running from the date the seized material actually reaches that person's own Assessing Officer — not from the date of the original search at someone else's premises. This follows directly from the first proviso to Section 153C(1), which states that references to the "date of initiation of search" in the second proviso to Section 153A must, for a non-searched "other person," be read as a reference to the date their own jurisdictional AO receives the seized books, documents, or assets.
The Tribunal relied on the Delhi High Court's ruling in PCIT v. Ojjus Medicare Pvt. Ltd. [2024] 465 ITR 101, which had already settled this question at the High Court level — the block period for a non-searched person runs from receipt of material by their own AO, not the search date itself. Notably, the Tribunal treated this as binding precedent even though a Special Leave Petition (SLP) against that ruling is reportedly pending before the Supreme Court — the pendency of an SLP doesn't, by itself, suspend the binding effect of a High Court's decision.
| Event | Date |
|---|---|
| Search on Alankit Group (Section 132) | 18 October 2019 |
| Satisfaction note by searched person's AO | 24 June 2022 |
| Satisfaction note by assessee's own AO (limitation trigger) | 10 October 2022 |
| Notice under Section 153C issued | 16 November 2022 |
| Assessment order passed | 16 March 2024 |
Why AY 2014-15 Fell Outside the Standard Block — and Why the ₹50 Lakh Threshold Mattered
Once the clock was correctly anchored to 10 October 2022 (receipt by the assessee's AO), AY 2014-15 fell outside the standard six-year block. That didn't automatically end the matter — the law allows assessment to reach further back, into a ten-year extended block, but only where the escaped income is substantial enough to justify it. The extended period is available only where the escaped income meets a mandatory threshold of ₹50 lakh or more.
Here, the total additions made by the AO amounted to just ₹4,05,888 (₹3,94,066 under Section 69A plus ₹11,822 under Section 69C) — nowhere close to the ₹50 lakh threshold required to justify reaching into the extended ten-year block. On that basis, the Tribunal held the Section 153C assessment for AY 2014-15 was invalid.
The practical bite: A department that wants to reach an assessment year beyond the standard six-year block via Section 153C needs to be able to point to escaped income of ₹50 lakh or more for that year. An assessment built on a small addition simply cannot stretch into the extended block, no matter how compelling the underlying seized material might otherwise seem.
A Door Left Open
The Tribunal didn't shut the door on the department entirely. It noted that if the AO forms a reasoned opinion that the escaped income is likely to amount to ₹50 lakh or more, fresh proceedings could in principle be initiated under the applicable law — referencing the position taken in Misha Gupta v. ACIT. That's a narrow and fact-specific escape route, though, and it requires the department to actually make out that higher threshold with reasoned justification rather than simply re-issuing the same notice.
Why This Matters Beyond This One Case
Section 153C proceedings routinely involve long gaps between the date of a search at a third party's premises and the date the "other person's" own AO actually receives and acts on the seized material — as this case shows, that gap ran to nearly three years. If the limitation clock ran from the search date itself, taxpayers could find themselves reassessed years further back than the statute's proviso actually contemplates, purely because of administrative delay in transmitting seized material between AOs. Anchoring the clock to actual receipt by the jurisdictional AO — as the first proviso to Section 153C(1) directs, and as the Delhi High Court and now this Tribunal have both confirmed — keeps the limitation period tied to something the taxpayer can actually verify, rather than to internal departmental timelines they have no visibility into.
The takeaway: for a person assessed under Section 153C without themselves being searched, the six-year (and extended ten-year) limitation block runs from the date their own jurisdictional AO receives the seized material — not from the date of the original search. And the extended ten-year block is available only where escaped income for that year is ₹50 lakh or more; anything less, and years outside the standard six-year window are simply out of reach.
This post summarizes the ITAT Delhi ruling in DCIT v. N.K. Malhotra (HUF), based on reporting as of September 2026. It is a general informational overview and not legal or tax advice — refer to the official order and consult a qualified tax professional for guidance specific to your facts.