The Gujarat High Court has clarified that Section 153A of the Income Tax Act prescribes two distinct and independent computational regimes for limitation. For six assessment years, the phrase “immediately preceding” excludes the search assessment year. For the extended ten-year period under Explanation 1 to Section 153A read with Section 153C and the proviso to Section 149, computation must be made “from the end of the assessment year” relevant to the previous year of search, and this necessarily includes the search assessment year as the first year in the ten-year block.
Applying that rule, where the search was conducted in FY 2024-25, AY 2025-26 became the first year and AY 2016-17 the tenth year; and therefore, AY 2015-16 fell beyond the permissible ten-year period and the notice was barred by limitation. Accordingly, the Court quashed the notice issued under Section 148 for AY 2015-16 on the ground that it was barred by limitation.
The Division Bench comprising Justice A.S. Supehia and Justice Vaibhavi D. Nanavati identified the sole issue as whether the notice for AY 2015-16 was barred by limitation. It examined Section 153A(1)(b) and Explanation 1 to Section 153A, and held that the statute uses two different computational models: the six-year block covers “six assessment years immediately preceding” the assessment year relevant to the previous year in which search is conducted, which excludes the search assessment year; but the ten-year block is to be computed “from the end of the assessment year” relevant to the previous year in which search is conducted, which necessarily includes the search assessment year in the reckoning. The Bench stressed that this difference in phraseology is deliberate and cannot be ignored by importing the six-year method into the ten-year framework.
The Bench rejected the Revenue’s argument that the search year must be excluded even for the ten-year block. It held that if Parliament intended identical computation for both periods, it would have used identical language. The Court also noted that the issue was no longer res integra in view of its earlier judgment in Jayantibhai Karamshibhai Maniya v. Income-tax Officer [(2026) 182 taxmann.com 493 (Guj.)], which had accepted that, for the extended ten-year period under Section 153A/153C, the search year or the year in which seized material is received must be included in the reckoning.
Briefly, Madhav Power Private Limited challenged a notice issued under Section 148 of the Income-tax Act, for reopening its assessment for AY 2015-16. The company had originally filed its return on Oct 30, 2015 declaring NIL income. A search under Section 132 was conducted on May 18, 2024 in the MSK and Madhav Group, and the Department stated that seized books/documents pertaining to the petitioner led to issuance of the Section 148 notice after approval. The petitioner’s core case was that the notice for AY 2015-16 was time-barred because, once the search took place in FY 2024-25, AY 2025-26 became the relevant/search assessment year, and on a ten-year computation the block would run only up to AY 2016-17, not AY 2015-16.
