Search assessment period of ten years must include the search year in its computation.

In brief

The question

1. Whether the notice issued under Section 148 of the Act for Assessment Year 2015-16 is barred by limitation.

The court held

The court held that the search year (AY 2025-26) must be included as the first year in the ten-year reckoning.

It also directed

Consequently, the power to reopen assessments under the extended period only reached back to AY 2016-17. Since the impugned notice targeted AY 2015-16, it was declared barred by limitation.

The Court quashed and set aside the notice dated 16.03.2026 and made the Rule absolute.

01Facts

The petitioner, part of the MSK Group, filed its return for Assessment Year (AY) 2015-16.

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On 18.05.2024, a search was conducted under Section 132 of the Income Tax Act, 1961.

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Following the search, the respondent issued a notice dated 16.03.2026 under Section 148 seeking to reopen the assessment for AY 2015-16.

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The petitioner challenged the notice on the primary ground that it was barred by limitation under the statutory scheme for search-related assessments.

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02Issues

i.1. Whether the notice issued under Section 148 of the Act for Assessment Year 2015-16 is barred by limitation.

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ii.2. Whether the assessment year relevant to the previous year in which the search is conducted (search year) should be included or excluded when computing the ten-year limitation period under Section 153A/153C.

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03Law Applied

The court applied Section 153A(1)(b) regarding the assessment of six preceding years and the Fourth Proviso to Section 153A read with Explanation 1, which defines the "relevant assessment year" for the extended ten-year period.

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It relied on the principle of statutory interpretation that distinct phraseologies ("immediately preceding" for the 6-year block vs. "from the end of the assessment year" for the 10-year block) imply different computational methods.

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The court followed the precedent in Jayantibhai Karamshibhai Maniya v. Income-tax Officer [2026] 182 taxmann.com 493 (Guj.), which adopted the reasoning from the Delhi High Court in Ojjus Medicare (P.) Ltd.

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Provisions in the judgment · 10

Income Tax Act, 1961 10 provisions

Section 132Section 132ASection 147Section 148Section 149Section 150Section 151Section 152Section 153ASection 153C

04Reasoning

The court analyzed the linguistic distinction in Section 153A. For the six-year block, the law uses "immediately preceding," which necessarily excludes the search year.

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However, for the extended ten-year block, Explanation 1 mandates reckoning "from the end of the assessment year relevant to the previous year in which search is conducted".

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The court reasoned that since the search occurred on 18.05.2024 (Financial Year 2024-25), the search assessment year is AY 2025-26. Counting ten years backward starting from AY 2025-26 as the first year, the limit terminates at AY 2016-17.

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The court rejected the Revenue's argument to exclude the search year, noting that doing so would render the specific phrase "from the end of the assessment year" redundant and would ignore the legislature's conscious choice of words.

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05Holding

The court held that the search year (AY 2025-26) must be included as the first year in the ten-year reckoning.

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Consequently, the power to reopen assessments under the extended period only reached back to AY 2016-17. Since the impugned notice targeted AY 2015-16, it was declared barred by limitation.

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The Court quashed and set aside the notice dated 16.03.2026 and made the Rule absolute.

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