ITAT Grants Relief After Finding Jurisdictional Defects in Search Assessments

The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) on 15 April 2026 held that once a search operation is conducted, the Income Tax Department cannot bypass the special statutory framework meant for search assessments by proceeding under the general provisions of Section 143(3) of the Income Tax Act, 1961. A Bench comprising Challa Nagendra Prasad and M. Balaganesh allowed multiple appeals filed by Rajdhani Flour Mills Ltd and dismissed the Revenue’s appeals concerning various additions made after a search and seizure action.

The dispute arose after search proceedings were conducted against Rajdhani Flour Mills Ltd. Following the search, the Assessing Officer framed assessments for AYs 2016-17 to 2023-24 under the general provisions of Section 143(3). The department also made several additions relating to cash found during the search, Mandi tax savings and other expenditure-related issues.

Before the Tribunal, the assessee argued that once a search is initiated, the jurisdiction for assessment must necessarily flow through the special provisions specifically enacted for search cases and not through the ordinary assessment mechanism. It was further contended that notices issued under Section 143(2) were barred by limitation since they were issued beyond the statutory period of three months from the end of the relevant financial year in which the returns were filed.

The Tribunal accepted the assessee’s jurisdictional challenge and observed that the legislative scheme governing search assessments constitutes a separate and specific code which cannot be bypassed by invoking general assessment provisions.

“The legislative intent is to ensure that when a search is carried out, assessments are framed under the specific provisions meant for such cases.”

The Bench further held that the statutory limitation prescribed for issuance of notices under Section 143(2) is mandatory in nature and cannot be relaxed. The Tribunal pointed out that:

“No notice under Section 143(2) could have been validly issued after the expiry of three months from the end of the financial year in which the return was furnished.”

On merits as well, the Tribunal granted substantial relief to the assessee. It dismissed the Revenue’s appeals challenging deletion of additions relating to cash found during the search proceedings. Several additions made across different assessment years were either deleted outright or restored for limited verification purposes.

Thus, the ITAT held that the assessments framed under the general provisions suffered from jurisdictional defects and allowed the assessee’s appeals either fully or partly for statistical purposes, while dismissing the Revenue’s appeals.

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