Section 153B of ITA, 1961 : Section 153B: Time-Limit For Completion Of Assessment Under Section 153A

Explanation using Example

Imagine Mr. A is a business owner who has been subjected to a search and seizure operation by the Income Tax Department under section 132 on 30th March 2021. The officers found undisclosed income and incriminating evidence suggesting tax evasion for the past six years.

According to Section 153B of the Income Tax Act, 1961, the Assessing Officer (AO) now has a specific timeframe to complete Mr. A's assessment. This period is twelve months from the end of the financial year in which the search was conducted, which means the AO has until 31st March 2022 to complete the assessment for the year in which the search took place, as well as for the six preceding assessment years.

If during this assessment, the AO finds that Mr. A has transactions with another person, say Mr. B, which are also suspicious, then under Section 153C, Mr. B's assessment or reassessment can be initiated. The AO will have the same twelve-month period or nine months from when Mr. B's documents are handed over to the AO in charge of Mr. B's case, whichever is later, to complete the assessment.

If Mr. A's case requires a reference to be made under section 92CA for transfer pricing issues, the period allowed for completing the assessment is extended by twelve months. This means, for Mr. A, the AO now has until 31st March 2023 to complete the assessment.

This section also outlines that certain periods are excluded from the calculation of the limitation period, such as the time during which the assessment proceedings are stayed by a court order, or the time taken for the assessee to get their accounts audited if directed by the AO.