Saloni Narang: Invalid Swiss Reference Can't Extend Search Assessment Limitation: Delhi High Court

A Question of Timing: The Limitation Challenge

The Delhi High Court has dismissed the Income Tax Department's appeal against an order that quashed a search assessment for Assessment Year 2006-07 as time-barred. The case centered on whether a reference to Swiss tax authorities—later deemed invalid—could extend the limitation period under Section 153B of the Income Tax Act.

The Division Bench of Justices Dinesh Mehta and Rajneesh Kumar Gupta heard the Revenue's challenge to an Income Tax Appellate Tribunal (ITAT) order that had allowed the appeal of Smt. Saloni Narang, the taxpayer.

The Invalid Swiss Reference

The dispute arose from a search conducted at Narang's residential premises in August 2011. The Department alleged she maintained an HSBC bank account in Geneva, Switzerland, and made an addition of ₹1.59 crore to her income based on information concerning that account.

Before the ITAT, Narang argued the assessment was barred by limitation. The Revenue contended the limitation period stood extended by one year under Explanation (ix) to Section 153B because a reference had been made to Swiss tax authorities under the India-Switzerland Double Taxation Avoidance Agreement (DTAA).

However, the ITAT found the reference itself invalid. The Department had sought information for the period April 1, 1995, to March 31, 2012. But the amended Article 26 of the DTAA, pursuant to the 2011 Protocol, permits exchange of information only for fiscal years beginning on or after April 1, 2011. The reference covering pre-2011 data was therefore impermissible. As the Revenue had not received any information concerning transactions before April 1, 2011, the ITAT held the reference could not be used to extend the limitation period.

The Precedent That Sealed the Case

Before the High Court, Senior Counsel for Narang submitted that even taking the Revenue's best arguments, the appeal was liable to be rejected in view of the court's recent judgment in Principal Commissioner of Income Tax, Central-1, Delhi v. Sanjay Jain (2026:DHC:585-DB). That ruling followed and elaborated on the earlier decision in Principal Commissioner of Income Tax, Central-1, Delhi v. Smt. Sneh Lata Sawhney (2025:DHC:3617-DB).

Revenue counsel Mr. Siddhartha Sinha could not controvert this position.

Final Verdict

The court dismissed the appeal, stating: "We are of the considered opinion that the appeal is liable to be dismissed in light of the judgment of this Court in the case of Sneh Lata Sawhney (supra) which has further been followed and elaborated by this Court in the case of Sanjay Jain (supra)."

The ruling reinforces that a flawed reference to foreign tax authorities cannot be used to extend statutory limitation periods for search assessments, ensuring taxpayers are not subjected to indefinite scrutiny based on invalid information requests.