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Issues: (i) Whether the assumption of jurisdiction under section 153C for the relevant assessment years was valid in the absence of incriminating material and a legally sufficient satisfaction note; (ii) Whether the addition of Rs. 50 lakhs as bogus donation could be sustained on the basis of a third-party statement recorded during survey and the alleged IDS linkage.
Issue (i): Whether the assumption of jurisdiction under section 153C for the relevant assessment years was valid in the absence of incriminating material and a legally sufficient satisfaction note.
Analysis: Section 153C can be invoked only when the Assessing Officer of the searched person records satisfaction that seized material belongs to or relates to the other person and, for concluded assessments, there is incriminating material having a bearing on the determination of total income. The seized donation receipt counterfoils identified in the satisfaction note were found to form part of the assessee's regular books and related to earlier years, not to the relevant assessment years in question. For both assessment years, the assessments were completed on the date relevant for section 153C and no cogent incriminating material was shown to justify reopening under the special regime.
Conclusion: The jurisdiction under section 153C was invalid and the consequential assessments were unsustainable.
Issue (ii): Whether the addition of Rs. 50 lakhs as bogus donation could be sustained on the basis of a third-party statement recorded during survey and the alleged IDS linkage.
Analysis: The addition rested substantially on a third-party statement recorded during survey, but the statement was not furnished to the assessee before assessment and no cross-examination was allowed. The statement was also recorded during survey without satisfying the preconditions for invoking oath-based examination, and thus could not safely be used against the assessee. The alleged IDS disclosure by the donor was not part of the original satisfaction note or assessment basis and did not cure the jurisdictional defect or supply reliable incriminating material. In the absence of corroboration, the donation could not be treated as bogus merely on suspicion.
Conclusion: The addition of Rs. 50 lakhs was not sustainable and was deleted in favour of the assessee.
Final Conclusion: The appeals succeeded, the jurisdictional challenge was upheld, and the impugned additions were not sustained for either assessment year.
Ratio Decidendi: For a concluded assessment under section 153C, seized material must be specifically linked to the relevant year and must constitute incriminating material; a jurisdictional satisfaction note cannot be supplemented later by untested third-party statements or post hoc explanations, and an adverse addition cannot rest on material collected in violation of natural justice.
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