Seized search documents and year-wise link to income u/s 153C: notices for non-related years quashed, 2019-20 continues.

Section 153C jurisdiction turned on whether incriminating material found in a search related to, or was likely to impact, the total income of each year sought to be covered. Applying HC precedent, the AO must record satisfaction that the seized material has a bearing on specific AYs; absent such year-wise nexus, Section 153C cannot be invoked for those years. As the satisfaction note for the non-searched person referred only to material pertaining to AY 2019-20, initiation for AYs 2014-15 to 2018-19 and 2020-21 lacked the statutory foundation and was quashed. The challenge to whether the material for AY 2019-20 was incriminating involved disputed facts and was left to the assessment; proceedings for AY 2019-20 were not interfered with.

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Issues:
Challenge to Impugned Notices and Order under Section 153C of the Income Tax Act for AYs 2014-15 to 2020-21.

Analysis:
The petitioner sought to quash the Impugned Notices dated 24.04.2023 and the Impugned Order dated 22.11.2023 issued under Section 153C of the Act for AYs 2014-15 to 2020-21, alleging them to be illegal and without jurisdiction. The Court noted that while the material alluded to pertained to AY 2019-20, the action under Section 153C sought to encompass AYs 2014-15 to 2020-21. Citing the judgment in Saksham Commodities Limited case, the Court emphasized that incriminating material must be identified with respect to the relevant AY before initiating proceedings under Section 153C. It held that the power to assess or reassess under Section 153C is confined to the years to which the material may relate or influence, and a mere power to assess or reassess the preceding AYs does not justify invoking Section 153C indiscriminately.

The petitioner contended that for AY 2019-20, the Assessing Officer did not refer to any incriminating material, arguing that the recovery of a ledger account cannot be considered incriminating. However, the Court declined to delve into this argument due to the disputed facts involved. The satisfaction note highlighted various findings related to M/s DNC, indicating suspicious activities and bogus transactions involving the entity. Based on these findings, the Court concluded that the impugned action under Section 153C for AYs 2014-15, 2015-16, 2016-17, 2017-18, 2018-19, and 2020-21 was quashed and set aside. However, the action for AY 2019-20 was left untouched, allowing all rights and contentions of the parties to be addressed in the ongoing assessment proceedings for that year.

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