2025 (10) TMI 1344 - HC - Income Tax

Income tax search assessments: can s.153C notice target a person whose own premises were searched? Notice quashed.

The dominant issue was whether assessment proceedings could be initiated against a person whose premises were searched by issuing notice under s.153C of ... Validity of assessment u/s 153C - Search was conducted in the premises of the petitioner - mandation of recording satisfaction note - petitioner was a searched person and not a non- searched person / such other person - HELD THAT:- In the instant case, the petitioner was the Chairman and Managing Director of M/s. Kalyani Group which was searched and in the light of the undisputed fact that the premises of the petitioner was searched and documents seized from him, by recording his statement, the sole / unmistakable conclusion / inference that can be arrived at from the material on record is that the petitioner was a searched person and not a non- searched person / such other person as contemplated under Section 153C of the I.T. Act and consequently, Section 153C would neither be applicable nor invocable as against the petitioner, who was a searched person to whom this provision would not apply and the impugned notice being illegal, arbitrary and without jurisdiction or authority of law and all further proceedings pursuant thereto deserve to be quashed. Insofar as the various judgments relied upon by both sides are concerned, having regard to the facts and circumstances narrated hereinbefore, coupled with the fact that the said decisions rendered in the facts of the said cases would not be applicable to the facts of the instant case and as such, the same are not elaborately dealt with for the purpose of the present order. 1. ISSUES PRESENTED AND CONSIDERED (a) Whether proceedings by issuance of notices under Section 153C could validly be initiated against a person whose residential premises were searched, whose statement was recorded during the search, and from whose premises documents were seized, or whether such person must be treated as a 'searched person' to whom Section 153C is inapplicable. (b) Whether, on the undisputed search material and the 'satisfaction note' relied upon by the Revenue, the impugned notices under Section 153C were without jurisdiction and liable to be quashed along with all consequential proceedings. 2. ISSUE-WISE DETAILED ANALYSIS (a) Applicability of Section 153C: 'searched person' vs 'such other person / non-searched person' Legal framework: The Court examined the scope of Section 153C as a provision meant for assessment of income of 'any other person' (i.e., a person other than the person referred to in Section 153A), and considered whether the petitioner fell within that category on the facts found from the record (including the satisfaction note, search warrant/panchanama details as noticed by the Court, and the admitted fact of search at the petitioner's residence). Interpretation and reasoning: The Court treated as determinative the undisputed factual position that (i) a warrant of authorization under Section 132 was obtained and a search was conducted at the petitioner's residential premises; (ii) the petitioner was present and his statement was recorded; (iii) documents were seized from the searched premises; and (iv) the satisfaction note itself recorded that the petitioner's residence 'was also searched' and that documents were seized as per the panchanama, with the petitioner's statement being recorded. The Court further noticed that, although the warrant/panchanama carried the name of another person for whom the warrant was issued, the petitioner was shown as the owner of the residential premises searched and was also described (on the Court's reading of the record) as the Chairman and Managing Director of the group stated to have been searched. On these features, the Court concluded that the petitioner could not be characterized as a 'non-searched / such other person' for invoking Section 153C. Conclusion: The Court held that, in the circumstances where the petitioner's premises were searched and material was seized from there, the petitioner was a 'searched person'; therefore, Section 153C 'would neither be applicable nor invocable' against him. The impugned notices under Section 153C were consequently held to be illegal, arbitrary and without jurisdiction/authority of law. (b) Consequence of lack of jurisdiction: validity of the impugned Section 153C notices and further proceedings Legal framework: The Court assessed jurisdictional validity of the impugned notices by testing whether the statutory precondition for invoking Section 153C-proceeding against an 'other person' distinct from the searched person-was satisfied on the admitted facts and the satisfaction note relied on by the Revenue. Interpretation and reasoning: On the Court's finding that the petitioner was not an 'other person' but a 'searched person,' the very foundation for initiating proceedings under Section 153C failed. The Court considered this defect as going to jurisdiction, rendering the notices and all consequential steps unsustainable. The Court also noted that, in view of the factual matrix and its conclusions, it did not find it necessary to elaborate upon the various decisions cited by either side, as they were not applied to alter the Court's determination on jurisdiction in the present facts. Conclusion: The Court allowed the petition and quashed the impugned notices issued under Section 153C for the concerned assessment years, and additionally quashed all further proceedings pursuant thereto, on the ground that the initiation itself was without jurisdiction.