Section 153C invocation requires AO satisfaction that seized material bears on total income before reassessment or abatement follows

Section 153C requires that the jurisdictional assessing officer form a satisfaction that books, documents or assets received from a search are likely to have a bearing on the determination of the total income of the non-searched person; only upon that satisfaction may a notice under Section 153C be issued and abatement or reopening of assessments follow. The mere discovery of incriminating material for a particular assessment year does not automatically trigger reassessment of all years within the six- or ten-year block; Satisfaction Notes must record reasons linking the material to the specific year(s) sought to be reopened.

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Issues Involved:
1. Legality of notices issued u/s 153C of the Income Tax Act, 1961.
2. Requirement of incriminating material for reopening assessments u/s 153C.
3. Abatement of pending assessments under Section 153C.
4. Distinction between Sections 153A and 153C.
5. Validity of reopening assessments for multiple assessment years based on incriminating material for a single year.

Summary:

1. Legality of Notices Issued u/s 153C:
The petitioners challenged the legality of notices issued u/s 153C of the Income Tax Act, asserting that the assumption of jurisdiction was illegal as no material pertaining to the Assessment Years (AYs) proposed to be reopened was gathered during the search. The court noted that in some cases, Satisfaction Notes were neither provided to the petitioners nor brought on record by the respondents, leading to the assumption that the incriminating material did not pertain to the AY in question.

2. Requirement of Incriminating Material for Reopening Assessments u/s 153C:
The court emphasized that the power to assess or reassess u/s 153C is premised on the existence of incriminating material that has a bearing on the determination of the total income of the non-searched entity. This requirement is essential even for abated assessments. The court referred to the Supreme Court's decision in Commissioner of Income Tax v. Sinhgad Technical Education Society (2018) 11 SCC 490, which held that incriminating material must pertain to the AY in question.

3. Abatement of Pending Assessments under Section 153C:
The court clarified that under Section 153C, abatement of pending assessments would follow the formation of an opinion that the material received is likely to impact the total income for a particular AY. The court distinguished this from Section 153A, where the issuance of a notice is mandatory upon a search.

4. Distinction between Sections 153A and 153C:
The court highlighted the differences between Sections 153A and 153C. Section 153A mandates the issuance of a notice upon a search, whereas Section 153C requires the AO to be satisfied that the documents or assets seized have a bearing on the determination of the total income of the non-searched entity. This satisfaction is a jurisdictional precondition for invoking Section 153C.

5. Validity of Reopening Assessments for Multiple Assessment Years Based on Incriminating Material for a Single Year:
The court rejected the respondents' argument that incriminating material for a single AY justifies reopening assessments for the entire block of six or ten AYs. The court held that the AO must identify the specific AYs to which the incriminating material relates and can only reopen those assessments. The court referred to Principal Commissioner of Income Tax v. Abhisar Buildwell Private Limited (2024) 2 SCC 433, which affirmed that no addition can be made in respect of completed assessments in the absence of incriminating material.

Operative Directions:
The court quashed the impugned notices insofar as they pertained to AYs 2013-14 to 2020-21, except for W.P.(C) 3007/2023 and W.P.(C) 3019/2023, where the notices were found to be valid as they were based on incriminating material specific to those AYs.

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