2025 (8) TMI 546 - HC - Income Tax

Notice under Section 153C valid only for assessment years linked to seized incriminating material

The HC held that a notice under Section 153C can only be issued for the assessment years corresponding to the incriminating material gathered or obtained. ... Validity of Notice u/s 153C - mandation to record satisfaction of same Assessment Years for which the incriminating material had been gathered or obtained - HELD THAT:- We find that the issue in the present case is squarely covered by a decision of Sinhgad Technical Education Society [2017 (8) TMI 1298 - SUPREME COURT] - Assessment Years before the Hon’ble Supreme Court were Assessment Years 2000-01, 2001-02, 2002-03 and 2003-04. In the satisfaction note before the Hon’ble Supreme Court, the material referred to therein was for Assessment Year 2004-05 onwards. It is in this light that the Hon’ble Supreme Court held that the Notice under Section 153C could not be issued for the Assessment Years 2000-01, 2001-02, 2002-03, 2003-04. This decision of the Hon’ble Supreme Court was thereafter followed by a Division Bench of Saksham Commodities Ltd. [2024 (4) TMI 461 - DELHI HIGH COURT] The Delhi High Court also, after considering the law on subject, came to the conclusion that the Notice under Section 153C could be issued only in respect of the Assessment Years for which the incriminating material had been gathered or obtained. Assessee appeal allowed. ISSUES: Whether a Notice under Section 153C of the Income Tax Act, 1961 can be issued for an Assessment Year not covered by the incriminating material found during search proceedings.Whether consequential Notices under Sections 142(1) and 143(2) can be validly issued for the same Assessment Year if the Section 153C Notice is invalid. RULINGS / HOLDINGS: The Notice under Section 153C issued for an Assessment Year (2012-13) not reflected in the satisfaction note or supported by incriminating material seized during search proceedings is impermissible and liable to be quashed.Consequential Notices under Sections 142(1) and 143(2) issued for the same Assessment Year must also be quashed as they flow from the invalid Section 153C Notice. RATIONALE: The Court relied on the statutory requirement under Section 153C that incriminating material seized must pertain specifically to the Assessment Year for which the Notice is issued, making this a 'jurisdictional fact'.The decision follows the Supreme Court precedent which held that issuance of a Section 153C Notice for Assessment Years not supported by seized documents is invalid, as 'the documents which were seized did not establish any co-relation, document-wise, with these... Assessment Years.'The Court also considered the Division Bench ruling of the Delhi High Court which emphasized that the issuance of Section 153C Notices must be strictly limited to Assessment Years for which incriminating material has been gathered, rejecting the assumption that Notices can be issued for all preceding years without material basis.The Supreme Court's dismissal of the Special Leave Petition against the Delhi High Court ruling affirms the binding nature of this interpretation.No merits of the underlying incriminating material or substantive findings on profiteering or other allegations were adjudicated, as the Court's decision was confined to the validity of the Notice issuance procedure.