2026 (1) TMI 930 - SCH - Income Tax

Validity of s.153C reassessment hinges on AO's satisfaction from search-recovered material; no automatic cascading across years

Whether reassessment under s.153C is valid where a jurisdictional AO issues notice following a satisfaction note: Court held s.153C requires formation of ... Validity of Proceedings u/s 153C - issuance of the notice as preceded by the drawl of a Satisfaction Note by the jurisdictional AO - importance of material recovered in the course of a search or a requisition made and a right to reassess u/s 153A and 153C - The usage of the expression “have a bearing” - Incriminating material - Cascading effect - Nature of the incriminating material that may be obtained and the years forming part of the block which would merit being thrown open - As decided by HC [2024 (4) TMI 461 - DELHI HIGH COURT] reopening or abatement would be triggered only upon the discovery of material which is likely to “have a bearing on the determination of the total income” and would have to be examined bearing in mind the AYs’ which are likely to be impacted. Thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the “relevant assessment year”. In our considered view, abatement of the six AYs’ or the “relevant assessment year” u/s 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs’ that may form part of the block of ten AYs’. Abatement would be triggered by the formation of that opinion rather than the other way around. HELD THAT:- Special Leave Petitions are dismissed on the ground of delay as well as on merits. Outcome: Special Leave Petition dismissed on the ground of delay and on merits.