TaxTMI 
TaxTMI 
2024 (4) TMI 461
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....024 & CM APPL 3078/2024, W.P.(C) 718/2024 & CM APPL 3176/2024, W.P.(C) 719/2024 & CM APPL 3181/2024, W.P.(C) 721/2024 & CM APPL 3183/2024, W.P.(C) 722/2024 & CM APPL 3190/2024, W.P.(C) 723/2024 & CM APPL 3194/2024, W.P.(C) 726/2024 & CM APPL 3201/2024, W.P.(C) 792/2024 & CM APPL 3426/2024, W.P.(C) 852/2024 & CM APPL 3611/2024, W.P.(C) 853/2024 & CM APPL 3613/2024, W.P.(C) 854/2024 & CM APPL 3615/2024, W.P.(C) 870/2024 & CM APPL 3643/2024, W.P.(C) 871/2024 & CM APPL 3645/2024, W.P.(C) 872/2024 & CM APPL 3647/2024, W.P.(C) 874/2024 & CM APPL 3654/2024, W.P.(C) 992/2024 & CM APPL 4114/2024, W.P.(C) 993/2024 & CM APPL 4116/2024, W.P.(C) 1112/2024 & CM APPL 4686/2024, W.P.(C) 994/2024 & CM APPL 4118/2024, W.P.(C) 1005/2024 & CM APPL 4200/2024, W.P.(C) 1008/2024 & CM APPL 4210/2024, W.P.(C) 1080/2024 & CM APPL 4517/2024, W.P.(C) 1081/2024 & CM APPL 4518/2024, W.P.(C) 1082/2024 & CM APPL 4521/2024, W.P.(C) 1083/2024 & CM APPL 4523/2024, W.P.(C) 1084/2024 & CM APPL 4525/2024, W.P.(C) 1089/2024 & CM APPL 4599/2024, W.P.(C) 1092/2024 & CM APPL 4606/2024, W.P.(C) 1093/2024 & CM APPL 4608/2024, W.P.(C) 1094/2024 & CM APPL 4610/2024, W.P.(C) 1095/2024 & CM APPL 4612/2024, W.P.(C) 1096/2024 & CM....
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.... Gupta, SSC with Mr. Shivendra Singh & Mr. Puneett Singhal, JSCs, Ms. Mahima Garg & Ms. Deepika Goyal, Advs., Mr. Abhishek Maratha, Sr. SC with Mr. Parth Semwal and Ms. Nupur Sharma, Advs. Mr. Shlok Chandra, Sr.SC with Ms. Madhavi Shukla, Jr.SC, Ms. Priya Sarkar, Jr.SC and Mr. Ujjwal Jain, Adv. Mr. Kunal Sharma, Sr.SC, Ms. Zehra Khan, Jr.SC & Mr. Shubhendu Bhattacharyya, Adv. Mr. Ashivini Kumar and Mr. Rishabh Nangia, Advs. JUDGMENT YASHWANT VARMA, J. A. INTRODUCTION 1. This batch of writ petitions impugns notices issued under Section 153C of the Income Tax Act, 1961 [Act] with the petitioners-assessees asserting that in the absence of any material pertaining to the Assessment Years [AO] which are proposed to be reopened and assessed having been gathered during the course of a search, the assumption of jurisdiction is wholly illegal and unsustainable in law. The submission principally flows from the recordal of facts as appearing in each of the Satisfaction Notes drawn by the Assessing Officer [AO] of the non-searched person and the same carrying no reference specific to the AY in respect of which the impugned notices have come to be issued. In some of the writ petition....
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....nexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1495/2024 2017-18 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1479/2024 2018-19 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1460/2024 2019-20 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1468/2024 2020-21 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Susheel Jain 718/2024 2014-15 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Susheel Jain 693/2024 2015-16 09.06.2022 (Annexure P-9) No Satisfaction Note 16.08.2022 (Annexure P- 3) Susheel Jain 695/2024 2017-18 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Susheel Jain 696/2024 2018-19 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Susheel Jain 698/2024 2019-20 09.06.2022 (Annexure P-8) ....
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....Annexure P- 4) Ashish Agrawal 1093/2024 2018-19 26.05.2022 (Annexure P-5) 24.06.2022 29.06.2024 (Annexure P- 4) Ashish Agrawal 1095/2024 2020-21 26.05.2022 (Annexure P-5) 24.06.2022 29.06.2024 (Annexure P- 4) Neelkanth Steel and Alloys 1764/2024 2014-15 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1770/2024 2017-18 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1776/2024 2016-17 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1774/2024 2018-19 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P-1) Neelkanth Steel and Alloys 1778/2024 2020-21 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1782/2024 2019-20 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1783/2024 2015-16 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Modicare Ltd 3007/2023 2013-14 20.10.2022 (Annexure L) 20.10.2022 (Annexure L) 21.10.2022 (Annexure-A) ....
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....Annexure-III) 04.11.2022 (Annexure-III) 15.11.2022 (Annexure-II) Forever Bodycare Industries 1084/2024 2018-19 24.06.2022 (Annexure-III) 04.11.2022 (Annexure-III) 15.11.2022 (Annexure-II) Mamta Agarwal 872/2024 2013-14 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 853/2024 2014-15 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 871/2024 2015-16 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 852/2024 2016-17 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 792/2024 2017-18 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 874/2024 2018-19 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 870/2024 2019-20 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 854/2024 2020-21 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 ....
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....AN: AABCM533G) A letter dated 24.06.2022 from DCIT, Central Circle-28, Delhi issued vide F.No. DCIT/CC-28/Misc/2022-23/956 has been received in this office. Through the above letter, the following have been informed: 1. A search and seizure operation was carried out in the Alankit Group of cases on 18.10.2019 subsequently the said group was centralized to the jurisdiction of the undersigned. Accordingly, during the course of assessment proceedings u/s 153A of Alankit Group, material/documents related to case of Saksham Commodity Private Limited have been found. 2. Ledgers of have been obtained from laptop of Sh. Sunil Kumar Gupta found and seized from the residence of Sh. Sunil Kumar Gupta, at 3584/4, Narang Colony, Gali No. Tri Nagar Delhi (Path: A-321 SUNIL KUMAR GUPTA HP LAPTOP/EXTRA CTED DATA\Tally[root].1\LocalDisk ANARKALI/BAC KUPIDATA 241DATA24). 3. The transactions entered into by various beneficiaries, against unaccounted cash or otherwise to take accommodation entries, are as tabulated below: Name of Beneficiary F.Y. Particulars of transaction as per ledger Sum of Amount Debit in Ledger Sum of Amount Cre....
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...."relevant assessment year" as defined in Section 153A of the Act. According to learned counsels, the existence of material which is likely to impact the total income, as determined or assessed for any AY, is a sine qua non for sustaining the initiation of action under Section 153C. It was submitted that the reopening of all AYs', which may form part of the block of six or ten AYs' would not be justified merely on the ground of incriminating material having been discovered pertaining to a particular AY. 8. As was noticed by us while recording the facts pertaining to the lead writ petition, the Satisfaction Note had alluded to incriminating material pertaining to AYs' 2010-11, 2011-12 and 2012-13 having been gathered in the course of the search. The Section 153C notice however which came to be issued and stands impugned pertains to AY 2015-16. It was in the aforesaid backdrop that the writ petitioner had asserted that sans any material gathered in the course of the search, and which could be said to pertain to AY 2015-16 and consequently "have a bearing on the determination of the total income" for that year, the invocation of Section 153C would not sustain. The criticality of inc....
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....s for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, the learned Senior Counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time-barred. 18. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of Assessment Years 2000-01 and 2001-02 was time-barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy. xxxx xxxx xxxx 20. Likewise, the Delhi High Court also decided the case on altogether different facts which will have no bearing once the matter is examined in the aforesaid hue on the facts of this case. The Bombay High Court has rightly distinguished the said judgment as not applicable giving the following reasons: (Sinhgad case [CIT v. Sinhgad Technical Education Society, 2015 SCC OnLine Bom 3922 : (2015) 378 ITR 84] , SCC OnLine Bom para 8) ....
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.... fact that the material gathered in the course of the search pertained only to AY 2004-05 or thereafter. It was in the aforesaid backdrop that it took the view that the Section 153C action would not sustain in respect of the four AYs' since the seized documents had no bearing on those years. 11. The petitioners also placed reliance upon various decisions rendered by our Court and which had laid emphasis on the material gathered in the course of the search impacting the computation of income for each particular AY as being determinative of the question which stands posited. The first decision which was cited in this context was that of CIT (Central)- III v. Kabul Chawla 2015 SCC Online Del 11555 and where the legal position came to be summarized in the following terms:- "37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six assessment yea....
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....losed or made known in the course of original assessment." 12. The petitioners contended that although Kabul Chawla was a decision rendered in the context of Section 153A, the judgment is instructive to the extent that it had held that Section 153A would warrant additions being made only on the basis of evidence found in the course of a search and those assessments not being liable to be arbitrarily reopened or examined afresh unless the seized material be found to have some nexus with the assessment of total income for that year. The Court in Kabul Chawla further held that completed assessments could be interfered with only on the basis of incriminating material unearthed during the course of search. 13. The issue came to be examined in greater detail in CIT V. RRJ Securities Ltd 2015 SCC Online Del 13085. Dealing with the imperatives of a correlation between the material discovered in the course of a search and the power to assess or reopen concluded assessments, in RRJ Securities, the Court held:- "33. The record slip belongs to the assessee and, therefore, the action of the Assessing Officer of the searched persons recording that the same belongs to the assessee ....
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....lude that the assets/documents handed over to him by the Assessing Officer of the searched person represent or indicate any undisclosed income of the assessee under his jurisdiction. As explained in SSP Aviation (supra), section 153C only enables the Assessing Officer of a person other than the one searched, to investigate into the documents seized and/or the assets seized and ascertain that the same do not reflect any undisclosed income of the assessee (i.e., a person other than the one searched) for the relevant assessment years. If the seized money, bullion, jewellery or other valuable article or thing seized as handed over to the Assessing Officer of the assessee, are duly disclosed and reflected in the returns filed by the assessee, no further interference would be called for. Similarly, if the books of account/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with. Merely because valuable articles and/or documents belonging to the assessee have been seized and handed over to the Assessing Officer of the assessee would not necessarily require the Assessing Officer to reopen the concluded assessments and reassess the incom....
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....incriminating material unearth during the course of search or requisition of documents. On reading of the order of the AO we could not found that there is any incriminating material referred by the AO which is found during the course of search for making these additions. Therefore respectfully following the decision of the Hon'ble. Delhi High Court in the case of Kabul Chawla Vs. CIT (supra) we confirm the order of the learned Commissioner of Income-tax (Appeals) and dismiss the appeal of the revenue." 4. The Revenue urges that the non-obstante clause in Section 153A together with Section 158BD removes the barrier vis-a-vis restriction upon search assessments being confined to "undisclosed income". In other words, it is stated that none of the provisions confine the enquiry of the AO to evaluating incriminating materials. This aspect, in the opinion of the Court, was extensively dealt with in Kabul Chawla v. CIT 380 ITR 173 which has, by now, been followed consistently in several appeals. The non-obstante clause, in the opinion of the Court, was necessary, given that there is a departure from the pre-existing provisions, which applied for the previous years and had a d....
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....fore, the ledger account could not have led the Assessing Officer to be satisfied that any income had escaped assessment for the assessment year 2010-11. 19. The net result is that neither of the documents mentioned in the Satisfaction Note could have formed a valid basis for the Assessing Officer to initiate proceedings against the petitioner under section 153C of the Act for the assessment year 2010-11 or any of the other years as proposed." 16. An identical question came up for consideration before this Court in Principal Commissioner of Income Tax - 2 (Central) v. Index Securities Private Limited 2017 SCC Online Del 10310. Taking note of the judgment rendered by the Supreme Court in Sinhgad Technical Education Society, the Division Bench in Index Securities observed as under:- "27. The recent decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society (Supra) is a complete answer to both points urged by the Revenue. The said decision, therefore, requires to be discussed in some detail. 28. The Supreme Court noted that the Assessee had raised a challenge to the validity of the assumption of jurisdicti....
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.... even time barred. 19. We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the Respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy." 30. From a reading of the above two paragraphs, it is plain that the Supreme Court (i) agreed with the ITAT that the documents seized had to relate to the AYs whose assessments were reopened and that this was an essential jurisdictional fact and (ii) upheld the decision of the ITAT to permit the additional ground to be raised before it for the first time. 31. The Supreme Court also agreed with the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel (Supra) to the extent it held that "it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned shoul....
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....by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132-A of the 1961 Act or not." 18. The Supreme Court while affirming the position in law as enunciated by this Court in Kabul Chawla and a judgment handed down by the Gujarat High Court in Principal Commissioner of Income Tax v. Saumya Constructions Private Limited 2016 SCC Online Guj 9976 held as follows:- "28. For the reasons stated hereinbelow, we are in complete agreement with the view taken by the Delhi High Court in Kabul Chawla [CIT v. Kabul Chawla, 2015 SCC OnLine Del 11555 : (2016) 380 ITR 573] and the Gujarat High Court in Saumya Construction (P) [CIT v. Saumya Construction (P) Ltd., 2016 SCC OnLineGuj 9976 : (2016) 387 ITR 529] , taking the view that no addition can be made in respect of completed assessment in absence of any incriminating material. 29. While considering the issue involved, one has to consider the object and purpose of insertion of Section 153-A in the 1961 Act and when there shall be a block assessment under Section 153-A of the 1961 Act. 30. That prior to insertion of Section 153-A in the stat....
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....tion under Section 132-A, the AO gets the jurisdiction to assess or reassess the "total income" in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153-A, the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132-A, as the case may be, shall abate. As per sub-section (2) of Section 153-A, if any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or Section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Therefore, the intention of the legislation seems to be that in case of search only the pending assessment/reassessment proceedings shall abate and the AO would assume the ....
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.... incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153-A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, the second proviso to Section 153-A and sub-section (2) of Section 153-A would be redundant and/or re-writing the said provisions, which is not permissible under the law. 35. For the reasons stated hereinabove, we are in complete agreement with the view taken by the Delhi High Court in Kabul Chawla [CIT v. Kabul Chawla, 2015 SCC OnLine Del 11555 : (2016) 380 ITR 573] and the Gujarat High Court in Saumya Construction [CIT v. Saumya Construction (P) Ltd., 2016 SCC OnLineGuj 9976 : (2016) 387 ITR 529] and the decisions of the other High Courts taking the view that no addition can be made in respect of the completed assessments in absence of any incriminating mater....
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....st be strictly adhered to. xxxx xxxx xxxx 76. The ingredients of Section 153A are: i) Initiation of search or requisition under the applicable statutory provisions, ii) Such search/requisition being after 31.05.2023 but before 31.05.2021. iii) A mandate upon the Assessing Officer who 'shall' issue notice to the person searched. iv) The notice shall require him to furnish within such period as specified, return of income. v) Such returns are to be filed in respect of each assessment year falling within six assessment years referred to in that provision duly verified and containing the required particulars. vi) Upon receipt of the returns, reassess total income of 6 assessment years immediately preceding the assessment year relating to the previous year that search was conducted/requisition made. 77. The ingredients of Section 153C are: i) Satisfaction of the Assessing Officer who is Assessing Officer of the section 153A noticee that money/bullion/jewellery/other valuable article or thing/books of account or documents (incriminating materials) seized/requisitioned belongs to/pertain to o....
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....terial received has a bearing on determination of total income of the third party for 6 assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made, that such notice would have to be issued for all the years. 82. It thus flows from the provision that the receiving assessing officer must apply his mind to the materials received and ascertain precisely the specific year to which the incriminating material relates. It is only when this determination/ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of a notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by an assessing officer. 83. The construction of Section 153A and 153C is consciously different and is seen to apply different yardsticks to an entity searched and a third party, such yardstick being more exacting in the case of the former. The process of assessment is demanding and an assessee, once in receipt of a notice, is bound by the stringent procedure under the Act, till finalisation of the process. 84. In othe....
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....l income of such other person". 23. It was contended that the stand of the respondents that even if the material unearthed be available for one AY, the same would justify proceedings being commenced for the entire block of ten AYs' is wholly untenable. This, according to learned counsels, would be clearly contrary to the judgments rendered by the Supreme Court in Sinhgad Technical Education Society and Abhisar Buildwell. The petitioners also countered the stand of the respondents on the basis of the consistent view taken by our Court right from the time when judgment came to be rendered in Kabul Chawla and thereafter again in RRJ Securities, ARN Infrastructure and Index Securities Private Limited. The petitioners laid emphasis on the fact that the judgment of this Court in Kabul Chawla had come to be specifically affirmed by the Supreme Court itself in Abhisar Buildwell. 24. Proceeding then to deal with the issuance of notices under Section 153C in respect of abated assessments, the petitioners sought to draw a distinction between the position which obtains under Section 153A as opposed to that which flows from Section 153C. According to learned counsels, as per the provision....
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....was in the aforesaid backdrop that it was contended that while in terms of the plain language of the Second Proviso to Section 153A, all proceedings pending in respect of the searched person would inevitably abate, the same would not be a consequence which would inevitably follow in the case of a non-searched person. This, since the initiation of action under Section 153C rests on the formation of an opinion that the material unearthed is likely to impact the total income for the six AYs' or the "relevant assessment year", as the case may be. 28. According to the learned counsels, the aforesaid distinction must necessarily be acknowledged to exist and is vital for the purposes of understanding the scope of Section 153C and if the aforesaid position were to be ignored, it would result in assessments coming to be reopened under Section 153C even though no incriminating material for the said AY or AYs' may have been obtained. In view of the above, they would contend that the existence of incriminating material is a foundational imperative for the initiation of action under Section 153C. 29. The second limb of the submission was that the discovery of incriminating material would ....
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....otices impugned fail to meet the aforesaid statutory prescriptions, they are liable to be quashed and the writ petitions consequently allowed. D. STAND OF THE RESPONDENTS 33. Mr. Sunil Agarwal, Mr. Sanjay Kumar and Mr. Puneet Rai, learned counsels advanced the following submissions on behalf of the respondents. They contended that at the time when the jurisdictional AO comes to issue notice under Section 153C of the Act, it has yet to examine the material in detail so as to assess the impact that the same may potentially have on the income for the period of six AYs' or the "relevant assessment year". According to learned counsels, it would be wholly incorrect for the AO being required to have formed a definitive opinion with respect to the income pertaining to the block of 10 AYs' individually for each AY. 34. According to learned counsels, if the aforesaid aspect is kept in mind, the jurisdictional AO would clearly be justified in commencing action under Section 153C, even if on a preliminary examination of the material handed over, it is found that the same is likely to "have a bearing on the determination of the total income" of a particular AY forming part of the block....
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...."relevant assessment year". Upon submission of that ROI, the AO stands empowered statutorily to assess or reassess the total income of six AYs' immediately preceding the assessment year corresponding to the year of search and for the "relevant assessment year". The expression "relevant assessment year" has been duly defined by Explanation 1 placed in Section 153A and is explained to include those years which fall beyond the six AYs' spoken of earlier but not later than ten AYs' from the end of the AY relevant to the FY in which the search was conducted. 38. As was held in SSP Aviation Ltd v. Deputy Commissioner of Income Tax 2012 SCC Online Del 1898, the AO of the searched person while proceeding to transmit the material gathered in the course of the search to the AO of the "other person" is not obliged to form any opinion with respect to escapement of income or for that matter the material likely to have an impact on the total income of the non-searched entity. At the stage of transmission of material, the AO of the searched person is only required to be satisfied that the material or documents unearthed pertain to a person or entity other than the one searched. The relevant ex....
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.... the returns filed by the other person for the period of six years does not show that the income reflected in the document has been accounted for, additions will be accordingly made after following the procedure prescribed by law and after giving adequate opportunity of being heard to such other person. That, in sum and substance, is the position. 18. A reference to section 158BD of the Act, which falls under Chapter XIV-B, may be of some use. This section provided for assessment of the undisclosed income by any person other than the person searched under section 132. It applies to search conducted prior to May 31, 2003. It provided as follows: "Where the Assessing Officer is satisfied that any undisclosed income belongs to any person, other than the person with respect to whom search was made under section 132 or whose books of account or other documents or any assets were requisitioned under section 132A, then, the books of account, other documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that the Assessing Officer shall proceed against such other person and the provisions of t....
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....h under section 132 could not have been issued on the footing that there was undisclosed income in the case of the petitioner simply because action under section 132 was taken not against the petitioner, but against the Puri group of companies. Section 153C postulates that while conducting the search on the person in whose name the search warrant is issued under section 132, some valuable article or books of account or document is seized, which does not belong to the searched person but is seen to belong to any other person, the procedure stated therein should be followed. Therefore, nothing is to be gained from saying that the pre-conditions mentioned in clauses (a), (b) and (c) of sub-section (1) of section 132 have not been satisfied vis-a-vis the petitioner so as to confer legality upon the seizure of the documents in question. In our opinion, it is not necessary for the Revenue authorities to have reasons to believe that the petitioner would not produce any books of account or document or that the petitioner is in possession of any money, bullion, jewellery or other valuable article or thing which it had not or will not disclose for the purpose of the assessment proceedings. T....
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....cording of a satisfaction that the assets/documents seized belong to a person other than the person searched is necessarily the first step towards initiation of proceedings under Section 153C of the Act. In the case where the AO of the searched person as well as the other person is one and the same, the date on which such satisfaction is recorded would be the date on which the AO assumes possession of the seized assets/documents in his capacity as an AO of the person other than the one searched. 19. The Allahabad High Court in the case of Commissioner of income Tax v. Gopi Apartments: (2014) 360 ITR 411 has expressed a similar view in the following words:- "25. A bare perusal of the provision contained in Section 153C of the I.T. Act leaves no doubt that, as is provided under Section 158BD, where the Assessing Officer, while proceeding under Section 153A against a person who has been subjected to search and seizure under Section 132(1) or has been proceeded under Section 132A, is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the perso....
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....are initiated. The handing over of documents etc. in such a case may or may not be of much relevance but the recording of satisfaction is still required and in fact it is mandatory." 20. Mention may also be made to the decision of the Madhya Pradesh High Court in Commissioner of Income Tax v. Mechmen: (2015) 60 taxmann.com 484 (Madhya Pradesh). In that case, the Court had explained that the fact that incidentally the AO is common at both stages would not extricate him from recording satisfaction at the respective stages. It was explained that since the satisfaction of the AO of a searched person that assets/documents seized belong to some other person is sine qua non to commencing proceedings under Section 153C of the Act in respect of such other person, the AO could not assume jurisdiction and transmit the items to another file concerning the person (other than the one searched) pending before him, before being satisfied that the seized assets/documents belonged to the other person. xxxx xxxx xxxx 32. Section 153C of the Act merely requires the AO of a searched person to handover the assets and documents seized, which belong to another person, to the AO ....
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....d in Section 153C was ushered in 2014. The Finance (No. 2) Bill, 2014, while seeking to explain the objective of the amendments which were proposed to be incorporated declared as follows: "Assessment of income of a person other than the person who has been searched Section 153C of the Act relates to assessment of income of any other person. The existing provisions contained in sub-section (1) of the said section 153C provide that notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belong to any person, other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. It is proposed....
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....148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person, other than the person referred to in section 153A, then the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, such Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A. This amendment will take effect from 1st October, 2014." 43. It was consequent to the passing of the aforesaid Act that Section 153C came to incorporate provisions relating to the AO being satisfied that the books of accounts, documents or assets seized o....
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....upporting surface. 4. A heraldic charge or device: in pl., that which is depicted on a coat of arms; a heraldic achievement, a coat of arms. 5. The direction in which a place, object, etc., lies; direction of movement, orientation; in pl., (knowledge of) relative position. 6. sing. & (freq.) in pl. Part of a machine which bears friction, esp. between a rotating part and its housing. 7. Practical relation or effect (up)on; influence, relevance " As is manifest from the aforesaid extract, "bearing" would include something which would lend support or credence. It has also been defined to mean something which may have a practical relation or effect upon, influence or relevance. 45. The Major Law Lexicon [4th Edition, Vol. 3 (2010)], authored by P. Ramanatha Aiyar explains "Bearing on, Having" as referring to something having a relation with. For ease of reference, the meaning assigned to the aforesaid expression is reproduced hereinbelow: "Bearing on, Having. Having relation with" 46. The New Lexicon Webster's Dictionary [Encyclopedic Edition, 1989] "bearing" defines the wordas follows: "The action of carrying // carriage, deport....
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....nder Section 153A(1) would mandatorily issue. The abatement of assessment and reassessment pending on that date would, in the case of a Section 153A assessment, be a preordained consequence. However, and in light of what has been observed hereinabove, it is apparent that Section 153C constructs a subtle and yet significant distinction insofar as the question of commencement of proceedings or assumption of jurisdiction is concerned. 49. That takes us to the principal question and which pertains to the nature of the incriminating material that may be obtained and the years forming part of the block which would merit being thrown open. Regard must be had to the fact that while Section 153C enables and empowers the jurisdictional AO to commence assessment or reassessment for a block of six AYs' or the "relevant assessment year", that action is founded on satisfaction being reached that the books of accounts, documents or assets seized "have a bearing on the determination of the total income of such other person". We in this regard bear in mind the well settled distinction which the law recognizes between the existence of power and the exercise thereof. Section 153C enables and empow....
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....be interfered with, only if some incriminating material were unearthed. This aspect came to be reiterated in RRJ Securities when the Court held that it would be impermissible to either reopen or reassess a completed assessment which may not be impacted by the material gathered in the course of the search and which may have no plausible nexus. The aforesaid position also comes to the fore when one reads para 17 of ARN Infrastructure and which annulled an action aimed at reopening assessments for years to which the incriminating document which was found did not relate. 53. Sinhgad Technical Education Society also constitutes a binding precedent in respect of the aforesaid proposition as would be evident from the Supreme Court noticing that the material disclosed pertained only to AY 2004-05 or thereafter and that consequently the Section 153C action initiated for AYs' 2000-01 to 2003-04 would not sustain. It was this position in law as enunciated in that decision which came to be reiterated by our Court in Index Securities. 54. In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclusively lays to rest any doubt that could have been possibly harbour....
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.... invoke those provisions. Consequently, the AO would be bound to ascertain and identify the year to which the material recovered relates. The years which could be then subjected to action under Section 153C would have to necessarily be those in respect of which the assessment is likely to be influenced or impacted by the material discovered. Section 153C neither mandates nor envisages a mechanical or an en blanc exercise of power, or to put it differently, one which is uninformed by a consideration of the factors indicated above. 56. We also bear in mind the pertinent observations made in RRJ Securities when the Court held that merely because an article or thing may have been recovered in the course of a search would not mean that concluded assessments have to "necessarily" be reopened under Section 153C and that those assessments are not liable to be revised unless the material obtained have a bearing on the determination of the total income. This aspect was again emphasised in para 38 of RRJ Securities with the Court laying stress on the existence of material that may be reflective of undisclosed income being of vital importance. All the aforenoted judgments thus reinforce the....
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..... However, and in cases where on facts it is found that the material gathered is unlikely to have any impact on the computation of total income for a particular year, there would exist no justification to invoke the powers conferred by Section 153C. 60. Before concluding, we also deem it imperative to briefly notice certain aspects which emerge from a reading of the Satisfaction Notes themselves. As is manifest from a reading of the Satisfaction Note drawn by the jurisdictional AO of the assessee in W.P. (C) 1459/2024, after noticing the material which was recovered during the search and related to FYs' 2009-10, 2010-11 and 2011-12 [corresponding AYs' thus being AYs' 2010-11, 2011-12 and 2012-13], it has proceeded to observe that the assessments which were liable to abate or be reopened would be AYs' 2010-11 to 2020-21. A similar note appears in W.P. (C)1117/2024. Here again, after referring to the material pertaining to FY 2009-10 [and thus relating to AY 2010-11], the AO proceeded to seek approval for initiating action under Section 153C in respect of AYs' 2010-11 up to 2020-21. 61. A reading of the aforesaid Satisfaction Notes would establish that jurisdictional AOs' appea....
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....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. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under t....
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....nd confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only be consequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments. H. OPERATIVE DIRECTIONS 69. When tested in light of the aforesaid principles, we find that except for a few exceptions which were noticed in the introductory parts of this judgment, the writ petitions forming part of this batch, impugn the invocation of Section 153C in respect of AYs' for which no incriminating material had been gathered or obtained. The Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to "have a bearing on the determination of the total income" for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the mo....