TaxTMI 
TaxTMI 
2025 (7) TMI 1240
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....ugning the notices (all dated 24.06.2024) issued under Section 153C of the Income Tax Act, 1961 [Act] in respect of assessment years [AY] 2015-16 to 2020-21. The said notices were premised on material found during the search and seizure operations conducted on 07.04.2019 under Section 132 of the Act in the case of Moser Baer Group and other related parties. The Assessee is related to one of the Directors and Promoter of Moser Baer Group of Companies. 2. During the search proceedings conducted at 43B, Okhla Phase-III, New Delhi certain documents were found which related to purchase of lands. These documents were seized and examined. The Assessing Officer [AO], exercising jurisdiction in respect of the searched persons, recorded a Satisfaction Note on 06.07.2023 expressing his satisfaction that the information contained in the seized documents, which were mentioned in the Satisfaction Note, related to the Assessee (being a person other than the searched person). The said documents were also forwarded to the AO, exercising jurisdiction in the case of the Assessee. The AO examined the said documents as well as the Satisfaction Note dated 06.07.2023 on the very same date and recorded....
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.... paid in cash in addition to cheques to various parties aggregating Rs. 5,51,56,250/- in respect of land ad-measuring 2.20625 acres. It is material to note that the documents also enclose sale deeds in respect of the lands in question, which were executed in December, 2013. The AO also noted that seized documents contained the details of the transactions for sale and purchase of land "in December, 2013". Additionally, it is also conceded that payments in cash, as reflected in the documents, were made on various dates between 06.12.2013 to 03.01.2014. We also consider it apposite to reproduce Paragraph 3.2 of the Satisfaction Note which sets out the details of the payments made in cash. The same is set out below: "3.2 It is seen from the above documents that the details of payments through banking channels available in the sheets i.e., pages No. 87 to 92 of Annexure A-1 seized from 438, Okhla Phase-III, New Delhi are exactly matching with the details of payments made through banking channels mentioned in the copy of sale deeds seized from the same premise. With respect to Land No. 1, Page numbers 92, 84 and 81 of the seized records are relevant and interconnected. The detai....
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....he person searched has been kept on record. I have also examined the above documents and the contents noted/written therein. After examination of these documents, I am also satisfied that the information contained in these documents relates to Mr. Neeraj Bhardwaj. Further, the information contained therein has a bearing on the determination of the total income of Assessee. In view of the same, I am further, satisfied that it is fit case for initiating proceedings u/s 153C of the Income Tax Act, 1961 for the AY 2014-15 to 2020-21." 6. It is important to note that the impugned notices are premised on the singular satisfaction note as referred to above. It is also clear from the contents of the satisfaction note that there is no material, which has any bearing on the income of the Assessee for the AYs 2015-16 to 2020-21. Assuming that the allegations as noted in the satisfaction note to the effect that the consideration of certain immovable properties purchased in the name of the Assessee's wife, were paid partly in cash, is correct; the same does not provide any ground to assume that the income chargeable to tax during the AYs 2015-16 to 2020-21 had escaped assessment. 7. The i....
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....t was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the jurisdiction under Section 153-C of the Act before the AO. Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground. 17. The ITAT permitted this additional ground by giving a reason that it was a jurisdictional issue taken up on the basis of facts already on the record and, therefore, could be raised. In this behalf, it was noted by the ITAT that as per the provisions of Section 153-C of the Act, incriminating material which was seized had to pertain to the assessment years in question and it is an undisputed fact that the documents which were seized did not establish any co-relation, document-wise, with these four assessment years. Since this requirement under Section 153-C of the Act is essential for assessment under that provision, it becomes a jurisdictional fact. We find this reasoning to be logical and valid, having regard to the provisions of Section 153-C of the Act. Para 9 of the order of the ITAT reveals that ITAT had....
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....arch. 11. In CIT v. Abhisar Buildwell (P.) Ltd.: (2024) 2 SCC 433, the Supreme Court considered the question whether the jurisdiction of the AO to make an assessment was confined to the incriminating material found during the course of the search under Section 132 or requisition under Section 132A of the Act. The Supreme Court expressly affirmed the view of this Court in CIT v. Kabul Chawla (supra) and rejected the contention that the AO could assess or reassess the income of the assessee even where no incriminating material have been found during the course of the search. We consider it apposite to set out the following extract from the said decision: "26. In Kabul Chawla [CIT v. Kabul Chawla, 2015 SCC OnLine Del 11555 : (2016) 380 ITR 573], the Delhi High Court, while considering the very issue and on interpretation of Section 153-A of the 1961 Act, has summarised the legal position as under: (SCC OnLine Del para 38) "Summary of the legal position 38. On a conspectus of Section 153-A(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: ....
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....r not already disclosed or made known in the course of original assessment." 27. Thereafter in Saumya Construction [CIT v. Saumya Construction (P) Ltd., 2016 SCC OnLine Guj 9976 : (2016) 387 ITR 529], the Gujarat High Court, while referring the decision of the Delhi High Court in Kabul Chawla [CIT v. Kabul Chawla, 2015 SCC OnLine Del 11555 : (2016) 380 ITR 573] and after considering the entire scheme of block assessment under Section 153-A of the 1961 Act, had held that in case of completed assessment/unabated assessment, in absence of any incriminating material, no addition can be made by the AO and the AO has no jurisdiction to reopen the completed assessment. In paras 15 and 16, it is held as under : (Saumya Construction case [CIT v. Saumya Construction (P) Ltd., 2016 SCC OnLine Guj 9976 : (2016) 387 ITR 529], SCC OnLine Guj) "15. On a plain reading of Section 153-A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under Section 132 or a requisition under Section 132-A of the Act. Once a search or requisition is made, a mandate is cast upon the assessing officer to issue notice under Section 153-A of the Act to the p....
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.... Court in a catena of decisions that the heading of the, section can be regarded as a key to the interpretation, of the operative portion of, the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of Section 153, the intention of the legislature is clear viz. to provide for assessment in case of search and requisition. When, the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment, should be connected with something found during the search or requisition viz. incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of Section 153-A of the Act, in every case where there is a search or requisition, the assessing officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only....
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....allel assessments and tax the "undisclosed" income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153-A and in case of search, there shall be block assessment for six years. Search assessments/Block assessments under Section 153-A are triggered by conducting of a valid search under Section 132 of the 1961 Act. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of Sections 153-A/153-C is detection of undisclosed income by undertaking extraordinary power of search and seizure i.e. the income which cannot be detected in ordinary course of regular assessment. Thus, the foundation for making search assessments under Sections 153-A/153-C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search. *** *** *** 34. If the submission on behalf of the Revenue that in case of search even where no incriminating material is found during the course of search, even in case of unabated/completed assessment, the AO can assess or reassess the income/total income taking into consideration the other material is accepted, in that case, there will....
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....ant of incriminating material. The relevant extract of the said decision is set out below: "1. In this batch of appeals, the assessments in case of each assessee were under Section 153-C of the Income Tax Act, 1961 (for short "the Act"). As found by the High Court in none of the cases any incriminating material was found during the search either from the assessee or from a third party. In that view of the matter, as such, the assessments under Section 153-C of the Act are rightly set aside [BJN Holdings Ltd. v. CIT, (2020) 15 ITR-OL 408 : 2018 SCC OnLine Del 13539], [CIT v. Ankush Saluja, (2019) 419 ITR 431 : 2019 SCC OnLine Del 11148], [CIT v. Dhananjay International Ltd., 2019 SCC OnLine Bom 13405], [CIT v. Best Infrastructure (India) (P) Ltd., 2017 SCC OnLine Del 13053], [CIT v. Caprihans (India) Ltd., 2019 SCC OnLine Bom 13406], [ARN Infrastructure (India) Ltd. v. CIT, (2017) 394 ITR 569 : 2017 SCC OnLine Del 8081] by the High Court. However, Shri N. Venkataraman, learned ASG appearing on behalf of the Revenue, taking the clue from some of the observations made by this Court in the recent decision in CIT v. Abhisar Buildwell (P) Ltd. [CIT v. Abhisar Buildwell (P) Ltd.,....
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....s were concluded and in respect of which the seized document had no bearing. In our view, the same would be clearly impermissible as the seized material now available with the Assessing Officer, admittedly, had no nexus with those assessments and was wholly irrelevant for the purpose of assessing the income of the assessee for the years in question. Merely because a valuable article or document belonging to an assessee is seized from the possession of a person searched under section 132 of the Act does not mean that the concluded assessments of the assessee are necessarily to be reopened under section 153C of the Act. In our view, the concluded assessments cannot be interfered with mechanically and solely for the reason that a document belonging to the assessee, which has no bearing on the assessments of the assessee for the years preceding the search, was seized from the possession of the searched persons. *** *** *** 36. The decision in SSP Aviation (supra) cannot be understood to mean that the Assessing Officer has the jurisdiction to make a reassessment in every case, where seized assets or documents are handed over to the Assessing Officer. The question wheth....
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.... It would be pertinent to bear in mind that Kabul Chawla was a decision rendered in the context of Section 153A. It was in the aforesaid backdrop that the Court significantly observed that once a search takes place under Section 132 of the Act, notice under 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 ....
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....he absence of any incriminating material, a completed assessment may be reiterated and the abated assessment or reassessment be concluded. The importance of incriminating material was further underlined in Kabul Chawla with the Court observing that completed assessments could 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 sustai....
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....ithin the maximum block period of ten years merely because the statute empowers the AO to do so. Unless the material gathered and recovered is found to have relevancy to the AY which is sought to be subjected to action under Section 153C, it would be legally impermissible for the respondents to 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 obta....
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....3C. 59. It would be pertinent to recall that Section 153C essentially seeks to merge ongoing assessments with a search assessment which may be triggered by the discovery of material obtained in a search and which was the statutory procedure which prevailed in terms of the provisions contained in Chapter XIV B. 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)1117/2....
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....bearing on the determination of the total income of the assessee if such information relates to the assessee. He contended that Section 153C of the Act has three distinctive limbs. The first is triggered when the AO is satisfied that any money, bullion, jewellery or other valuable article or thing, seized or requisitioned belongs to the Assessee being a person other than the searched person. The second limb is triggered if the books of accounts or documents seized or requisitioned pertains to the assessee (being a person other than the searched person). And, the third is triggered if the books or documents seized or requisitioned contain information which relates to the assessee being a person other than the searched person. He submitted that the third limb is not qualified with the condition that it must have a bearing on the income of the non-searched person. He contended that therefore, there was no requirement that the information contained in the seized material which relates to a non-searched person should have a bearing on his income for the AO to assume the jurisdiction under Section 153C of the Act. 18. It is relevant to refer to Sub-section (1) of Section 153C of the A....