TaxTMI 
TaxTMI 
2026 (1) TMI 595
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....cases each whose relevant details stand tabulated as under :- Sr. No. ITA No. Assessment Year Order appealed against CIT(A), DIN No. and Date 1 4216/Del/2025 2013-14 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076953936(1) 13.06.2025 2 4217/Del/2025 2014-15 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076954333(1) 13.06.2025 3 4218/Del/2025 2015-16 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076954622(1) 13.06.2025 4 4219/Del/2025 2016-17 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076954838(1) 13.06.2025 5 4220/Del/2025 2017-18 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076955179(1) 13.06.2025 6 4221/Del/2025 2018-19 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076955412(1) 13.06.2025 7 4222/Del/2025 2019-20 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076955632(1) 13.06.2025 8 4223/Del/2025 2020-21 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076957090(1) 13.06.2025 9 4264/Del/2025 2013-14 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076993905(1) 13.06.2025 10 4265/Del/2025 2014-15 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076995166(1) 13.06.2025 11 4266/Del/2025 2015-16 CIT(A)-2....
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....5 2015-16 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076924277(1) 11.06.2025 36 4276/Del/2025 2016-17 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076924816(1) 11.06.2025 37 4277/Del/2025 2017-18 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076926186(1) 11.06.2025 38 4278/Del/2025 2018-19 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076926712(1) 11.06.2025 39 4279/Del/2025 2019-20 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076927412(1) 11.06.2025 40 4280/Del/2025 2020-21 CIT(A)-25, DIN:ITBA/APL/M/250/2025- 26/1076928044(1) 11.06.2025 Heard both the parties. Case files perused. 2. It emerges that at the outset that there arises the first and foremost issue of the validity of all the impugned section 153C r.w.s. 143(3) assessment itself in furtherance the ld. Assessing Officer's satisfaction dated 24.12.2021 (page no.86-87) in the "lead" appeal ITA No.4208/Del/2025 in M/s Alankit Forex India Limited reading as under :- Satisfaction note for initiating proceedings u/s 153C of the Income Tax Act, 1961 in the case of M/s Alankit Forex India Limited (PAN: AACCS2951F), by AO of the other than the searched person. ....
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....on 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 these documents belong to the 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 A. Ys. 2010-11 to 2020-21. 3. Faced with the situation, learned CIT(DR) has taken pains to place on record the Revenue's following written submissions dated 27.11.2025; reading as under: ALKA AGARWAL -Appeal No.ITA 4262/DEL/2025, ITA 4263/DEL/2025, ITA4264/DEL/2025, ITA 4265/DE1/2025. ITA4266/DEL/2025, ITA4267/DEL/2025, ITA4268/DEL/2025, ITA4269/DEL/2025, ITA4271/DEL/2025, ITA4272/DEL/2025. AY- 2013-14, 2014-15, 2015-16, 2016-17, 2018-19, 2019-20, 2020-21 ALANKIT FINSEC LTD -Appeal No ITA 4273/DEL/2025, ITA4274/DEL/2025, IT A4275/DEL/2025,ITA 4276/DEL/2025, ITA4277/DEL/2025, ITA4278/DEL/2025, ITA4279/DEL/2025, ITA4280/DEL/2025. AY- 2013-14, 2014-15, 2015-16, 2016-17, 2018-19, 2019-20, 2020-21 ALANKIT FOREX INDIA LIMITED - Appeal No. ITA 4208/DEL/2025, ITA 4209/DE....
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....inst 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, that 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 six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A ... ". 4. Interpretation of Phrase: "Have a Bearing" 4.1. The Hon'ble Delhi High Court delved into the meaning of the phrase "have a bearing" as used in Section 153C. It concluded that the mere discovery of material is insufficient; the AO must be satisfied that the material is relevant to the determination of the total income. The court referenced various dictionaries and legal lexicons to define "bearing" as something that lends support, has a practical relation, or influences the determination of income. 4.2. The court's analysis underscored the importance of the AO's s....
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....hi High Court observed as under: "67. On an overall consideration of the aforesaid, we come to the firm conclusion that the "incriminating material" which is spoken of would have to be identified with respect to the AY to which it relates or may be likely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the "relevant assessment year" would not justify a sweeping or indiscriminate invocation of Section 153C. 68. The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to place the assessee on notice under Section 153C. The power to undert....
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.... CIT(DR) could hardly dispute that the above satisfaction note recorded in the assessee's case nowhere makes it clear as to whether the corresponding material found/seized during the course of search dated 18.10.2019 carried in the case of "M/s Alnakit Group" had any "bearing on the determination of total income of such other person" as per hon'ble jurisdictional high court's recent decision in Saksham Commodities Ltd. v. Income Tax Officer (2024) 161 taxmann.com 485 (Del.) reading as under :- "7. Submissions on behalf of the writ petitioners were advanced by Mr. Salil Kapoor, Dr. Rakesh Gupta, Mr. Ved Jain and Mr. Rohit Jain, learned counsels. The petitioners principally contended that the power to assess or to reassess conferred by virtue of Section 153C of the Act is premised on the AO of the non-searched entity being satisfied on a perusal of the material handed over to it that the same would "have a bearing on the determination of the total income" of the "other person" for six AYs' immediately preceding the AY relevant to the FY in which the search was undertaken or documents requisitioned, as well as for the "relevant assessment year" as defined in S....
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....nbsp; ** ** 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 scanned through the Satisfaction Note and the material which was disclosed therein was culled ou....
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....d to file returns for the six assessment years commencing from 2003-04 onwards. The assessee filed returns for those years but disclosed Nil taxable income. These returns were accepted by the assessing officer, however, in respect of Assessment Year 2007-08 there was a significant difference in the pattern of assessment for this year also, the return was filed for Nil income but there were certain documents and which showed that there were transactions of sale of development rights and from which profits were generated and taxable for Assessment Year 2007-08. Thus, the receipt of Rs 44 crores as deposit in the previous year relevant to Assessment Year 2008-09 and later on became subject-matter of the writ petition before the Delhi High Court. That was challenging the validity of notice under Section 153-C read with Section 153- A. In dealing with such situation and the peculiar facts that the Delhi High Court upheld the satisfaction and the Delhi High Court found that the machinery provided under Section 153-C read with Section 153A equally facilitates inquiry regarding existence of undisclosed income in the hands of a person other than searched person. The provisions have been ref....
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....he power to assess and reassess the "total income" of the aforementioned six years in separate assessment orders for each of the six years. In other words, there will be only one assessment order in respect of each of the six assessment years "in which both the disclosed and the undisclosed income would be brought to tax". (iv) Although section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Assessing Officer which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this section only on the basis of the seized material." (v) In the absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word "assess" in section 153A is relatable to abated proceedings (i.e., those pending on the date of search) and the word "reassess" to the completed assessment proceedings. (vi) In so far....
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....cer, 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. 34. In SSP Aviation (supra), this court had noted the difference between the provisions of section 158BD of the Act and the provisions of section 153C. Whereas section 158BD referred to the satisfaction of an Assessing Officer with regard to any "undisclosed income" belonging to a person other than the searched person, section 153C(1) of the Act in contrast referred merely to the Assessing Officer being satisfied that assets/documents seized during a searc....
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....s/documents handed over to him. It is only in cases where the seized documents/assets could possibly reflect any undisclosed income of the assessee for the relevant assessment years, that further enquiry would be warranted in respect of those years. Whilst, it is not necessary for the Assessing Officer to be satisfied that the assets/documents seized during search of another person reflect undisclosed income of an assessee before commencing an enquiry under section 153C of the Act, it would be impermissible for him to commence such enquiry if it is apparent that the documents/assets in question have no bearing on the income of the assessee for the relevant assessment years. " 14. Yet another judgment which merits notice is that of Pr. CIT v. Ram Avtar Verma [2017] 88 taxmann.com 666/395 ITR 252 (Delhi)/IT Appeal Nos.61 & 62 of 2017, dated 7-2-2017, where the following pertinent observations were made :- "3. CIT(A), after considering the record, was of the opinion that the additions could not be justified, and accordingly granted relief,, holding that no incriminating material was recovered during the search. The Revenue's appeal was rejected. The ITAT held as ....
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....n regard to unadopted/current assessment years as well as reassessment proceedings pending at the time of the search in respect of which proceedings were to be completed under Sections 153A/153C. Having regard to the above directions, we are of the opinion that the ITAT decision does not call for interference. Both the appeals are accordingly dismissed." 15. Thereafter, this Court following its decision and while dealing with an identical question in ARN Infrastructure India Ltd. v. Asstt. CIT [2017] 81 taxmann.com 260/394 ITR 569/2017 SCC Online Del 8081 held: "17. As regards the other document seized, and mentioned in the satisfaction note, viz., the extract of the ledger account maintained by the petitioner concerning the payments of commission made by it to RGEPL, even if it is held to "belong" to the petitioner, it could hardly be said to be an "incriminating" document. This was a document relevant only for the assessment year 2010-11. It could not have been used for reopening the assessments of the earlier years, i.e., the assessment years 2007-08 to the assessment years 2009-10, 2011-12 and 2012-13. This position again stands settled by the decision in CIT ....
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....man 260 (Delhi) and that of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III (2013) 263 CTR (Gui) 362 which according to the Revenue held to the contrary. 29. The Supreme Court noted that the appeals relating to four of the AYs i.e. 2000-01 to 2003-04 were covered by the notice under Section 153C of the Act. In dealing with the question as to whether the ITAT was right in permitting the Assessee to raise this additional ground for the first time before it, the Supreme Court in paras 18 and 19 observed as under: "18. 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 153C 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 153C of the Act is essential for assessment under that provis....
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....sp; ** ** 35. As regards the second jurisdictional requirement viz., that the seized documents must be incriminating and must relate to the AYs whose assessments are sought to be reopened, the decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society (supra) settles the issue and holds this to be an essential requirement. The decisions of this Court in CIT-7 v. RRJ Securities [2015] 62 taxmann.com 391/[2016] 282 CTR 321/380 ITR 612 (Delhi) and ARN Infrastructure India Limited v. ACIT [2017] 81 taxmann.com 260/394 ITR 569 (Delhi) also hold that in order to justify the assumption of jurisdiction under Section 153C of the Act the documents seized must be incriminating and must relate to each of the AYs whose assessments are sought to be reopened. Since the satisfaction note forms the basis for initiating the proceedings under Section 153 C of the Act, it is futile for Mr. Manchanda to contend that this requirement need not be met for initiation of the pro....
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....t provision for block assessment was under Section 158-BA of the 1961 Act. The erstwhile scheme of block assessment under Section 158-BA envisaged assessment of "undisclosed income" for two reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime i.e. : (i) block assessment under Section 158BA to assess the "undisclosed income", and (ii) regular assessment in accordance with the provisions of the Act to make assessment qua income other than undisclosed income. Secondly, that the "undisclosed income" was chargeable to tax at a special rate of 60% under Section 113 whereas income other than "undisclosed income" was required to be assessed under regular assessment procedure and was taxable at normal rate. Therefore, Section 153A came to be inserted and brought on the statute. Under Section 153A regime, the intention of the legislation was to do away with the scheme of two parallel assessments and tax the "undisclosed" income too at the normal rate of tax as against any special rate. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/Block assessments under Section 153A ....
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....t 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 jurisdiction to assess or reassess the "total income" for the entire six years' period/block assessment period. The intention does not seem to be to reopen the completed/unabated assessments, unless any incriminating material is found with respect to assessment year concerned falling within last six years preceding the search. Therefore, on true interpretation of Section 153A of the 1961 Act, in case of a search under Section 132 or requisition under Section 132A and during the search any incriminating material is found, even in case of unabated/completed assessment, the AO would have the jurisdiction to assess or reassess the "total income" taking into consideration the incriminating material collected during the search and other material which would include income declared in the returns, if any, furnished by the assessee as well as the undisclosed income. However, in case during the search no incriminating material is found, in case of completed/unabate....
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....d., 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 material. 36. In view of the above and for the reasons stated above, it is concluded as under: 36.1. That in case of search under Section 132 or requisition under Section 132A, the AO assumes the jurisdiction for block assessment under Section 153A; 36.2. All pending assessments/reassessments shall stand abated; 36.3. In case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the "total income" taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns; and 36.4. In case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessmen....
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....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 153 C are: (i) Satisfaction of the Assessing Officer who is Assessing Officer of the section 153A notice that money/bullion/jewellery/other valuable article or thing/books of account or documents (incriminating materials) seized/requisitioned belongs to/pertain to or any information contained, relates to, a third party. (ii) Recording of satisfaction as above. (iii) Handing over of the incriminating material to the Assessing Officer having jurisdiction over the third party. (iv) Recording of satisfaction by the Assessing Officer of the third party that the incriminating material has a bearing on the determination of total income of the third party. (v) Upon condition of recording of the satisfaction of both officers as above, notices be issued to assess/reassess the income of the third party in....
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....rtainment 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 other words, a Damocles sword appears over the head of an assessee with the issuance of every notice which is laid to rest only upon conclusion of the proceedings; The sword cannot be invoked lightly and except if the statutory condition is satisfied. That is to state, an officer has to analyse and compartmentalise the incriminating material year wise, to arrive at a categoric determination as to the year to which the incriminating material relates and issue notices only for those years. 85. Needless to state these are some situations....
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....onsistent 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 (P.) Ltd .. 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 provisions of Section 153A, in the case of a person who is searched, the AO is mandated to issue notice for six AYs'. They submitted that a bare reading of Section 153A would establish that the AO is conferred no discretion in the matter of issuance of notice and that consequently, the moment a person is searched, it would be bound to call upon such an assessee to furnish ROIs' for the six preceding AYs' as well as for the "relevant assessment year". 25. According to the petitioners, contrar....
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....e 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 have to be examined in the context of the AY to which it may relate. The submission in essence was that merely because material may have been gathered during a search pertaining to a particular AY, the same would not justify the reopening or reassessment of all AYs' which may otherwise fall within the ambit of six AYs' immediately preceding the AY corresponding to the year of search or the "relevant assessment year". 30. It was lastly....
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.... 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 of the "relevant assessment year". As per the respondents, material found with respect to a particular AY out of the block of six or ten AYs' would be sufficient to commence action under Section 153C and assess or reassess income for the entire block of six or ten AYs', as the case may be. 35. They would contend that the abatement of all pending assessments would ensue upon the ....
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....ation 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. Dy. CIT [2012] 20 taxmann.com 214/207 Taxman 260/346 ITR 177/2012 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 extracts of the decision in SSP Aviation Ltd are reproduced hereinbelow: "15. It needs to be appreciated that the satisfaction that is required to be reached by the Assessing Officer having jurisdiction over the searched person is that the valuable article or books of account or docume....
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....eing 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 this Chapter shall apply accordingly." (underlining ours) It will be seen that whereas section 158BD refers to the satisfaction of the Assessing Officer that any "undisclosed income" belongs to any person other than the searched person, section 153C(1) in contrast....
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....t 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 preconditions 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. The petitioner was not searched. Search was on a third person and the validity of the seizure has to be examined with reference to the said person searched. At the time when the Assessing Officer having jurisdiction over the searched person reaches the satisfaction that the....
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....p; ** ** ** ** ** ** ** 18. It, plainly, follows that the recording of a satisfaction that the assets/documents seized belong to ....
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.... The second stage commences from the recording of such satisfaction by the Assessing Officer of the 'searched person' followed by handing over of all the requisite documents etc. to the Assessing Officer of such 'other person', thereafter followed by issuance of the notice of the proceedings under Section 153C read with section 153A against such 'other person'. The initiation of proceedings against 'such other person' are dependant upon a satisfaction being recorded. Such satisfaction may be during the search or at the time of initiation of assessment proceedings against the 'searched person', or even during the assessment proceedings against him or even after completion of the same, but before issuance of notice to the 'such other person' under Section 153C. 26. Even in a case, where the Assessing Officer of both the persons is the same and assuming that no handing over of documents is required, the recording of 'satisfaction' is a must, as, that is the foundation, upon which the subsequent proceedings against the 'other person' are initiated. The handing over of documents etc. in such a case ma....
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.... ** 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 of that person. The AO of a searched person is not required to examine whether such documents could provide a clue for discovery of undisclosed income of the person to whom the document so belongs. This Court in SSP Aviation Ltd. (supra) had observed as under :- "At the time when the Assessing Officer having jurisdiction over the searched person reaches the satisfaction that the document belongs to a person other than the searched person, it is not necessary for him to also reach a firm conclusion/opinion that the document shows undisclosed income belonging to such other person. That is a matter for enquiry, which is to be conducted in the manner prescribed by section 153C." 40. It is thus apparent that it is only when the transmitted documents and material reaches the desk of the jurisdictional AO that it becomes empowered to initiate action under Section 153C of the Act. This is evident from a plain textual reading of that provision and which speaks of the commencement point being ....
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....roceed 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 to amend section 153C of the Act to 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 belongs or belong to any person, other than the person referred to in section 153A, then 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 if he 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 refe....
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....." 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 or requisitioned must "have a bearing on the determination of the total income of such other person" for the six preceding AYs' or the "relevant assessment year" as referred to in Explanation 1 to Section 153A. Prior to the promulgation of these amendments, the AO of the non-searched party was not obliged to form an opinion that the material received by it was likely to impact the estimation of income of that person. Significantly, although this prerequisite came to be incorporated in Section 153C, no such corresponding precondition was included in Section 153A. This, although the legislative history of the search assessment provisions placed in the Act would indicate that they were amended from time to time in order to constitute a complete and homogeneous code. This becomes apparent from the legislative mandate of those two provisions being applicable to searches undertaken in a particular time period, the principles of abatement being replicated and the search assessmen....
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....g relation with" 46. The New Lexicon Webster's Dictionary^20 defines the word "bearing" as follows: "The action of carrying // carriage, deportment// (heraldry) a single charge // relevancy, that has no bearing on the matter // endurance, the capacity to tolerate, behaviour past all bearing // (pl.) position in relation to some reference point // (pl/) grasp of one's situation, to find one's bearings // a part of a machine that bears the friction set up by a moving part. Sliding friction is reduced by making the bearing of Babbitt metal, and by separating it and its moving part by a thin film of lubricant. By the introduction of ball bearings (or roller bearings) sliding friction is replaced by rolling friction, which is must less in effect // an angle measured from true north, magnetic north, or from some given survey line to lose one's bearings to be lost// to be puzzled." 47. This too speaks of "relevancy" as one of the meanings one may gather where that particular expression is used. This leads us to the inevitable conclusion that the initiation of action under Section 153C would have to be founded on a formation of opinion by the juri....
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.... 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 empowers the jurisdictional AO to assess or reassess the six AYs' or the "relevant assessment year". The Act thus sanctions and confers an authority upon the AO to exercise the power placed in its hands for up to a maximum of ten AYs'. Despite the conferral of that power, the question which would remain is whether the facts and circumstances of a particular case warrant or justify the invocation of that power. It is the aforesaid aspect which bids us to reiterate the distinction between the existence and exercise of power. 50. What we seek to emphasise is that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particular AY forming part of the six AYs' immed....
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.... 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 harboured. The Supreme Court in unequivocal terms held that absent incriminating material, the AO would not be justified in seeking to assess or reassess completed assessments. Though the aforesaid observations were rendered in the context of completed assessments, the same position would prevail when it comes to assessments which abate pursuant to the issuance of a notice under Section 153C. Here too, the AO would have to firstly identify the AYs' to which the material gathered in the course of the search may relate and consequently it would only be those assessments which would face the spectre of abatement. The additions here too would have to be based on material that may have been unearthed in the course of the search or on the basis of material requisitioned. The statute thus creates a persistent and enduring connect between the material discovered and the assessment that may be ultimately made. The provision while speaking ....
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....ed 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 requirement of incriminating material having an ineradicable link to the estimation of income for a particular AY. 57. It becomes pertinent to note that both Sections 153A and 153C require the assessee upon being placed on notice to furnish ROIs' for the six AYs' or the "relevant assessment year". All that the two provisions mandate is that notwithstanding the submission of those ROIs', the AO would frame one assessment order in respect of each of the years which were made subject matter of the notice and which would deal with both disclosed and undisclosed income. This too reinforces our view that Section 153C would apply only to such AYs' where the jurisdictional AO is satisfied and has incriminating material for those AYs' and which may be concerned with disclosed and undisclosed income. 58. The aforesaid position stands further fortified from a r....
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....lar 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' appear to have proceeded on the premise that the moment incriminating material is unearthed in respect of a particular AY, they would have the jurisdiction and authority to invoke Section 153C in respect of all the assessment years which could otherwise form part of the "relevant assessment year" as defined in Section 153A. In our considered opinion, the aforesaid understanding of Section 153C is clearly erroneous and unsustainable. As explained hereinabove, the discovery of material likely to implicate the assessee and impact the assessment of total income for a particular AY is not intended to set off a chain reaction or have a waterfall effect on all AYs' which could form part of the "relevant assessment year". This, more so since none of the Satisfaction Notes record any reasons of how that material is likely to ....
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....ed 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 that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case may be. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the "relevant assessment year". It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to "have a bearing on the determination of the total income" that a notice under Section 153C would be issue....
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....n 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 moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs' years immediately preceding the assessment correlatable to the search year or the "relevant assessment year" as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents noticed above." 5. We have given our thoughtful consideration to the assessee's and the Revenue's respective stands. We make it clear that not only the learned Assessing Officer's satisfaction herein had given a miss to section 153C wherein he had failed to make it clear a....