TaxTMI 
TaxTMI 
2026 (1) TMI 1591
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.... 30/10760/2019-20 2. As all the three captioned appeals filed by the assessee have similar issues which are inter-linked, inter-connected and this fact has been admitted by both the parties during the course of hearing before us, therefore, all the appeals filed by the assessee are decided by a common order. 3. First, we take the assessee's appeal in ITA No. 2227/Del/2025 for AY 2018-19. ITA No. 2227/Del/2025 [Assessment Year: 2018-19] 4. Brief facts of the case are that the assessee e-filed her return of income on 31.08.2018, declaring total income of INR 9,87,793/-. A search and seizure operation was carried out at various premises of Shri Kuldeep Bishnoi Group and its associates on 23.07.2019. Various documents/books of accounts etc. were found and seized and statements of various persons were recorded. It was found that some incriminating material found and seized contained some entries related to the assessee. Subsequently, satisfactions were recorded by AO of the searched person and the documents alongwith the satisfaction note was handed over to the AO of the assessee. Thereafter the AO of the assessee recorded his satisfaction note on 03.12.2021 and in....
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....32(4) of the Act of the Act without any corroborative/incriminating material vide CIT v. Harjeev Aggarwal, 2016 SCC OnLine Del 1512. 5. That on the facts and circumstances of the present case, the Ld. CIT (A) vide Second impugned order has failed to appreciate that the impugned assessment order has arbitrarily rejected the cross examination of Kuldeep Bishnoi and the subsequent cogent material placed by the Appellant establishing non-implication in the entire modus. 6. That on the facts and circumstances of the present case, the impugned assessment proceedings u/s. 153C of the Act is void ab initio as separate satisfaction notes u/s. 153C of the Act have not been prepared for each of the assessment years 2014-2015 to 2020-2021 which itself would render the impugned proceedings void-ab-initio vide DCIT vs. Sunil Kumar Sharma., [2024] 159 taxmann.com 179 (Karnataka High Court). 7. That on the facts and circumstances of the present case, the Ld. CIT (A) has erred in upholding the impugned assessment order ignoring that the Ld. AO, instead of discharging his statutory onus, that alleged (cash) transactions took place, rather put the negative burden on the App....
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....IT (A) failed to appreciate that tax liability cannot be based on hypothetical income and must be tied to actual realizations/income vide the binding ratio of Hon'ble Supreme Court in CIT v. Shoorji Vallabhdas & Co. [1962] 46 ITR 144. 15. The Appellant craves leave to add, delete, modify or vary any of the grounds of appeal at any time during the pendency of the appeal or at the time of hearing. 7. During the course of hearing, Ld.AR raised certain additional grounds of appeal alongwith prayer under Rule 11 of the Income Tax Appellate Tribunal Rules, 1963. The additional ground of appeal taken reads as under: I. "That the notice dated 06.12.2021 issued by Ld. Assessing Officer ("Ld. AO") under Section 153C(1) of the Income-tax Act, 1961 ("the Act") is void ab initio for the want of jurisdiction as the date of initiation of search as per 1st proviso thereto is 03.12.2021 viz., the date of issuance of satisfaction note vide PCIT vs. Ojjus Medicare (P.) Ltd. [2024] 465 ITR 101 (Delhi)." II. That the issuance of impugned notice dated 06.12.2021 grossly contravenes Section 153C(3) of the Act, which renders the said provision inapplicable in relation to ....
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.... AO of the assessee on 03.12.2021, the law stood amended and provisions of section 153C become inapplicable and alternatively claimed that the satisfaction note is not in accordance with law. 12. Before us, Ld.AR for the assessee submits that proceedings u/s 153C of the Act were initiated in the case of the assessee on the basis of the documents found and seized during the course of search on third person. Ld.AR further submits that based on the entries found noted in one diary seized during the search on third person, a satisfaction note was recorded on 03.12.2021 by the AO of person searched that some entries in the said diary pertained to the assessee. Accordingly, proceedings u/s 153C were initiated in the case of the assessee and additions were made. Ld.AR submits that from 01.04.2021, law has been amended and as per the order of Hon'ble Jurisdictional High Court in the case of PCIT Vs. Ojjus Medicare Pvt. Ltd. reported in (2024) 465 ITR 101(Delhi), the date of search should be the date when the AO of the assessee has recorded his satisfaction which in the present case is 03.12.2021 relevant to AY 2022-23. However, since the law has been amended w.e.f. 01.04.2021, according....
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....us for the purpose of initiating the proceedings us/ 153C of the Act, the date of search in the case of Kuldeep Bishnoi is to be considered. Ld. CIT DR thus submits that the AO has rightly initiated the proceedings u/s 153C of the Act which deserves to be held as valid proceedings. Regarding the common satisfaction and invalid satisfaction ld. CIT DR submits that the AO has recorded the clear satisfaction based on the admission of the person who has written the diary and the assessee has failed to controvert the same thus she prayed for the confirmation of the initiation of proceedings u/s 153C of the Act in the present case. 15. Heard the parties at length and perused the material available on record. Claim of the assessee is that the AO has recorded his satisfaction on 03.12.2021 thus the date of search should be reckoned from that date only. Assessee further claimed that the law was amended w.e.f. 1.4.2021 by Finance Act, 2021, and as per the amended law, no action u/s 153C of the Act could be taken on the search carried out on or after 01.04.2021 and the assessment should have been completed u/s 148 of the Act as per the amended provisions. Before going further, we examine t....
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....any assessment or reassessment has abated. ( 2) Where books of account or documents or assets seized or requisitioned as referred to in subsection (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other pe....
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....1, 2011-12 and 2012-13 would clearly fall outside block period of ten assessment years as provided under section 153C read with section 153A - Held, yes [Paras 85, 86, 96 and 97] [In favour of assessee]." 17. Now coming to the sub-section (3) of section 153C of the Act which provides that provisions of section 153C are not applicable to the search initiated on or after 1st day of April, 2021. Since in the present case, date of search is to be taken as 03.12.2021 i.e. the date when the satisfaction note was recorded by the AO of the assessee and, such date (03.12.2021) is fallen after 01.04.2021, therefore, as per sub-section (3) of section 153C, provisions of section 153C would not be applicable and the initiation of proceedings u/s 153C and subsequent assessment order passed us/ 153C of the Act is invalid and without jurisdiction. The hon'ble Madras High court after considering these facts under identical circumstances, in the case of Harigovind v ACIT (supra) has held as under: 35. "A reading of the second proviso to Section 153A(1) would show that the assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years....
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....h the materials, books of accounts, etc., are handed over to the JAO of the other person and this date would be considered as the date of initiation of search for other person for all purposes. Thus, there cannot be two different date of initiation of search, either for the searched person or for the other person. 41. The provisions of Sub-Section (3) of Section 153C states that "153C(3).nothing contained in this Section shall apply in relation to a search initiated under Section 132 or books of account, other documents or any assets requisition under Section 132A on or after the 1st day of April, 2021" which means, if the search is initiated subsequent to 01.04.2021, the provision of Section 153C will not apply and accordingly, no proceedings can be initiated against the other person. 42. According to the petitioner, the date of handing over of the seized materials, i.e., 25.11.2022, is the date of initiation of search. If the said contention of the petitioner is accepted, obviously, the issuance of impugned notices dated 07.02.2023 by the 2nd respondent is without any authority and contrary to Sub-Section (3) of Section 153C of the Act and thus, the sam....
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....confined in its application to the question of abatement", which means, as per the law laid down by the Hon'ble Apex Court, the said provision is not only for the purpose of abatement but also for all the other practical purposes. 46. For ready reference, the relevant portion of the judgement rendered in the case of Jasjit Singh (supra) is extracted hereunder: "9. It is evident on a plain interpretation of Section 153C(1) that the Parliamentary intent to enact the proviso was to cater not merely to the question of abatement but also with regard to the date from which the six year period was to be reckoned, in respect of which the returns were to be filed by the third party (whose premises are not searched and in respect of whom the specific provision under Section 153-C was enacted. The revenue argued that the proviso [to Section 153(c)(1)] is confined in its application to the question of abatement. 10. This Court is of the opinion that the revenue's argument is insubstantial and without merit. It is quite plausible that without the kind of interpretation which SSP Aviation adopted, the A.O. seized of the materials - of the search party, under Se....
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.... are quashed." 18. The facts of the aforesaid case of hon'ble Madras High court are squarely applicable to the facts of the present case. It is also a matter of fact that the AO himself has initiated the proceedings u/s 153C of the Act for AY 2018-19 to AY 2020-21 though the date of search in the case of Shri Kuldeep Bishnoi was 23.07.2019 and as per the same, the search year was AY 2020-21. Thus, by respectfully following the judgement of hon'ble Madra High court in the case of Harigovind vs ACIT (supra), we set aside the notice issued u/s 153C on the assessee as the date of handing over the material i.e. 03.12.2021 is the date of initiation of search. The issuance of notice us 153C dt. 06.12.2021 is without any authority and contrary to subsection (3) of section 153C of the Act and thus the consequent order passed u/s 153C of the Act is quashed. The additional grounds of appeal Nos. I to III are thus, allowed. 19. Regarding the alternative Additional Ground of appeal No. IV of the assessee, from the perusal of the satisfaction note available at pages 215-216 of the paper book, it is observed that the AO has not recorded the satisfaction that "have bearing on the t....
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.... as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having jurisdiction over such other person, such Assessing Officer sh....
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....essment 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 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 alon....
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....e 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 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 ....
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....ve 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 requirement of incriminating material having an ineradicable link to the estimation of income fora 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 ....
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....d 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' 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 ....
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....mmenced 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 that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case maybe. 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 on....
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.... 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 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." 21. The Hon'ble Jurisdictional Delhi High Court in th....