TaxTMI 
TaxTMI 
2026 (10) TMI 45
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....ion 153C(1) in as much as: 2.1 The satisfaction recorded by the JAO of the assessee does not state, even remotely, that the seized material had any bearing on the determination of total income of the assessee 2.2 The satisfaction recorded is a borrowed, mechanical and consolidated satisfaction for multiple assessment years, without any year-wise nexus or quantification of alleged undisclosed income. 3. That the Ld. CIT(A) erred in sustaining the assessment order dated 31.03.2023 passed u/s 153C/143(3) of the Act, despite the admitted fact that legal and jurisdictional objections raised by the assessee against initiation of proceedings under section 153C were never disposed of by the Ld. AO by a speaking order. 4. That the Ld. CIT(A) erred in law in upholding the assessment framed without compliance of mandatory approval under section 153D of the Act, which was granted in a mechanical, consolidated and non-application-of-mind manner. 5. That the Ld. CIT(A) erred in law and on facts in sustaining the addition of Rs. 71,10,000/- as alleged commission under section 69A, which is based solely on uncorroborated WhatsApp chats, without any evid....
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....TICULARS REMARKS 02.01.2020 Search u/s 132 carried out on Sushen Mohan Group 30.09.2021 Satisfaction note was recorded by the AO of 'searched person' [DCIT Central Circle 15, New Delhi] P. NO. 2-21 of PB 09.04.2022 Satisfaction note was recorded by the AO of 'other person/assessee' [ITO Ward 70(1), New Delhi] P.NO. 1 of PB 09.04.2022 Notice u/s 153C was issued by the AO of the assessee[ITO Ward 70(1), New Delhi] P.NO. 22 of PB 3. Ld AR for the assessee submitted that in respect of Grounds No.2, 2.1 and 2.2 of grounds of appeal, the issue involved is assumption of jurisdiction u/s 153C of the Income-tax Act, 1961 (for short 'the Act'). 4. It was submitted that section 153C contemplates two distinct and independent jurisdictional satisfactions where the Assessing Officer of the searched person and that of the other person are different, namely, first, the AO of the searched person must be satisfied that the seized books/documents "pertain to", or the information contained therein "relates to", a person other than the searched person, and thereafter, the AO of such other person must independently record his satisfaction that the mate....
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....DR of the Revenue relied on the detailed findings of the lower authorities and specifically brought to our notice the detailed findings of Ld CIT(A) at Para 6.2 to 6.4 of the impugned order. In this regard, placed reliance on the following decisions :- * Hon'ble High Court of Judicature for Rajasthan at Jodhpur D.B. Civil Writ Petition No.3152/2025 dated 04.03.2025 in Giriraj Pugalia vs. ACIT * Hon'ble Supreme Court in the case of Super Malls (P.) Ltd. vs. Pr.CIT (2020) 423 ITR 281 (SC) * Hon'ble High Court of Allahabad in CIT vs. Classic Enterprises (2013) 358 ITR 465 (Allahabad) 9. Considered the rival submissions and material placed on record. We find that the satisfaction note of the AO of the non-searched person i.e. the assessee, was recorded which is at page 1 of the paper book filed by the assessee and the same is reproduced as under: "Satisfaction note for initiating proceedings under section 153C read with section 153A of the Income Tax Act, 1961 in the case of Sh. Deepak Sahu (PAN: ATBPS1398D). A search action u/s 132 of the I.T. Act, 1961 was conducted in the case of Sushen Mohan Garg Group on 02.01.2020. It has been broug....
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....aterial from the AO of the searched person and then Assessing Officer shall proceed against such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153Athat, if, 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. We observe that the satisfaction note recorded by the AO of the assessee, he has not recorded how the documents seized have a bearing on the determination of the total income of the assessee for the impugned year. It clearly shows that the satisfaction note recorded is not as per the provisions of section 153C of the Act. We observe from the decision of Saksham Commodities Ltd (Delhi) (Supra), in which it is held as under: "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....
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....hall 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 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 h....
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....ar 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 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 applicabl....
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.... reference, the meaning assigned to the aforesaid expression is reproduced herein below: "Bearing on, Having. Having 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....
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....tisfaction 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 alone would not be sufficient to justify steps in that direction being taken, unless the incriminating ....
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....nsequently 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 the search or on the basis of material requisitioned. The statute thus creates a persistent and end....
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....ssarily" 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 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....
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....ded 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 chain reaction or have a waterfall effect on all AYs' which could form part of the "relevant ....
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....te 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 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 possessi....