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TMI Blog2024 (4) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... 19/2024 & CM APPL 3181/2024, W.P.(C) 721/2024 & CM APPL 3183/2024, W.P.(C) 722/2024 & CM APPL 3190/2024, W.P.(C) 723/2024 & CM APPL 3194/2024, W.P.(C) 726/2024 & CM APPL 3201/2024, W.P.(C) 792/2024 & CM APPL 3426/2024, W.P.(C) 852/2024 & CM APPL 3611/2024, W.P.(C) 853/2024 & CM APPL 3613/2024, W.P.(C) 854/2024 & CM APPL 3615/2024, W.P.(C) 870/2024 & CM APPL 3643/2024, W.P.(C) 871/2024 & CM APPL 3645/2024, W.P.(C) 872/2024 & CM APPL 3647/2024, W.P.(C) 874/2024 & CM APPL 3654/2024, W.P.(C) 992/2024 & CM APPL 4114/2024, W.P.(C) 993/2024 & CM APPL 4116/2024, W.P.(C) 1112/2024 & CM APPL 4686/2024, W.P.(C) 994/2024 & CM APPL 4118/2024, W.P.(C) 1005/2024 & CM APPL 4200/2024, W.P.(C) 1008/2024 & CM APPL 4210/2024, W.P.(C) 1080/2024 & CM APPL 4517/2024, W.P.(C) 1081/2024 & CM APPL 4518/2024, W.P.(C) 1082/2024 & CM APPL 4521/2024, W.P.(C) 1083/2024 & CM APPL 4523/2024, W.P.(C) 1084/2024 & CM APPL 4525/2024, W.P.(C) 1089/2024 & CM APPL 4599/2024, W.P.(C) 1092/2024 & CM APPL 4606/2024, W.P.(C) 1093/2024 & CM APPL 4608/2024, W.P.(C) 1094/2024 & CM APPL 4610/2024, W.P.(C) 1095/2024 & CM APPL 4612/2024, W.P.(C) 1096/2024 & CM APPL 4614/2024, W.P.(C) 1117/2024 & CM APPL 4697/2024, W.P.(C) 1119/202 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Garg & Ms. Deepika Goyal, Advs., Mr. Abhishek Maratha, Sr. SC with Mr. Parth Semwal and Ms. Nupur Sharma, Advs. Mr. Shlok Chandra, Sr.SC with Ms. Madhavi Shukla, Jr.SC, Ms. Priya Sarkar, Jr.SC and Mr. Ujjwal Jain, Adv. Mr. Kunal Sharma, Sr.SC, Ms. Zehra Khan, Jr.SC & Mr. Shubhendu Bhattacharyya, Adv. Mr. Ashivini Kumar and Mr. Rishabh Nangia, Advs. JUDGMENT YASHWANT VARMA, J. A. INTRODUCTION 1. This batch of writ petitions impugns notices issued under Section 153C of the Income Tax Act, 1961 [Act] with the petitioners-assessees asserting that in the absence of any material pertaining to the Assessment Years [AO] which are proposed to be reopened and assessed having been gathered during the course of a search, the assumption of jurisdiction is wholly illegal and unsustainable in law. The submission principally flows from the recordal of facts as appearing in each of the Satisfaction Notes drawn by the Assessing Officer [AO] of the non-searched person and the same carrying no reference specific to the AY in respect of which the impugned notices have come to be issued. In some of the writ petitions, the Satisfaction Notes as drawn by the AO of the non-searched person had neither ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1479/2024 2018-19 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1460/2024 2019-20 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1468/2024 2020-21 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Susheel Jain 718/2024 2014-15 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Susheel Jain 693/2024 2015-16 09.06.2022 (Annexure P-9) No Satisfaction Note 16.08.2022 (Annexure P- 3) Susheel Jain 695/2024 2017-18 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Susheel Jain 696/2024 2018-19 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Susheel Jain 698/2024 2019-20 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Susheel Jain 706/2024 2020-21 09.06.2022 (Annexure P-8) No Satisfaction Note 16.08.2022 (Annexure P- 2) Naresh Mittal 1112/2024 2019-20 24.06.2022 (Annexure P-9) 08.08 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eel and Alloys 1776/2024 2016-17 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1774/2024 2018-19 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P-1) Neelkanth Steel and Alloys 1778/2024 2020-21 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1782/2024 2019-20 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1783/2024 2015-16 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Modicare Ltd 3007/2023 2013-14 20.10.2022 (Annexure L) 20.10.2022 (Annexure L) 21.10.2022 (Annexure-A) Modicare Ltd 3019/2023 2014-15 20.10.2022 (Annexure L) 20.10.2022 (Annexure L) 21.10.2022 (Annexure-A) Modicare Ltd 3681/2023 2015-16 22.03.2022 (Annexure G) 24.03.2022 (Annexure G) 25.04.2022 (Annexure-A) OPV Packaging Pvt Ltd 1493/2024 2014-15 05.04.2022 (Annexure-F) 23.06.2022 (Annexure-F) 23.06.2022 (Annexure-A) OPV Packaging Pvt Ltd 1474/2024 2015-16 05.04.2022 (Annexure-F) 23.06.2022 (Annexure-F) 23.06.2022 (Annexure-A) OPV Packaging Pvt Ltd 1492/2024 2016-17 05.04.2022 (Annexure-F) 23.06.2022 (Annexure-F) 23.06.2022 (Annexure-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 870/2024 2019-20 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 854/2024 2020-21 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Ashutosh Agarwal 994/2024 2013-14 24.06.2022 (Annexure-A-6) 31.05.2023 (Annexure-A-6) 12.06.2023 (Annexure-A-2) Ashutosh Agarwal 992/2024 2017-18 24.06.2022 (Annexure-A-6) 31.05.2023 (Annexure-A-6) 12.06.2023 (Annexure-A-2) Ashutosh Agarwal 993/2024 2018-19 24.06.2022 (Annexure-A-6) 31.05.2023 (Annexure-A-6) 12.06.2023 (Annexure-A-2) Ashutosh Agarwal 1005/2024 2019-20 24.06.2022 (Annexure A-6) 31.05.2023 (Annexure-A-6) 12.06.2023 (Annexure-A-2) Ashutosh Agarwal 1008/2024 2020-21 24.06.2022 (Annexure-A-6) 31.05.2023 (Annexure-A-6) 12.06.2023 (Annexure-A-2) Vikas Wahi 726/2024 2016-17 24.06.2022 (Annexure-A-6) Undated (Annexure-A-6) 10.11.2022 (Annexure-A-2) Vikas Wahi 723/2024 2017-18 24.06.2022 (Annexure-A-6) Undated (Annexure-A-6) 10.11.2022 (Annexure-A-2) Vikas Wahi 722/2024 2018-19 24.06.2022 (Annexure-A-6) Undated (Annexure- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; of Beneficiary F.Y. Particulars of transaction as per ledger Sum of Amount Debit in Ledger Sum of Amount Credit in Ledger SAKSHAM COMMODITY PRIVATE LIMITED 2009-10 VIJAY BANK- AFL 242 1,50,000 43,00,000 VIJAY BANK- AIL 35,00,000 32,00,000 2010-11 VIJAY BANK- AFL 22,50,000 2011-12 Cash 16,00,000 VIJAY BANK-AFL 16,00,000 4. The assessment proceedings are required to be taken u/s 153C of the Income Tax Act, 1961 as the warrant issued in the name of Sh. Alok Kumar Aggarwal, Sh. Ankit Aggarwal, M/s Alankit Ltd. and M/s Alankit Assignment. A.Y. Invoiced: A.Y. 2010-11 to A.Y. 2020-21." 5. As is manifest from a perusal of the aforenoted Satisfaction Note, the respondents refer to incriminating material found in the course of the search and pertaining to Financial Years [FY] 2009-10, 2010-11 and 2011-12. Since the corresponding AYs' for the aforenoted period would be AYs' 2010-11, 2011-12 and 2012-13, the petitioner asserts that the invocation of Section 153C for AY 2015-16 is wholly arbitrary and legally unsustainable. 6. When the writ petition was initially entertained on 01 February 2024, we had taken note of the challenge which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vocation of Section 153C would not sustain. The criticality of incriminating material and its correlation to the AY which is sought to be reassessed, according to the writ petitioners, is an aspect which stands conclusively answered by the Supreme Court in Commissioner of Income Tax v. Sinhgad Technical Education Society (2018) 11 SCC 490. 9. In Sinhgad Technical Education Society, Section 153C notices had been issued against the assessee for AYs' 2000-01 to 2005-06. The appeal before the Supreme Court, however, stood restricted to AYs' 2001 to 2003-04. Taking note of the view which weighed with the ITAT, the Supreme Court observed as under:- "15. In these appeals, qua the aforesaid four assessment years, the assessment is quashed by the ITAT (which order is upheld by the High Court) on the sole ground that notice under Section 153- C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153-C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2015) 378 ITR 84] , SCC OnLine Bom para 8) "8. Reliance on the judgment of the Division Bench of the High Court of Delhi reported in SSP Aviation Ltd. v. CIT [SSP Aviation Ltd. v. CIT, 2012 SCC OnLine Del 1898 : (2012) 346 ITR 177] is misplaced. There, search was carried out in the case of "P" group of companies. It was found that the assessee before the Hon'ble Delhi High Court had acquired certain development rights from "P" group of companies. Based thereon, the satisfaction was recorded by the assessing officer and he issued notice in terms of Section 153-C. Thereupon the proceedings were initiated under Section 153-A and the assessee was directed 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 taxabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r six assessment years immediately preceding the previous year relevant to the assessment year in which the search takes place. (ii) Assessments and reassessments pending on the date of the search shall abate. The total income for such assessment years will have to be computed by the Assessing Officers as a fresh exercise. (iii) The Assessing Officer will exercise normal assessment powers in respect of the six years previous to the relevant assessment year in which the search takes place. The Assessing Officer has the 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 relevanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion then arises is whether the Assessing Officer of the assessee was justified in taking further steps for reassessing the income of the assessee in respect of the assessment years for which the assessments 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. 34. In SSP Aviation (supra), this court had noted the difference bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation (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 whether the documents/assets seized could possibly reflect any undisclosed income has to be considered by the Assessing Officer after examining the seized assets/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 Principal Commissioner of Income Tax - 9 vs. Ram Avtar Verma Order dated 07.02.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring block periods. With the unification of assessment years for the block period, i.e. only one assessment order for each year in the block period, it was necessary for an overriding provision of the kind actually adopted in Section 153A. But for such a non-obstante clause, the Revenue could possibly have faced hurdles in 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. ACIT, Central Circle -28, New Delhi 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the ITAT erred in allowing the said challenge by the Assessee by way of additional grounds. A reference was made by the Revenue to the decision of this Court in SSP Aviation Limited v. Deputy Commissioner of Income Tax [2012] 346 ITR 177 (Del) and that of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel v. Commissioner of Income Tax-III (2013) 263 CTR (Guj) 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the High Court is correct, which is stated by the Bombay High Court in the impugned judgment as well." xxxx xxxx xxxx 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 (2016) 380 ITR 612 (Del) and ARN Infrastructure India Limited v. ACIT [2017] 394 ITR 569 (Del) 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 proceedings but only during the subsequent assessment." 17. The necessity of an indelible link being found to exist between the mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo reasons, firstly that there were two parallel assessments envisaged under the erstwhile regime i.e. : (i) block assessment under Section 158-BA 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 153-A came to be inserted and brought on the statute. Under Section 153-A 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 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rial is found with respect to assessment year concerned falling within last six years preceding the search. Therefore, on true interpretation of Section 153-A of the 1961 Act, in case of a search under Section 132 or requisition under Section 132-A 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/unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under Sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in Sections 147/148, as in such a situation, the Revenue cannot be left with no remedy. Therefore, even in case of block assessment under Section 153-A and in case of unabated/completed assessment and in case no incriminating material is found during the searc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 153-A; 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 assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132-A of the 1961 Act. However, the completed/unabated assessments can be re- opened by the AO in exercise of powers under Sections 147/148 of the Act, subject to fulfilment of the conditions as envisaged/mentioned under Sections 147/148 of the Act and those powers are saved." The view as expressed in Abhisar Buildwell came ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 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 accordance with the procedure stipulated under Section 153A. 78. In my considered view, there is a vital distinction between the object, intention as well as the express judge of Sections 153A and 153C. Section 153A addresses the searched entity and the procedure set evidently a notch higher for this reason. There is no discretion or condition precedent under Section 153A to the issuance of notice save the conduct of a search under Section 132 or making of a requisition under Section 132A. Upon the occurrence of one of the aforesaid events, it is incumbent upon the office to issue notice under Section 153Ato the searched entity in line with the procedure stipulated. 79. Section 153C however requires the satisfaction of two conditions prior to issuance of notice: i) Recording of satisfaction by the Assessing Officer of the searched entities that some of the incriminating materials relate to a third party. ii) Recording of satisfaction by the Assessing Officer of the third party that the in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and issue notices only for those years. 85. Needless to state these are some situations/issue when the spread of information and the nature of the issue itself might need more, and in-depth probing before such year-wise determination is possible. In such cases, the officer would be well within his right to state the nature of the issue and detail the difficulties that present themselves in precise bifurcation at that stage. This would reflect application of mind and, in my considered view, would serve as sufficient compliance with the statutory condition." 20. It was in the aforesaid backdrop that the petitioners contended that in the absence of any incriminating material having been unearthed in the search, it would be impermissible for the respondents to initiate action under Section 153C for the six AYs' preceding the year of search or for that matter, the "relevant assessment year". 21. It was then submitted that the material collated in the course of the search and the same likely to have a probable impact "on the determination of the total income" is a facet which must be evident and borne out from a reading of the Satisfaction Note itself. They would contend that unle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the petitioners, contrary to the above, in a case to which Section 153C applies, the jurisdictional AO must firstly and at the outset come to a prima facie conclusion that the material handed over and received by it is likely to implicate and "have a bearing on the determination of the total income". However, once the documents are handed over to the jurisdictional AO and it is satisfied that the same would have no "bearing on the determination of the total income" for any particular AY, it would stand deprived of the authority to initiate action under Section 153C. This position, according to learned counsels, would prevail irrespective of whether the assessment relates to an abated year or one which has been completed. According to the petitioners, Section 153C carves out no distinction between abated and completed assessments, since the AO of the "other person" is not obliged to record a satisfaction separately for those assessments. They would contend that if no incriminating material in respect of an abated assessment year is found, no notice under Section 153C can justifiably be issued. This, since according to them, the absence of material "having a bearing on the determina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incorporates various provisions relating to assessment of income. According to learned counsels, one would have to bear in mind the clear distinction which exists between an assessment under Section 153C, a scrutiny assessment under Section 143(3), a best judgment assessment under Section 144 and assessment or reassessment of escaped assessment under Section 147. According to learned counsels, the assessment under Section 153C is a special procedure carved out by the statute and which is liable to be invoked only consequent to adverse material relating to a third party having been discovered in the course of a search. It was their submission that the said provision can be invoked only if the jurisdictional preconditions are shown to exist. 31. Viewed in that light, learned counsels contended that Section 153C assessment is clearly distinct from a scrutiny assessment under Section 143(3) or a reassessment under section 147. They also contended that if the stand of the respondents were to be accepted, namely that the reopening of any AY would be justified notwithstanding no incriminating material specific to that year having been gathered, the same would clearly result in manifest a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfined to a particular year or it being found to have a correlation with a particular AY out of the entire block of six or ten AYs'. The submission was that material for one or more of the AYs' would be sufficient for the block of six AYs' or the "relevant assessment year", as the case may be, being subjected to assessment. It was also their contention that the material found in the course of the search need not be required to be specifically tied down to each of the six AYs' or the "relevant assessment year". 36. According to learned counsels, the jurisdictional AO would be justified in initiating action as long as the material gathered is likely to impact the assessment of total income of any one particular AY forming part of the block which comes to be thrown open under Section 153C. They contended that the underlying statutory scheme of Section 153C is liable to be recognised as warranting the entire block period of ten AYs' being scrutinised even though the proceedings may have been triggered by material that may pertain to a particular AY only. The aforesaid position, according to learned counsels, stands fortified from the statutory command of that provision which abates a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account or documents belonging to the other person must be shown to show to conclusively reflect or disclose any undisclosed income. xxxx xxxx xxxx 17. The judgment of this court in Saraya Industries Ltd. (2008) 306 ITR 189 (Delhi) was relied upon by Mr. Bajpai, in support of his contention that the seizure of the document must be of such nature that even closed assessments for six years could be reopened and this requirement postulates that the provisions of section 153C can be set in motion only if there is a finding that the seized document or books of account or valuable article represents the undisclosed income of the other person. The said decision does not assist the petitioner. The section merely enables the Revenue authorities to investigate into the contents of the document seized, which belongs to a person other than the person searched so that it can be ascertained whether the transaction or the income embedded in the document has been accounted for in the case of the appropriate person. It is aimed at ensuring that income does not escape assessment in the hands of any other person merely because he has not been searched under section 132 of the Act. It is onl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 153C read with section 153A merely facilitates an enquiry regarding the existence or otherwise of undisclosed income in the hands of the person other than the searched person. The starting point of the enquiry is the seizure of the valuable article or books of account or document, which according to the satisfaction reached by the Assessing Officer, belongs to a person other than the searched person. It is necessary to notice the difference between the two provisions in order to deal with the contention put forward by the learned counsel for the petitioner that the seizure itself is invalid or illegal on the ground that there could not have been any satisfaction before issuing the warrant of authorization under section 132 of the Act that the petitioner had earned undisclosed income because the income reflected in the seized documents, namely, the collaboration agreement dated August 24, 2006, and the assignment agreement dated July 21, 2006, had already been taken note of in the account books of the petitioner. This is a debatable issue as is apparent from the submission of the Revenue. They have submitted to the contrary. It cannot be said that the seizure of the docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he manner prescribed by section 153C. The fact that the procedure envisaged by section 153C is somewhat cumbersome and that the person other than the searched person is put to some inconvenience cannot be an argument to hold that the entire proceedings are bad in law." 39. The principle that the AO of the searched person is only required to be satisfied that the documents or materials pertain to the "other person" at the stage of transmission of material or documents to the jurisdictional AO of the non-searched entity was reiterated in RRJ Securities. We deem it apposite to extract the following passages from that decision: "13. The first and foremost step for initiation of proceedings under Section 153C of the Act is for the AO of the searched person to be satisfied that the assets or documents seized belong to the Assessee (being a person other than the searched person). The AO of the Assessee, on receiving the documents and the assets seized, would have jurisdiction to commence proceedings under Section 153C of the Act. The AO of the searched person is not required to examine whether the assets or documents seized reflect undisclosed income. All that is required for him is to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred as 'the searched person'. Based on such search and seizure, assessment proceedings are initiated against the 'searched person' under Section 153A. At the time of initiation of such proceedings against the 'searched person' or during the assessment proceedings against him or even after the completion of the assessment proceedings against him, the Assessing Officer of such a 'searched person', may, if he is satisfied, that any money, document etc. belongs to a person other than the searched person, then such money, documents etc. are to be handed over to the Assessing Officer having jurisdiction over 'such other person'. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 the handing over of documents or assets seized or requisitioned to the AO of the "other person" and it in turn proceeding to issue notice to assess or reassess the income of the non-searched entity in accordance with Section 153A. However, the initiation of action under Section 153C is significantly premised upon the AO being satisfied that the books of account or documents and assets seized or requisitioned having "a bearing on the determination of the total income of such other person". This is manifest from the provision employing the expression "if, that Assessing Officer is satisfied.....". It would therefore necessarily follow that the issuance of a notice under Section 153C is clearly not intended to be an inevitable consequence to the receipt of material by the jurisdictional AO. That the AO before commencemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sue 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 referred to in sub-section (1) of section 153A. The amendment will take effect from 1st October, 2014." 42. It would also be apposite to notice the Notes on Clause 53 of the Finance Bill, 2014, which sought to amend Section 153C and which is reproduced hereinbelow: "Clause 53 of the Bill seeks to amend section 153C of the Income-tax Act relating to assessment of income of any other person. The existing provisions contained in sub-section (1) of the aforesaid section 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 a person, other than the person referred to in section 153A, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 assessment power being available to be invoked for the "relevant assessment year", and which extended the power to be exercised over a ten year block, being simultaneously introduced in those provisions. The Legislature clearly intended both these provisions to form part of a cohesive scheme and to be complementary to each other. However, the aspects of satisfaction and of the material likely to implicate or influence were not added in Section 153A. The fact that any additions that may be ultimately made upon a culmination of assessment under Section 153A being indelibly founded on the material gathered in the course of the search is a separate issue all together. 44. The usage of the expression "have a bearing" would necessarily lead one to conclude that the mere discovery of books, documents or assets would not justify the initiation of proceedings under that provision. Upon receipt of that material, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aks 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 jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the "determination of the total income" and would be of relevancy for the purposes of assessment or reassessment. F. INCRIMINATING MATERIAL- CASCADING EFFECT? 48. In terms of the Second Proviso to Section 153A, all assessment or reassessment proceedings relating to the six AYs' or the "relevant assessment year" pending on the date of search are statutorily envisaged to abate. Abatement is envisioned to be an inevitable consequence of the initiation of action under Section 153A. Neither issuance of notice nor abatement are predicated upon a formation of opinion by the AO of the searched person that the material is likely to impact the total income of that assessee. However, the spectre of abatement insofar as the "other person" is concerned would arise only after the jurisdictional AO has formed the requisite satisfaction of the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficient 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' immediately preceding the AY pertaining to the search year or for the "relevant assessment year". 51. Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words "have a bearing on the determination of the total income of such other person" as appearing in Section 153C would necessarily have to be conferred pre-eminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening or assessing all over again all the ten AYs' that could possibly form part of the block of ten years. 52. The decisions which hold that an assessment is liable to be revised only if incriminating material be found, even if rendered in the context of Section 153A, would clearly govern the question tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thus creates a persistent and enduring connect between the material discovered and the assessment that may be ultimately made. The provision while speaking of AYs' falling within the block of six AYs' or for that matter all years forming part of the block of ten AYs', appears to have been put in place to cover all possible contingencies. The aforesaid provisions clearly appear to have been incorporated and made applicable both with respect to Section 153A as well as Section 153C ex abundanti cautela. Which however takes us back to what had been observed earlier, namely, the existence of the power being merely enabling as opposed to a statutory compulsion or an inevitable consequence which was advocated by the respondents. 55. Take for instance a case where the material gathered in the search is contemplated to have an adverse impact on the declarations and disclosures made by an assessee pertaining only to AYs' 2016-17 and 2017-18. What we seek to emphasise is that pending assessments for those two years could validly form subject matter of action under Section 153C and pending assessments in that respect would surely abate. However, that by itself would not be sufficient to eith ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed income. 58. The aforesaid position stands further fortified from a reading of the First Proviso to Section 153A and which speaks of the power of the AO to assess or reassess the total income in respect of "each assessment year". The aforesaid phraseology stands replicated in Section 153B(1)(a) which again alludes to "each assessment year" falling within the six AYs or the "relevant assessment year". The aforesaid language is then reiterated in Section 153D and which prescribes that no order of assessment or reassessment shall be passed by an AO in respect of "each assessment year" referred to in Section 153A or 153B of the Act, except with the prior approval of the Joint Commissioner. We note that once the aforesaid principles are borne in mind, there would exist no discernible distinction between abated and completed assessments. This, since in both situations, the AO would be bound to base its decision to abate or reopen on material that is likely to impact the assessment of the total income for a particular AY. In case of assessment proceedings which are ongoing on the date when the AO proceeds to draw its satisfaction and in respect of which no incriminating materi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w that material is likely to materially influence the computation of income for those AYs'. 62. Hypothetically speaking, it may be possible for the material recovered in the course of a search having the potential or the probability of constituting incriminating material for more than one assessment year. However, even if such a situation were assumed to arise, it would be incumbent upon the AO to duly record reasons in support of such a conclusion. The Satisfaction Notes would thus have to evidence a formation of opinion that the material is likely to be incriminating for more than a singular assessment year and thus warranting the drawl of Section 153C proceedings for years in addition to those to which the material may be directly relatable. G. CONCLUSIONS 63. On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to "have a bearing on the determination of the total income" and would have to be examined bearing in mind the AYs' which are likely to be impacted. It would thus be incorrect to either interpret or construe Section 153C as envisaging in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. 66. Therefore, and in our opinion, abatement of the six AYs' or the "relevant assessment year" would follow the formation of that opinion and satisfaction in that respect being reached. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' being AY 2013-14 and 2014-15. Ex facie, the impugned notice pertains to an assessment period in respect of which material had been specifically identified.
71. Similarly, in W.P. (C) 3019/2023, the challenge is to a notice relating to AY 2014-15. A reading of the Satisfaction Note placed at Annexure-J would indicate that here too there is a clear reference to the material that was obtained and was cor-relatable to the said AY.
72. Consequently, the aforenoted two writ petitions would not be entitled to succeed on grounds which were urged on behalf of the writ petitioners. Accordingly, and while we would dismiss these two writ petitions, we leave all other contentions of parties open to be addressed in the proceedings presently ongoing.
73. Accordingly, and for all the aforesaid reasons, we allow the present writ petitions and quash the impugned notices insofar as they pertain to AYs' 2013-14, 2014-15, 2015-16, 2016-17, 2017-18, 2018- 19, 2019-20 and 2020-21 as per the details set out in the chart extracted hereinabove. W.P.(C) Nos. 3007/2023 and 3019/2023, however, for reasons aforenoted shall stand dismissed subject to the observations made hereinabove. X X X X Extracts X X X X X X X X Extracts X X X X
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