TMI Blog2024 (4) TMI 461X X X X Extracts X X X X X X X X Extracts X X X X ..... in the search, it would be impermissible for the respondents to initiate action u/s 153C for the six AYs preceding the year of search or for that matter, the relevant assessment year . Distinction between Section 153A and Section 153C - HELD THAT:- It is only when the transmitted documents and material reaches the desk of the jurisdictional AO that it becomes empowered to initiate action u/s 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 u/s 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 . Issuance of a notice u/s 153C is clearly not intended to be an inevitable consequence to the receipt of material by the jurisdictional AO. That the AO before commencement of action u/s 153C is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determination of the total income of such other person and having formed the opinion that proceedings u/s 153C are liable to be initiated. It would be pertinent to bear in mind that Kabul Chawla [ 2015 (9) TMI 80 - DELHI HIGH COURT] was a decision rendered in the context of Section 153A. It was in the aforesaid backdrop that the Court significantly observed that once a search takes place u/s 132 of the Act, notice under Section 153A(1) would mandatorily issue. The abatement of assessment and reassessment pending on that date would, in the case of a Section 153A assessment, be a preordained consequence. However, and in light of what has been observed hereinabove, it is apparent that Section 153C constructs a subtle and yet significant distinction insofar as the question of commencement of proceedings or assumption of jurisdiction is concerned. Nature of the incriminating material that may be obtained and the years forming part of the block which would merit being thrown open - Section 153C enables and empowers the jurisdictional AO to assess or reassess the six AYs or the relevant assessment year . Ultimately Section 153C is concerned with books, documents or articles seized in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould warrant a mechanical and inevitable assessment or reassessment for the entire block of the relevant assessment year . In our considered view, abatement of the six AYs or the relevant assessment year u/s 153C would follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs that may form part of the block of ten AYs . Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. We would thus recognize the flow of events contemplated u/s 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 poten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cluded assessments. Operative Directions - 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. 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. 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. - HON'BLE MR. JUSTICE YASHWANT VARMA AND HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /2024, W.P.(C) 1770/2024 CM APPL 7395/2024, W.P.(C) 1774/2024 CM APPL 7405/2024, W.P.(C) 1776/2024 CM APPL 7409/2024, W.P.(C) 1778/2024 CM APPL 7417/2024, W.P.(C) 1782/2024 CM APPL 7425/2024, W.P.(C) 1783/2024 CM APPL 7427/2024, W.P.(C) 1802/2024 CM APPL 7524/2024 For the Petitioner Through: Mr. Salil Kapoor, Mr. Sumit Lalchandani, Ms. Ananya Kapoor, Ms. Tarun Chanana, Mr. Shivam Yadav, Mr. Vibhu Jain, Mr. Utkarsa Gupta, Mr. Amandeep Mehta and Mr. Sanat Kapoor, Advs. Mr. Rohit Jain and Mr. Saksham Singhal, Advs. Mr. Gautam Jain, Ms. Reeta Chudhary and Mr. Manish Yadav, Advs. Dr. Rakesh Gupta, Mr. Somil Agarwal, Mr. Dushyant Agrawal and Mr. Prateek Bhati, Advs. Mr. Ved Jain, Mr. Nischay Kantoor, Ms. Soniya Dodeja and Mr. Animesh Tripathi, Advs. Mr. Raghvendra Singh, Mr. Abhishek Gupta, Mr. Gyanendra Rathour and Mr. Vaibhav Kumar, Advs. Mr. Ruchesh Sinha and Ms. Monalisa Maity, Advs. Mr. Satyen Sethi and Mr. Arta Trana Panda, Advs. For the Respondent Through: Mr. Sunil Agarwal, Sr. SC with Mr. Shivansh B. Pandya, Jr. SC and Mr. Utkarsh Tiwari, Adv for I.T. Dept. Mr. Sanjay Kumar, Sr. Standing Counsel along with Ms. Easha Kadian and Ms. Hemlata Rawat, Jr. Standing Counsels. Mr. Gaurav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial may have been discovered in the course of a search and basis which the AO of the other person would be of the opinion that the same is likely have a bearing on the determination of the total income of the non-searched entity. The additional submission was that the requirement of incriminating material existing and thus constituting the basis for invocation of Section 153C would be liable to be viewed on identical terms, even in those cases where assessments may come to abate. The petitioners have placed the following details in respect of each of the individual writ petitioners which form part of this batch in the form of a chart which is extracted hereinbelow: Petitioner name WP(C) No. A.Y. Date of Satisfaction Note by Assessing Officer of the searched person Date of Satisfaction note by Assessing Officer of the non-searched person Date of Section 153C notice Saksham Commodities Limited 1459/2024 2015-16 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1478/2024 2016-17 24.06.2022 (Annexure P-6) 11.07.2022 (Annexure P-13) 11.07.2022 (Annexure P-3) Saksham Commodities Limited 1495/2024 2017-18 24.06.2022 (Annexure P-6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06.2022 (Annexure P-6) 08.08.2022 (Annexure P-9) 24.08.2022 (Annexure P- 3) Sunoj Engineers Pvt. Ltd. 1408/2024 2020-21 24.06.2022 (Annexure P-6) 08.08.2022 (Annexure P-9) 24.08.2022 (Annexure P- 3) Ashish Agrawal 1089/2024 2014-15 26.05.2022 (Annexure P-4) 24.06.2022 29.06.2024 (Annexure P- 3) Ashish Agrawal 1096/2024 2015-16 26.05.2022 (Annexure P-4) 24.06.2022 29.06.2024 (Annexure P- 3) Ashish Agrawal 1094/2024 2016-17 26.05.2022 (Annexure P-5) 24.06.2022 29.06.2024 (Annexure P- 4) Ashish Agrawal 1092/2024 2017-18 26.05.2022 (Annexure P-5) 24.06.2022 29.06.2024 (Annexure P- 4) Ashish Agrawal 1093/2024 2018-19 26.05.2022 (Annexure P-5) 24.06.2022 29.06.2024 (Annexure P- 4) Ashish Agrawal 1095/2024 2020-21 26.05.2022 (Annexure P-5) 24.06.2022 29.06.2024 (Annexure P- 4) Neelkanth Steel and Alloys 1764/2024 2014-15 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel and Alloys 1770/2024 2017-18 -- 22.06.2022 (Annexure P-2) 14.06.2023 (Annexure P- 1) Neelkanth Steel 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Body care Industries 1083/2024 2017-18 24.06.2022 (Annexure-III) 04.11.2022 (Annexure-III) 15.11.2022 (Annexure-II) Forever Bodycare Industries 1084/2024 2018-19 24.06.2022 (Annexure-III) 04.11.2022 (Annexure-III) 15.11.2022 (Annexure-II) Mamta Agarwal 872/2024 2013-14 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 853/2024 2014-15 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 871/2024 2015-16 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 852/2024 2016-17 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 792/2024 2017-18 24.06.2022 (Annexure-A-7) Undated (Annexure-A-10) 18.08.2022 (Annexure-A-2) Mamta Agarwal 874/2024 2018-19 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 (Annex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the said group was centralized to the jurisdiction of the undersigned. Accordingly, during the course of assessment proceedings u/s 153A of Alankit Group, material/documents related to case of Saksham Commodity Private Limited have been found. 2. Ledgers of have been obtained from laptop of Sh. Sunil Kumar Gupta found and seized from the residence of Sh. Sunil Kumar Gupta, at 3584/4, Narang Colony, Gali No. Tri Nagar Delhi (Path: A-321 SUNIL KUMAR GUPTA HP LAPTOP/EXTRA CTED DATA\Tally[root].1\LocalDisk ANARKALI/BAC KUPIDATA 241DATA24). 3. The transactions entered into by various beneficiaries, against unaccounted cash or otherwise to take accommodation entries, are as tabulated below: Name 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY. 8. As was noticed by us while recording the facts pertaining to the lead writ petition, the Satisfaction Note had alluded to incriminating material pertaining to AYs 2010-11, 2011-12 and 2012-13 having been gathered in the course of the search. The Section 153C notice however which came to be issued and stands impugned pertains to AY 2015-16. It was in the aforesaid backdrop that the writ petitioner had asserted that sans any material gathered in the course of the search, and which could be said to pertain to AY 2015-16 and consequently have a bearing on the determination of the total income for that year, the invocation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as argued by the respondent that notice in respect of Assessment Years 2000-01 and 2001-02 was time-barred. However, in view of our aforementioned findings, it is not necessary to enter into this controversy. xxxx xxxx xxxx 20. Likewise, the Delhi High Court also decided the case on altogether different facts which will have no bearing once the matter is examined in the aforesaid hue on the facts of this case. The Bombay High Court has rightly distinguished the said judgment as not applicable giving the following reasons: ( Sinhgad case [CIT v. Sinhgad Technical Education Society, 2015 SCC OnLine Bom 3922 : (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 pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h stands posited. The first decision which was cited in this context was that of CIT (Central)- III v. Kabul Chawla 2015 SCC Online Del 11555 and where the legal position came to be summarized in the following terms:- 37. On a conspectus of section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: (i) Once a search takes place under section 132 of the Act, notice under section 153A(1) will have to be mandatorily issued to the person searched requiring him to file returns for 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating material unearthed during the course of search. 13. The issue came to be examined in greater detail in CIT V. RRJ Securities Ltd 2015 SCC Online Del 13085. Dealing with the imperatives of a correlation between the material discovered in the course of a search and the power to assess or reopen concluded assessments, in RRJ Securities, the Court held:- 33. The record slip belongs to the assessee and, therefore, the action of the Assessing Officer of the searched persons recording that the same belongs to the assessee cannot be faulted. However, the question 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y disclosed and reflected in the returns filed by the assessee, no further interference would be called for. Similarly, if the books of account/documents seized do not reflect any undisclosed income, the assessments already made cannot be interfered with. Merely because valuable articles and/or documents belonging to the assessee have been seized and handed over to the Assessing Officer of the assessee would not necessarily require the Assessing Officer to reopen the concluded assessments and reassess the income of the assessee. 36. The decision in SSP Aviation (supra) cannot be understood to mean that the Assessing Officer has the jurisdiction to make a reassessment in every case, where seized assets or documents are handed over to the Assessing Officer. The question 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ords, it is stated that none of the provisions confine the enquiry of the AO to evaluating incriminating materials. This aspect, in the opinion of the Court, was extensively dealt with in Kabul Chawla v. CIT 380 ITR 173 which has, by now, been followed consistently in several appeals. The non-obstante clause, in the opinion of the Court, was necessary, given that there is a departure from the pre-existing provisions, which applied for the previous years and had a different structure where two sets of assessment orders were made by the AO during 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 ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Securities observed as under:- 27. The recent decision of the Supreme Court in Commissioner of Income Tax-III, Pune v. Sinhgad Technical Education Society (Supra) is a complete answer to both points urged by the Revenue. The said decision, therefore, requires to be discussed in some detail. 28. The Supreme Court noted that the Assessee had raised a challenge to the validity of the assumption of jurisdiction by the AO under Section 153C of the Act for the first time before the ITAT. It was urged on behalf of the Revenue 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... raised before it for the first time. 31. The Supreme Court also agreed with the decision of the Gujarat High Court in Kamleshbhai Dharamshibhai Patel (Supra) to the extent it held that it is an essential condition precedent that any money, bullion or jewellery or other valuable articles or thing or books of accounts or documents seized or requisitioned should belong to a person other than the person referred to in Section 153A of the Act. The Supreme Court observed: This proposition of law laid down by 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 jurisd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting material. 29. While considering the issue involved, one has to consider the object and purpose of insertion of Section 153-A in the 1961 Act and when there shall be a block assessment under Section 153-A of the 1961 Act. 30. That prior to insertion of Section 153-A in the statute, the relevant 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date of receipt 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 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 c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (P) Ltd., 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 132-A, the AO assumes the jurisdiction for block assessment under Section 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminating 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 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 und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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/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 f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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, 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 comple ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecause 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 urged that the Act envisages and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 issuance of a notice under Section 153C, irrespective of the identified incriminating material being confined 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 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fficer having jurisdiction over the searched person is that the valuable article or books of account or documents seized during the search belong to a person other than the searched person. There is no requirement in section 153C(1) that the Assessing Officer should also be satisfied that such valuable articles or books 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ched person, section 153C(1) in contrast refers merely to the satisfaction of the Assessing Officer that the valuable article or books of account or document belongs to a person other than the searched person. The latter provision does not refer to any undisclosed income at all. The machinery provided 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 da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson 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. 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 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erson notice and assess or reassess income of such other person in accordance with the provisions of section 153A. Thus, there are two stages: The first stage comprises of a search and seizure operation under Section 132 or proceeding under Section 132A against a person, who may be 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' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfaction 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 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 Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction, 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 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isdiction 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 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 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 subjec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the total income that a notice under Section 153C would be issued. Abatement would thus be a necessary 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 co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g been recovered for FYs 2012-13 and 2013-14 and consequently the corresponding AYs 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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