Facts of the Case

The case formed part of a batch of writ petitions before the Delhi High Court challenging notices issued under Section 153C of the Income Tax Act, 1961 to various assessees, including Sunoj Engineers Pvt. Ltd.

The petitioners contended that the notices sought to reopen multiple assessment years despite the absence of any incriminating material pertaining to those specific years having been found during the course of search conducted on another entity. The proceedings were initiated on the basis of satisfaction notes prepared by the Assessing Officers of the searched person and the “other person.”

Issues Involved

  1. Whether jurisdiction under Section 153C can be assumed against a non-searched person without incriminating material relating to the specific assessment year.
  2. Whether discovery of material for one year permits reopening of all preceding years within the statutory block.
  3. Distinction between assessments under Sections 153A (searched person) and 153C (other person).
  4. Validity of proceedings where satisfaction notes fail to establish nexus between seized material and the relevant year.

Petitioner’s Arguments

The petitioners argued that Section 153C can be invoked only where material seized during search belongs to or pertains to the non-searched person and has a bearing on determination of income for the relevant assessment year.

It was contended that mere existence of some incriminating material relating to a particular year cannot justify reopening of all six preceding assessment years or the entire block period. In the case of completed assessments, reassessment is permissible only on the basis of year-specific incriminating material.

The petitioners also asserted that in certain cases satisfaction notes were either not supplied or did not demonstrate any connection between the seized material and the assessment years sought to be reopened.

Respondent’s Arguments

The Revenue contended that once incriminating material relating to the non-searched person is found during search, proceedings under Section 153C can be initiated for all assessment years falling within the statutory framework.

It was argued that the statute authorizes reassessment of total income for multiple years and that the presence of relevant material suffices to assume jurisdiction.

Court Order / Findings

  • Section 153C proceedings against a non-searched person require existence of incriminating material discovered during search that pertains to that person.
  • Such material must have a bearing on determination of income for the specific assessment year sought to be reopened.
  • Discovery of material relating to one year does not justify reopening of all other years.
  • For completed assessments, additions can be made only on the basis of incriminating material relating to that year.
  • The jurisdictional requirement applies equally even where assessments may have abated.
  • Absence of a valid satisfaction note or failure to establish nexus between seized material and the assessment year vitiates the proceedings.

Important Clarification

The judgment reinforces that Section 153C is not a blanket provision permitting reassessment of multiple years of a non-searched person merely because a search occurred elsewhere. Strict compliance with jurisdictional prerequisites—particularly the existence of relevant incriminating material—is mandatory.

The ruling significantly strengthens safeguards against arbitrary search-based assessments of third parties and clarifies the limited scope of reassessment under Section 153C.

Link to download the order – https://www.mytaxexpert.co.in/uploads/1772256129_SUNOJENGINEERSPVT.LTDVsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE27DELHIANR..pdf 

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