Facts of the Case

The matter arose as 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 several assessees, including Susheel Jain.

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

Issues Involved

  1. Whether jurisdiction under Section 153C can be invoked without incriminating material relating to the specific assessment year.
  2. Whether reopening of multiple assessment years is permissible merely because some material was found during search.
  3. Whether absence of a valid satisfaction note vitiates proceedings under Section 153C.
  4. Distinction between assessments of searched persons under Section 153A and non-searched persons under Section 153C.

Petitioner’s Arguments

The petitioners argued that Section 153C applies only when 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 submitted that discovery of material relating to a particular year cannot justify reopening of all preceding years. For completed assessments, reassessment is permissible only on the basis of incriminating material specific to that year.

The petitioners further contended that in certain cases, including those of Susheel Jain, satisfaction notes of the Assessing Officer of the non-searched person were either not supplied or did not exist, thereby rendering the proceedings without jurisdiction.

Respondent’s Arguments

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

It was argued that the statutory scheme allows reassessment of total income for multiple years and that the existence of incriminating material is sufficient to trigger 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.
  • In the case of completed assessments, additions can be made only on the basis of year-specific incriminating material.
  • The absence of a valid satisfaction note or failure to demonstrate nexus between seized material and the relevant assessment year vitiates jurisdiction.
  • Proceedings under Section 153C involve an additional jurisdictional threshold compared to Section 153A and must be strictly construed.

Important Clarification

The judgment reinforces that Section 153C is not a blanket power to reassess multiple years of a non-searched person merely because a search occurred elsewhere. Jurisdiction depends on the existence of relevant incriminating material and a valid satisfaction note establishing nexus with undisclosed income for the specific assessment year.

This decision 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/1772256215_SUSHEELJAINVsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE27DELHIANR..pdf  

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