Facts of the Case

Ashish Agrawal filed writ petitions before the Delhi High Court challenging notices issued under Section 153C of the Income Tax Act, 1961, pursuant to search and seizure operations conducted on another person. The petitioner was treated as an “other person” for the purposes of post-search assessment.

The challenge was based on the contention that no incriminating material pertaining to the relevant assessment years was discovered during the search, yet reassessment proceedings were initiated for multiple preceding years. The petitions formed part of a large batch of connected matters involving several assessees against whom similar notices had been issued.

Issues Involved

  1. Whether proceedings under Section 153C could be initiated against a non-searched person without assessment-year-specific incriminating material discovered during search.
  2. Whether reassessment of completed assessments for preceding years was permissible in such circumstances.
  3. What constitutes valid jurisdictional satisfaction for invoking Section 153C.
  4. The distinction between Sections 153A and 153C and their applicability to searched and non-searched persons.

 Petitioner’s Arguments

  • The petitioner contended that the assumption of jurisdiction under Section 153C was illegal in the absence of incriminating material relating to the specific assessment years proposed to be reopened.
  • It was argued that discovery of material pertaining to one year cannot justify reassessment for other years without a direct nexus.
  • The petitioner asserted that completed assessments can be reopened only if material found during the search has a bearing on determination of total income for those years.
  • It was also contended that the statutory requirement of recording proper satisfaction by the Assessing Officer had not been fulfilled.

 Respondent’s Arguments (Revenue)

  • The Revenue contended that the proceedings were validly initiated pursuant to search operations and subsequent transfer of relevant material.
  • It was submitted that the Assessing Officer had recorded the requisite satisfaction for invoking Section 153C.
  • The Department argued that the material seized had a bearing on the income of the petitioner and justified reassessment proceedings.
  • It was further contended that the statutory scheme permits assessment of multiple years once jurisdiction under Section 153C is validly assumed.

 Court Order / Findings

  • Section 153C can be invoked only when seized material belonging to or pertaining to the “other person” is found during the search.
  • For completed assessments, reassessment must be based on incriminating material having a bearing on the determination of income for the specific assessment year.
  • The existence of such material constitutes a foundational jurisdictional requirement.
  • The distinction between Sections 153A (searched person) and 153C (other person) must be strictly maintained.

Important Clarification

  • Proceedings under Section 153C are not automatic merely because a search has been conducted on another person.
  • Jurisdiction over a non-searched person arises only where seized material specifically relates to that person and the relevant assessment years.
  • Reassessment of completed assessments requires incriminating material with a direct nexus to the determination of income for those years.
  • The judgment underscores the critical distinction between assessment of searched persons (Section 153A) and other persons (Section 153C).

Link to download the order –  https://www.mytaxexpert.co.in/uploads/1772271249_ASHISHAGRAWALVsASSISSTANTCOMMISSIONEROFINCOMETAXCENTALCIRCLE28DELHIANR..pdf  

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