Facts of the Case

Ashutosh Agarwal 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 purpose of post-search assessment proceedings.

The challenge was primarily based on the contention that no incriminating material pertaining to the specific assessment years sought to be reopened had been discovered during the course of the search. Despite this, reassessment proceedings were initiated for multiple preceding assessment years. The petitions formed part of a batch of connected matters involving several assessees raising similar issues.

Issues Involved

  1. Whether proceedings under Section 153C can be initiated against a non-searched person without assessment-year-specific incriminating material discovered during search.
  2. Whether completed assessments for earlier years can be reopened in the absence of such material.
  3. What constitutes valid jurisdictional satisfaction for invoking Section 153C.
  4. The legal distinction between Sections 153A (searched person) and 153C (other person). 

Petitioner’s Arguments

  • The petitioner contended that the assumption of jurisdiction under Section 153C was unlawful in the absence of incriminating material relating to the specific assessment years proposed to be reassessed.
  • It was argued that discovery of material pertaining to one assessment year cannot justify reopening of other years without a direct nexus.
  • The petitioner asserted that completed assessments can be disturbed only where material found during the search has a bearing on the determination of total income for those years.
  • It was also contended that proper satisfaction as required under the statute had not been validly recorded or communicated.

 Respondent’s Arguments (Revenue)

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

 Court Order / Findings

  • Section 153C can be invoked only where 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 determination of income for the relevant assessment year.
  • Mere existence of material relating to some period cannot justify reopening of all preceding years without a specific nexus.
  • Proper recording of satisfaction by the Assessing Officer is a foundational jurisdictional requirement.

Important Clarification

  • Proceedings under Section 153C are not automatic upon search of another person.
  • Jurisdiction over a non-searched person arises only where seized material specifically relates to that person and the relevant assessment years.
  • Reopening of completed assessments requires incriminating material with a direct nexus to determination of income for those years.
  • The judgment reinforces the strict distinction between assessments under Sections 153A and 153C.

Link to download the order –  https://www.mytaxexpert.co.in/uploads/1772271302_ASHUTOSHAGARWALVsASSISTANTCOMMISSIONEROFINCOMETAXCENTRALCIRCLE28DELHI.pdf 

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