Facts of the Case

Naresh Mittal 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 proceedings.

The principal contention was that no incriminating material pertaining to the specific assessment years sought to be reopened had been discovered during the search. Despite this, reassessment proceedings were initiated for several preceding assessment years forming part of the statutory block period. The petitions were heard as part of a large batch of connected matters involving multiple assessees raising similar jurisdictional challenges.

 

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 distinction between Sections 153A (searched person) and 153C (other person).

Petitioner’s Arguments

  • The petitioner contended that assumption of jurisdiction under Section 153C was illegal 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 seized material has a bearing on determination of total income for those years.
  • It was further contended that statutory requirements regarding recording of satisfaction had not been properly complied with.

 Respondent’s Arguments (Revenue)

  • The Revenue submitted that proceedings were validly initiated pursuant to search operations and transfer of relevant material.
  • It was contended that the Assessing Officer had recorded the requisite satisfaction for invoking Section 153C.
  • The Department argued that once jurisdiction is properly assumed, assessment of multiple years within the statutory block period is permissible.
  • It was further submitted that the seized material had relevance to the petitioner’s income.

Court Order / Findings

  • Section 153C can be invoked only when seized material belonging to or pertaining to the “other person” is discovered during the search.
  • In respect of completed assessments, reassessment must be based on incriminating material having a bearing on determination of income for the specific assessment year.
  • Material relating to one assessment year cannot justify reopening of all preceding years without a specific nexus.
  • Proper recording of satisfaction by the Assessing Officer is a foundational requirement for assumption of jurisdiction.

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.
  • Reopening of completed assessments requires incriminating material with a direct nexus to determination of income for those years.
  • The judgment underscores the strict distinction between assessments of searched persons under Section 153A and other persons under Section 153C of the Act.

Link to download the order –  https://www.mytaxexpert.co.in/uploads/1772274796_NARESHMITTALVsINCOMETAXOFFICERWARD437DELHIORS..pdf 

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