Delhi High Court
Neeraj Bharadwaj vs Assistant Commissioner Of Income Tax, … on 14 July, 2025
Author: Vibhu Bakhru
Bench: Vibhu Bakhru
$~51 to 56
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Decision: 14.07.2025
+ W.P.(C) 3979/2025 CM APPL. 18499/2025 CM APPL. 18500/2025
CM APPL. 39396/2025
+ W.P.(C) 3980/2025 CM APPL. 18502/2025 CM APPL. 18503/2025
CM APPL. 39490/2025
+ W.P.(C) 3981/2025 CM APPL. 18505/2025 CM APPL. 18506/2025
CM APPL. 39496/2025
+ W.P.(C) 3982/2025 CM APPL. 18508/2025 CM APPL. 18509/2025
CM APPL. 39394/2025
+ W.P.(C) 3984/2025 CM APPL. 18514/2025 CM APPL. 18515/2025
CM APPL. 39555/2025
+ W.P.(C) 3985/2025 CM APPL. 18517/2025 CM APPL. 18518/2025
CM APPL. 39391/2025
NEERAJ BHARADWAJ .....Petitioner
Through: Mr Sachit Jolly, Sr. Advocate with
Mr Rishi Agrawala, Mr Vaibhav
Mishra, Ms Niyati Kohli, Mr
Abhyudaya Shankar and Mr Pratham
Vir Agarwal, Advocates.
Versus
ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE INT
TAX 1(1)(2) & ANR. .....Respondents
Through: Mr Debesh Panda, SSC.
CORAM:
HON'BLE MR. JUSTICE VIBHU BAKHRU
HON'BLE MR. JUSTICE TEJAS KARIA
VIBHU BAKHRU, J.
1. The Assessee has filed the present set of petitions impugning the
notices (all dated 24.06.2024) issued under Section 153C of the Income Tax
Act, 1961 [Act] in respect of assessment years [AY] 2015-16 to 2020-21.
W.P.(C) 3979/2025 & connected matters Page 1 of 29
Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
The said notices were premised on material found during the search and
seizure operations conducted on 07.04.2019 under Section 132 of the Act in
the case of Moser Baer Group and other related parties. The Assessee is
related to one of the Directors and Promoter of Moser Baer Group of
Companies.
2. During the search proceedings conducted at 43B, Okhla Phase-III,
New Delhi certain documents were found which related to purchase of
lands. These documents were seized and examined. The Assessing Officer
[AO], exercising jurisdiction in respect of the searched persons, recorded a
Satisfaction Note on 06.07.2023 expressing his satisfaction that the
information contained in the seized documents, which were mentioned in the
Satisfaction Note, related to the Assessee (being a person other than the
searched person). The said documents were also forwarded to the AO,
exercising jurisdiction in the case of the Assessee. The AO examined the
said documents as well as the Satisfaction Note dated 06.07.2023 on the
very same date and recorded his satisfaction to the effect that the
information contained in the documents had a bearing on the total income of
the Assessee. And, he was satisfied that it was a fit case for initiation of
proceedings under Section 153C of the Act for AYs 2015-16 to 2020-21.
3. The Assessee challenges the impugned notices principally on the
ground that there was no incriminating material pertaining to the previous
years, relevant to the AYs in question, and therefore re-initiation of
reassessment under Section 153C of the Act in respect of the AYs in
question is without jurisdiction.
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Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
4. The Revenue has filed the counter affidavit enclosing therewith the
Satisfaction Note recorded by the AO. The said note refers to the material
and documents found which, according to the AO, has a bearing on the
income of the Assessee for the relevant AYs. Paragraph No.3 of the
Satisfaction Note encapsulating the allegations on which the impugned
notices are founded is set out below:
“3. The seized document in question contains the details of
purchase of agricultural land by Ms. Sabena Puri and the assessee,
Mr. Neeraj Bhardwaj, situated at Vill – Bandhwadi, Sohna, Distt –
Gurgaon admeasuring (i)- 8 Kanal (1 Acre) and ii)- 17 Kanal 13
Marlas (2.20625 Acres)] in December, 2013. The documents reveal
that the said land was purchased at a higher rate than was shown in
sale deed. Thus, the difference of the amount of actual sale
consideration and that shown in sale deed was paid in cash and was
unaccounted. A brief of the sale consideration as found from the
documents seized from the premise is as given below:
Land Area in Situated at Rate Actual sale Amount paid Amount paid
no. Acres per consideration in cheque in cash
Acre (INR) (shown in
sale deed)
1. 8 Kanal (1 Village – 3.20 3,20,00,000/- 90,00,000/- 2,30,00,000/-
Acre) Bandhwadi Crores
2. 17 Kanal Sohna, 3.40 7,50,12,500/- 1,98,56,250/- 5,51,56,250/-
13 Marlas Distt- Crores
(2.20625 Gurgaon
Acres)
Total 10,70,12,500/- 2,88,56,250/- 7,81,56,250/-"
5. The Satisfaction Note also sets out images of two documents
containing excel sheets, which reflect payment of ₹2,30,00,000/- being paid
in cash in addition to ₹90,00,000/- paid in respect of property measuring one
acre. Similarly, the said sheets also reflect the amounts paid in cash in
addition to cheques to various parties aggregating ₹5,51,56,250/- in respect
of land ad-measuring 2.20625 acres. It is material to note that theW.P.(C) 3979/2025 & connected matters Page 3 of 29
Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
documents also enclose sale deeds in respect of the lands in question, which
were executed in December, 2013. The AO also noted that seized documents
contained the details of the transactions for sale and purchase of land “in
December, 2013”. Additionally, it is also conceded that payments in cash, as
reflected in the documents, were made on various dates between 06.12.2013
to 03.01.2014. We also consider it apposite to reproduce Paragraph 3.2 of
the Satisfaction Note which sets out the details of the payments made in
cash. The same is set out below:
“3.2 It is seen from the above documents that the details of payments
through banking channels available in the sheets i.e., pages No. 87 to
92 of Annexure A-1 seized from 438, Okhla Phase-III, New Delhi are
exactly matching with the details of payments made through banking
channels mentioned in the copy of sale deeds seized from the same
premise. With respect to Land No. 1, Page numbers 92, 84 and 81 of
the seized records are relevant and interconnected. The details of
payment made through banking channels are exactly matching with
the details of payments made through banking channels mentioned in
the sale deed.
Similarly in the case of Land No. 2, Page numbers 87, 67, 62 & 61 of
the seized records are relevant and interconnected. The details of
payment made through banking channels are exactly matching with
the details of payments made through banking channels mentioned in
the sale deed. Following are the details of transfer of the land from
the different farmers to Ms. Sabena Puri and Mr. Neeraj Bhardwaj.
Land Name of Seller Share as Cheque Cash Date of Actual sale
No. per sale Payment payment payment considerati
deed on (INR)
8 Kanal Pemi 34/320 1912500 4887500 6800000
(1 Acre) Maya 35/320 1293750 5031250 632500
Dharampal 34/320 1968750 4887500 6856250
Mahipal 34/320 1912500 4887500 6800000
Bilandar 23/320 1912500 3306250 5218750
All s/o Antram Total 9000000 23000000 32000000
s/o Ishri
17 Jagan s/o Bhule ¼ share 4964062 2500000 06.12.13 9464062
Kanal 2000000 10.12.13
13 Bagmal s/o ¼ share 4964062 3000000 12.12.13 10964062
Marlas Bhule 3000000 13.12.13
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Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
(2.20625 Tajuram / Tejpal ¼ share 4964062 4000000 16.12.13 1294062
Acres) s/o Bhule 4000000 16.12.13
Anil s/o 1/16 1241015 3000000 1812.13 7241015
Shahmal Bhule share 3000000 18.12.13
Ajay s/o 1/16 1241015 4000000 19.12.13 7241015
Shahmal Bhule share 3000000 20.12.13
Smt. Rajo w/o 3/32 1861527 4000000 2312.13 8861527
Shahmal s/o share 3000000 24.12.13
Bhule
Smt. Suresh s/o 1/32 620507 3000000 26.12.13 18120507
Tejuraml s/o share 14500000 03.01.14
Bhule
Total 19856250 55000000 74856250
Grand 28856250 78000000 106856250
Total
On receiving the satisfaction note and the seized data, the
undersigned has gone through the seized data i.e. Annexure A-1, and
has recorded the finding in this satisfaction note. The said satisfaction
note prepared by the AO of the person searched has been kept on
record. I have also examined the above documents and the contents
noted/written therein. After examination of these documents, I am
also satisfied that the information contained in these documents
relates to Mr. Neeraj Bhardwaj. Further, the information contained
therein has a bearing on the determination of the total income of
Assessee. In view of the same, I am further, satisfied that it is fit case
for initiating proceedings u/s 153C of the Income Tax Act, 1961 for
the AY 2014-15 to 2020-21.”
6. It is important to note that the impugned notices are premised on the
singular satisfaction note as referred to above. It is also clear from the
contents of the satisfaction note that there is no material, which has any
bearing on the income of the Assessee for the AYs 2015-16 to 2020-21.
Assuming that the allegations as noted in the satisfaction note to the effect
that the consideration of certain immovable properties purchased in the
name of the Assessee’s wife, were paid partly in cash, is correct; the same
does not provide any ground to assume that the income chargeable to tax
during the AYs 2015-16 to 2020-21 had escaped assessment.
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Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
7. The immoveable properties were purchased in the name of the
Assessee’s wife. However, it is not necessary to examine whether the
purchase of the properties in the name of the Assessee’s wife could have a
bearing on the income of the Assessee. This is because, in any view of the
matter, the said transaction has no bearing on the income chargeable to tax
during the AYs 2015-16 to 2020-21. As noted above, the alleged payments
in cash were during the financial year [FY] 2013-14 relevant to AY 2014-
15. Thus, such payments may have bearing on the income chargeable to tax
during the AY 2014-15. However, the information as noted in the
satisfaction note does not provide any ground for issuance of the impugned
notices for the AYs 2015-16 to 2020-21.
8. It is well settled that the assessments under Section 153C read with
Section 153A of the Act cannot be made unless the AO has in his possession
incriminating material in the form of (i) money, bullion, jewellery or other
valuable article or thing, seized or requisitioned which belong to the
Assessee; or (ii) books of account or documents seized or requisitioned that
pertains to the Assessee or contain information relating to the Assessee,
which has a bearing on the income of the Assessee.
9. In CIT v. Sinhgad Technical Education Society: (2018) 11 SCC 490,
the Income Tax Appellate Tribunal [ITAT] found that the jurisdictional fact
for making assessments under Section 153C of the Act in respect of four
assessment years out of the block of assessment years for which notices
under Section 153C of the Act had been issued, were not sustainable as the
co-relation between the documents and the four assessment years was not
established. The relevant extract of the said decision is set out below:
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Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
“15. In these appeals, qua the aforesaid four assessment
years, the assessment is quashed by the ITAT (which order
is upheld by the High Court) on the sole ground that notice
under Section 153-C of the Act was legally unsustainable.
The events recorded above further disclose that the issue
pertaining to validity of notice under Section 153-C of the
Act was raised for the first time before the Tribunal and the
Tribunal permitted the assessee to raise this additional
ground and while dealing with the same on merits, accepted
the contention of the assessee.
16. First objection of the learned Solicitor General was that
it was improper on the part of the ITAT to allow this ground
to be raised, when the assessee had not objected to the
jurisdiction under Section 153-C of the Act before the AO.
Therefore, in the first instance, it needs to be determined as
to whether ITAT was right in permitting the assessee to
raise this ground for the first time before it, as an additional
ground.
17. The ITAT permitted this additional ground by giving a
reason that it was a jurisdictional issue taken up on the basis
of facts already on the record and, therefore, could be raised.
In this behalf, it was noted by the ITAT that as per the
provisions of Section 153-C of the Act, incriminating
material which was seized had to pertain to the assessment
years in question and it is an undisputed fact that the
documents which were seized did not establish any co-
relation, document-wise, with these four assessment years.
Since this requirement under Section 153-C of the Act is
essential for assessment under that provision, it becomes a
jurisdictional fact. We find this reasoning to be logical and
valid, having regard to the provisions of Section 153-C of
the Act. Para 9 of the order of the ITAT reveals that ITAT
had scanned through the Satisfaction Note and the material
which was disclosed therein was culled out and it showed
that the same belongs to Assessment Year 2004-05 or
thereafter. After taking note of the material in para 9 of the
order, the position that emerges therefrom is discussed inW.P.(C) 3979/2025 & connected matters Page 7 of 29
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Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
para 10. It was specifically recorded that the counsel for the
Department could not point out to the contrary. It is for this
reason the High Court has also given its imprimatur to the
aforesaid approach of the Tribunal. That apart, the learned
Senior Counsel appearing for the respondent, argued that
notice in respect of Assessment Years 2000-01 and 2001-02
was even time-barred.
18. We, thus, find that the ITAT rightly permitted this
additional ground to be raised and correctly dealt with the
same ground on merits as well. Order of the High Court
affirming this view of the Tribunal is, therefore, without any
blemish. Before us, it was argued by the respondent that
notice in respect of Assessment Years 2000-01 and 2001-02
was time-barred. However, in view of our aforementioned
findings, it is not necessary to enter into this controversy.
19. Insofar as the judgment of the Gujarat High Court relied
upon by the learned Solicitor General is concerned, we find
that the High Court in that case has categorically held that it
is an essential condition precedent that any money, bullion
or jewellery or other valuable articles or thing or books of
accounts or documents seized or requisitioned should belong
to a person other than the person referred to in Section 153-
A of the Act. This proposition of law laid down by the High
Court is correct, which is stated by the Bombay High Court
in the impugned judgment as well. The judgment of the
Gujarat High Court in the said case went in favour of the
Revenue when it was found on facts that the documents
seized, in fact, pertain to third party i.e. the assessee, and,
therefore, the said condition precedent for taking action
under Section 153-C of the Act had been satisfied.”
10. In CIT v. Kabul Chawla: (2016) 380 ITR 573, this Court had, in the
context of Section 153A of the Act, held that an assessment under Section
153A of the Act could be made only on the basis of some incriminating
material unearthed during the course of the search or on requisition of
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Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
documents or undisclosed income discovered during the course of the
search.
11. In CIT v. Abhisar Buildwell (P.) Ltd.: (2024) 2 SCC 433, the
Supreme Court considered the question whether the jurisdiction of the AO to
make an assessment was confined to the incriminating material found during
the course of the search under Section 132 or requisition under Section
132A of the Act. The Supreme Court expressly affirmed the view of this
Court in CIT v. Kabul Chawla (supra) and rejected the contention that the
AO could assess or reassess the income of the assessee even where no
incriminating material have been found during the course of the search. We
consider it apposite to set out the following extract from the said decision:
“26. In Kabul Chawla [CIT v. Kabul Chawla, 2015 SCC
OnLine Del 11555 : (2016) 380 ITR 573] , the Delhi High
Court, while considering the very issue and on interpretation
of Section 153-A of the 1961 Act, has summarised the legal
position as under : (SCC OnLine Del para 38)
“Summary of the legal position
38. On a conspectus of Section 153-A(1) of the Act,
read with the provisos thereto, and in the light of the law
explained in the aforementioned decisions, the legal
position that emerges is as under:
(i) Once a search takes place under Section 132 of the
Act, notice under Section 153-A(1) will have to be
mandatorily issued to the person searched requiring him
to file returns for six AYs immediately preceding the
previous year relevant to the AY in which the search takes
place.
(ii) Assessments and reassessments pending on the
date of the search shall abate. The total income for such
AYs will have to be computed by the AOs as a fresh
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Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
exercise.
(iii) The AO will exercise normal assessment powers
in respect of the six years previous to the relevant AY in
which the search takes place. The AO has the power to
assess and reassess the “total income” of the
aforementioned six years in separate assessment orders
for each of the six years. In other words there will be only
one assessment order in respect of each of the six AYs ‘in
which both the disclosed and the undisclosed income
would be brought to tax’.
(iv) Although Section 153-A does not say that
additions should be strictly made on the basis of evidence
found in the course of the search, or other post-search
material or information available with the AO which can
be related to the evidence found, it does not mean that the
assessment ‘can be arbitrary or made without any
relevance or nexus with the seized material. Obviously an
assessment has to be made under this Section only on the
basis of seized material.’
(v) In absence of any incriminating material, the
completed assessment can be reiterated and the abated
assessment or reassessment can be made. The word
“assess” in Section 153-A is relatable to abated
proceedings (i.e. those pending on the date of search) and
the word “reassess” to completed assessment proceedings.
(vi) Insofar as pending assessments are concerned, the
jurisdiction to make the original assessment and the
assessment under Section 153-A merges into one. Only
one assessment shall be made separately for each AY on
the basis of the findings of the search and any other
material existing or brought on the record of the AO.
(vii) Completed assessments can be interfered with by
the AO while making the assessment under Section 153-A
only on the basis of some incriminating material
unearthed during the course of search or requisition of
documents or undisclosed income or property discoveredW.P.(C) 3979/2025 & connected matters Page 10 of 29
Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
in the course of search which were not produced or not
already disclosed or made known in the course of original
assessment.”
27. Thereafter in Saumya Construction [CIT v. Saumya
Construction (P) Ltd., 2016 SCC OnLine Guj 9976 : (2016)
387 ITR 529] , the Gujarat High Court, while referring the
decision of the Delhi High Court in Kabul
Chawla [CIT v. Kabul Chawla, 2015 SCC OnLine Del 11555
: (2016) 380 ITR 573] and after considering the entire
scheme of block assessment under Section 153-A of the 1961
Act, had held that in case of completed assessment/unabated
assessment, in absence of any incriminating material, no
addition can be made by the AO and the AO has no
jurisdiction to reopen the completed assessment. In paras 15
and 16, it is held as under : (Saumya Construction
case [CIT v. Saumya Construction (P) Ltd., 2016 SCC
OnLine Guj 9976 : (2016) 387 ITR 529] , SCC OnLine Guj)
“15. On a plain reading of Section 153-A of the Act, it
is evident that the trigger point for exercise of powers
thereunder is a search under Section 132 or a requisition
under Section 132-A of the Act. Once a search or
requisition is made, a mandate is cast upon the assessing
officer to issue notice under Section 153-A of the Act to
the person requiring him to furnish the return of income in
respect of each assessment year falling within six
assessment years immediately preceding the assessment
year relevant to the previous year in which such search is
conducted or requisition is made and assess or reassess the
same. Since the assessment under Section 153-A of the
Act is linked with search and requisition under Sections
132 and 132-A of the Act, it is evident that the object of
the section is to bring to tax the undisclosed income which
is found during the course of or pursuant to the search or
requisition. However, instead of the earlier regime of block
assessment whereby; it was only the undisclosed income
of the block period that was assessed, Section 153-A of the
Act seeks to assess the total income for the assessment
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Signature Not Verified
Digitally Signed
By:TARUN RANA
Signing Date:17.07.2025
15:07:08
year, which is clear from the first proviso thereto which
provides that the assessing officer shall assess or reassess
the total income in respect of each assessment year, falling
within such six assessment years. The second proviso
makes the intention of the legislature clear as the same
provides that assessment or reassessment, if any, relating
to the six assessment years referred to in the sub-section
pending on the date of initiation of search under Section
132 or requisition under Section 132-A, as the case may
be, shall abate. Sub-section (2) of Section 153-A of the Act
provides that if any proceeding or any order of assessment
or reassessment made under sub-section (1) is annulled in
appeal or any other legal provision, then the assessment or
reassessment relating to any assessment year which had
abated under the second proviso would stand revived. The
proviso thereto says, that such revival shall cease to have
effect if such order of annulment is set aside. Thus, any
proceeding of assessment or reassessment falling within
the, six assessment years prior to the search or requisition
stands abated and the total income of the assessee is
required to be determined under Section 153-A, of the Act.
Similarly, sub-section (2) provides for revival of any
assessment or reassessment which stood abated, if any
proceeding or any order of assessment or reassessment
made under Section 153-A of, the Act is annulled in appeal
or any other proceeding.
16. Section 153-A bears the heading “Assessment in
case of search or requisition”. It is well settled as held by
the Supreme Court in a catena of decisions that the
heading of the, section can be regarded as a key to the
interpretation, of the operative portion of, the section and if
there is no ambiguity in the language or if it is plain and
clear, then the heading used in the section strengthens that
meaning. From the heading of Section 153, the intention of
the legislature is clear viz. to provide for assessment in
case of search and requisition. When, the very purpose of
the provision is to make assessment in case of search or
requisition, it goes without saying that the assessment has
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Signing Date:17.07.2025
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to have relation to the search or requisition. In other words,
the assessment, should be connected with something found
during the search or requisition viz. incriminating material
which reveals undisclosed income. Thus, while in view of
the mandate of sub-section (1) of Section 153-A of the
Act, in every case where there is a search or requisition,
the assessing officer is obliged to issue notice to such
person to furnish returns of income for the six years
preceding the assessment year relevant to the previous year
in which the search is conducted or requisition is made,
any addition or disallowance can be made only on the
basis of material collected during the search or requisition.
In case no incriminating material is found, as held by the
Rajasthan High Court in Jai Steel (India) v. CIT [Jai Steel
(India) v. CIT, 2013 SCC OnLine Raj 1939] , the earlier
assessment would have to be reiterated. In case where
pending assessments have abated, the assessing officer can
pass assessment orders for each of the six years
determining the total income of the assessee which would
include income declared in the returns, if any, furnished by
the assessee as well as undisclosed income, if any,
unearthed during the search or requisition. In case where a
pending reassessment under Section 147 of the Act has
abated, needless to state that the scope and ambit of the
assessment would include any order which the assessing
officer could have passed under Section 147 of the Act as
well as under Section 153-A of the Act.”
28. For the reasons stated hereinbelow, we are in
complete agreement with the view taken by the Delhi High
Court in Kabul Chawla [CIT v. Kabul Chawla, 2015 SCC
OnLine Del 11555 : (2016) 380 ITR 573] and the Gujarat
High Court in Saumya Construction (P) [CIT v. Saumya
Construction (P) Ltd., 2016 SCC OnLine Guj 9976 : (2016)
387 ITR 529] , taking the view that no addition can be made
in respect of completed assessment in absence of any
incriminating material.
*** *** ***
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Signing Date:17.07.2025
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30. That prior to insertion of Section 153-A in the statute,
the relevant provision for block assessment was under
Section 158-BA of the 1961 Act. The erstwhile scheme of
block assessment under Section 158-BA envisaged
assessment of “undisclosed income” for two reasons, firstly
that there were two parallel assessments envisaged under the
erstwhile regime i.e. : (i) block assessment under Section
158-BA to assess the “undisclosed income”, and (ii) regular
assessment in accordance with the provisions of the Act to
make assessment qua income other than undisclosed income.
Secondly, that the “undisclosed income” was chargeable to
tax at a special rate of 60% under Section 113 whereas
income other than “undisclosed income” was required to be
assessed under regular assessment procedure and was taxable
at normal rate. Therefore, Section 153-A came to be inserted
and brought on the statute. Under Section 153-A regime, the
intention of the legislation was to do away with the scheme
of two parallel assessments and tax the “undisclosed” income
too at the normal rate of tax as against any special rate. Thus,
after introduction of Section 153-A and in case of search,
there shall be block assessment for six years. Search
assessments/Block assessments under Section 153-A are
triggered by conducting of a valid search under Section 132
of the 1961 Act. The very purpose of search, which is a
prerequisite/trigger for invoking the provisions of Sections
153-A/153-C is detection of undisclosed income by
undertaking extraordinary power of search and seizure i.e.
the income which cannot be detected in ordinary course of
regular assessment. Thus, the foundation for making search
assessments under Sections 153-A/153-C can be said to be
the existence of incriminating material showing undisclosed
income detected as a result of search.
*** *** ***
34. If the submission on behalf of the Revenue that in
case of search even where no incriminating material is found
during the course of search, even in case of
unabated/completed assessment, the AO can assess orW.P.(C) 3979/2025 & connected matters Page 14 of 29
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By:TARUN RANA
Signing Date:17.07.2025
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reassess the income/total income taking into consideration
the other material is accepted, in that case, there will be two
assessment orders, which shall not be permissible under the
law. At the cost of repetition, it is observed that the
assessment under Section 153-A of the Act is linked with the
search and requisition under Sections 132 and 132-A of the
Act. The object of Section 153-A is to bring under tax the
undisclosed income which is found during the course of
search or pursuant to search or requisition. Therefore, only in
a case where the undisclosed income is found on the basis of
incriminating material, the AO would assume the jurisdiction
to assess or reassess the total income for the entire six years
block assessment period even in case of completed/unabated
assessment. As per the second proviso to Section 153-A, only
pending assessment/reassessment shall stand abated and the
AO would assume the jurisdiction with respect to such
abated assessments. It does not provide that all
completed/unabated assessments shall abate. If the
submission on behalf of the Revenue is accepted, in that
case, the second proviso to Section 153-A and sub-section
(2) of Section 153-A would be redundant and/or re-writing
the said provisions, which is not permissible under the law.
35. For the reasons stated hereinabove, we are in complete
agreement with the view taken by the Delhi High Court
in Kabul Chawla [CIT v. Kabul Chawla, 2015 SCC OnLine
Del 11555 : (2016) 380 ITR 573] and the Gujarat High Court
in Saumya Construction [CIT v. Saumya Construction (P)
Ltd., 2016 SCC OnLine Guj 9976 : (2016) 387 ITR 529] and
the decisions of the other High Courts taking the view that no
addition can be made in respect of the completed assessments
in absence of any incriminating material.”
12. It is material to note that although the decision in CIT v. Abhisar
Buildwell (P.) Ltd. (supra) was rendered in the context of Section 153A of
the Act. The decision would be equally applicable for an assessment under
Section 153C of the Act as the Supreme Court had expressly clarified that
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foundation for making “search assessments under Section 153A/153C” was
the existence of incriminating material showing undisclosed income.
13. We also consider it apposite to refer to the decision in the case of CIT
v. U.K. Paints (Overseas) Ltd.: (2023) 14 SCC 433, where the Supreme
Court had upheld the decision of the High Court to set aside the assessment
orders passed under Section 153C of the Act for want of incriminating
material. The relevant extract of the said decision is set out below:
“1. In this batch of appeals, the assessments in case of each
assessee were under Section 153-C of the Income Tax Act,
1961 (for short “the Act”). As found by the High Court in
none of the cases any incriminating material was found during
the search either from the assessee or from a third party. In
that view of the matter, as such, the assessments under
Section 153-C of the Act are rightly set aside [BJN Holdings
Ltd. v. CIT, (2020) 15 ITR-OL 408 : 2018 SCC OnLine Del
13539] , [CIT v. Ankush Saluja, (2019) 419 ITR 431 : 2019
SCC OnLine Del 11148] , [CIT v. Dhananjay International
Ltd., 2019 SCC OnLine Bom 13405] , [CIT v. Best
Infrastructure (India) (P) Ltd., 2017 SCC OnLine Del
13053] , [CIT v. Caprihans (India) Ltd., 2019 SCC OnLine
Bom 13406] , [ARN Infrastructure (India) Ltd. v. CIT, (2017)
394 ITR 569 : 2017 SCC OnLine Del 8081] by the High
Court. However, Shri N. Venkataraman, learned ASG
appearing on behalf of the Revenue, taking the clue from
some of the observations made by this Court in the recent
decision in CIT v. Abhisar Buildwell (P) Ltd. [CIT v. Abhisar
Buildwell (P) Ltd., (2024) 2 SCC 433] , more particularly,
paras 33 and 35, has prayed to observe that the Revenue may
be permitted to initiate reassessment proceedings under
Sections 147/148 of the Act as in the aforesaid decision, the
powers of the reassessment of the Revenue even in case of the
block assessment under Section 153-A of the Act have been
saved.
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2. As observed hereinabove, as no incriminating material
was found in case of any of the assessees either from the
assessee or from the third party and the assessments were
under Section 153-C of the Act, the High Court has rightly set
aside the assessment order(s). Therefore, the impugned
judgment and order(s) [BJN Holdings Ltd. v. CIT, (2020) 15
ITR-OL 408 : 2018 SCC OnLine Del 13539] , [CIT v. Ankush
Saluja, (2019) 419 ITR 431 : 2019 SCC OnLine Del
11148] , [CIT v. Dhananjay International Ltd., 2019 SCC
OnLine Bom 13405] , [CIT v. Best Infrastructure (India) (P)
Ltd., 2017 SCC OnLine Del 13053] , [CIT v. Caprihans
(India) Ltd., 2019 SCC OnLine Bom 13406] , [ARN
Infrastructure (India) Ltd. v. CIT, (2017) 394 ITR 569 : 2017
SCC OnLine Del 8081] passed by the High Court do not
require any interference by this Court. Hence, all these
appeals deserve to the dismissed and are accordingly
dismissed.
3. However, so far as the prayer made on behalf of the
Revenue to permit them to initiate the reassessment
proceedings is concerned, it is observed that it will be open
for the Revenue to initiate the reassessment proceedings in
accordance with law and if it is permissible under the law.
14. In CIT v. RRJ Securities Ltd.: (2016) 380 ITR 612, the Coordinate
Bench of this Court of which one of us (Vibhu Bakhru, J.), was a member
had emphasized that it would be impermissible for re-assessing the income
of the assessee in respect of assessment years for which assessments were
concluded in respect of which the seized documents would have no bearing.
The relevant extract of the said decision reads as under:
“33. The record slip belongs to the assessee and, therefore,
the action of the Assessing Officer of the searched persons
recording that the same belongs to the assessee cannot be
faulted. However, the question then arises is whether the
Assessing Officer of the assessee was justified in takingW.P.(C) 3979/2025 & connected matters Page 17 of 29
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further steps for reassessing the income of the assessee in
respect of the assessment years for which the assessments
were concluded and in respect of which the seized document
had no bearing. In our view, the same would be clearly
impermissible as the seized material now available with the
Assessing Officer, admittedly, had no nexus with those
assessments and was wholly irrelevant for the purpose of
assessing the income of the assessee for the years in question.
Merely because a valuable article or document belonging to
an assessee is seized from the possession of a person searched
under section 132 of the Act does not mean that the concluded
assessments of the assessee are necessarily to be reopened
under section 153C of the Act. In our view, the concluded
assessments cannot be interfered with mechanically and
solely for the reason that a document belonging to the
assessee, which has no bearing on the assessments of the
assessee for the years preceding the search, was seized from
the possession of the searched persons.
*** *** ***
36. The decision in SSP Aviation (supra) cannot be
understood to mean that the Assessing Officer has the
jurisdiction to make a reassessment in every case, where
seized assets or documents are handed over to the Assessing
Officer. The question whether the documents/assets seized
could possibly reflect any undisclosed income has to be
considered by the Assessing Officer after examining the
seized assets/documents handed over to him. It is only in
cases where the seized documents/assets could possibly
reflect any undisclosed income of the assessee for the relevant
assessment years, that further enquiry would be warranted in
respect of those years. Whilst, it is not necessary for the
Assessing Officer to be satisfied that the assets/documents
seized during search of another person reflect undisclosed
income of an assessee before commencing an enquiry under
section 153C of the Act, it would be impermissible for him to
commence such enquiry if it is apparent that the
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of the assessee for the relevant assessment years.”
(emphasis added)
15. The controversy involved in the present case is squarely covered by
the decision of this Court in Saksham Commodities Limited v. Income Tax
Officer Ward 22(1), Delhi & Another: Neutral Citation: 2024: DHC:2836-
DB. In that case, the Coordinate Bench of this Court had examined various
earlier decisions rendered by this Court and had held that if there was no
incriminating material having a bearing on the income of the relevant
assessment year, the initiation of the proceedings under Section 153C of the
Act in respect of the said assessment year would not be sustainable. We
consider it apposite to set out the following extract of the said judgment:
“48. In terms of the Second Proviso to Section 153A, all
assessment or reassessment proceedings relating to the six
AYs’ or the “relevant assessment year” pending on the date of
search are statutorily envisaged to abate. Abatement is
envisioned to be an inevitable consequence of the initiation of
action under Section 153A. Neither issuance of notice nor
abatement are predicated upon a formation of opinion by the
AO of the searched person that the material is likely to impact
the total income of that assessee. However, the spectre of
abatement insofar as the “other person” is concerned would
arise only after the jurisdictional AO has formed the requisite
satisfaction of the material having “a bearing on the
determination of the total income of such other person” and
having formed the opinion that proceedings under Section
153C are liable to be initiated. It would be pertinent to bear in
mind that Kabul Chawla was a decision rendered in the
context of Section 153A. It was in the aforesaid backdrop that
the Court significantly observed that once a search takes place
under Section 132 of the Act, notice under Section 153A(1)
would mandatorily issue. The abatement of assessment andW.P.(C) 3979/2025 & connected matters Page 19 of 29
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reassessment pending on that date would, in the case of a
Section 153A assessment, be a preordained consequence.
However, and in light of what has been observed hereinabove,
it is apparent that Section 153C constructs a subtle and yet
significant distinction insofar as the question of
commencement of proceedings or assumption of jurisdiction is
concerned.
49. That takes us to the principal question and which pertains
to the nature of the incriminating material that may be obtained
and the years forming part of the block which would merit
being thrown open. Regard must be had to the fact that while
Section 153C enables and empowers the jurisdictional AO to
commence assessment or reassessment for a block of six AYs’
or the “relevant assessment year”, that action is founded on
satisfaction being reached that the books of accounts,
documents or assets seized “have a bearing on the
determination of the total income of such other person”. We in
this regard bear in mind the well settled distinction which the
law recognizes between the existence of power and the
exercise thereof. Section 153C enables and empowers the
jurisdictional AO to assess or reassess the six AYs’ or the
“relevant assessment year”. The Act thus sanctions and
confers an authority upon the AO to exercise the power placed
in its hands for up to a maximum of ten AYs’. Despite the
conferral of that power, the question which would remain is
whether the facts and circumstances of a particular case
warrant or justify the invocation of that power. It is the
aforesaid aspect which bids us to reiterate the distinction
between the existence and exercise of power.
50. What we seek to emphasise is that merely because Section
153C confers jurisdiction upon the AO to commence an
exercise of assessment or reassessment for the block of years
which are mentioned in that provision, the same alone would
not be sufficient to justify steps in that direction being taken,
unless the incriminating material so found is likely to have an
impact on the total income of a particular AY forming part of
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search year or for the “relevant assessment year”.
51. Ultimately Section 153C is concerned with books,
documents or articles seized in the course of a search and
which are found to have the potential to impact or have a
bearing on an assessment which may be undergoing or which
may have been completed. The words “have a bearing on the
determination of the total income of such other person” as
appearing in Section 153C would necessarily have to be
conferred pre-eminence. Therefore, and unless the AO is
satisfied that the material gathered could potentially impact the
determination of total income, it would be unjustified in
mechanically reopening or assessing all over again all the ten
AYs’ that could possibly form part of the block of ten years.
52. The decisions which hold that an assessment is liable to be
revised only if incriminating material be found, even if
rendered in the context of Section 153A, would clearly govern
the question that stands posited even in the context of Section
153C. It would be relevant to recall that the Division Bench in
Kabul Chawla had observed that in the absence of any
incriminating material, a completed assessment may be
reiterated and the abated assessment or reassessment be
concluded. The importance of incriminating material was
further underlined in Kabul Chawla with the Court observing
that completed assessments could be interfered with, only if
some incriminating material were unearthed. This aspect came
to be reiterated in RRJ Securities when the Court held that it
would be impermissible to either reopen or reassess a
completed assessment which may not be impacted by the
material gathered in the course of the search and which may
have no plausible nexus. The aforesaid position also comes to
the fore when one reads para 17 of ARN Infrastructure and
which annulled an action aimed at reopening assessments for
years to which the incriminating document which was found
did not relate.
53. Sinhgad Technical Education Society also constitutes a
binding precedent in respect of the aforesaid proposition as
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would be evident from the Supreme Court noticing that the
material disclosed pertained only to AY 2004-05 or thereafter
and that consequently the Section 153C action initiated for
AYs’ 2000-01 to 2003-04 would not sustain. It was this
position in law as enunciated in that decision which came to be
reiterated by our Court in Index Securities.
54. In any case, Abhisar Buildwell, in our considered opinion,
is a decision which conclusively lays to rest any doubt that
could have been possibly harboured. The Supreme Court in
unequivocal terms held that absent incriminating material, the
AO would not be justified in seeking to assess or reassess
completed assessments. Though the aforesaid observations
were rendered in the context of completed assessments, the
same position would prevail when it comes to assessments
which abate pursuant to the issuance of a notice under Section
153C. Here too, the AO would have to firstly identify the
AYs’ to which the material gathered in the course of the search
may relate and consequently it would only be those
assessments which would face the spectre of abatement. The
additions here too would have to be based on material that may
have been unearthed in the course of the search or on the basis
of material requisitioned. The statute thus creates a persistent
and enduring connect between the material discovered and the
assessment that may be ultimately made. The provision while
speaking of AYs’ falling within the block of six AYs’ or for
that matter all years forming part of the block of ten AYs’,
appears to have been put in place to cover all possible
contingencies. The aforesaid provisions clearly appear to have
been incorporated and made applicable both with respect to
Section 153A as well as Section 153C ex abundanti cautela.
Which however takes us back to what had been observed
earlier, namely, the existence of the power being merely
enabling as opposed to a statutory compulsion or an inevitable
consequence which was advocated by the respondents.
55. Take for instance a case where the material gathered in the
search is contemplated to have an adverse impact on the
declarations and disclosures made by an assessee pertaining
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only to AYs’ 2016-17 and 2017-18. What we seek to
emphasise is that pending assessments for those two years
could validly form subject matter of action under Section 153C
and pending assessments in that respect would surely abate.
However, that by itself would not be sufficient to either reopen
or issue notices in respect of AYs’ prior to or those falling
after those two AYs’ and which may otherwise fall within the
maximum block period of ten years merely because the statute
empowers the AO to do so. Unless the material gathered and
recovered is found to have relevancy to the AY which is
sought to be subjected to action under Section 153C, it would
be legally impermissible for the respondents to invoke those
provisions. Consequently, the AO would be bound to ascertain
and identify the year to which the material recovered relates.
The years which could be then subjected to action under
Section 153C would have to necessarily be those in respect of
which the assessment is likely to be influenced or impacted by
the material discovered. Section 153C neither mandates nor
envisages a mechanical or an en blanc exercise of power, or to
put it differently, one which is uninformed by a consideration
of the factors indicated above.
56. We also bear in mind the pertinent observations made in
RRJ Securities when the Court held that merely because an
article or thing may have been recovered in the course of a
search would not mean that concluded assessments have to
“necessarily” be reopened under Section 153C and that those
assessments are not liable to be revised unless the material
obtained have a bearing on the determination of the total
income. This aspect was again emphasised in para 38 of RRJ
Securities with the Court laying stress on the existence of
material that may be reflective of undisclosed income being of
vital importance. All the aforenoted judgments thus reinforce
the requirement of incriminating material having an
ineradicable link to the estimation of income for a particular
AY.
57. It becomes pertinent to note that both Sections 153A and
153C require the assessee upon being placed on notice to
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furnish ROIs’ for the six AYs’ or the “relevant assessment
year”. All that the two provisions mandate is that
notwithstanding the submission of those ROIs’, the AO would
frame one assessment order in respect of each of the years
which were made subject matter of the notice and which would
deal with both disclosed and undisclosed income. This too
reinforces our view that Section 153C would apply only to
such AYs’ where the jurisdictional AO is satisfied and has
incriminating material for those AYs’ and which may be
concerned with disclosed and undisclosed income.
58. The aforesaid position stands further fortified from a
reading of the First Proviso to Section 153A and which speaks
of the power of the AO to assess or reassess the total income in
respect of “each assessment year”. The aforesaid phraseology
stands replicated in Section 153B(1)(a) which again alludes to
“each assessment year” falling within the six AYs or the
“relevant assessment year”. The aforesaid language is then
reiterated in Section 153D and which prescribes that no order
of assessment or reassessment shall be passed by an AO in
respect of “each assessment year” referred to in Section 153A
or 153B of the Act, except with the prior approval of the Joint
Commissioner. We note that once the aforesaid principles are
borne in mind, there would exist no discernible distinction
between abated and completed assessments. This, since in both
situations, the AO would be bound to base its decision to abate
or reopen on material that is likely to impact the assessment of
the total income for a particular AY. In case of assessment
proceedings which are ongoing on the date when the AO
proceeds to draw its satisfaction and in respect of which no
incriminating material has been discovered, there would exist
no justification to initiate proceedings under Section 153C.
59. It would be pertinent to recall that Section 153C essentially
seeks to merge ongoing assessments with a search assessment
which may be triggered by the discovery of material obtained
in a search and which was the statutory procedure which
prevailed in terms of the provisions contained in Chapter XIV
B. However, and in cases where on facts it is found that the
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material gathered is unlikely to have any impact on the
computation of total income for a particular year, there would
exist no justification to invoke the powers conferred by
Section 153C.
60. Before concluding, we also deem it imperative to briefly
notice certain aspects which emerge from a reading of the
Satisfaction Notes themselves. As is manifest from a reading
of the Satisfaction Note drawn by the jurisdictional AO of the
assessee in W.P. (C) 1459/2024, after noticing the material
which was recovered during the search and related to FYs’
2009-10, 2010-11 and 2011-12 [corresponding AYs’ thus
being AYs’ 2010-11, 2011-12 and 2012-13], it has proceeded
to observe that the assessments which were liable to abate or
be reopened would be AYs’ 2010-11 to 2020-21. A similar
note appears in W.P. (C)1117/2024. Here again, after referring
to the material pertaining to FY 2009-10 [and thus relating to
AY 2010-11], the AO proceeded to seek approval for initiating
action under Section 153C in respect of AYs’ 2010-11 up to
2020-21.
61. A reading of the aforesaid Satisfaction Notes would
establish that jurisdictional AOs’ appear to have proceeded on
the premise that the moment incriminating material is
unearthed in respect of a particular AY, they would have the
jurisdiction and authority to invoke Section 153C in respect of
all the assessment years which could otherwise form part of
the “relevant assessment year” as defined in Section 153A. In
our considered opinion, the aforesaid understanding of Section
153C is clearly erroneous and unsustainable. As explained
hereinabove, the discovery of material likely to implicate the
assessee and impact the assessment of total income for a
particular AY is not intended to set off a chain reaction or have
a waterfall effect on all AYs’ which could form part of the
“relevant assessment year”. This, more so since none of the
Satisfaction Notes record any reasons of how that material is
likely to materially influence the computation of income for
those AYs’.
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62. Hypothetically speaking, it may be possible for the
material recovered in the course of a search having the
potential or the probability of constituting incriminating
material for more than one assessment year. However, even if
such a situation were assumed to arise, it would be incumbent
upon the AO to duly record reasons in support of such a
conclusion. The Satisfaction Notes would thus have to
evidence a formation of opinion that the material is likely to be
incriminating for more than a singular assessment year and
thus warranting the drawl of Section 153C proceedings for
years in addition to those to which the material may be directly
relatable.”
16. It is apparent that the documents seized do not constitute any material
or contain any information that has any bearing on the income of the
Assessee for the relevant assessment year. The impugned notices are, thus,
unsustainable.
17. The learned counsel appearing for the Revenue referred to Section
153C of the Act and earnestly submitted that there was no requirement
under Section 153C of the Act that the information contained in the books of
accounts or documents seized or requisitioned has a bearing on the
determination of the total income of the assessee if such information relates
to the assessee. He contended that Section 153C of the Act has three
distinctive limbs. The first is triggered when the AO is satisfied that any
money, bullion, jewellery or other valuable article or thing, seized or
requisitioned belongs to the Assessee being a person other than the searched
person. The second limb is triggered if the books of accounts or documents
seized or requisitioned pertains to the assessee (being a person other than the
searched person). And, the third is triggered if the books or documents
seized or requisitioned contain information which relates to the assessee
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being a person other than the searched person. He submitted that the third
limb is not qualified with the condition that it must have a bearing on the
income of the non-searched person. He contended that therefore, there was
no requirement that the information contained in the seized material which
relates to a non-searched person should have a bearing on his income for the
AO to assume the jurisdiction under Section 153C of the Act.
18. It is relevant to refer to Sub-section (1) of Section 153C of the Act.
The same is set out below:
“153C. Assessment of income of any other person.
(1) Notwithstanding anything contained in section 139,
section 147, section 148, section 149, section 151 and
section 153, where the Assessing Officer is satisfied
that,–
(a) any money, bullion, jewellery or other valuable article
or thing, seized or requisitioned, belongs to; or
(b) any books of account or documents, seized or
requisitioned, pertains or pertain to, or any information
contained therein, relates to, a person other than the
person referred to in section 153A, then, the books of
account or documents or assets, seized or requisitioned
shall be handed over to the Assessing Officer having
jurisdiction over such other person and that Assessing
Officer shall proceed against each such other person and
issue notice and assess or reassess the income of the other
person in accordance with the provisions of section 153A,
if, that Assessing Officer is satisfied that the books of
account or documents or assets seized or requisitioned
have a bearing on the determination of the total income of
such other person for six assessment years immediately
preceding the assessment year relevant to the previousW.P.(C) 3979/2025 & connected matters Page 27 of 29
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year in which search is conducted or requisition is made
and for the relevant assessment year or years referred to in
sub-section (1) of section 153A :
Provided that in case of such other person, the
reference to the date of initiation of the search under
section 132 or making of requisition under section 132A
in the second proviso to sub-section (1) of section 153A
shall be construed as reference to the date of receiving the
books of account or documents or assets seized or
requisitioned by the Assessing Officer having jurisdiction
over such other person:
Provided further that the Central Government may
by rules 30 made by it and published in the Official
Gazette, specify the class or classes of cases in respect of
such other person, in which the Assessing Officer shall
not be required to issue notice for assessing or reassessing
the total income for six assessment years immediately
preceding the assessment year relevant to the previous
year in which search is conducted or requisition is made
and for the relevant assessment year or years as referred to
in sub-section (1) of section 153A except in cases where
any assessment or reassessment has abated.”
[Emphasis added]
19. It is clear from the plain reading of the language that the notice under
Section 153C of the Act can be issued only if the AO is “satisfied that the
books or documents or assets seized or requisitioned have a bearing on the
determination of the total income of such other person”. The contention that
the AO is not required to be satisfied that the information contained in books
or account or document seized or requisitioned has a bearing on the income
of the Assessee (the Assessee being the person other than the searched
person) if the information relates to the such person, is insubstantial. The
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said contention was contrary to the plain language of Section 153C(1) of the
Act.
20. In view of above, the impugned notice(s) are set aside.
21. The petitions are allowed in the aforesaid terms. The pending
applications are also disposed of.
VIBHU BAKHRU, J
TEJAS KARIA, J
JULY 14, 2025
m/’gsr’/RK
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