Income Tax Act | Section 153C Proceedings Require Incriminating Material Found During Search And Satisfaction Of Both Assessing Officers: Calcutta High Court
Deekshitha Sharmile
The High Court of Calcutta Single Bench of Justice Om Narayan Rai held that reassessment proceedings under Section 147 of the Income Tax Act could proceed and dismissed the assessee’s writ petition against the reassessment order for the relevant assessment year. The Court clarified that the special mechanism under Section 153C, governing assessments of persons other than the searched person on the basis of search material, applies only where a search or requisition yields incriminating material relating to such person and both the assessing officer of the searched person and that of the “other person” record the requisite satisfaction. Finding no incriminating material against the assessee arising from the search and seizure, the Court declined to exercise writ jurisdiction while leaving open the statutory appellate remedy.
The matter arose from assessment proceedings relating to the assessment year 2019–20. An earlier writ petition had challenged an assessment order passed under Section 147/144B of the Income Tax Act, 1961, on the ground of violation of natural justice. That order was set aside, and the matter was remanded with directions to provide a personal hearing.
Following the remand, a fresh assessment order was passed under Section 147 read with Sections 260 and 144B. The petitioner challenged this order, contending that the proceedings ought to have been initiated under Section 153C, applicable in cases where incriminating material is found during search operations against persons other than those searched. The petitioner argued that failure to invoke Section 153C amounted to violation of statutory provisions and natural justice.
The petitioner relied on the fact that the assessment order referred to search and survey operations at finance brokers, asserting that this required invocation of Section 153C. The respondents defended the assessment under Section 147, submitting that the proceedings were based on information received from the investigation wing and evidences collected during and after search operations. The dispute centered on whether incriminating material was found against the petitioner and whether jurisdiction lay under Section 153C or Section 147.
Justice Om Narayan Rai recorded that Section 153C requires satisfaction of both the Assessing Officer of the searched person and the Assessing Officer of the other person. The Court noted: “A meaningful reading of the provisions of section 153C of the said Act would reveal that a notice under section 153C of said Act of 1961 can be issued only when both - the Assessing Officer of the searched person as well as the Assessing Officer of the person other than the searched person are- satisfied that (a) either any property… belongs to a person other than the searched person or (b) any books of accounts or document seized or requisitioned pertains to or any information contained therein relates to a person other than the searched person referred to in Section 153A of the Act.”
The Court referred to the Delhi High Court decision in CIT v. Naveen Kumar Gupta: “Indisputably, if any of the aforesaid conditions are not satisfied, the income of such other person cannot be assessed or reassessed under section 153C of the Act.”
On the facts, the Court stated: “In the case at hand, there is nothing on record to demonstrate that any of the two the Assessing Officers had reached such satisfaction. There is nothing on record to demonstrate that any incriminating material had been found against the petitioner in the search and seizure operation.”
The Court noted that the assessment was based on information from the investigation wing and evidences collected during and after search proceedings. It relied on the Supreme Court’s decision in CIT v. Abhisar Buildwell (P) Ltd.: “However, in case during the search no incriminating material is found, in case of completed/ unabated assessment, the only remedy available to the Revenue would be to initiate the reassessment proceedings under Sections 147/48 of the Act, subject to fulfilment of the conditions mentioned in Sections 147/148, as in such a situation, the Revenue cannot be left with no remedy.”
The Court stated that the petitioner’s objection was without substance. It further recorded: “It is noted that the petitioner did not raise this issue at any point prior to the institution of the present writ petition although the point was available to the petitioner at the stage of issuance of notice under Section 148A(b) as well as upon issuance of the order dated March 27, 2023 under Section 148A(d) of the said Act of 1961.”
The Court concluded that the petitioner appeared to seek avoidance of the statutory forum of appeal and delay in adjudication.
The Court directed: “Since the jurisdictional issue raised by the petitioner has failed to withstand scrutiny of this Court under Article 226 of the Constitution of India and the petitioner has an alternative and efficacious remedy before the Appellate Authority under Section 246 of the said Act of 1961, the instant writ petition cannot be entertained. W.P.O646 of 2024 stand dismissed.”
“However, this order shall not prevent the petitioner to prefer appeal before the appellate authority under section 246 of the said Act of 1961. Since the petitioner has approached this Court within the statutory period of limitation provided for preferring appeal under section 246 of the said Act of 1961, if an appeal is filed by the petitioner within 15 days from date, the Appellate Authority shall consider such appeal on merits and dispose of the same in accordance with law, without raising the issue of limitation.”
Advocates Representing the Parties
For the Petitioners: Mr. Anirban Banerjee, Adv., Mr. Deep Agarwal, Adv.
For the Respondents: Mr. Aryak Dutt, Adv.
Case Title: Shiv Kumar Saraf vs Principal Chief Commissioner of Income Tax, Kolkata and Ors
Case Number: WPO/646/2024
Bench: Justice Om Narayan Rai
