Rasraj Marketing Private Limited vs DCIT, Central Circle-28

ITA No.8952/Del/2025 Assessment Year 2013-14

1.

The CIT(A) erred in law and on facts in upholding the assumption of jurisdiction under section 153C of the Act, despite the fact that no valid, year-specific incriminating material belonging to OR relating to the appellant for the relevant year was identified at the time of recording the satisfaction, as there was none, and the so-called satisfaction note is vague, composite and mechanical, failing to establish the mandatory live nexus between the seized material, though there was none at all and the income of the appellant, thereby rendering the entire proceedings void ab initio which must be quashed.

2.

The CIT(A) failed to appreciate that no assessment order can be passed u/s 153C of the Act as it is a machinery provision and an assessment order can only be passed on the basis of incriminating material seized elsewhere u/s 153A r.w.s. 153C of the Act and under no other provisions of the Act. In fact, there is no mention of the same in the appellate order, despite detailed submissions placed on record of the CIT(A) on the validity of the assessment order who has just acknowledged the same in the appellate order without commenting its non- applicability therein specifically. Thus, the impugned order, much less an assessment order, is void ab initio and must be quashed at the threshold.

3.

The CIT(A) erred in law and on facts in ignoring that the impugned order was dated 30/03/2023 but the accompanied notice of demand had already been prepared and signed on 29/03/2023 by the AO duly signed manually with both dates under her own hand writing, proving that the entire exercise of the assessment proceedings was just a facade with a predetermined approach to make additions. Such order must be quashed.

4.

The CIT(A) erred in law and facts by sustaining the assessment on the basis of an omnibus and non-speaking satisfaction note dated 24/12/2021 of the AO of the assessee, which neither specifies the seized documents nor quantifies OR explains how such material allegedly impacts the income of the appellant for the year under appeal, contrary to the mandatory jurisdictional requirement u/s 153C of the Act as no corresponding asset was found during the search belonging to the assessee.

5.

The CIT(A) erred in law and on facts by confirming the assessment framed solely on the basis of third-party statements and digital data allegedly seized from another group, without any independent corroborative evidence establishing ownership, control OR actual receipt of cash OR commission by the appellant, and without discharging the burden cast upon the revenue.

6.

The CIT(A) erred in upholding the assessment despite denial of effective cross-examination of the person whose statement formed the foundation of the additions, even though such statement was specifically relied upon for drawing adverse inferences against the appellant, thereby violating the principles of natural justice and rendering the additions legally unsustainable.

7.

The CIT(A) erred in law and facts in confirming estimated additions u/s 69A without first rejecting the regularly maintained and audited books of account under section 145(3), and without pointing out any specific defect OR inconsistency therein, contrary to settled law that additions for unexplained money cannot be made when transactions are duly recorded in books.

8.

The CIT(A) erred in law and on facts in confirming the addition of Rs. 18,11,822/- on account of alleged commission income without any evidence of actual receipt in any premises searched, agreement, rate of commission OR flow of funds, and merely on presumptions arising from third-party material, making the addition arbitrary, conjectural and unsustainable in law.

9.

The CIT(A) erred in law and on facts in confirming the addition of Rs. 60,58,384/- towards alleged unexplained cash deposits by ignoring the cash flow statement, bank withdrawals and contemporaneous records produced by the appellant, without demonstrating any real discrepancy, and by mis appreciating the factual position regarding availability of cash.

10.

The CIT(A) erred in law and facts by sustaining mutually contradictory findings by simultaneously treating the appellant as an accommodation entry provider and also treating the same cash as unexplained money belonging to the appellant, resulting in impermissible double taxation of the same alleged income.

11 The CIT(A) erred in upholding the application of section 69A in the absence of any evidence establishing that the appellant was the owner of the alleged unexplained money outside the books of account, and when the alleged amounts were duly recorded and explained through banking and accounting records.

12 The CIT(A) erred in law and on facts in sustaining taxation under section 115BBE mechanically, without first establishing the legal sustainability of the underlying additions, contrary to the settled position that section 115BBE cannot be applied automatically OR consequentially.

13.

The CIT(A) appeal erred in law and on facts that the AO failed to provide copies of the entire material seized though specifically demanded, thus, violating the principles of natural justice.

14.

The CIT(A) erred in upholding the assessment despite the approval granted u/s 153D being mechanical and without demonstrable application of mind, thereby vitiating the assessment proceedings, which must be quashed.

15.

The CIT(A) erred in law and facts in ignoring that no legally enforceable notice demand u/s 156 of the Act could at all be issued based on this illegal paper much less an order and the same must also be quashed.

16.

The CIT(A) erred in confirming the validity of an illegal consolidated satisfaction note recorded for all the 11 assessment years from AY 2010-11 to 2020-21 on 20/12/2021 by the AO of the assessee. Thus, the same is void ab initio and must be quashed.

“…Original Return of Income u/s 139(1) of the Income Tax Act, 1961(hereinafter referred to as ‘the Act’) was e-filed by the assessee on 29.09.2013 declaring income of Rs.97,610/-. Notice u/ s153C of the Act was issued dated 28.12.2021.

2.

A search and seizure proceeding under section 132 of the Act was carried out on the Alankit Group, Sh. Alok K Agarwal, his son Ankit Agarwal and some of the close associates and key employees of Sh. Alok K Agarwal on 18.10.20 I 9. Incriminating seized evidences recovered during the course of search proceedings clearly establish that Sh. Alok Agarwal, has facilitated acquisition of shares of several shell entities for benefit of his own group as well as his known associates and clients. He has received and provided accommodation entries and also facilitated bogus short-term capital loss to set off long-term capital gains to various persons through several entities managed and controlled by him and his associates. During the course of search and seizure operation catTied out on 18.10.2019 at the premise of Sh. Alok K Agarwal, Ankit Agarwal, Alankit Limited and Alankit Assignments Limited at 3584, Third Floor, Gali no. 4, Narang Colony, Trinagar, Delhi. Some incriminating documents were found from the premises in the name of the assessee; hence, case of the assessee was centralized to Central Circle-28, New Delhi.

3.

The notice u/s 153C of the Act dated 28.12.2021 was issued to assessee asking to file the return within IO days of receipt of this letter. In response to notice issued u/s l 53C of the Act, the assessee filed his return of income on 17.O l.2022declaring income of Rs. 97,610/-. Further, the notice u/s 143(2) of the Act dated 29.06.2022 was issued through ITBA and notice u/s 142(1) of the Act were also issued to the assessee through ITBA on 15.02.2022, 11.01.2023 and 27.01.2023. In compliance to the above statutory notices issued from time to time, the assessee filed his submission through e-filing portal on various dates. The same were examined and placed on file.

4.

The assessee has reported its income in the ITR as income from business and profession and income from other sources.

5.

Satisfaction note prepared by Juri dictional assessing officer as requested by the assessee also provided vide this office notice dated 20.12.2021. Further, satisfaction note drawn by the assessing officer of the searched person was also provided to the assessee vide notice dated 20.I2.2021. Moreover, copy of the incriminating ci/ed documents in the form of ledger accounts along, with the relevant extract of the statement of, Sh. Sunil Kumar Gupta(concerned persons relied upon) were also provided to the assessee on 15.12.2022. Assessee was issued show cause notice issued dated 15.02.2023 and dated 18.02.2023.

6.1

During the course of search and seizure proceeding in ca e of Alankit Group, incriminating material in the form of hard data as well as digital data, ere found and seized from different premises. On perusal of these incriminating documents, it was found that Alankit Group (whose main promoter is h. Alok Kumar Agarwal) was involved in providing accommodation entries to various person / entities in lieu of cash payments which was done through the various companies owned/ controlled b) Sh. Alok Kumar Agarwal. During the course of search and seizure operation carried out on Alankit Group of cases, the residential premise of Sh. Sunil Kumar Gupta, i.e. at 3584/4, Na rang Colony, Gali No. 4 Tri Nagar Delhi was also covered. Sh. Sunil Kumar Gupta is an employee of Sh. Alok Kumar Agarwal (Key person and promoter of Alankit Group) who manages all the affairs and transaction of the Alankit Group of cases. From the possession of Sunil Kumar Gupta the incriminating material in the form of HP Laptop was found and seized as Annexure-A-32 which entailed the key circumstantial evidences reflecting the true and correct modus operandi of the Alankit Group of companies …………………………………………………………………………………… ……………………………………………………………………….

12.

Rasraj Marketing Private Limited was a Kolkata based shell company having huge bogus share capital in its books, raised through other Kolkata based shell companies. It has been acquired at a meagre price by Shri Sanjay Jain, a Delhi based businessman, through his owned and controlled companies. The capital in this company has been repeatedly used to make investments in Alankit group companies and companies/entities belonging to Sh. Sanjay Jain or to provide accommodation entries to various beneficiaries. Rasraj Marketing is a shell company only utilized to provide accommodation entries and it has no business of its own. Further, during the course of Search and Seizure proceedings and during post search analysis of evidences gathered, the huge amount of unaccounted cash transactions done by Sh. Sanjay Jain facilitated by Sh. Alok K Agarwal for acquisition of ownership of Rasraj Marketing and then to provide accommodation entries through this company have been unearthed.

12.

Sh. Som Prakash appears to be an intermediary who has facilitated accommodation entries the accounts of various beneficiaries. Also Sh. Lalit too appears to be a Kolkata based entry operator/intermediary. Sh. Sudhir Gupta appears to be an intermediary who has assisted several beneficiaries in taking accommodation entries through bogus unsecured loan, bogus share trading, commodity trading, future options etc. The modus operandi appears that unaccounted cash received from the beneficiary by Alok K Agarwal is paid to these intermediaries and in turn, entries are received from various Kolkata based non-descript entries into the accounts of companies which are sought to be acquired.

13.

From the ledgers of Sh. Lalit Sh. Som Prakash, Sh. Sudhir Gupta and others, the following transactions are observed below. As already mentioned above, it is reiterated that most of these transaction pertain to transfer of shareholding of various Kolkata based companies. It is also important to note here that, some transaction arc recorded against a particular ledger name, so these are contra entries of those transactions……………………….. …………………………………………………………………………………… …………………………………………………………………………

16.

Based on the above discussion, it is established that the transactions recorded in the incriminating seized evidences in form of ledgers reflects the true picture of transactions that have undertaken and that it includes both cash as well as bank transactions. It is important to note that the bank account entries recorded by Sh. uni! Kumar Gupta in excel and tally are duly renected in the bank account statement and the corresponding cash entries recorded by Sh. Sunil Kumar Gupta in the same excel and tally cannot be denied. The reliance in this regard can be placed upon the decision of hon'ble Jurisdictional I ligh Court of Delhi in the case of Karun Dube vs. Assistant Commissioner of Income-tax, Central Circle-9, New Delhi* (ITANO. 134 OF 2008 Dated March 10, 2008) wherein the Hon'ble Court held that a document is to be accepted or rejected in totality and it cannot be said that part of the document is true and other part is false. Tbe relevant observation of the Court are r·eprocluced as under for the ready reference:

" ...The assessee had admitted that entries are in his own writing and has also admitted this/act that some of the transactions shown in the document were real. A document has to be accepted or rejected in toto. It cannot be said that" part of the document is true whereas the other part is false."

17.

It would not be out of place to mention that the assessee has not given any details regarding the transactions recorded in the incriminating seized material in the form of ledgers confronted to the assessee vide statutory notices u/s 142( I) of the Act. The assessee has merely furnished the copy of ledgers and details of banking entries to justify the banking transactions. It is impo1tant to note that the assessee has owned, admitted and accepted the bank account entries recorded by Sh. Sunil Kumar Gupta in excel and tally and has tried to deny the corresponding cash entries which are part of the same incriminating material i.e. the copy of ledger accounts, recorded by Sh. Sunil Kumar Gupta in the same excel and tally, which is not permissible in law. In response to the Show Cause Notices, through its reply, assessee has also contended for the cross-examination of statements of persons relied upon. In this regard, it is stated that the right of cross examination is not the assessee’s natural right. The Hon’ble High Court of Delhi in Nath International Sales and Anr. Vs Union of India And Ors. on 17 January, 1992 has relied on the decision of the Hon’ble Supreme Court of India in the case of State of J & K and others v. Bakshi Gulam Mohammad & anr. and has adjudged the following:

“a right of hearing does not include a right to cross-examine and the right to cross-examine must depend upon the circumstances of each case…….”

“…2. It emerges during the course of hearing that the assessee/appellant has raised its first and foremost legal ground/argument challenging all the impugned section 153C r.w.s. 143(3) assessments framed by the learned Assessing Officer and upheld in the lower appellate discussion(s). We advert to the basic relevant facts.

3.

There is hardly any dispute between the parties that the learned departmental authorities had carried out search in issue in M/s. Alankit Group on 18.10.2019 wherein it is alleged to have come across against the corresponding incriminating material against the assessee as well. There is further no issue between the parties that the assessee’s jurisdictional Assessing Officer; other than the searched party’s Assessing Officer, recorded his section 153C common satisfaction in its case on 24.12.2021 relating to all these assessment years 2013-14 to 2020-21 before us. Learned counsel has duly placed the same on record. A perusal thereof indicates that the learned Assessing Officer nowhere made it clear in the impugned satisfaction note dated 24.12.2021 that the alleged incriminating material sought to be proceeded against the assessee had a “bearing” on determination of its total income in all these assessment years.

4.

Learned CIT(DR) at this stage vehemently supports the impugned satisfaction. Her case is that it is nowhere mandatory for the Assessing Officer to specifically incorporate the word “bearing” on the determination of the assessee’s taxable income in such a satisfaction note u/s 153C of the Act.

5.

We find no merit in the Revenue’s foregoing vehement objections as the instant issue stands squarely settled in the assessee’s favour and against the department going by Saksham Commodities Ltd. Vs. ITO (2024) 464 ITR 1 (Delhi)(HC) wherein their lordships have made it clear that the relevant satisfaction note must make it clear that the seized material sought to be used against the assessee indeed has a “bearing” of determination of its total taxable income. We thus accept the assessee’s instant first and foremost legal ground/argument to quash all these section 153C assessments in very terms….”

“19.

Regarding the alternative Additional Ground of appeal No. IV of the assessee, from the perusal of the satisfaction note available at pages 215-216 of the paper book, it is observed that the AO has not recorded the satisfaction that “have bearing on the total income of the assessee” as provided in section 153C of the Act. The same is reproduced as under for sake of convenience:

Assessment of income of any other person.

153C. (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 previous 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 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.

(2)

Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year—

(a)

no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or

(b)

a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or

(c)

assessment or reassessment, if any, has been made, before 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, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153A.

(3)

Nothing contained in this section shall apply in relation to a search initiated under section 132 or books of account, other documents or any assets requisitioned under section 132A on or after the 1st day of April, 2021.”

20.

The Hon’ble Jurisdictional High Court in the case of Saksham Commodities Ltd (supra) has held as under:-

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 and 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 153Cconstructs 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 153Cenables 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 the six AYs' immediately preceding the AY pertaining to the 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 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 2003-04would 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 Section153C. 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 a swell 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 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 enblanc 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 fora particular AY.

57.

It becomes pertinent to note that both Sections 153A and 153C require the assessee upon being placed on notice to 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 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 orbe 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'.

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.

G. CONCLUSIONS

63.

On an overall consideration of the structure of Sections 153A and 153C, we thus find that a reopening or abatement would be triggered only upon the discovery of material which is likely to "have a bearing on the determination of the total income" and would have to be examined bearing in mind the AYs' which are likely to be impacted. It would thus be incorrect to either interpret or construe Section 153C as envisaging incriminating material pertaining to a particular AY having a cascading effect and which would warrant a mechanical and inevitable assessment or reassessment for the entire block of the "relevant assessment year".

64.

In our considered view, abatement of the six AYs' or the "relevant assessment year" under Section 153Cwould follow the formation of opinion and satisfaction being reached that the material received is likely to impact the computation of income for a particular AY or AYs' that may form part of the block of ten AYs'. Abatement would be triggered by the formation of that opinion rather than the other way around. This, in light of the discernibly distinguishable statutory regime underlying Sections 153A and 153C as explained above. While in the case of the former, a notice would inevitably be issued the moment a search is undertaken or documents requisitioned, whereas in the case of the latter, the proceedings would be liable to be commenced only upon the AO having formed the opinion that the material gathered is likely to inculpate the assessee. While in the case of a Section 153A assessment, the issue of whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case maybe.

65.

We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the "relevant assessment year". It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to "have a bearing on the determination of the total income" that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity.

66.

Therefore, and in our opinion, abatement of the six AYs' or the "relevant assessment year" would follow the formation of that opinion and satisfaction in that respect being reached.

67.

On an overall consideration of the aforesaid, we come to the firm conclusion that the "incriminating material" which is spoken of would have to be identified with respect to the AY to which it relates or may belikely to impact before the initiation of proceedings under Section 153C of the Act. A material, document or asset recovered in the course of a search or on the basis of a requisition made would justify abatement of only those pending assessments or reopening of such concluded assessments to which alone it relates or is likely to have a bearing on the estimation of income. The mere existence of a power to assess or reassess the six AYs' immediately preceding the AY corresponding to the year of search or the "relevant assessment year" would not justify a sweeping or indiscriminate invocation of Section 153C.

68.

The jurisdictional AO would have to firstly be satisfied that the material received is likely to have a bearing on or impact the total income of years or years which may form part of the block of six or ten AYs' and thereafter proceed to place the assessee on notice under Section 153C. The power to undertake such an assessment would stand confined to those years to which the material may relate or is likely to influence. Absent any material that may either cast a doubt on the estimation of total income for a particular year or years, the AO would not be justified in invoking its powers conferred by Section 153C. It would only beconsequent to such satisfaction being reached that a notice would be liable to be issued and thus resulting in the abatement of pending proceedings and reopening of concluded assessments.

H. OPERATIVE DIRECTIONS

69.

When tested in light of the aforesaid principles, we find that except for a few exceptions which were noticed in the introductory parts of this judgment, the writ petitions forming part of this batch, impugn the invocation of Section 153C in respect of AYs' for which no incriminating material had been gathered or obtained. The Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to "have a bearing on the determination of the total income" for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs' years immediately preceding the assessment correlatable to the search year or the "relevant assessment year" as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents noticed above.”

21.

The Hon’ble Jurisdictional Delhi High Court in the aforesaid judgement held that for initiation of proceedings u/s 153C of the Act, the AO should satisfy that books of accounts or documents or assets seized or requisition must be pertained to the assessee and the entries contained therein must “have bearing on the determination of the total income of such other person”.

22.

As could be observed from the satisfaction note as reproduced herein above, the AO nowhere has recorded the satisfaction that entries contained in the diary seized “pertained to the assessee” and further such entries “have the bearing on the determination of the income of the assessee”. Therefore, by respectfully following the judgement of Hon’ble Delhi High Court in the case of Saksham Commodities (supra), we hold that satisfaction note recorded before initiation of the proceeding’s u/s 153C of the Act is not a valid satisfaction. Accordingly, we allow additional Ground of appeal No. IV raised by the assessee and quashed the proceedings initiated u/s 153C of the Act based on such invalid satisfaction…”