Facts of the Case

The petitioner, R.C. Jewellers Pvt. Ltd., challenged separate notices dated 26.12.2019 issued under Section 153C of the Income-tax Act for Assessment Years 2012-13 to 2017-18, along with an order dated 17.03.2021 rejecting its objections. The notices arose out of a search conducted under Section 132 on 27.10.2017 at Rajkot Airport following interception of courier parcels containing gold bullion and jewellery.

During the search proceedings, one parcel containing 49 grams of fine gold valued at ₹1,32,288 was seized. The parcel was found to have been sent by the petitioner to one Rajesh Kumar Mohan Lal, Rajkot, for job work. The petitioner did not dispute dispatch of the parcel and asserted that the transaction was duly recorded in its books of account.

The Assessing Officer recorded a satisfaction note on 26.12.2019 stating that since the seized gold belonged to the petitioner, proceedings under Section 153C were required to be initiated for six preceding assessment years.

Issues Involved

Whether proceedings under Section 153C could be validly initiated in the absence of incriminating material belonging to the assessee and having bearing on the determination of income for the relevant assessment years, whether mere seizure of a disclosed item sent for job work constituted incriminating material, and whether the satisfaction note met the statutory requirements.

Petitioner’s Arguments

The petitioner contended that the seized gold was duly accounted for and sent for job work in the ordinary course of business. It was argued that the seizure of a single parcel of 49 grams of gold during the search did not constitute incriminating material for reopening concluded assessments for six assessment years. The petitioner further submitted that the satisfaction note failed to record how the seized material had any bearing on the income of the petitioner for AYs 2012-13 to 2017-18, rendering the assumption of jurisdiction under Section 153C invalid.

Respondent’s Arguments

The Revenue contended that since the seized gold admittedly belonged to the petitioner, the condition for invoking Section 153C stood satisfied. It was argued that the Assessing Officer had rightly recorded satisfaction and issued notices for the relevant assessment years.

Court Order / Findings

The Delhi High Court examined the satisfaction note and found that it merely recorded that the seized gold belonged to the petitioner, without recording any finding that such material had any bearing on the income of the petitioner for the assessment years in question. The Court held that for invoking Section 153C, it is mandatory that incriminating material belonging to the assessee must be found during search and such material must have a bearing on the determination of total income for the relevant assessment years.

The Court observed that the petitioner had explained the transaction and that the seized gold was sent for job work and duly reflected in its books. The seizure of such parcel could not be treated as incriminating material for reopening concluded assessments. The Court held that in the absence of incriminating material relatable to the relevant years, proceedings under Section 153C were without jurisdiction.

The Court relied on the binding precedents of the Supreme Court in Commissioner of Income Tax v. Sinhgad Technical Education Society and its own decisions including Saksham Commodities Ltd. and U.K. Paints (Overseas) Ltd., which clearly laid down that Section 153C cannot be invoked mechanically.

Important Clarification

The High Court clarified that mere identification of material as “belonging to” an assessee is insufficient for invoking Section 153C. The Assessing Officer must record satisfaction that such material is incriminating and has a bearing on the determination of income for the relevant assessment years. Absent such nexus, proceedings under Section 153C are invalid.

Final Outcome

The writ petition was allowed. The notices dated 26.12.2019 issued under Section 153C for Assessment Years 2012-13 to 2017-18 and the order dated 17.03.2021 rejecting objections were set aside. All proceedings initiated pursuant thereto were quashed.

Link to download order https://www.mytaxexpert.co.in/uploads/1769756608_R.C.JEWELLERSPVT.LTD.VsDEPUTYCOMMISSIONEROFINCOMETAXCENTRALCIRCLE32DELHI.pdf 

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