Facts of the Case

The petitioner, Neeraj Bharadwaj, challenged multiple notices dated 24.06.2024 issued under Section 153C of the Income-tax Act, 1961 for Assessment Years 2015–16 to 2020–21. The notices were issued pursuant to a search conducted on 07.04.2019 under Section 132 in the case of the Moser Baer Group and related entities. Certain documents relating to purchase of agricultural land in December 2013 were seized, and a satisfaction note was recorded on 06.07.2023 alleging that part of the sale consideration was paid in cash. Based on this, proceedings under Section 153C were initiated against the petitioner.

Issues Involved

Whether notices under Section 153C could be sustained in the absence of incriminating material having a bearing on the income of the petitioner for the assessment years 2015–16 to 2020–21, whether the satisfaction recorded satisfied the statutory requirement of Section 153C(1), and whether completed assessments could be reopened mechanically merely because seized material related to the assessee.

Petitioner’s Arguments

The petitioner contended that the seized documents pertained exclusively to transactions undertaken in Financial Year 2013–14 relevant to Assessment Year 2014–15 and had no bearing on the income of the petitioner for the subsequent assessment years for which notices were issued. It was argued that initiation of proceedings under Section 153C without year-specific incriminating material was without jurisdiction. Reliance was placed on binding precedents including CIT v. Kabul Chawla, CIT v. Sinhgad Technical Education Society, CIT v. RRJ Securities Ltd., and the Supreme Court judgment in CIT v. Abhisar Buildwell (P.) Ltd.

Respondent’s Arguments

The Revenue argued that Section 153C contained three independent limbs and that where seized documents related to a person other than the searched person, there was no requirement that such documents must necessarily have a bearing on the income of the assessee for each assessment year. It was contended that once the seized material related to the petitioner, jurisdiction under Section 153C was validly assumed for all years falling within the permissible block period.

Court Order / Findings

The Delhi High Court examined the satisfaction note and the seized material in detail and held that all alleged cash payments related to December 2013 and January 2014, corresponding to Assessment Year 2014–15. The Court found that there was no incriminating material whatsoever having any bearing on the income of the petitioner for Assessment Years 2015–16 to 2020–21.

The Court reiterated that assessments under Section 153C read with Section 153A can be made only on the basis of incriminating material unearthed during the search which has a direct nexus with the income of the relevant assessment year. Relying extensively on CIT v. Kabul Chawla, CIT v. Sinhgad Technical Education Society, CIT v. Abhisar Buildwell (P.) Ltd., and CIT v. U.K. Paints (Overseas) Ltd., the Court held that completed assessments cannot be reopened in a mechanical manner merely because documents belonging to the assessee were found during search.

The Court rejected the Revenue’s interpretation of Section 153C and held that the statutory requirement that seized material must have a bearing on the determination of total income is mandatory and cannot be diluted.

Important Clarification

The Court clarified that Section 153C does not permit an automatic or blanket reopening of all assessment years falling within the block period. The Assessing Officer must identify the specific assessment year to which the seized material relates and record satisfaction that such material has a bearing on the determination of income for that year. Absence of such year-specific incriminating material renders the proceedings without jurisdiction.

Final Outcome

The writ petitions were allowed. The Delhi High Court set aside all notices dated 24.06.2024 issued under Section 153C of the Income-tax Act, 1961 for Assessment Years 2015–16 to 2020–21 and all proceedings initiated pursuant thereto. All pending applications were disposed of accordingly.

 

Link to Download Order- https://www.mytaxexpert.co.in/uploads/1769594970_NEERAJBHARADWAJVsASSISTANTCOMMISSIONEROFINCOMETAXCIRCLEINTTAX112ANR..pdf

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