Notice U/S 153C Income Tax Act Can Be Issued Only If Incriminating Material Has 'Bearing On Total Income' Of Non-Searched Assessee: Delhi HC
The Delhi High Court has made it clear that assessments under Section 153C of the Income Tax Act, 1961 can be made on a non-searched entity only when the Assessing Officer has incriminating material which “has a bearing” on its total income.Section 153C allows the Revenue department to proceed against a party other than the person who is being searched, if incriminating articles belonging...
The Delhi High Court has made it clear that assessments under Section 153C of the Income Tax Act, 1961 can be made on a non-searched entity only when the Assessing Officer has incriminating material which “has a bearing” on its total income.
Section 153C allows the Revenue department to proceed against a party other than the person who is being searched, if incriminating articles belonging to the other person are found during the search.
A division bench of Justices Vibhu Bakhru and Tejas Karia rejected Revenue's contention that 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 jurisdiction under Section 153C.
Revenue had submitted that Section 153C has three distinctive limbs:
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.
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).
Third is triggered if the books or documents seized or requisitioned contain information which relates to the assessee being a person other than the searched person.
This third limb, the Revenue contended, is not qualified with the condition that it must have a bearing on the income of the non-searched person.
Finding the submission to be contrary to the plain language of Section 153C(1), the High Court said,
“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 Court was dealing with the petition filed by a person related to one of the Directors and Promoter of Moser Baer Group of Companies, which was the searched entity under Section 132.
Notices were issued to the Petitioner-assessee in respect of assessment years 2015-16 to 2020-21, for purchasing properties in the name of his wife by paying partly in cash.
The High Court however noted that the material with the AO had no bearing on the income of the Petitioner-assessee for those AYs.
“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,” the Court held and allowed the petition.
Appearance: Mr Sachit Jolly, Sr. Advocate with Mr Rishi Agrawala, Mr Vaibhav Mishra, Ms Niyati Kohli, Mr Abhyudaya Shankar and Mr Pratham Vir Agarwal, Advocates for Petitioner; Mr Debesh Panda, SSC
Case title: Neeraj Bharadwaj v. Assistant Commissioner Of Income Tax, Circle Int Tax 1(1)(2) & Anr
Citation: 2025 LiveLaw (Del) 818
Case no.: W.P.(C) 3979/2025