HC Quashes Section 153C Notices for Years Unconnected to Seized Documents
The Taxpayer challenged notices issued under Section 153C of the Income Tax Act for assessment years (AYs) 2015-16 to 2020-21. These notices were based on documents seized during a search conducted on July 4, 2019, in connection with another case. The seized records allegedly revealed cash payments for agricultural land purchased in December 2013, partly in the name of the petitioner’s wife.
The Assessing Officer (AO), relying on a Satisfaction Note, concluded that the transactions indicated unaccounted cash amounting to Rs. 7.81 crore. On this basis, the AO initiated proceedings under Section 153C against the assessee. The assessee, aggrieved by this action, filed an appeal before the High Court.
Central Issue
The primary question was whether Section 153C notices, which pertained to assessment years 2015-16 to 2020-21, could be sustained in the absence of relevant seized documents tied to those specific years.
HC’s Ruling
The Hon’ble High Court quashed the Section 153C notices for AYs 2015-16 to 2020-21. It ruled that the seized documents were related solely to assessment year 2014-15 and had no nexus with the subsequent years. The Court emphasized that a notice under Section 153C can only be issued if the AO is satisfied that the seized records have a direct bearing on the determination of the total income of the assessee for the relevant years.
The Revenue’s argument that mere association of the seized documents to the assessee was sufficient was firmly rejected. The Court highlighted the statutory requirement that a connection must exist between the seized documents and taxable income for the assessment years in question.
Additionally, the Court reiterated that for documents to be seized under Section 153C, they must directly impact the assessee’s income for the relevant assessment years. It reaffirmed that no additional assessments could be made without incriminating material applicable to those years, citing precedents such as CIT v. Kabul Chawla and CIT v. Sinhgad Technical Education Society. Consequently, the notices were revoked, and the petitions were allowed.
To read the full judgment, you can download the PDF provided below.