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 AYs 2015-16 to 2020-21. These notices were based on documents seized during a 07/04/2019 search in another case. The seized records allegedly showed 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, held that the transactions indicated unaccounted cash of Rs. 7.81 crore. Based on this, he initiated proceedings under Section 153C against the assessee. Aggrieved, the assessee filed the present appeal before the High Court.

Central Issue: If the seized documents only pertain to transactions in FY 2013-14 (AY 2014-15), could Section 153C notices for AYs 2015-16 to 2020-21 be sustained?

HC’s Ruling: The Hon’ble High Court quashed the Section 153C notices for AYs 2015-16 to 2020-21. It held that the seized documents related only to the assessment year 2014-15 and had no nexus with the later years. It emphasised that a notice under Section 153C 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 Revenue’s argument that mere relation of the seized documents to the assessee sufficed was rejected. The Court stressed the statutory requirement that there must be a connection to taxable income.

The Court emphasised that for documents to be seized under Section 153C, they must directly affect the assessee’s income for the relevant assessing years. The Court reaffirmed that no additions can be made without incriminating material for the relevant years, citing CIT v. Kabul Chawla, CIT v. Sinhgad Technical Education Society. As a result, the notices were revoked, and the petitions were allowed.

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