The document seized is a letter our client wrote to the person searched. Does it belong to our client for s.153C?
Not under the pre-amendment wording. A letter written by A to B is B's document, and 'belongs to' is not the same as 'relates to'. The words 'pertains to', which would have caught it, were inserted with effect from 1 June 2015 and operate prospectively, so they do not assist a satisfaction note recorded before that date. Note what that limit attaches to: it is the date of the satisfaction note, not the date of the search. In ITO v. Vikram Sujitkumar Bhatia (SC, 2023) the Supreme Court held the amended provision applies even where the search was conducted before 1 June 2015, if the seized material reaches the Assessing Officer of the other person on or after that date. What survives in ARN is the construction of 'belongs to' and the result on its own facts, the satisfaction note there being dated 21 July 2014; what does not survive is any reading of it as making a pre-2015 search enough to keep a case on the narrow 'belongs to' test. Separately, a document relevant only to one year cannot be used to reopen earlier years.
Decided by the High Court (S. Muralidhar J and Chander Shekhar J) on 2017-04-25, reported as W.P.(C) 2768/2016 with CM APPL. 11636/2016 and W.P.(C) 2769/2016 with CM APPL. 11637/2016 (Delhi High Court). It bears on section 153C, section 153A, section 143(3), section 132 of the Income Tax Act 1961, in Search, Survey & Block Assessment matters.
Older s.153C proceedings, meaning those in which the satisfaction note was recorded before 1 June 2015, stand or fall on the narrower 'belongs to' test. This is the case that applies it to the commonest fact pattern of all, correspondence and ledger extracts, and it also applies the rule that the six-year block for the other person runs from the year the satisfaction note is prepared.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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A search under s.132 was initiated on 16 January 2013 in the case of Earth Infrastructures Ltd, and the panchnama drawn on 18 January 2013 added Real Gain Estate Pvt. Ltd. Two documents were relied on in the satisfaction note: a three page ledger account of Real Gain Estate maintained by the petitioner, showing commission payments made by the petitioner to Real Gain Estate, and a letter dated 27 January 2010 written by the petitioner to Real Gain Estate. The satisfaction note was prepared on 21 July 2014 and a notice under s.153C followed on 23 July 2014 calling for returns for assessment years 2007-08 to 2012-13. A questionnaire under s.142(1) was issued, the petitioner replied on 11 March 2016 and again on 17 March 2016, the Assessing Officer responded on 18 March 2016, and two writ petitions were filed. The commission payments of about Rs. 4.95 crores to Real Gain Estate had already been disclosed in the petitioner's accounts and examined in the regular assessment under s.143(3) for assessment year 2010-11.
Both petitions were allowed with no order as to costs. The notice dated 23 July 2014 issued under s.153A read with s.153C, and all proceedings consequent on it including the order dated 16 March 2016, were quashed. The letter written by the petitioner to Real Gain Estate belonged to the recipient and not to the petitioner; the amendment which brought documents that pertain to a person within s.153C was prospective from 1 June 2015 and did not apply to a satisfaction note prepared on 21 July 2014; the ledger extract related only to assessment year 2010-11 and could not support reopening earlier years; and in any event it was not incriminating because the payments recorded in it had already been disclosed and examined in the regular assessment.
Following RRJ Securities, the Court took the six year period for the person other than the searched person to commence from the year in which the satisfaction note is prepared, which excluded the earlier assessment years from the block (para 12). On the seized material, the letter of 27 January 2010 written by the petitioner to Real Gain Estate was to be treated as a document belonging to Real Gain Estate; whether it related to the petitioner was beside the point because the amendment to s.153C in that regard was prospective from 1 June 2015, later than the date of the satisfaction note (para 13). The Court applied the distinction drawn in Pepsico India Holding between an expression 'belongs to' and an expression 'relates to', using the illustration of a registered sale deed of which copies exist with both vendor and vendee, the vendee's copy not belonging to the vendor and vice versa (para 14). The ledger account was a document relevant only to assessment year 2010-11 and could not be used to reopen earlier years (para 17). Finally, even taking the ledger as belonging to the petitioner, the commission payments it recorded had been disclosed in the accounts and examined in the s.143(3) assessment, so nothing in it showed income escaping assessment (para 18).
Whether it may or may not be related to the Petitioner is not relevant since the amendment to Section 153 C of the Act in that regard was prospective with effect from 1st June 2015 i.e. subsequent to the date of preparation of the „Satisfaction Note‟ in the present case.
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Handle my notice → Ask a CA on WhatsAppNot under the pre-amendment wording. A letter written by A to B is B's document, and 'belongs to' is not the same as 'relates to'. The words 'pertains to', which would have caught it, were inserted with effect from 1 June 2015 and operate prospectively, so they do not assist a satisfaction note recorded before that date. Note what that limit attaches to: it is the date of the satisfaction note, not the date of the search. In ITO v. Vikram Sujitkumar Bhatia (SC, 2023) the Supreme Court held the amended provision applies even where the search was conducted before 1 June 2015, if the seized material reaches the Assessing Officer of the other person on or after that date. What survives in ARN is the construction of 'belongs to' and the result on its own facts, the satisfaction note there being dated 21 July 2014; what does not survive is any reading of it as making a pre-2015 search enough to keep a case on the narrow 'belongs to' test. Separately, a document relevant only to one year cannot be used to reopen earlier years. This was decided by the High Court (S. Muralidhar J and Chander Shekhar J) and bears on section 153C, section 153A, section 143(3), section 132 of the Income Tax Act 1961. It is reported as W.P.(C) 2768/2016 with CM APPL. 11636/2016 and W.P.(C) 2769/2016 with CM APPL. 11637/2016 (Delhi High Court). Older s.153C proceedings, meaning those in which the satisfaction note was recorded before 1 June 2015, stand or fall on the narrower 'belongs to' test. This is the case that applies it to the commonest fact pattern of all, correspondence and ledger extracts, and it also applies the rule that the six-year block for the other person runs from the year the satisfaction note is prepared. If it applies to you, the first step is this: Fix the date the satisfaction note was prepared. If it is before 1 June 2015, argue the case on 'belongs to' and resist any attempt to widen it to material that merely relates to your client.
A search under s.132 was initiated on 16 January 2013 in the case of Earth Infrastructures Ltd, and the panchnama drawn on 18 January 2013 added Real Gain Estate Pvt. Ltd. Two documents were relied on in the satisfaction note: a three page ledger account of Real Gain Estate maintained by the petitioner, showing commission payments made by the petitioner to Real Gain Estate, and a letter dated 27 January 2010 written by the petitioner to Real Gain Estate. The satisfaction note was prepared on 21 July 2014 and a notice under s.153C followed on 23 July 2014 calling for returns for assessment years 2007-08 to 2012-13. A questionnaire under s.142(1) was issued, the petitioner replied on 11 March 2016 and again on 17 March 2016, the Assessing Officer responded on 18 March 2016, and two writ petitions were filed. The commission payments of about Rs. 4.95 crores to Real Gain Estate had already been disclosed in the petitioner's accounts and examined in the regular assessment under s.143(3) for assessment year 2010-11. The matter was decided on 2017-04-25 by the High Court (S. Muralidhar J and Chander Shekhar J). On those facts the High Court held as follows. Both petitions were allowed with no order as to costs. The notice dated 23 July 2014 issued under s.153A read with s.153C, and all proceedings consequent on it including the order dated 16 March 2016, were quashed. The letter written by the petitioner to Real Gain Estate belonged to the recipient and not to the petitioner; the amendment which brought documents that pertain to a person within s.153C was prospective from 1 June 2015 and did not apply to a satisfaction note prepared on 21 July 2014; the ledger extract related only to assessment year 2010-11 and could not support reopening earlier years; and in any event it was not incriminating because the payments recorded in it had already been disclosed and examined in the regular assessment.
Following RRJ Securities, the Court took the six year period for the person other than the searched person to commence from the year in which the satisfaction note is prepared, which excluded the earlier assessment years from the block (para 12). On the seized material, the letter of 27 January 2010 written by the petitioner to Real Gain Estate was to be treated as a document belonging to Real Gain Estate; whether it related to the petitioner was beside the point because the amendment to s.153C in that regard was prospective from 1 June 2015, later than the date of the satisfaction note (para 13). The Court applied the distinction drawn in Pepsico India Holding between an expression 'belongs to' and an expression 'relates to', using the illustration of a registered sale deed of which copies exist with both vendor and vendee, the vendee's copy not belonging to the vendor and vice versa (para 14). The ledger account was a document relevant only to assessment year 2010-11 and could not be used to reopen earlier years (para 17). Finally, even taking the ledger as belonging to the petitioner, the commission payments it recorded had been disclosed in the accounts and examined in the s.143(3) assessment, so nothing in it showed income escaping assessment (para 18). In the words reproduced by the source cited on this page: "Whether it may or may not be related to the Petitioner is not relevant since the amendment to Section 153 C of the Act in that regard was prospective with effect from 1st June 2015 i.e. subsequent to the date of preparation of the „Satisfaction Note‟ in the present case." The decision followed or applied CIT-7 v. RRJ Securities Ltd. (Delhi High Court) — followed on the commencement of the six year block and on the satisfaction note requirement; Pepsico India Holding Pvt. Ltd. v. ACIT (Delhi High Court) — followed on the distinction between 'belongs to' and 'relates to'; CIT (Central)-III v. Kabul Chawla (2016) 380 ITR 573 (Delhi High Court) — cited in argument and referred to at paras 6 and 10; the Court's own incriminating-material reasoning at paras 17 and 18 does not itself invoke it; PCIT-06 v. Nikki Drugs and Chemicals Pvt. Ltd. (Delhi High Court) — referred to.
It was decided by the High Court on 2017-04-25 and is reported as W.P.(C) 2768/2016 with CM APPL. 11636/2016 and W.P.(C) 2769/2016 with CM APPL. 11637/2016 (Delhi High Court). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 153C, section 153A, section 143(3), section 132, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. Both petitions were allowed with no order as to costs. The notice dated 23 July 2014 issued under s.153A read with s.153C, and all proceedings consequent on it including the order dated 16 March 2016, were quashed. The letter written by the petitioner to Real Gain Estate belonged to the recipient and not to the petitioner; the amendment which brought documents that pertain to a person within s.153C was prospective from 1 June 2015 and did not apply to a satisfaction note prepared on 21 July 2014; the ledger extract related only to assessment year 2010-11 and could not support reopening earlier years; and in any event it was not incriminating because the payments recorded in it had already been disclosed and examined in the regular assessment. It arises in Search, Survey & Block Assessment matters, on section 153C, section 153A, section 143(3), section 132 of the Income Tax Act 1961, and was decided by S. Muralidhar J and Chander Shekhar J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. For each seized document ask who it belongs to on ordinary principles. Correspondence sent by your client to the searched party belongs to the recipient, not to your client. Count the six years from the year in which the satisfaction note was prepared, not the year of search, and strike out any assessment year outside that block. Then test each remaining year separately: a document that speaks only to one year cannot support reopening any other year. If the item was already disclosed and examined in a regular s.143(3) assessment, say so. It is then not incriminating, whoever it belongs to.
Superseded by amendment. Not overruled, and the result stands. Its prospectivity reasoning is qualified by ITO v. Vikram Sujitkumar Bhatia (SC, 2023): the amended s.153C reaches searches conducted before 1 June 2015 where the material is handed over to the Assessing Officer of the other person after that date, so the pre-amendment 'belongs to' test survives only where the satisfaction note itself predates 1 June 2015, as it did here (21 July 2014). The reasoning also rests on RRJ Securities, against which the Revenue's special leave petition was pending and unstayed when this judgment was delivered; the outcome of that petition was not verified for this entry. Date scope: by the closing limb of s.153A(1) that section reaches only a search initiated, or a requisition made, after 31 May 2003 and on or before 31 March 2021, and s.153C is excluded by its own sub-section (3) from any search initiated on or after 1 April 2021, so this entry is authority for a search within that window and says nothing about a later one — a search initiated between 1 April 2021 and 31 August 2024 is governed instead, by force of s.152(3), by ss.147 to 151 as they stood immediately before the Finance (No. 2) Act 2024, and a search initiated on or after 1 September 2024 by the substituted Chapter XIV-B. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
This decision turns on s.153C as it stood before 1 June 2015. The Supreme Court in ITO v. Vikram Sujitkumar Bhatia (2023) 453 ITR 417, already in the library, has since held that the amended s.153C applies to searches conducted before 1 June 2015 where the seized material is handed to the Assessing Officer of the other person after that date, reversing the Gujarat High Court in Anil Kumar Gopikrishna Agarwal. ARN is unaffected on its own facts, the satisfaction note there being dated 21 July 2014, but its prospectivity proposition must be stated as turning on the date of the satisfaction note and not on the date of the search. The Court also recorded that the Revenue had filed a special leave petition against RRJ Securities but that no stay of its operation had been granted. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
Both petitions were allowed with no order as to costs. The notice dated 23 July 2014 issued under s.153A read with s.153C, and all proceedings consequent on it including the order dated 16 March 2016, were quashed. The letter written by the petitioner to Real Gain Estate belonged to the recipient and not to the petitioner; the amendment which brought documents that pertain to a person within s.153C was prospective from 1 June 2015 and did not apply to a satisfaction note prepared on 21 July 2014; the ledger extract related only to assessment year 2010-11 and could not support reopening earlier years; and in any event it was not incriminating because the payments recorded in it had already been disclosed and examined in the regular assessment.
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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