Section 153C

Section 153C — the law in short

What the courts have decided on section 153C, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• CIT v Jasjit Singh Supreme CourtHelps taxpayer
  A search was made on someone else and my papers were found. From which date are my six years counted - the search, or when my Assessing Officer got the papers?
  From the date your Assessing Officer received the material. The Supreme Court held that the proviso to section 153C(1) does not deal only with abatement: it also fixes the date from which the six year period is reckoned for the person who was not searched. The Revenue's argument that the proviso is confined to abatement, so that the period relates back to the date of the search on the other person, was held insubstantial and without merit. The Court approved the Delhi High Court's reasoning in SSP Aviation and dismissed the Revenue's appeals.
• Dy. CIT v U.K. Paints (Overseas) Ltd Supreme CourtHelps taxpayer
  A section 153C assessment was made on me after a search on someone else, but nothing incriminating about me was found. Does the Abhisar Buildwell rule protect me too?
  Yes. The Supreme Court dismissed a batch of Revenue appeals, holding that where no incriminating material was found during the search — either from the assessee or from the third party — the assessments under section 153C were rightly set aside by the High Court. The Court declined to interfere with those judgments. It did, however, record on the Revenue's request, made on the strength of Abhisar Buildwell, that it remains open to the Revenue to initiate reassessment proceedings under sections 147 and 148 in accordance with law, if that is permissible under the law.
• ITO v Vikram Sujitkumar Bhatia Supreme CourtHelps department
  The search was before June 2015 but the notice came later. Which version of s.153C applies?
  The amended one. The 2015 amendment, which changed 'belongs to' into 'pertains to', applies to searches conducted before 1 June 2015 as well, because the trigger is when the material reaches the officer having jurisdiction over the other person.
• Super Malls Pvt Ltd v PCIT Supreme CourtHelps department
  What if the same officer holds charge of both the searched person and you?
  Then one satisfaction note is enough, provided it records clearly that the seized documents belong to the other person and not to the searched person. There is nothing to transmit, so no second note is needed.
• CIT v Sinhgad Technical Education Society Supreme CourtHelps taxpayer
  The seized documents say nothing about the years being assessed. Can s.153C still be used for them?
  No. The incriminating material must pertain to the assessment years in question, with a document-wise correlation to each. That is a jurisdictional requirement, and without it the notice for those years cannot stand.
• CIT v Calcutta Knitwears Supreme CourtHelps department
  When must the satisfaction note be recorded before proceedings are taken against a third party?
  Before the seized records are handed over. It may be recorded at any of three stages — with the initiation of proceedings against the searched person, during them, or immediately after they are completed — but the note itself is a sine qua non.
• Neeraj Bharadwaj v ACIT High CourtHelps taxpayerValidity unconfirmed
  The seized material shows a cash payment made in an earlier year. Can six later years be reopened under s.153C on the strength of it?
  No. A s.153C notice can be issued for an assessment year only if the Assessing Officer is satisfied that the seized books, documents or assets have a bearing on the determination of the total income for that year. Material about a transaction in one financial year says nothing about the years that follow, and notices for those years cannot stand.
• Saksham Commodities Ltd v ITO High CourtHelps taxpayer
  The satisfaction note points to material for one year, but notices under s.153C have come for the whole block of six. Can they stand?
  No. Section 153C confers a power; it does not compel its use across the block. Before issuing a notice the Assessing Officer must identify the assessment year or years to which the seized material relates or which it is likely to affect, and must be satisfied that it is likely to bear on the total income of those years. The proceedings are confined to those years. Where the material speaks to one year, notices for the remaining years of the block are unsustainable, and if the Revenue says a document is incriminating for several years the satisfaction note must record reasons for saying so.
• PCIT v Ojjus Medicare P Ltd High CourtCuts both ways
  How do I count the six and the ten assessment years for a s.153C notice, and does the Rs 50 lakh figure have to be met year by year?
  Count them from different points, and no. For a person who was not searched, the first proviso to section 153C moves the starting point: the date on which the seized books, documents or assets are handed to his own Assessing Officer stands in place of the date of the search. From that point the six assessment years are the six that immediately precede the assessment year relevant to that previous year - the year of the handing over is excluded and treated as the zero year. The further block of 'relevant assessment years' under Explanation 1 to section 153A is not counted the same way: it runs backwards from the END of that assessment year, that is from the 31st of March, and the tenth year is the terminal point. On the money threshold, the Rs 50 lakh in clause (a) of the fourth proviso is satisfied if the escaped income meets the benchmark cumulatively or in the aggregate; it does not have to be reached in each year separately.
• Mohd. Farhan A. Shaikh v ACIT (Full Bench) High CourtHelps taxpayer
  Bombay had two conflicting lines on defective penalty notices. Which one won?
  The assessee's. A Full Bench held that the grounds must be conveyed through the statutory notice, that an omnibus notice suffers from the vice of vagueness, and that non-striking of the irrelevant portion renders the penalty order bad in law.
• PCIT v Anand Kumar Jain (HUF) High CourtHelps taxpayer
  The addition rests only on an entry operator's search statement. Is that enough to assess me?
  No. A s.132(4) statement has evidentiary value, but standing alone and without any other material found in the search it cannot support the assessment. Where the statement came out of a search of a third party, s.153C is the route and cannot be bypassed, and the deponent must be offered for cross-examination.
• Sanjay Sawhney v PCIT High CourtHelps taxpayerValidity unconfirmed
  I won before the CIT(A) but lost the jurisdiction point. Can I raise it in their appeal?
  Yes. Rule 27 lets a respondent who has not appealed support the order on a ground decided against him, provided the ground relates to the subject matter of the appeal and bears on the outcome. Not filing a cross-objection is not acceptance of the adverse findings, and the Rule prescribes no written application.
• Ganpati Fincap Services Pvt Ltd v CIT High CourtHelps departmentValidity unconfirmed
  The same officer is the Assessing Officer of the searched person and of our client. Does he still have to record a satisfaction note, and does he need two?
  He must record one, and it must exist before the s.153C proceedings are started. He does not have to write two notes. The single note is recorded in his capacity as the Assessing Officer of the searched person, it is a note about the other person, and it is placed in the other person's file. It does not have to say in terms that the documents do not belong to the searched person.
• ARN Infrastructure India Ltd v ACIT High CourtHelps taxpayerSuperseded by amendment
  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.
• CIT v RRJ Securities Ltd High CourtHelps taxpayerValidity unconfirmed
  Papers of mine were seized in a search on somebody else and I have got notices under section 153C for six years. Which six years, and can completed assessments be reopened when the papers show nothing?
  It depends, and here the answer was no on both counts. The Delhi High Court held that for a person other than the searched person, the six assessment years under section 153C run from the date the seized material is handed over to his Assessing Officer - here the satisfaction note of 8 September 2010 - not from the date of the search. Assessment years 2003-04 and 2004-05 were therefore outside the section. It further held that completed assessments cannot be reopened where the seized documents have no bearing on those years. The Revenue's appeals were dismissed.
• Pepsi Foods Pvt Ltd v ACIT High CourtHelps taxpayerSuperseded by amendment
  The satisfaction note says the officer is satisfied and nothing else. Is that enough to found a s.153C notice?
  On s.153C as it stood before 1 June 2015. No. Anything found during a search is presumed by law to belong to the person searched. Before the Assessing Officer of the searched person can say a document belongs to somebody else, he must rebut that presumption on cogent material, and the satisfaction note itself must show the reasons. A note that only recites the word 'satisfied' fails the first step, and everything built on it goes. Read the decision only against that older wording: with effect from 1 June 2015 s.153C was widened to cover books or documents that 'pertain to' the other person or contain information 'relating to' him, and in ITO v. Vikram Sujitkumar Bhatia (SC, 2023) the Supreme Court held the amended provision applies even where the search was conducted before that date. The 'belongs to' analysis in this case is therefore not the current test.
• SSP Aviation Ltd v DCIT High CourtHelps departmentValidity unconfirmed
  A search was carried out on someone else and my agreements were seized. Can the department open six years of my assessments under section 153C when everything was already in my audited books?
  Yes, it can start the enquiry. The Delhi High Court dismissed the writ petition and held that section 153C(1) requires the searched person's Assessing Officer to be satisfied only that the seized document belongs to another person - not that it discloses undisclosed income of that person. Unlike section 158BD, section 153C does not mention undisclosed income at all. The section is only the first step: the documents go to the other person's Assessing Officer, who then follows the section 153A procedure, and if the returns show the income was accounted for, the proceedings must be closed. Inconvenience is not a ground to strike the machinery down.
• Kaane Visionary Projects Pvt Ltd v ACIT ITATHelps taxpayerValidity unconfirmed
  The CIT(A) deleted the addition but taxed something else instead. Can the first appeal introduce a new source of income?
  No. The enhancement power under s.251 is confined to what was the subject matter of the assessment. Estimating commission income the Assessing Officer had never examined went beyond it, and the enhancement was deleted.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.