Income Tax Act | S. 153C Proceedings Unsustainable Without Incriminating Material Found In Search: Calcutta High Court

The Calcutta High Court has held that proceedings under Section 153C of the Income Tax Act cannot be initiated unless incriminating material relating to the assessee is found during a search and both the assessing officers (the Assessing Officer of the searched person as well as the Assessing Officer of the person other than the searched person) record the necessary satisfaction.

Section 153C of the Income Tax Act contains a special provision relating to the assessment of 'other person', pursuant to material found during the search operations conducted under Section 132 on any person or as a result of a requisition made under Section 132A of the Act.

Justice Om Narayan Rai stated that there is nothing on record to demonstrate that any incriminating material had been found against the assessee in the search and seizure operation.

In this case, earlier a petition was filed by the assessee challenging the assessment order passed under Section 147/144B of the Income Tax Act, 1961, on the ground that the order had been passed in derogation of the principles of natural justice.

The said writ petition was disposed of by setting aside the assessment order and remanding the matter to the assessing officer for fresh consideration.

The assessing officer has passed a fresh assessment order under Section 147 read with Sections 260 and 144B of the said Act of 1961 upon affording an opportunity of hearing to the assessee.

The case of the assessee is that the assessment proceedings ought to have been initiated and concluded under Section 153C of the said Act of 1961 and not under Section 147 of the said Act of 1961.

The assessee argued that when a search operation is conducted under Section 132 of the Income Tax Act 1961, if there is any incriminating material found during the search operation, the assessing officer should complete the assessment under Section 153A and the name of the assesse will be called “persons searched” and the third party against whom the incriminating material is found will be called “other persons”.

The bench disagreed with the assessee and referred to section 153C of the Income Tax Act.

The bench opined that there is nothing on record to demonstrate that any of the two Assessing Officers had reached such satisfaction.

In fact, the assessment order reveals that the assessment proceeding is based on information received from ADIT(Inv), Unit 2(4), Kolkata, as available in the insight portal, as also evidence collected not only during the search proceedings but also post-search proceedings, noted the bench.

Since the jurisdictional issue raised by the assessee has failed to withstand scrutiny of this Court under Article 226 of the Constitution of India and the assessee has an alternative and efficacious remedy before the Appellate Authority under Section 246 of the said Act of 1961, the petition cannot be entertained, stated the bench.

In view of the above, the bench dismissed the petition.

Case Title: Shiv Kumar Saraf v. Principal Chief Commissioner of Income Tax

Case Number: WPO/646/2024

Counsel for Petitioner/Assessee: Anirban Banerjee and Deep Agarwal

Counsel for Respondent/Department: AryakDutt

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