M/S. EAGLE TRADERS & LOGISTICS,BELLARY vs. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 2(3), BANGALORE

Per Laxmi Prasad Sahu, Accountant Member : All these ITA Nos. 234, 235, 236 & 237/Bang/2020 are appeals filed by the assessee relating to assessment years 2008-09 to 2011-12 against separate order passed by the l. CIT (A) . , Bengaluru, all dated 29-11-2019 of the CIT(Appeals)-11, . Common issues are involved in all these appeals and arises out of identical facts and circumstances. We therefore deem it fit and convenient to pass a common order. The assessee has raised following grounds of appeal :- Sl. No. Particulars Tax Effect in Rs. 1 a) The orders of the authorities below in so far as these are against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case. -

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b) The appellant denies itself liable to be assessed on a total income of Rs.1,83,75,86,023/- as against the returned income of Rs.3,60,56,850/- under the facts and circumstances of the case.
2
a)
The assessment completed under section 153C of the Act is bad in law as the appellant is the person searched and thus the assessment ought to have been completed under section 153A of the Act under the facts & circumstances of the case.
b)
The learned CIT(A) erred in holding that the assessment completed under section 153C of the Act instead of 153A is a curable defect under section 292BB of the Act under the facts & circumstances of the case.
c)
The learned CIT(A) failed to appreciate that the juri ictional defects cannot be cured under section 292BB of the Act and thus the assessment completed under section 153C of the Act ought to have been quashed under the facts & circumstances of the case.
d)
Without prejudice, the order of assessment is bad in law as the mandatory condition of recording of satisfaction under section 153C of the Act has not been complied with or having complied, copy of satisfaction note has not been provided to the appellant and thus the assessment has no legs to stand the test of law.
e)
The orders of the authorities below are bad in law as the search initiated in the case of the appellant is illegal and ultra vires the provisions of section 132(1)(a), (b) & (c) of the Act on the facts of the case.
f)
The authorities below failed to appreciate that the search is conducted not on the basis of any prior information or material inducing any belief but purely on the suspicion and therefore, the action under section 132(2) is bad in law and consequent assessment is null and void-ab-initio on the parity of the ratio of the decision of the Hon’ble
The authorities below failed to discharge the burden of proving that there is a valid initiation of search under section 132(1)(a), (b) & (c) of the Act, its execution and -

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its completion in accordance with law to render the proceedings valid under the facts and circumstances of the case.
3
Prior Approval of the Additional Commissioner:
a) The prior approval of the Additional Commissioner was not obtained or having obtained, the copy of the same was not provided to the appellant which is in gross violation of the settled principles of natural justice and thus the order of assessment needs to be set aside under the facts and circumstances of the case.
b) The order of assessment is bad in law as the approval of the Additional Commissioner under section 153D of the Act presupposes the application of mind by the Additional
Commissioner which is not discernible from the order of assessment on the facts of the case.
c) The learned CIT(A) failed to appreciate that the prior approval of the Additional Commissioner could not have been obtained by the assessing officer as the assessment order was passed on 20.03.2013 whereas the impugned approval of the Additional Commissioner was obtained on 30.03.2013 under the facts & circumstances of the case.
-
1. The other specific grounds raised by the appellant are as under:
A.Y. 2008-09
4
Disallowance of Purchases:
a)
The learned CIT(A) erred in confirming the addition made by the assessing officer of Rs.77,02,800/- being purchases from unregistered dealers under the facts and circumstances of the case.
b)
The authorities below erred in holding that the appellant failed to establish genuineness of the persons from whom purchases were made under the facts & circumstances of the case.
29,03,293/-

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c)
The authorities below failed to appreciate that the impugned purchases have been declared in the statutory returns filed under the Karnataka Value Added Tax Act, 2003 and thus the addition made by holding that the appellant failed to establish genuineness of the persons from whom purchases made is untenable & liable to be deleted under the facts &
circumstances of the case.
d)
The authorities below are not justified in disallowing the purchases made by the appellant while accepting the entire sales under the facts & circumstances of the case.
5
The appellant denies itself liable to be levied to interest under sections 234A, B & C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with the provisions of the Act.
23,30,485/-
A.Y. 2009-10
4
Disallowance of Purchases:
a) The learned CIT(A) erred in confirming the addition made by the assessing officer of Rs.13,49,83,622/- being purchases from unregistered dealers under the facts and circumstances of the case.
b)
The learned CIT(A) erred in confirming the addition made by the assessing officer of Rs.23,25,28,455/- being purchases from registered dealers under the facts and circumstances of the case.
c)
The authorities below failed to appreciate that the impugned purchases have been declared in the statutory returns filed under the Karnataka Value Added Tax Act, 2003 and thus the addition made by holding that the appellant failed to establish genuineness of the persons from whom purchases made is untenable & liable to be deleted under the facts &
circumstances of the case.
d)
The authorities below are not justified in disallowing the purchases made by the appellant while accepting the entire sales under the facts & circumstances of the case.
4,17,09,939/-
7,18,51,293/-

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5
The appellant denies itself liable to be levied to interest under sections 234A, B & C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with the provisions of the Act.
7,68,81,516/-
A.Y. 2010-11
4
Disallowance of Purchases:
e)
The learned CIT(A) erred in confirming the addition made by the assessing officer of Rs.45,53,51,501/- being purchases from unregistered dealers under the facts and circumstances of the case.
f)
The learned CIT(A) erred in confirming the addition made by the assessing officer of Rs.1,13,12,76,982/- being purchases from registered dealers under the facts and circumstances of the case.
g)
The authorities below failed to appreciate that the impugned purchases have been declared in the statutory returns filed under the Karnataka Value Added Tax Act,
2003 and thus the addition made by holding that the appellant failed to establish genuineness of the persons from whom purchases made is untenable & liable to be deleted under the facts & circumstances of the case.
h)
The authorities below are not justified in disallowing the purchases made by the appellant while accepting the entire sales under the facts & circumstances of the case.
14,07,03,614/-
34,95,64,587/-
5
Disallowance of Bad Debts:
a)
The learned CIT(A) erred in confirming the disallowance of bad debts written off of Rs.6,44,25,411/- under the facts
& circumstances of the case.
b)
Without prejudice, the sum of Rs.6,44,25,411/- ought to have been allowed as a business loss/ expense under section 28 or section 37(1) of the Act under the facts and circumstances of the case.
1,99,07,452/-

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c)
Without prejudice, the authorities below erred in disallowing the bad debts written off of Rs.3,28,25,539/- being amounts receivable from M/s. Sri Krishna Minerals,
Hospet despite the finding of the assessing officer that the claim of the appellant is allowable under the facts &
circumstances of the case.
6
Disallowance of Transportation Charges:
a)
The learned CIT(A) erred confirming the addition made by the assessing officer of Rs. 15,04,75,279/- as bogus transportation charges under the facts and circumstances of the case.
b)
Without prejudice, the authorities below ought to have allowed at least a sum of Rs.6,00,52,973/- as there is no contrary finding by the learned assessing officer on the impugned amounts under the facts & circumstances of the case.
4,64,96,861/-
7
The appellant denies itself liable to be levied to interest under sections 234A, B & C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with the provisions of the Act.
32,41,24,102/-
A.Y. 2011-12
4
Disallowance of Purchases:
a)
The learned CIT(A) erred in confirming the addition made by the assessing officer of Rs.14,77,63,883/- being purchases from registered dealers under the facts and circumstances of the case.
b)
The authorities below failed to appreciate that the impugned purchases have been declared in the statutory returns filed under the Karnataka Value Added Tax Act, 2003 and thus the addition made by holding that the appellant failed to establish genuineness of the persons from whom purchases made is untenable & liable to be deleted under the facts &
circumstances of the case.
4,56,59,040/-

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c)
The authorities below are not justified in disallowing the purchases made by the appellant while accepting the entire sales under the facts & circumstances of the case.
5
The appellant denies itself liable to be levied to interest under sections 234A, B & C of the Act and further the computation of interest was not provided to the appellant as regard to the rate, period and method of calculation of interest under the facts and circumstances of the case. The appellant expressly urges that the period of levy of interest is not in accordance with the provisions of the Act.
2,04,65,598/-
2. Since in all these appeals the issues are similar , therefore, the cases were heard together and disposing of by way of this common order. For the sake of convenience & brevity we are taking first to the assessment year2008-09 and decision taken on this appeal shall apply mutant-mundis in other appeals also.
3. Briefly stated the facts of the case are that,the appellant is a firm, Sri B
Nagendra and Sri. K Nagaraj are the partners of the firm. The appellant is engaged in the business of trading in iron ore. There was a search & seizure action conducted on 25-10-2010 u/s. 132 of the Income-tax Act, 1961 [the Act] in the case of B Nagendra, who happens to be one of the partners of assessee firm and the place of business of the assesseewas also subjected to search. The assessee has filed its return of income u/s 139 (1) declaring income of RS. 92,26910/- consequent upon search conducted a notice under section 153C dated
14.11.2011 was issued to the assessee, further due to change of incumbency another notice u/s 153Cr.w.s. 129 dated 01.10.2012 was issued to the assessee.
The assessee filed a letter dted 08.10.2012 requesting time and time was granted.
further the AO gave another oppourtunity vide letter dated 29.10.2012, thereafter the assessee filed another letter dated 21.11.2012 and sought further time . further the assessee was given show cause notice vide letter dated 17.12.2012, consequent to this letter the assessee filed return of income pursuant the notice u/s 153C declaring the same income as declared in return filed u/s 139 (1) .

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subsequently other statutory notices were issued to the assessee but there was no compliance from the assessee side IN light of the above a final show cause notice was given u/s 144 dated 04.03.2013 proposing to complete the assessment on the basis of materials available on record . All the issues that were found to be incriminating aganit the assessee were incorporated in the show-cause notice. .
on 14.03.2013 the assessee requested for copy of seized materials. Subsequently the assessee submitted reply. Considering the submissions and on the basis of materials available on the basis of search , it was seen from the Profit & Loss
Account of the assessee firm reflected a purchase of iron worth Rs. 77,02,800/- from unregistered dealers which were reflected in seized materials as A/BN/41
dated 25.10.2010. During the course of scrutiny proceedings, notice under section 142(1) of the Act dated 04.03.2013 was issued to the assessee. The assessee was asked to furnish substantiating evidence of the persons from whom the undersigned purchase is claimed to have been made by producing the following documents.
1. Full and true disclosure of the parties along with their PANs from whom the unregistered iron ore is claimed to be purchased for the purpose of verification,
2. Copies of mining lease held if any by the parties from whom the unregistered purchases of iron ore has been made.
4. In response to the above, the assessee filed a letter dated 14.03.2013 with regard to the above questionnaire, submitted the payments for said unregistered purchases have been made. However, the assessee did not furnish any substantiating proof and evidence as called for. On examination of the ledger abstract of unregistered purchase reflects as under :

There is no PAN nor the assessee has been able to furnish the complete detailed address as required in notice dated 04.03.2013. ITA Nos.234 to 237/Bang/2020
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
The assessee has not been able to produce the parties before the AO for the verification of genuineness of purchase.

The details submitted of parties, there is no TIN and therefore they do not have the statutory recognition by the commercial department, Government of Karnataka.

Where the assessee has made payment in cheque, the assessee has failed to establish the identity of the seller.

There is no purchase invoices in any of the transactions of URD purchases.
5. From the above, the AO has noticed that the amount of Rs.77,02,800/- debited as URD purchase is bogus entry and it is proved beyond reasonable doubt that it is only an adjustment entry to reduce the profits as per books by inflating expenditure and reducing tax liability thereon. In the light of the above, the assessee was further asked to substantiate why section 40A(3) of the Act should not be invoked in the assessee’s case with regard to the unregistered purchases.
In this response, the assessee’s letter dated 14.03.2013 has stated that no payment of cash towards purchase exceeds Rs.20,000/- and therefore no disallowance on account of the above is warranted. The contention of the assessee was not accepted and observed that the assessee has not substantiated the genuineness of the purchase and identity of unregistered dealers and given the fact that the cash payments have been made to the unregistered dealers in due compliance of section 40A(3) of the Act. Thus, the assessee has not complied with the provisions of section 40A(3) of the Act. Further, the assessee was asked to substantiate why explanation to section 37(1) of the Act should not be invoke by treating the unregistered purchases as illegal mining, given the fact that the assessee has failed to establish the genuineness of unregistered dealers. In ITA Nos.234 to 237/Bang/2020
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response to the above, the assessee stated that all purchases are accounted in the books of the assessee firm and payments have been effected through banking channels in most of the cases and further stated that there is prohibition in law to purchase from unregistered dealers and hence proved by circumstantial evidence at the explanation to section 37(1) of the Act does not apply to the assessee firm.
Further, the assessee firm stated illegality has to be under any particular provision of the law or Act. Since the assessee firm has not given the notice under any other law. The purchases cannot be treated as illegal purchase and unexplained purchases because the source of the payment and party to whom payment is made is true. Further, the AO noted that the assessee is unable to produce any of the parties from whom URD purchases were made vide as per the Office letter dated
04.03.2013 and further observed that the purchase made is unexplained purchases and not genuine. Further, it was observed that, iron ore found in the area of business operation of the firm has been found to be traded illegally excavated without proper licence from the Department of Mines and Geology and clearance from Ministry of Environment and Forests. The AO observed that assessee is unable to substantiate the genuineness of purchases and legality of the unregistered purchases by producing the cogent evidentiary value. The total purchases from unregistered dealers were disallowed in terms of explanation to section 37(1) of the Act and added back to the total income.
6. Aggrieved from the above Order, assessee filed appeal before the learned
CITA() raising the legal issues as well as on merits. The learned CIT(A) after considering the submissions, dismissed the appeal of the assessee.
7. Aggrieved from the Order of the CIT(A), assessee filed appeal before the ITAT. The appellant has challenged the validity of the assessments framed under Section 153C of the Income-tax Act, 1961 (“the Act”) on multiple grounds. It has been contended that, since the appellant's business premises were subjected to search and seizure operations, the appellant becomes a "person searched".

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Consequently, the assessments ought to have been completed under Section 153A, and not under Section 153C. Further, it has been contended that recording of a satisfaction which is a precondition for invoking juri iction under Section 153C by the Assessing Officerhas not been complied with. Further, the appellant submits that the mandatory approval from the competent authority under Section 153D of the Act was not obtained prior to the completion of the assessments, thereby rendering the proceedings invalid and unsustainable in law.The appellant has raised detailed and substantive grounds of appeal for each of the four assessment years under consideration. However, since the issues involved are common to all four years and arise from identical facts and circumstances.TheGroundsNo. 1 to 3 are common for all the four years. The said grounds are reproduced as under:
4. In ground 2(a),the appellant has raised a specific contention that a search under Section 132 of the Act, was carried out at its business premises. It is the appellant’s case that, since its premises were subject to search, it falls within the scope of a "person searched" as contemplated under Section 153A of the Act. Accordingly, it has been submitted by the learned
Authorised Representative (AR) that the initiation and completion of assessment proceedings under Section 153C of the Act are without juri iction and, therefore, liable to be quashed.
5. The authorities below have stated that the appellant was a person searched.
The learned CIT(A)has noted that invoking section 153C instead of section 153A as claimed by the appellant is a curable defect and hence rejected the contention of the appellant.
6. The learned Departmental Representative (DR) submitted that the search was primarily conducted in the case of Mr. B. Nagendra, one of the partners of the appellant firm, and not in the case of the appellant per se. It was ITA Nos.234 to 237/Bang/2020
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further submitted that the appellant, being a person other than the person searched but in respect of whom incriminating material was allegedly found during the course of the search, was rightly assessed under the provisions of Section 153C of the Act. Accordingly, the learned DR contended that the assessment is valid in law.
7. In ground 2(d),the appellant has contended that the mandatory requirement of recording satisfaction, as prescribed under Section 153C of the Act has not been complied with. Alternatively, it is submitted that even if such satisfaction has been recorded, a copy of the satisfaction note has not been furnished to the appellant, thereby rendering the assessment proceedings legally unsustainable.During the course of the appellate hearing, the learned
Authorised Representative submitted that, assuming without admitting that the appellant is not a person searched, the requisite satisfaction under Section 153C of the Act ought to have been recorded in the files of the person searched, namely, Mr. B. Nagendra. It was further submitted that, as per the information provided by the Department, no such satisfaction has been recorded in the files of Mr. B. Nagendra.In view of the above, the learned AR has argued that the assumption of juri iction under Section 153C of the Act is vitiated and the proceedings initiated thereunder are void ab initio. Accordingly, it was prayed that the assessment orders passed by the lower authorities be quashed on this ground alone.
8. In Ground No. 3, the appellant has specifically contended that the prior approval of the competent authority, i.e., the Additional Commissioner or Joint Commissioner of Income Tax, as mandated under Section 153D of the Act, was not obtained prior to the issuance of the assessment order. In the absence of such statutory approval, the appellant has prayed for the assessment order to be set aside as being without authority of law and, therefore, void ab initio.

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8. During the course of the hearing on 10.12.2024, the appellant requested the Bench to call for the departmental records evidencing the recording of satisfaction under Section 153C of the Income-tax Act, 1961 (“the Act”), along with the files containing the reasons for initiation of proceedings and the approval granted under Section 153D of the Act.Subsequent to this request, the Bench directed the appellant to visit the office of the Income Tax Department for inspection of the relevant assessment records. In compliance with the said direction, the appellant visited the office of the juri ictional Assessing Officer,
Ward–1 & TPS, Bellary, to inspect the files pertaining to the recording of satisfaction under Section 153C of the Act and to obtain details regarding the approval under Section 153D of the Act.
9. The appellant vide letter dated 27.01.2025 informed the Bench that, owing to the recent decentralisation of juri iction, the relevant assessment records were said to be unavailable and would be produced in due course. Despite that assurance, the records were never furnished for inspection. The learned
Authorised Representative therefore sought a direction compelling the Department to produce the complete files andwe have directed the learned
Departmental Representative to place the records before the Bench.
10. The learned Departmental Representative produced communications from the juri ictional Assessing Officer dated 10.02.2025 and 24.03.2025, wherein it was stated that the Assessing Officer for both the appellant and the person searched, namely Mr. B. Nagendra, is the same. Along with these communications, an order sheet noting in the files of the appellantwas also furnished, as per which certain documents pertaining to the appellant were seized during the course of the search and consequently, notice under Section 153C was issued. However, during the course of the hearing, the learned DR fairly admitted that the satisfaction note, as required under Section 153C of the Act, was not recorded in the file of the person searched, i.e., Mr. B. Nagendra. Additionally,

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(SC) and the decision of the Hon’ble Karnataka High Court in the case of CIT v.
IBC Knowledge Park (P.) Ltd. [(2016) 385 ITR 346], where it was held that the precondition for issuing notice under Section 153C is the existence of incriminating material that is found and seized during the course of a valid search and that such material must pertain to the assessee. It was further held that in the absence of such material, no valid proceedings under Section 153C can be initiated.
13. The appellant has also relied upon the judgment of the Hon’ble Delhi High
Court in Pr. CIT v. Delhi International Airport Pvt. Ltd. [(2023) 443 ITR
382], wherein it was emphasized that the Assessing Officer must record a satisfaction note which demonstrates a nexus between the seized material and the income alleged to have escaped assessment. The decision reiterates that the mere existence of documents is not sufficient unless they are shown to be incriminating and form the basis for inferring undisclosed income.

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14. Per contra, the learned Departmental Representative supported the orders passed by the Commissioner of Income Tax (Appeals) and submitted that the assessments were validly initiated and completed in accordance with law. It was further contended that the additions made by the Assessing Officer were based on material evidence and are liable to be sustained.
15. The learned DR has submitted the warrant of authorization issued in the case of Mr. B. Nagendra, which clearly demonstrates that the search operation was conducted in his case. However, the Authorised Representative (AR) for the appellant was unable to produce any documentary evidence to establish that a warrant of authorization was issued in the name of the appellant. Instead, the AR relied solely on the references made in the assessment order and the order of the CIT(A), wherein it was mentioned that a search was conducted at the appellant’s premises. In the absence of a warrant in the name of the appellant, and given the DR’s submission confirming the warrant was issued only in the case of Mr. B.
Nagendra, the appellant cannot be treated as a “person searched” for the purpose of invoking assessment proceedings under Section 153A. Therefore, the proceedings initiated under Section 153C must meet the strict statutory requirements, including the recording of valid satisfaction and obtaining prior approval under Section 153D.
16. We have carefully considered the submissions advanced by both sides.
Section 153C of the Income-tax Act, 1961, contemplates the assessment of a person other than the person searched, provided that the Assessing Officer is satisfied that any money, bullion, jewellery, books of account, or documents seized or requisitioned during the course of a search under Section 132 or a requisition under Section 132A, belongs to or pertains to such other person. A fundamental prerequisite for the lawful invocation of juri iction under Section 153C is the recording of a satisfaction note by the Assessing Officer of the person searched. This satisfaction must unequivocally state that the seized or ITA Nos.234 to 237/Bang/2020
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requisitioned material belongs to or relates to a person other than the one searched, namely, the assessee. Only upon the recording of such satisfaction can the Assessing Officer of the other person assume juri iction and initiate proceedings under Section 153C. Here in this case the assessing officer of the searched person and AO of the other person is same, in such case if the valid satisfaction is recorded in the case of person searched would suffice to requirement of section 153C of the Act, relying on the judgemnt of hon’ble Apex court in the case of super Malls (p) Ltd. vs PCIT reported in (2020) 115
taxmann.com 105 (SC).The cse recorded was called for of Shri B. Nagendra &
assessee on the date of hearing at the request of ld. AR, the same were produced.
On examination of the same we found that there is no satisfaction recorded by the AO, only the copies of ordersheet in both the files are there, the scanned copies are as under:-

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17. On going through the above order sheet entry and various judgements decided by the hon’ble courts it has been held that recording of satisfaction note is mandatory words regarding the documents belongs to , pertains to relates to are missing as held by the hon’ble Apex court in the case of VIKRAM Sujit kumarBhtia vs PCIT reported in(2023) 149 taxmann.com 123 (SC) in which it has been held as under:-
4. Shri K.M. Nataraj, learned ASG appearing on behalf of the Revenue has vehemently submitted that while passing the impugned common judgment and order and quashing and setting aside the notice under section 153C of the Act,
1961 issued against the original writ petitioners - the persons other than the searched persons, the High Court has not properly appreciated and considered the ITA Nos.234 to 237/Bang/2020
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object and purpose, which necessitated the amendment in section 153C of the Act, 1961. He has taken us to the section 153C of the Act, 1961 as it stood before the amendment vide Finance Act, 2015 and section 153C after being amended by the Finance Act, 2015, which read as under:—
"Section 153C as it stood before the amendment vide Finance Act, 2015 read as:—
153-C. Assessment of income of any other person.—(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and Section 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned belongs or belong to a person other than the person referred to in section 153-A, then, the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing Officer having juri iction over such other person and that Assessing Officer shall proceed against each other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A,
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132-A in the second proviso to sub-section (1) of section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having juri iction over such other person:
Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made except in cases where any assessment or reassessment has abated.
(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having juri iction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132-
A and in respect of such assessment year—

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(a) no return of income has been furnished by such other person but no notice under sub-section (2) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having juri iction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153-A."
Section 153C of the act after being amended by Finance Act, 2015 reads thus:—
153C. Assessment of income of any other person.—(1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,—
(a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153-A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having juri iction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153-A:
Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132-A in the second proviso to sub-section (1) of section 153-A shall be construed as reference to the date of receiving the books of account or documents or assets

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seized or requisitioned by the Assessing Officer having juri iction over such other person:
Provided further that the Central Government may by rules made by it and published in the Official Gazette, specify the class or classes of cases in respect of such other person, in which the Assessing Officer shall not be required to issue notice for assessing or reassessing the total income for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153-A except in cases where any assessment or reassessment has abated.
(2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having juri iction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132-
A and in respect of such assessment year—
(a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having juri iction over such other person, such Assessing Officer shall issue the notice and assess or reassess total income of such other person of such assessment year in the manner provided in section 153-A."
4.1 It is submitted by Shri Nataraj, learned ASG that the amendment in section 153C was necessitated in view of the observation of the Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. v. Asstt. CIT [2014] 50 taxmann.com
299/[2015] 228 Taxman 116 (Mag.)/2014 SCC Online Del 4155 whereby the High Court has observed that the words "belongs or belong to" should not be confused with the words 'relates to or refers to,' the former being much narrower than the latter. It is submitted that it was held that therefore, the provision could not have been invoked unless the documents/material 'belong to' the third party
(other than the searched person). That in such a situation, where though incriminating material pertaining to a third party was found during search

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proceedings under section 132, the Revenue could not proceed against such third party in view of the observations of the Delhi High Court. Therefore, as such, the said observation of the Delhi High Court was coming in the way of suppressing the very mischief which the legislature intended to suppress. That therefore, vide
Finance Act, 2015, w.e.f. 1-6-2015, section 153C has been amended by way of substitution to replace the words "belongs or belong to" with the words "pertains or pertain to" insofar as books of account and documents are concerned.
4.2 It is further submitted that there is a difference between the words or phrases
"belongs or belong to" and "pertains or pertain to". It is submitted that the words
"pertains or pertain to" are of much wider import than "belongs or belong to".
That, therefore, the legislature has expanded the scope of operation of section 153C to include the situation where during search proceedings under section 132
of the Act, 1961, if incriminating documents/materials pertaining to a third party are found, the Revenue can proceed against such third party.
4.3 It is next submitted by Shri Nataraj, learned ASG appearing on behalf of the Revenue that while interpreting the amendment to section 153C by Finance Act,
2015, the following principles/tests need to be kept in mind:—
(i) effect of amendment by substitution;
(ii) legislative intent;
(iii) Section 153C of the Act, 1961 is a machinery provision;
(iv) interpretation which makes the statute or a part of it a "dead letter" to be avoided;
(v) power to legislate includes power to legislate retrospectively.
4.4 Elaborating the above, it is submitted that so far as the effect of amendment to section 153C is concerned, section 153C has been amended by way of "substitution", vide Finance Act, 2015, w.e.f. 1-6-2015 whereby the words
"belongs or belong to" have been substituted by "pertains or pertain to". That it is a well settled principle of interpretation that any amendment made by way of substitution relates back to the date of the Parent Act. Reliance is placed on the decision of this Court in the case of Shamrao V. Parulekar v. District
Magistrate [1952] 2 SCC 1/1952 SCR 683. That in the said decision, it is observed and held that an amendment by substitution has the effect of wiping out the earlier provision from the statute book and replacing it with the amended provision as if the unamended provision never existed. Therefore, the statute, which in this case is section 153C of the Act, 1961 would have to be read as if ITA Nos.234 to 237/Bang/2020
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the amended provision existed from the very inception. Shri Nataraj, learned
ASG has also placed reliance on the decision of this Court in the case of Zile
Singh v. State of Haryana [2004] 8 SCC 1 (paras 24 and 25).
4.5 It is contended that even while interpreting the amendment to section 153C by Finance Act, 2015, the legislative intent behind the amendment is required to be considered. That while interpreting a statute the Court must bear in mind the intention with which the legislation was passed and the mischief it sought to suppress. That the interpretation which best expresses the intention of the legislature should be preferred. That in the present case, the intention of the legislature was to bring within the scope of section 153C those persons against whom incriminating material is found at another person's premises during the search proceedings under section 132. That, however, the narrow scope given to the words "belongs or belong to" frustrated this purpose and, therefore, the amendment was necessitated. It is submitted that bearing the said legislative intent and the mischief sought to be suppressed in mind, any interpretation other than that the amended section 153C will apply to all pending and future proceedings, irrespective of whether the search under section 132 of the Act,
1961 was before or after the amendment, would fail to advance the object of the legislation. In support of the above submission, Shri Nataraj, learned ASG has relied upon the decisions of this Court in the cases of Zile Singh (supra) (paras
14, 15, 18 and 20) and Girdhari Lal v. Balbir Nath Mathur [1986] 2 SCC 237. 4.6 Relying upon above two decisions, it is contended that the object and purpose of the amendment to remove the mischief and defect for which the amendment was necessitated is required to be considered and borne in mind. That as observed and held that once the Parliament's intention is ascertained and the object and purpose of the legislation is known, it then becomes the duty of the Court to give the statute a purposeful or a functional interpretation.
4.7 It is further contended by Shri Nataraj, learned ASG that section 153C of the Act, 1961 is a machinery provision. He submitted that the High Court in the impugned judgment and order has also observed that section 153C is a machinery provisions. While interpreting a machinery provision of a taxing statute, it is the duty of the Court to give effect to its manifest purpose. The interpretation that defeats the purpose of the statute should be avoided. That despite the observation by the High Court that section 153C of the Act, 1961 is a machinery provision, the High Court has failed to give effect to the object behind it. Reliance is placed on the decision of this Court in the case of CIT v. Calcutta Knitwears [2014] 43
taxmann.com 446/223 Taxman 115 (Mag.)/6 SCC 444 (paras 32 and 34).
4.8 It is next submitted by Shri Nataraj, learned ASG that as per the settled position of law, the statute must be read as a whole and any interpretation which ITA Nos.234 to 237/Bang/2020
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makes the statute or a part of it a "dead letter" has to be avoided. That the construction adopted shall be in consonance with other provisions of the statute.
That as per the settled law, the courts should endeavour to harmonise statutes in conflict. One provision cannot be used to defeat the object and purpose of another. It is submitted that in this background, a perusal of section 153C would show that if the contention of the respondents that the amended section 153C would not be applicable to searches conducted before the amendment is accepted, then the purpose behind the words "if that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for six assessment years immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years referred to in sub-section (1) of section 153A" would be defeated.
That it is always presumed that the legislature would not take away with one hand what it gives with the other. In support of the above, reliance is placed on the decision of this Court in the case of CIT v. Hindustan Bulk Carriers [2003] 126
Taxman 321/3 SCC 57 (paras 17 to 21).
4.9 It is submitted that even otherwise the power to legislate includes the power to legislate retrospectively. That it is well settled that the legislature is well competent to legislate retrospectively. That though, retrospectivity of an enactment may not be presumed, the same can be done through express enactment or by necessary implication. Therefore, if the legislature is competent and the intention of the legislature to expand the scope of the statute can be gathered, whether expressly or by necessary implication, the same shall be given effect to. In support of the above submission, reliance is placed on the decision of this Court in the case of Government of Andhra Pradesh v. Hindustan
Machine Tools Ltd. [1975] 2 SCC 274 (para 10) and Lily Thomas v. Union of India [2013] 7 SCC 653 (para 21).
4.10 It is further submitted by Shri Nataraj, learned ASG that the High Court has erred in holding that the respondents have a "vested right" and the amendment to section 153C of the Act, 1961 affects such vested substantive right of the respondents. That no such substantive rights are vested in the respondents. Once the conditions enumerated in section 153C are satisfied, no liability is fastened ipso facto. It is submitted that the authorities issued a show cause notice and thereafter proceedings were initiated in accordance with law. Therefore, the High
Court has erred in quashing the proceedings at the initial stage of show cause notice by holding that substantive rights of the respondents are affected.
4.11 Making above submissions, it is vehemently submitted that the High Court has committed a grave error in holding that section 153C as amended by the ITA Nos.234 to 237/Bang/2020
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Finance Act, 2015 w.e.f. 1-6-2015, though a machinery provision, will only apply to search proceedings initiated after the amendment in section 153C.
4.12 Making above submissions, it is prayed that the present appeals be allowed and the impugned common judgment and order passed by the High Court be quashed and set aside.
5. While opposing the present appeals, the counsel appearing on behalf of the respective assessees have vehemently submitted that the controversy in the present group of appeals is with respect to the point of applicability of the extant law in search cases, i.e., whether section 153C of the Act, 1961 as amended with effect from 1-6-2015 would be applicable to cases where search is initiated prior to that date.
5.1 It is submitted that the issue has arisen because with effect from 1-6-2015, i.e., after the date of the search, but before the issuance of section 153C notice, the law has been amended vide the Finance Act, 2015 to expand the scope of third parties covered by the search to include a new set of assessees. It is submitted that on the basis of this amendment, notices under section 153C of the Act, 1961 were issued to assessees, who were not included within the scope of the provision as it stood on the date of the search.
5.2 It is further submitted on behalf of the respective assessees that it is the case on behalf of the Department that as section 153C of the Act, 1961 is a procedural and machinery provision, the amendment, though made with effect from 1-6-
2015, is retrospective and, thus, applicable to the cases where search was conducted prior to amendment but the notices under section 153C of the Act,
1961 have been issued after the amendment. It is also submitted on behalf of the Department that the amendment does not take away vested rights, and hence can be applied retrospectively. It is further contended on behalf of the Department that the date of the search is not relevant to section 153C of the Act, 1961 and the amended provision would apply as both the satisfaction note and assumption of juri iction were post 1-6-2015. In relation to the aforesaid contentions of the Department, it is submitted on behalf of the respective assessees that a machinery provision that affects substantive rights cannot be held to be retrospective. That though section 153C of the Act, 1961 is a machinery provision, the amendment cannot be held to be retrospective.
5.3 It is next submitted that as rightly observed by the High Court though the provisions are machinery provisions, the amendment brings into its fold persons not otherwise covered and hence affects the substantive rights and, therefore, cannot be made applicable retrospectively. In support of their submission that the amendment to section 153C by Finance Act, 2015 shall not be made applicable retrospectively and with respect to the search carried out prior to 1-6-2015,

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reliance is placed on the decision of this Court in the case of Controller of Estate
Duty v. M.A. Merchant 1989 Supp (1) SCC 499. It is submitted that in the said decision, this Court had refused to interfere with the vested rights by allowing reopening of an assessment completed prior to the date w.e.f. which the new section in the Estate Duty Act came into force.
5.4 It is contended that in the present case, the amendment to section 153C by Finance Act, 2015 brings into the fold of section 153C of the Act, 1961, assessees, who were not so far covered by it, i.e., persons to whom books of account/documents pertain or relate to, and not just persons to whom it belong.
That this widening, thus, affects substantive rights, as new assessees may now be proceeded against and hence the decision of this Court in the case of M.A.
Merchant (supra) has rightly been applied by the High Court.
5.5 It is further contended that it is well settled that even procedural laws grant substantive rights and amendments affecting such rights have been held to be prospective. That reopening has been held to be a question of power and not procedure as observed and held by this Court in the case of State of Tamil
Nadu v. Star Tobacco Co. [1974] 3 SCC 249. 5.6 It is next contended that the amendment to section 153C of the Act, 1961 has added a new class of assessees and not merely changed the procedure for the existing assessees, hence it cannot be given retrospective effect. That the High
Court has specifically observed and held that the amendment to section 153C of the Act, 1961 is not merely a change in procedure provision affecting the assessees already covered. A new class of assessees are sought to be brought under section 153C of the Act, 1961, which affects the substantive rights of the assessees. Subsequent to the date of the search, the assessees, who were not included within the ambit of section 153C of the Act, 1961 as on the date of the search are now sought to be brought within its fold.
5.7 It is submitted that before 1-6-2015, the Assessing Officer could have only recorded satisfaction as to whether the seized material belongs to the other person. That in the present case, since the hard disk, which was found from the searched persons, did not belong to the respondents, on the date of the search, therefore, the juri iction under section 153C of the Act did not exist. It is submitted that as rightly observed by the High Court that if on the date of the search in 2013, the material were forwarded by the Assessing Officer of the searched person on the basis that it belongs to the respondents - assessees, challenge against issue of notice under section 153C of the Act, 1961 would have been successful, as the material does not actually 'belong' to the respondent. That moreover, having once formed a satisfaction and forwarded the material, there is no question of the Assessing Officer of the searched person once again forming

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a satisfaction on the basis of the amended provision. Thus, section 153C of the Act, 1961 as it stood then, did not permit any action against the respondent, as admittedly the hard disk belonged to the searched person. Hence, the Assessing
Officer could not have invoked section 153C of the Act, 1961 at all.
5.8 It is further submitted that the amended section 153C of the Act, 1961 deals with both procedural and substantive rights, therefore, the prospective rule of construction shall be applicable. That as observed and held by this Court in the case of Zile Singh (supra), it is a cardinal principle of construction that every statute is prima facie prospective unless it is expressly or by necessary implication made to have a retrospective operation. The rule in general is applicable where the object of the statute is to affect vested rights or to impose new burdens or to impair existing obligations. It is submitted that unless there are words in the statute, which are sufficient to show the intention of the legislature to affect existing rights, it is deemed to be prospective only. That the date of search is the relevant date, which has to be taken into consideration for applying the amendment. The same is supported by the CBDT Circular No. 2/2018 dated
15-2-2018 wherein section 153A was amended with effect from 1-4-2017. That Para 80.5 of the Circular clearly states that the amended provisions of section 153A shall apply where search under section 132 of the Act, 1961 is initiated or requisition under section 132A has been made on or after 1-4-2017. It is submitted that while section 153A was introduced by Finance Act, 2003, the legislature considered the dates of search and specified that the provision is applicable to search actions conducted after 31-5-2003. Therefore, sections 153A and 153C are to be read together and the relevant date ought to be the date of search as clarified by Finance Act, 2003. 5.9 It is further submitted on behalf of the assessees that even the satisfaction has not been recorded immediately. That the searched person had filed application before the Settlement Commission on 30-1-2015 and accepted receipt of money on the basis of hard disk from petitioners. The copy of the settlement application is required to be given to Assessing Officer. Accordingly, Assessing Officer of the searched person would have information regarding alleged money payment by petitioners on 30-1-2015, if not before, whereas, documents were transferred on 25-4-2017. Hence, the documents were transferred after 2 years and 3 months after the knowledge about facts, on the basis of which section 153C proceedings are initiated. It is submitted that the same is not permissible considering the decision of this Court in the case of Calcutta Knitwears (supra).
5.10 Learned counsel appearing on behalf of the assesses in Civil Appeal Nos.
1019, 997, 1016, 1021 and 1023 of 2022 has in addition to the above, further submitted that before the High Court, the respondents - original writ petitioners had raised various grounds for holding that the notices issued under section 153C

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were bad and illegal. That, however, the High Court has followed the decision in Balaji Construction Co.'s case (supra) and others and has allowed the writ petitions by deciding only one question in favour of the petitioners and the remaining issues are left undecided. It is submitted that, therefore, if this Hon'ble
Court is to allow the appeals by the Revenue, the matters may be sent back to the High Court for deciding the validity of the notices and other issues that were originally left undecided.
5.11 Making the above submissions, it is prayed by the learned counsel appearing on behalf of the respective original writ petitioners - assessees that the present appeals be dismissed.
6. We have heard the learned counsel appearing on behalf of the respective parties at length.
7. The question of law that arises for consideration of this Court is:—
"Whether the amendment brought to section 153C of the Income-tax Act,
1961 vide Finance Act, 2015 would be applicable to searches conducted under section 132 of the Act, 1961 before 1-6-2015, i.e., the date of amendment?"
8. While considering the aforesaid question and the submissions made on behalf of the respective parties, a few facts, which are necessary for determination of the question are required to be referred to, which are as under:—
(i) That a search under section 132 of the Act, 1961 was conducted at the various premises of one H.N. Safal Group on 4-9-2013. When the search came to be conducted, section 153C as it stood then (pre amendment
2015) was applicable.
(ii) section 153C as it stood then provided that "Notwithstanding anything contained in sections 139, 147, 148, 149, 151 and 153, where the Assessing Officer is satisfied that any money, bullion, jewellery or other valuable article or thing or books of account or documents seized or requisitioned "belongs or belong to" a person other than the person referred to in section 153-A, then, the books of account or documents or assets seized or requisitioned shall be handed over to the Assessing
Officer having juri iction over such other person and that Assessing
Officer shall proceed against such other person and issue such other person notice and assess or reassess income of such other person in accordance with the provisions of section 153A. It also further provided that in case of such other person, the reference to the date of initiation of the search under section 132 or making of requisition under section 132-
A in the second proviso to sub-section (1) of section 153-A shall be ITA Nos.234 to 237/Bang/2020
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construed as reference to the date of receiving the books of account or documents or assets seized or requisitioned by the Assessing Officer having juri iction over such other person.
(iii) During the course of search, various incriminating material/documents were found and seized. Upon verification of such seized material, it was noticed that certain documents pertained/related to the respondent herein, who is other than the searched person. Accordingly, satisfaction to that extent was recorded by the Assessing Officer of the searched person with respect to the respondents - assessees (other than the searched person) on 25-4-2017. That the said satisfaction note alongwith the incriminating material was forwarded to the Assessing Officer of the non-searched person on 25-4-2017. That, thereafter, the Assessing Officer of the respondents - assessees (non-searched persons) after verifying the seized material, found certain incriminating material against them and the cash entries, which were not declared in the original return filed. Accordingly, the Assessing Officer of the respondents recorded his independent satisfaction and issued notice under section 153C on 4-5-2018. (iv) At this stage, it is required to be noted that in the meantime, section 153C came to be amended by Finance Act, 2015 w.e.f. 1-6-2015 and the words
"belongs or belong to" came to be substituted by the words "pertains or pertain to".
(v) Thus, at the time when the satisfaction note came to be recorded by the Assessing Officer of the searched person on 25-4-2017 as well as by the Assessing Officer of the respondents - assessees (non-searched persons) on 4-5-2018, section 153C (as amended by Finance Act, 2015 w.e.f. 1-6-
2015) became applicable. The notice under section 153C against the non- searched persons on the basis of the material seized during the search conducted at the various premises of H.N. Safal Group (searched person) and the assessment orders were the subject matter of appeal before the High Court.
9. In light of the aforesaid facts, the question of law, which arises for consideration of this Court is, "Whether amendment brought to section 153C of the Income-tax Act, 1961 vide Finance Act, 2015 would be applicable to searches conducted under section 132 of the Act, 1961 before 1-6-2015, i.e., the date of amendment", is required to be considered.

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10. While considering the aforesaid question, the reason and the object and purpose of the amendment to section 153C introduced vide Finance Act, 2015
w.e.f. 1-6-2015 is required to be considered.
10.1 As observed hereinabove, in the pre-amended section 153C, the words used were "belongs or belong to" a person other than the searched person. In the case of Pepsico India Holdings (P.) Ltd. (supra), the Delhi High Court interpreted the expression "belong to" and observed and held that there is a difference and distinction between "belong to" and "pertain to". It was observed and held that on the basis of the registered sale deed seized from the premises of the searched person, it cannot be said that it "belongs to" the vendor. Therefore, the High Court view gave a very narrow and restrictive meaning to the expression/word "belongs to" and held that the ingredients of section 153C have not been satisfied. To remove the basis of the observation made by the Delhi High Court in the case of Pepsico India Holdings (P.) Ltd. (supra), now, section 153C came to be amended w.e.f. 1-6-2015 by substituting the words "belongs or belong to" with the words "pertains or pertain to" insofar as the books of account and documents are concerned. Thus, having found that the observation made by the Delhi High
Court in the case of Pepsico India Holdings (P.) Ltd. (supra) led to a situation where, though incriminating material pertaining to third party was found during the search proceedings under section 132, the Revenue could not proceed against the third parties, it was observed that the said observation made by the Delhi High
Court in the aforesaid decision was coming in the way of suppressing the very mischief which the legislature intended to suppress, which necessitated the amendment in section 153C. Thus, it is a case of substitution of the words by way of amendment.
Further in the case of Super mall (P) Ltd. vs PCIT -8 new Delhi reported in (2020) 15 taxmann.com 105 (SC) it was held that:- Whether when Assessing
Officer of searched person and third person is same, it is sufficient by Assessing
Officer to record in satisfaction note that documents seized from searched person belonged to other person and there is no requirement of transmitting documents so seized from searched person – In Para NO. 6.2 the Hon,ble Apex COURT in the above judgement has observed as under:
6.2 Now let us consider from the satisfaction note recorded by the Assessing
Officer, in the present case. Whether there is a sufficient compliance of section 153C of the Act or not. The satisfaction note reads as under:

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"Name and address of the assessee
: M/s. Super Malls (P.) Ltd. Sector 12, HUDA, Karnal Regd.
Office at 51, Transport Centre Punjabi Bagh, New Delhi.
PAN
: AAICS2163F
Status
: Company
Reasons/Satisfaction note for taking up the case of M/s. Super Malls (P.) Ltd.
Sector-12, HUDA, Karnal Regd. Office at 51, Transport Centre, Punjabi Bagh,
New Delhi under section 153C of the Income-tax Act, 1961. The juri iction of this case has been assigned to this Office u/s 127 of the Income-tax Act, 1961 by the worthy Commissioner of Income Tax-III New
Delhi vide order F. No. CITIII/Delhi/Centralization/1012-1312455 dated 15-1-
2013. By virtue of the authorization of the Director of Income-tax (Investigation),
Chandigarh, a search & seizure operation u/s 132(1) of the Act was carried out on 8/9-4-2010 at the residential/business premises of Sh. Tejwant Singh & Sh.
Ved Parkash Bharti Group of cases, Karnal, Panipat & Delhi and a survey u/s 133A of the IT Act, 1961 was also carried out at the business premises of M/s. Super Mall (P.) Ltd. Karnal & New Delhi. During the course of search on 8/9-4-2010 at residence of Sh. Ved Parkash Bharti who is a Director in the assessee company M/s. Super Mall (P.) Ltd., Pen drives were found and seized as per Annexure-3 from vehicle No. HR 06 N-0063 parked in front of the residence of Sh. Ved Parkash Bharti. Some documents as per Annexure A-1 were seized after taking print out of the above said pen drives. These documents contain the details of cash receipt on sale of shop/offices at M/s. Super Mall,
Karnal also beside other concerns. These documents are required for assessment proceedings. During the statement of Sh. Ved Parkash Bharti at the time of search, he has also stated that these documents pertain to him and M/s. Super Mall (P.) Ltd., Karnal in which he is Director. In view of the above and as per the provisions of sub-section 91 of Section 153C of the Act, I am satisfied that the document seized from the residence of Sh. Ved Parkash Bharti belongs to a person i.e. Super Mall (P.) Ltd., other than the person referred in section 153A.
Accordingly, it is directed to issue such person
(M/s. Super Mall (P.) Ltd.) notice and assess and reassess income in accordance with the provision of section 153A of the Act.
Dated: 22-2-2013 (VED PARKASH KALIA)"
From the aforesaid satisfaction note, it emerges that the Assessing Officer is satisfied that the documents containing the details of the cash receipts on sale of shop/offices at M/s. Super Mall, Karnal belonged to the other person - assessee -
M/s. Super Mall. He is also satisfied that the documents/pen drive are seized from the searched person. He is also satisfied that the documents so seized from the ITA Nos.234 to 237/Bang/2020
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residence of the searched person/Ved Prakash Bharti belonged to the assessee the other person. Therefore, the Assessing Officer was satisfied and it is specifically mentioned that the documents so seized belonged to the assessee-the other person. Therefore, it cannot be said that the mandatory requirements of section 153C of the Act, in the facts and circumstances of the case, have not been complied with. The satisfaction note by the Assessing Officer clearly states that the documents so seized belonged to the other person - the assessee and not the searched person. Thus, the High Court is justified in observing that the requirement of section 153C has been fulfilled. On facts, we are in complete agreement with the view taken by the High Court on the requirement of section 153C of the Act being fulfilled by the Assessing Officer before initiating the proceedings under section 153C of the Act.
18. Since, in instant case, Assessing Officer of searched person and other person i.e. assessee, herein was same and, he has not recorded any satisfaction note . he should be that document seized from searched person belonged to assessee which should have been specifically mentioned in satisfaction note as well, requirement of section 153C was not dully fulfilled – In the above judgement the AO had recorded satisfaction note, however in the case on hand the copy of order sheet scanned sbove nothing is mentioned in the line of the judgemnt. the above order sheet entry can not be said that these are satisfaction note recorded by the AO.
19. Furthert he co-ordinate bench has held that the recording of satisfaction note to invoking provision of section 153C is mandatory in the case of Eastern
Steels (P) Ltd. vs DCIT reported in (2025) 174 taxmann.com 159 (Delhi-Trib) order dated 25.04.2025 in ITA NO. 985/Del/2009, in which it has been held as under:-
7. We have heard both parties and have perused the material available on the record. We perused all the case laws relied upon. After careful consideration of material on the record and facts in entirety, we find force in the argument of the Ld. Counsel of the appellant company; M/s. Esteem Steel (P.) Ltd. We are of the considered view that the issue raised in additional ground is squarely covered by the decision of the Hon'ble Supreme Court in the case of Super Mall Pvt. Ltd.
(supra) and the decision of the Hon'ble Delhi High Court in the case of Ganpati
Fincap Services Pvt. Ltd. (supra). We therefore, following the reasoning given

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by the Hon'ble Supreme Court and the Hon'ble Delhi High Court in above mentioned decisions, hold that the AO has not recorded satisfaction note for initiating proceedings under section 153C of the Act in the hands of the appellant/company; M/s. Esteem Steel (P.) Ltd. Accordingly, the assessment order is held void ab-initio. Consequentially, the impugned order is set aside and the addition of Rs.2,24,00,000/- is deleted
20. The Hon’ble Supreme Court, in the case of CIT v. Calcutta Knitwears
[(2014) 362 ITR 673 (SC)], laid down the binding principle that the satisfaction required under Section 153C must be recorded prior to the initiation of proceedings, and importantly, such satisfaction must be recorded by the Assessing Officer of the person searched. This principle has been consistently reaffirmed, notably in the decision of the Hon’ble Delhi High Court in Pepsi
Foods Pvt Ltd. v. ACIT [(2014) 367 ITR 112 (Delhi HC)], where it was held that the absence of a satisfaction note, or the failure to record it in the file of the person searched, renders the proceedings initiated under Section 153C void and without juri iction.
21. The learned AR for the appellant submitted that the Assessing Officer, in the assessment order, stated that prior approval of the Additional Commissioner of Income Tax, Central Range-2, Bangalore, had been obtained vide letter
F.No.51(3)/Addl.CIT-CR-2/12-13 dated 30.03.2013, before passing the assessment order. However, the AR pointed out that the assessment orders themselves are dated 20.03.2013. Therefore, the Assessing Officer could not have obtained prior approval on 30.03.2013—ten days after the purported date of the assessment order—which renders the claim factually untenable.
22. The AR argued that this discrepancy casts serious doubt on the procedural validity of the assessment, particularly with respect to compliance under Section 153D of the Act. He placed reliance on the decision of the Bombay High Court in CIT v. Smt. Shreelekha Damani, reported in 174 DTR 86. ITA Nos.234 to 237/Bang/2020
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23. Nevertheless, if the assessment order was in fact passed on 20.03.2013 and the mention of 30.03.2013 is merely a typographical error, then the requirement of obtaining prior approval under Section 153D may be considered as having been complied with. In this context, we are inclined to view the discrepancy in dates as a possible clerical error. However, it would have been prudent for the Department to furnish the original approval document along with supporting evidence to establish the actual sequence of events and eliminate any ambiguity.
24. In the absence of such clarification, the procedural irregularity remains a matter of concern—more so when the DR was unable to produce any evidence of the approval required under Section 153D of the Act. Therefore, we are of the considered opinion that the approval mandated under Section 153D of the Act was not obtained, and thus, the assessment proceedings completed under Section 153C stand vitiated.
25. Although we have held that the assessment proceedings under Section 153C of the Act are vitiated due to juri ictional and procedural lapses, and therefore are not required to examine the merits of the case, we deem it appropriate—in the interest of completeness and contextual fairness—to briefly address the basis of the additions made by the Assessing Officer.
26. The Hon’ble Supreme Court in PCIT vs. Abhisar Buildwell (P.) Ltd.,
454 ITR 212, it was held that the existence of incriminating material is a sine qua non for initiating proceedings under Section 153A/153C of the Act.
“9.1…………………………. Thus, after introduction of Section 153A and in case of search, there shall be block assessment for six years. Search assessments/block assessments under section 153A are triggered by conducting of a valid search under section 132 of the Act, 1961. The very purpose of search, which is a prerequisite/trigger for invoking the provisions of sections

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153A/153C is detection of undisclosed income by undertaking extraordinary power of search and seizure, i.e., the income which cannot be detected in ordinary course of regular assessment.
Thus, the foundation for making search assessments under sections 153A/153C can be said to be the existence of incriminating material showing undisclosed income detected as a result of search.” (Emphasis Added)
27. The Court emphasized that, in the absence of any incriminating materials that reasonably indicate undisclosed income attributable to the person other than the one searched, no valid juri iction can be assumed under Section 153C. This ruling firmly establishes that mere possession of documents, without any demonstration of their incriminating nature or connection to escaped income, is insufficient to sustain proceedings under Section 153C.
28. In view of the above legal analysis and factual matrix, it is evident that the mandatory juri ictional conditions prescribed under Section 153C of the Act have not been satisfied in the present case. The Department has admitted that the satisfaction note, as required by law, was not recorded in the files of the person searched, i.e., Mr. B. Nagendra. This omission strikes at the very root of the validity of the proceedings initiated under Section 153C. As held by the Hon’ble
Supreme Court in Calcutta Knitwears (supra) and Singhad Technical Education
Society, the recording of such satisfaction is a sine qua non for valid assumption of juri iction under Section 153C, and non-compliance renders the proceedings void ab initio.
29. Furthermore, the appellant was not provided access to the relevant records, including the approval under Section 153D, despite direction from the Bench.
The failure to furnish such material, coupled with the absence of satisfaction and approval, demonstrates clear procedural irregularities and violation of statutory requirements, as well as principles of natural justice.

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30. Before us, the appellant has filed a paper book comprising pages 1 to 546. Pages 1 to 68 contain the returns of income, computation statements, and audited financial statements pertaining to the assessment years under consideration.
Pages 139 to 264 consist of VAT returns filed before the appropriate Sales Tax
Authorities. Upon perusal, we note that all these documents were in existence and available well before the date of the search conducted under Section 132 of the Act.
31. It is observed that the additions made by the Assessing Officer primarily rest on the alleged non-genuineness of purchases from both registered &
unregistered dealers. However, we find that these purchases were duly reflected in the VAT returns filed with the Sales Tax Department and also formed an integral part of the audited financial statements furnished by the appellant. These documents, being already on record and disclosed in regular filings, cannot be regarded as incriminating material found during the course of the search.
Consequently, we are unable to accept the premise that such documents form the basis for valid additions under Section 153C of the Act.
32. We further observe that the additions made in the impugned assessments are founded exclusively on the books of account which were neither discovered nor seized during the course of the search. These records were already available with the Department prior to the search and were not brought to light as a consequence of the search operations. Crucially, no incriminating material was unearthed during the search that could serve as a valid basis for the additions made by the Assessing Officer.
33. In view of the above, it is evident that such documents cannot be classified as incriminating material found during the course of the search so as to justify additions under the provisions of Section 153C. Therefore, even on merits, the ITA Nos.234 to 237/Bang/2020
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additions appear to lack legal foundation in the absence of any seized incriminating material.
34. The Hon’ble Supreme Court, in PCIT v. Abhisar Buildwell (P.) Ltd.
[(2023) 454 ITR 212 (SC)], has authoritatively held that no addition can be made under the provisions of Section 153A/153C in respect of a completed or unabated assessment in the absence of incriminating material found during a valid search.
Applying the binding ratio of the aforesaid decision to the facts of the present case, we are of the considered view that the additions made, being unsupported by any seized incriminating material, are without legal foundation and consequently, cannot be sustained in law. The same are therefore liable to be deleted.
35. Further, we take support from the following judgements:
i.
In the case of DreamcityBuildwell (P.) Ltd. reported in [2019] 110
taxmann.com 28 (Delhi), in the identical facts, Hon'ble High Court of Delhi had deleted the additions with the following reasoning: -
"15. It can straightaway be noticed that the crucial change is the substitution of the words 'books of account or documents, seized or requisitioned belongs to or belong to a person other than the person referred to in Section 153A' by ITA Nos.1061
to 1066/Bang/2023
Sri
Prakash
Bhajandas
Talreja,
Bangalore two clauses i.e. a and b, where clause b is in the alternative and provides that 'such books of account or documents, seized or requisitioned' could 'pertain' to or contain information that 'relates to' a person other than a person referred to in Section 153A of the Act.
• The trigger for the above change was a series of decisions under Section 153C, as it stood prior to the amendment, which categorically held that unless the documents or material seized 'belonged' to the Assessee, the assumption of juri iction under Section 153C of the Act qua such Assessee would be impermissible. The legal position in this regard was ITA Nos.234 to 237/Bang/2020
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explained in Pepsi Foods (P.) Ltd. v. Asstt. CIT [2014] 367
ITR 112 (Del)where in para 6 it was held as under:
'6. On a plain reading of Section 153C, it is evident that the Assessing Officer of the searched person must be "satisfied"
that inter alia any document seized or requisitioned "belongs to" a person other than the searched person. It is only then that the Assessing Officer of the searched person can handover such document to the Assessing Officer having juri iction over such other person (other than the searched person). Furthermore, it is only after such handing over that the Assessing Officer of such other person can issue a notice to that person and assess or reassess his income in accordance with the provisions of Section 153A. Therefore, before a notice under Section 153C can be issued two steps have to be taken.
The first step is that the Assessing Officer of the person who is searched must arrive at a clear satisfaction that a document seized from him does not belong to him but to some other person. The second step is -after such satisfaction is arrived at - that the document is handed over to the Assessing Officer of the person to whom the said document "belongs".
In the present cases it has been urged on behalf of the petitioner that the first step itself has not been fulfilled. For this purpose it would be necessary to examine the provisions of presumptions as indicated above. Section132 (4A)
(i) clearly stipulates that when inter alia any document is found in the possession or control of any person in the course of a search it may be presumed that such document belongs to such person. It is similarly provided in Section 292C (1) (i). In other words, whenever a document is found from a person who is being searched the normal presumption is that the said document belongs to that person. It is for the Assessing Officer to rebut that presumption and come to a conclusion or "satisfaction" that the document in fact belongs to somebody else. There must be some cogent material available with the Assessing Officer before he/she arrives at the satisfaction that the seized document does not belong to the searched person but to somebody else. Surmise and conjecture cannot take the place of "satisfaction'.
• In the present case the search took place on 5th January
2009. Notice to the Assessee was issued under Section 153 C on 19th November 2010. This was long prior to 1st June, 2015
and, therefore, Section 153C of the Act as it stood at the relevant time applied. In other words, the change brought about prospectively with effect from 1st June, 2015 by the ITA Nos.234 to 237/Bang/2020
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amended Section 153C (1) of the Act did not apply to the search in the instant case. Therefore, the onus was on the Revenue to show that the incriminating material/documents recovered at the time of search 'belongs' to the Assessee. In other words, it is not enough for the Revenue to show that the documents either 'pertain' to the Assessee or contains information that 'relates to' the Assessee.
• In the present case, the Revenue is seeking to rely on three documents to justify the assumption of juri iction under Section 153 C of the Act against the Assessee. Two of them, viz., the licence issued to the Assessee by the DTCP and the letter issued by the DTCP permitting it to transfer such licence, have no relevance for the purposes of determining escapement of income of the Assessee for the AYs in question.
Consequently, even if those two documents can be said to 'belong' to the Assessee they are not documents on the basis of which juri iction can be assumed by the AO under Section 153C of the Act.
• As far as the third document, being Annexure A to the statement of Mr. D. N. Taneja, is concerned that was not a document that 'belonged' to the Assessee. Admittedly, this was a statement made by Mr. Taneja during the course of the search and survey proceedings. While it contained information that 'related' to the Assessee, by no stretch of imagination could it be said to a document that 'belonged' to the Assessee. Therefore, the juri ictional requirement of Section 153C of the Act, as it stood at the relevant time, was not met in the present case.
• For the aforementioned reasons, this Court concludes that the ITAT committed no legal error in holding that the AO had wrongly assumed juri iction under Section 153C qua the Assessee. The ITAT, rightly, therefore, set aside the order of the CIT (A), which had held the contrary."
ii.
In the decision of the Hon'ble Supreme Court in the case of CIT Vs.
Singhad Technical Education Society reported in [2017] 84
taxmann.com 290 (SC) it was categorically held that the incriminating material should belong to the assessee and for the assessment year under consideration in the following manner:
"15. At the outset, it needs to be highlighted that the assessment order passed by the AO on August 7, 2008 covered

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eight Assessment Years i.e. Assessment Year 1999-2000 to Assessment Year 2006-07. As noted above, insofar as Assessment Year 1999-2000 is concerned, same was covered under Section 147 of the Act which means in respect of that year, there were re-assessment proceedings. Insofar as Assessment Year 2006-07 is concerned, it was fresh assessment under Section 143(3) of the Act. Thus, insofar as assessment under Section 153C read with Section 143(3) of the Act is concerned, it was in respect of Assessment Years
2000-01 to 2005-06. Out of that, present appeals relate to four
Assessment Years, namely, 2000-01 to 2003-04 covered by notice under Section 153C of the Act. There is a specific purpose in taking note of this aspect which would be stated by us in the concluding paragraphs of the judgment.
• In these appeals, qua the aforesaid four Assessment Years, the assessment is quashed by the ITAT (which order is upheld by the High Court) on the sole ground that notice under Section 153C of the Act was legally unsustainable. The events recorded above further disclose that the issue pertaining to validity of notice under Section 153C of the Act was raised for the first time before the Tribunal and the Tribunal permitted the assessee to raise this additional ground and while dealing with the same on merits, accepted the contention of the assessee.
• First objection of the learned Solicitor General was that it was improper on the part of the ITAT to allow this ground to be raised, when the assessee had not objected to the juri iction under Section 153C of the Act before the AO.
Therefore, in the first instance, it needs to be determined as to whether ITAT was right in permitting the assessee to raise this ground for the first time before it, as an additional ground.
• The ITAT permitted this additional ground by giving a reason that it was a juri ictional issue taken up on the basis of facts already on the record and, therefore, could be raised.
In this behalf, it was noted by the ITAT that as per the provisions of Section 153C of the Act, incriminating material which was seized had to pertain to the Assessment Years in question and it is an undisputed fact that the documents which were seized did not establish any co- relation, documentwise, with these four Assessment Years. Since this requirement under Section 153C of the Act is essential for assessment under that provision, it becomes a juri ictional fact. We find this reasoning to be logical and valid, having regard to the ITA Nos.234 to 237/Bang/2020
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provisions of Section 153C of the Act. Para 9 of the order of the ITAT reveals that the ITAT had scanned through the Satisfaction Note and the material which was disclosed therein was culled out and it showed that the same belongs to Assessment Year 2004-05 or thereafter. After taking note of the material in para 9 of the order, the position that emerges therefrom is discussed in para 10. It was specifically recorded that the counsel for the Department could not point out to the contrary. It is for this reason the High Court has also given its imprimatur to the aforesaid approach of the Tribunal. That apart, learned senior counsel appearing for the respondent, argued that notice in respect of Assessment Years 2000-01 and 2001-02 was even time barred.
• We, thus, find that the ITAT rightly permitted this additional ground to be raised and correctly dealt with the same ground on merits as well. Order of the High Court affirming this view of the Tribunal is, therefore, without any blemish. Before us, it was argued by the respondent that notice in respect of the Assessment Years 2000-01 and 2001-02 was time barred.
However, in view of our aforementioned findings, it is not necessary to enter into this controversy."
36. In light of the above judgements , there was no cogent incriminating material or admissible evidence pertaining to these assessment years under consideration as it belongs to the assessee and hence,we hold that the assessment orders passed under Section 153C of the Income-tax Act, 1961, are without juri iction and are therefore liable to be quashed. Consequently, grounds of appeal 2(d) and 3 are allowed. In light of our findings on these juri ictional issues, we deem it unnecessary to examine the remaining grounds raised by the appellant, which pertain to the merits and quantum of the additions made by the Assessing Officer and upheld by the Commissioner of Income Tax (Appeals).

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37. Accordingly, the appeals filed by the assessee are allowed in above terms
A common order passed shall be kept in the respective case files.
Pronounced in the court on the date mentioned on the caption page. (KESHAV DUBEY)
Accountant Member
Bangalore,
Dated : 29.05.2025. /NS/*
Copy to:
1. Appellant 2. Respondent 3. Pr.CIT4.CIT(A)
5. DR, ITAT, Bangalore.
By order