Gujarat HC Quashes S. 153C Income Tax Notices for Lack of Incriminating Material Linking Petitioner to Search [Read Order]
The Bench ruled that proceedings under Section 153C cannot be initiated on conjecture, nor can material sourced independently by the AO substitute incriminating evidence
The Gujarat High Court has set aside a series of notices issued under Section 153C of the Income Tax Act, 1961, holding that the foundational requirement of incriminating material “relating to” the assessee was entirely absent.
The Court observed that the search carried out by the Department on a third party did not reveal any document or digital material proving any remote nexus with the assessee, rendering the satisfaction recorded by the Assessing Officer (AO) untenable in law.
The petitioner, Sandhya Maulik Patel, challenged the notices issued for multiple assessment years on the basis of a search conducted in the case of a land broker, where certain mobile images of an MoU pertaining to land Survey No. 329 were found. The petitioner claimed that since the document cited by the AO did not include her name or mention her role, it could not serve as the foundation for a Section 153C proceeding.
On the other hand, the respondent authority argued that the discovery of the MoU and land records suggested a substantial difference between the consideration mentioned in the MoU and the sale deed executed with the petitioner, justifying the AO’s satisfaction regarding undisclosed investment as a result.
The Bench of Justice A.S. Supehia and Justice Pranav Trivedi, held that the MoU discovered during the search was between different sets of parties altogether and contained no mention of the petitioner.
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The Court noted that the AO did not rely on confiscated material but on information independently collected from the public domain after the search, including revenue records and the registered sale deed. Such information, the Court emphasised, could not be classified as incriminating material “found during the search” as required under Section 153C.
The Court further observed that even the revenue documents (7/12 and Form No. 6) could not serve as the foundation for a 153C proceeding because they were provided by the broker only after the search and were not seized during the search.
Further, the reliance placed by AO on the judgment of the Apex Court in Vikram Sujitkumar Bhatia was found to be baseless. The satisfaction recorded by the AO, therefore, was held to be de hors the statutory mandate.
As a result, the High Court quashed the impugned notices and allowed the writ petitions.
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