No Satisfaction Recorded to Invoke S.153C under Income Tax: Calcutta HC Upholds S.147 Reassessment, Rejects assessee’s Jurisdictional Plea [Read Order]

The Calcutta High Court has dismissed a writ petition challenging a reassessment order under Section 147 of the Income Tax Act, 1961, holding that the assessee failed to show any jurisdictional error relating to non-initiation of proceedings under Section 153C.

The bench of Justice Om Narayan Rai noted that no satisfaction was recorded by either of the Assessing Officers, as required under Section 153C, to trigger proceedings against a person other than the searched person.

The petitioner, Shiv Kumar Saraf, had earlier succeeded in having an assessment order dated 1 February 2024 quashed by the High Court on grounds of violation of natural justice. The Court, by its order dated 22 March 2024, had remanded the matter to the Assessing Officer with a direction to grant a fresh opportunity of hearing via video conferencing. Complying with the order, the Assessing Officer passed a fresh reassessment order on 10 June 2024 under Section 147 read with Sections 260 and 144B.

In the present proceedings, the petitioner sought to raise a jurisdictional objection, contending that the assessment ought to have been carried out under Section 153C, and not under Section 147.

The petitioner argued that since the assessment order referred to a search operation conducted on finance brokers, the Revenue was mandated to proceed under Section 153C. He quoted the principle that where incriminating material is found against a third party during a search, proceedings against such “other person” must necessarily fall under Section 153C.

It was contended that the entire process was void because neither the Assessing Officer of the searched person nor the Assessing Officer of the other person had satisfaction notes.

The Court, noting the contentions, observed the provision Section 153C. It held that issuance of notice under Section 153C is contingent on dual satisfaction by both the Assessing Officer of the searched person and the Assessing Officer of the “other person” that incriminating documents, books, assets or information seized during search belong to or relate to the other person.

The High Court observed that the assessment order itself showed that the case was based on information received from the Investigation Wing and evidence gathered during both search and post-search proceedings, not on any incriminating material seized relating specifically to the petitioner.

There was nothing on record to show that any document or asset belonging to the petitioner had been found during the search. In the absence of such material, the statutory preconditions for invoking Section 153C were not met.

The Court further said that the petitioner had not raised this jurisdictional plea at any earlier stage neither in response to the notice under Section 148A(b), nor against the order passed under Section 148A(d).

According to the court, raising the issue for the first time in the second writ petition, after an adverse reassessment, is a move to delay adjudication and bypass the appellate mechanism. Thus, the court refused to grant relief and ruled that the reassessment under Section 147 is valid.

Therefore, the bench directed the petitioner to take the alternative remedy before the appellate authority under Section 246 without exercising the writ jurisdiction under Article 226.

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