Section 153C of The Income Tax Act, 1961 provides that where search is conducted on a person and undisclosed assets/documents indicating undisclosed income are found as belonging to or pertains to "other person" other than, searched person", then in that case, proceedings u/s 153C would be undertaken against the "other person".

A bare reading of Section 153C says :-

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 153A , then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction 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 153A

Section 153C starts with non-obstante clause relating to normal assessment procedure covered by section 139, 147, 148, 149, 151 and once section 153C is triggered it is mandatory for the Assessing Officer ("AO") to issue notice calling upon the assessee to file returns for the six assessment years prior to the year in which the search on took place. If the interpretation as per the doctrine of harmonious construction is accepted, it will mean that during pendency of assessment proceedings under Section 153C, separate proceedings under Section 148 may be initiated for making assessment of escaped income, discovered otherwise, than during the course of search. However, the doctrine of harmonious construction cannot be made applicable in the case of assessment under section 153C. It is a settled position that once proceedings under Section 153C are initiated, then no parallel proceedings under Section 143(3)/147 can be made.

Thus, once the conditions as mentioned in the said section are satisfied, then the only route available with AO is to make assessment against other person in accordance with section 153C not as per provisions of section 147. Therefore, if the AO has reopened proceedings under section 147 instead of section 153C, in that case the assessment made under 147 will be annulled.

Various Judicial Rulings supporting this view :-

  • [2015] 61 50 (Pune – Trib.) ACIT V. SHRI RADHESHYAM B. AGRAWAL


There is no separate requirement of recording of satisfaction for initiating proceedings u/s 153A, as no search u/s 132(1) can be initiated without a satisfaction note by "conducting officer" of the "searched person". However, in the case of assessment of "other person" u/s 153C, the satisfaction is of supreme importance. Therefore, one satisfaction is to be recorded by the AO of the "searched person" that the books of accounts/documents belongs to/relates to "other person" and the second satisfaction is to be recorded by the AO of "other person" that the books of accounts/assets have bearing on the total income of other person.

Whether a single satisfaction or a dual satisfaction is required to initiate proceedings under section 153C?

However, single satisfaction note will serve the purpose where the AO of "person searched" and "other person" is same.

The Central Board of Direct Taxes (CBDT) also issued a circular no. 24/2015 explaining the requirement of "recording of satisfaction" by the Assessing Officer before issuing notice under section 153BD/153C of the Act. It is observed that when proceedings are proposed to be initiated under section 153C of the Act against the "other person", a satisfaction note must precede it by the Assessing Officer of the "searched person". It is further observed that the AO of "searched person" will record satisfaction that the seized documents belong/relates to "other person."

Where seized documents did not belong to the assessee

Where seized documents which formed basis of proceedings u/s. 153C, did not belong to assessee, even though a satisfaction was recorded by the AO of person searched, condition precedent under that section would not be satisfied and, therefore, entire proceedings would be null and void.

  • CIT v. Arpit Land (P.) Ltd. [2017] 78 com 300/393 ITR 276 (Bom.)
  • CIT v. Meghmani Organics Ltd. [2013] 40 com 31/[2014] 221 Taxman 25(Mag.) (Guj.)

Six Assessment Years

As per proviso to section 153C, the period of six assessment years would start from the date of the search and not from date of handing over of documents by the AO of person searched to the AO of "other person". Pr. CIT v. Sarwar Agency (P.) Ltd. [2017] 85 269/397 ITR 400 (Delhi)

Effect of section 292B

In the absence of satisfaction by the AO of the person searched, the AO of "other person" does not get any jurisdiction to issue notice u/s. 153C. Therefore, notice u/s. 153C issued by the Assessing Officer of the person searched lacked jurisdiction which is not curable by virtue of the provisions of section 292B. Parshwa Corpn. v. Dy. CIT [2017] 88 43 (Ahd. - Trib.)

Whether approval granted u/s 153D mechanically to an order passed by AO u/s 153C would invalidate that order

There should be evidence on record that approval granting authority has examined the draft assessment order and assessment record and after application of mind approval was granted. Where approval is granted mechanically, it will be an empty formality and the assessment order so finally passed by the AO will not be sustainable. If draft order is placed before the Joint Commissioner of Income Tax (JCIT) on 31-12-2010 on which date there was no time with him to examine the record, the approval would be a mechanical approval leading to the order so passed as bad in law.

Where there is no evidence that Deputy Commissioner of Income tax (DCIT) who passed the order u/s 153A had taken prior approval of JCIT, as required u/s 153D, order u/s 153A would be null and void. Where assessment proceedings were going on 27.12.2010 before the AO and approval was allegedly granted on 24-12-2010 then entire assessment made by the AO u/s 153A/143(3) is not sustainable as there is no valid approval in the eyes of law.

Whether for making addition u/s 69C or u/s 69B read with section 153C, mere incriminating documents showing payments or receipts of cash is sufficient.

For making addition u/s 69C, it is necessary for the AO to prove that actual expenditure has been incurred by the assessee and for making addition u/s 69B, it is necessary for the AO to prove that assessee has made actual payment. So also, for making addition u/s 69B, it is necessary for the AO to prove that assessee has made actual investment. It has been held by Hon'ble Gujarat High Court in Gayatri Enterprise v. ITO 35 that "Unless it is established on record by the department that as a matter of fact, the consideration as alleged by the department did pass to the seller from the purchaser, it cannot be said that the department had any right to make any additions u/s. 69B."

Thus, in the search, if documents relating to disbursement of cash for purchase of land were found and the managing person stated u/s 132(4) that certain amount of cash has also been received by him to purchase the land, and the statement was retracted after two and half months from the date of search, addition made u/s 69C in the assessment made u/s 153C, were deleted on the grounds the documents seized in the search did not belong to the assessee and there was no material to conclusively show that huge amount as revealed from the seized documents were actually transferred from one side to another SLP against this order was dismissed.

Whether in the absence of any incriminating material found during search, additions made u/s 153C in the assessed income are unsustainable in law.

This issue has been covered in several judgement of different High Courts wherein it has been held that no addition can be made in a completed assessment if no incriminating material has been found in the search. But SLP against similar decision given by Hon'ble Bombay High court in Pr. CIT v. Dhananjay International Ltd. [2020 114 351(SC) has been admitted by Hon'ble Supreme Court. It may be noted that Hon'ble Apex Court in Pr. CIT v. Meeta Gutgutia [2017] 82 287 (Delhi) has held that for invocation of section 153A to re-open concluded assessments of assessment years earlier to year of search was not justified in absence of incriminating material found during search qua each such earlier assessment year.

It means that AO of "other person" has to satisfy whether there was any incriminating material qua each assessment year and therefore, if for certain assessment years out of six assessment years, there is no incriminating material, the AO should not issue notice u/s 153C. Therefore, where AO is not able to adduce any cogent material or evidence to prove that additions made in the assessment completed u/s 144/153C, was based on any incriminating material or document found during the course of the search, such addition are liable to be deleted.


Before initiating proceedings u/s. 153C a satisfaction by the AO of the person searched is mandatory that certain seized assets/ documents belonged/pertained to "other person". In absence of satisfaction by the AO of the person searched, proceedings u/s. 153C will be vitiated. Only the issues arising from the incriminating material can be considered under section 153C proceedings and in order to support or counter, the AO can bring the material on record. No external material either collected in post-search inquiries or through action u/s. 133A/133(6) giving rise to new issues of taxable income can be considered u/s. 153C. Proceedings u/s. 148 can be undertaken only after closure of proceedings u/s. 153C and not during their pendency.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.