Documents obtained post search & information obtained from public domain not incriminating material

Documents obtained post search and information obtained from the public domain not incriminating material.

Documents obtained by AO post search and information obtained from the public domain was not incriminating material. Hence, the satisfaction recorded by the AO was against the provisions of Section 153C of the Income Tax Act, 1961.

ABCAUS Case Law Citation:
5232 (2026) (09) abacus.in SC

Important Case Laws relied upon by Parties:
Commissioner of Income-tax-XIII vs. Radhey Shyam Bansal
Commissioner of Income-tax vs. Raj Pal Bhatia
Principal Commissioner of Income-tax, Central-3 vs. Abhisar Buildwell (P.) Ltd.
Income Tax Officer vs. Vikram Sujitkumar Bhatia

A search under Section 132 of the Income Tax Act, 1961 (the Act) was conducted in the case of Land Broker & Financer Group wherein digital data/images from the mobile phone of one searched person were acquired, based on which notices under Section 153C of the Act were issued to the petitioners.

The petitioners filed objections to the recording of satisfaction notes as well as the issuance of show-cause notices. The Assessing Officer (AO) disposed of the objections and issued notices under Section 142(1) of the Act to the petitioners seeking exhaustive information with regard to the alleged incriminating evidence found in search.

Aggrieved, the Petitioners approached the Hon’ble High Court and contended that the information/ document received by the AO during the search did not relate to the petitioners. It is submitted that in the impugned notice, the AO had incorporated the statement of searched person wherein he referred to a MoU for sale and purchase of the land in question. However, the searched person had categorically stated that the deal was not done by him but by some other broker. However, he supplied the latest information/document of the land in question.

It was submitted that by making a public inquiry, the AO relied upon a registered sale deed between the petitioners and the seller and presumed that Petitioner must have paid on money  / cash to the seller and treated it as undisclosed investment for the land in question. It was submitted that such an approach of the AO runs contrary to the provisions of Section 153C of the Act.

It was submitted that it cannot be said that any incriminating material had been found which had a direct or indirect nexus with the petitioners during the search conducted on the third person, and hence, the impugned notices are required to be quashed and set aside.

On the other hand, the Revenue placing reliance on the judgment of the Hon’ble Supreme Court contended that the provisions of Section 153C of the Act were amended from 01.06.2015 and the expression “pertains or pertain to” was added. Hence, as per the amended provisions of Section 153C, more particularly clause (b), any information contained during the search emanating from any books of accounts or documents seized or requisitioned from the searched person, if it relates to a person other than the person referred to in Section 153A of the Act – which in the present case are the petitioners who have a direct nexus – then such person is liable to be assessed under Section 153C of the Act.

The Revenue contended that the searched person in his statement had admitted that initially the MoU was entered into for the very same land and merely because the said land deal did not fructify would not affect the assessment proceedings against the petitioners.

The Hon’ble High Court observed that the AO in his satisfaction had positively recorded that he ascertained from the public domain that the said land was purchased by the petitioners. The AO presumed that since the seller had earlier entered into the MoU for a higher amount in which the searched person was a broker, he could not have entered into a sale with the petitioners for a lesser amount without receiving cash/on-money.

Further, the broker, in his statement before the AO asserted that he did not broker the land deal and only supplied 7/12 Form and Form No. 6 showing land entries post search. Thus, these forms were not seized during the search but were handed over by the broker to the AO post search. After these were supplied, the AO obtained the sale deed information from the public domain.

The Hon’ble High Court observed that there was no incriminating material found during the search having a direct nexus with the petitioners. Thus, the information/documents collected by the AO from the broker or seller could not be said to create a live link involving the petitioners, and the presumption of escaped income.

The Hon’ble High Court opined that the search conducted did not yield any document relating to undisclosed income “relating to” or “pertaining to” the petitioners. Hence, the satisfaction recorded by the AO roping the petitioners into assessment proceedings on the basis of digital data impounded during the search, which had no nexus with the petitioners, was required to be quashed and set aside. Thus, the AO had acted de hors the provisions of Section 153C of the Act.

The Hon’ble High Court opined that reliance placed by the Revenue on the judgment of the Apex Court did not assist them, since the issue before the Apex Court pertained to the applicability of the amendment brought to Section 153C by the Finance Act, 2015 to searches conducted before 01.06.2015.

Accordingly, the Hon’ble quashed and set aside the impugned notices and allowed the writ petitions.

Not satisfied with the judgment of the High Court, the Department challenged it before the Hon’ble Supreme Court by way of filing a Special Leave Petition. However, the Apex Court dismissed the SLP with the following observations,

“we do not find any good ground to interfere with the impugned judgment of the High Court”.

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