Delhi HC Quashes Section 153C Proceedings as Seized Documents Did Not Belong to Assessee

Canyon Financial Services Ltd. Vs ITO (Delhi High Court)

The Delhi High Court considered five writ petitions filed by Canyon Financial Services Limited challenging the satisfaction notes dated 13 March 2014 and 19 March 2014 issued by the Assessing Officers initiating proceedings under Section 153C of the Income Tax Act, 1961. The proceedings arose from a search and seizure operation conducted in the Dalmia Group on 20, 27 and 28 January 2012, during which documents comprising 249 pages were seized from the premises of a searched person.

The Assessing Officer of the searched person identified certain seized documents, including an application for equity shares, a certificate confirming allotment of shares, copies of Form 32, the return of income, the director’s report, the certificate of incorporation, and the memorandum of association relating to the assessee. The Assessing Officer recorded satisfaction that these documents belonged to the assessee and transferred them to the Assessing Officer having jurisdiction over the assessee. The latter recorded an identical satisfaction note and proceedings under Section 153C were initiated for Assessment Years 2006-07 to 2011-12.

The assessee objected to the initiation of proceedings, contending that neither satisfaction note explained how the seized documents “belonged to” the assessee as required under the unamended Section 153C. It also relied on the statutory presumption under Sections 132(4A) and 292C, arguing that documents found during the search were presumed to belong to the searched person unless that presumption was rebutted.