“Live Link” Requirement under Amended Section 153C of the Income-tax Act:
A Detailed Commentary on Sandhya Maulik Patel v. Assistant Commissioner of Income Tax, Gujarat High Court (24 November 2025)

I. Introduction

The Gujarat High Court’s common oral judgment in Sandhya Maulik Patel v. Assistant Commissioner of Income Tax, Central Circle 2(3), Ahmedabad, delivered on 24 November 2025 in Special Civil Application Nos. 4162 and 4163 of 2023, addresses a crucial jurisdictional question under Section 153C of the Income-tax Act, 1961 (“the Act”).

The core issue was whether proceedings under Section 153C can validly be initiated against a person (“other person”) when the only material found during a search on a third party did not mention or implicate that person at all, and the link to such person was constructed only through post-search enquiries and documents obtained from the public domain.

The High Court has, in effect, laid down and reaffirmed an important principle: even after the 2015 amendment to Section 153C (which introduced the phrase “pertains or pertain to” and “relates to or relate to”), there must still be a “live nexus” between the seized material and the “other person”. Mere inferences drawn from publicly available information, combined with a speculative presumption of “on-money”, are insufficient to confer jurisdiction under Section 153C.

II. Factual Background

1. The Search and the Seized Material

• A search under Section 132 was conducted on 15.10.2019 in the case of Land Broker & Financer Group, Ahmedabad, specifically at the premises of one Shri Dhaval Teli, a land broker.
• During this search, digital images from the mobile phone of Shri Dhaval Teli were seized. These included an MoU (Memorandum of Understanding) concerning land bearing Survey No. 329.
• The MoU:
  • Was between seller: Dilipbhai Patel, and buyer: Dhirenbhai Bharvad;
  • Mentioned a total sale consideration of Rs. 39,32,25,000/-;
  • Recorded that Rs. 1,00,00,000/- was paid in cash on 01.03.2016;
  • Did not mention the petitioners’ names at all.

2. Subsequent Events and the AO’s Inference

• The assessment of the searched person, Shri Dhaval Teli, was completed on 14.07.2021.
• On 11.10.2021, the Assessing Officer (AO) recorded a satisfaction note under Section 153C, leading to notices dated 13.10.2021 issued to the petitioners for AYs 2014–15 to 2020–21.
• The AO, through enquiries and by accessing the public domain, discovered that:
  • The same land (Survey No. 329) was ultimately sold under a registered sale deed No. 885 dated 12.04.2018;
  • The purchasers under this registered sale deed were the petitioners (and connected persons);
  • The sale consideration in that registered deed was only Rs. 12,00,00,000/-.
• Comparing:
  • MoU value: Rs. 39.32 crore (between Dilipbhai Patel and Dhirenbhai Bharvad); and
  • Registered sale deed value: Rs. 12 crore (between the same seller and the petitioners),
  the AO presumed that there was undisclosed “on-money” investment of Rs. 27.32 crore in the hands of the petitioners in AY 2019–20.
• It is significant that:
  • The searched person (Dhaval Teli) stated that he had not brokered this land deal and had only supplied 7/12 extracts and Form No. 6 after the search; and
  • Those forms were not seized during the search – they were provided post-search.

3. Petitioners’ Response

• Upon receiving notices under Section 153C on 13.10.2021, the petitioners:
  • Filed their returns of income electronically in October 2021;
  • Requested copies of the satisfaction notes on 28.10.2021;
  • Received two satisfaction notes on 08.11.2021;
  • Filed detailed objections on 17.11.2021 challenging:
    • The validity and sufficiency of the satisfaction; and
    • The very assumption of jurisdiction under Section 153C.
• Notices under Section 142(1) were issued on 09.07.2022, replied to on 20.07.2022, and further notices under Section 142(1) were issued on 18.02.2023, seeking extensive details regarding alleged incriminating evidence.
• The AO passed an order disposing of the objections on 23.01.2023 and continued the assessment proceedings, prompting the petitioners to approach the High Court under Article 226 seeking the quashing of the 153C notices.

III. Statutory Context: Section 153C and Related Provisions

At the heart of the dispute lies Section 153C (as amended by the Finance Act, 2015, w.e.f. 01.06.2015). In essence, Section 153C provides for assessment of income of a person other than the person searched when, in the course of a search under Section 132 or a requisition under Section 132A:

• Books of account, documents, or assets are seized or requisitioned;
• Which “belong to” or “pertain to” or “relate to” a person other than the searched person;
• The AO of the searched person records a satisfaction note to that effect;
• And then proceeds (or causes the AO of such other person to proceed) to assess or reassess that other person for the prescribed years.

The 2015 amendment broadened the language from the earlier requirement that the material must “belong to” the other person to the current, seemingly wider phrases “pertains or pertain to” and “relates to or relate to” such other person.

The dispute in this case is not about whether the amendment applies (it clearly does, since the search is post-2015), but about the quality and nature of nexus that the seized material must have with the “other person” to validly trigger Section 153C.

IV. Issues Before the Court

The primary issues the Gujarat High Court had to determine were:

1. Whether the digital images of an MoU found on the mobile phone of the searched person (a broker) – an MoU which does not mention the petitioners at all – can be treated as material “relating to” or “pertaining to” the petitioners for the purposes of Section 153C.
2. Whether subsequent enquiries by the AO (through public domain records and documents furnished post-search) can be used to build a connection between the seized material and the petitioners so as to justify the invocation of Section 153C.
3. Whether, in the exercise of writ jurisdiction, the High Court can interfere at the notice stage with proceedings under Section 153C on the ground that the jurisdictional preconditions (incriminating material, “live link”) are absent.

V. Summary of the Judgment

The Division Bench (A.S. Supehia, J. and Pranav Trivedi, J.) allowed the writ petitions and quashed the notices under Section 153C.

Key conclusions:

• The MoU seized during the search is an agreement between the seller (Dilipbhai Patel) and a proposed buyer (Dhirenbhai Bharvad) for Rs. 39.32 crore. It does not mention the petitioners, nor does it establish any connection whatsoever with them.
• The petitioners’ connection with the land in question (Survey No. 329) arises only from the registered sale deed dated 12.04.2018, which the AO discovered from the public domain and from documents not seized during the search.
• The AO’s “satisfaction” that there was undisclosed investment of Rs. 27.32 crore in the hands of the petitioners is based purely on a presumption drawn from comparing:
  • MoU consideration of Rs. 39.32 crore (with a third party buyer); and
  • Registered sale consideration of Rs. 12 crore (with the petitioners);
  without any incriminating material discovered in the search that has a direct nexus with the petitioners.
• Therefore, the jurisdictional condition for invoking Section 153C – that the seized material must “relate to” or “pertain to” the petitioners – is not satisfied.
• The AO has acted de hors Section 153C, and the satisfaction note does not legally justify roping in the petitioners as “other persons” under Section 153C.
• The High Court, in exercise of its limited but potent writ jurisdiction, held that such a jurisdictional defect warranted interference even at the notice stage. Consequently, all impugned notices were quashed without costs.

VI. Detailed Analysis

A. Precedents Cited and Their Influence

1. CIT v. Radhey Shyam Bansal, (2011) 337 ITR 217 (Delhi)

In Radhey Shyam Bansal, the Delhi High Court interpreted the (then) unamended Section 153C. The Court emphasised:

• For valid initiation of Section 153C proceedings, the seized material must “belong to” the other person;
• It must not be a mere casual reference to such person but must have a real connection; and
• A proper satisfaction note recording this conclusion is mandatory.

While the statutory language has since been expanded beyond “belongs to” to include “pertains to” and “relates to”, the underlying logic—that there must be a real, not remote or speculative, nexus between the seized material and the other person—remains intact. The Gujarat High Court’s insistence in the present case on a “live link” between seized data and the petitioners is conceptually in line with Radhey Shyam Bansal.

2. CIT v. Raj Pal Bhatia, (2011) 333 ITR 315 (Delhi)

In Raj Pal Bhatia, the Delhi High Court again underscored:

• That Section 153C is a special provision that can be invoked only when there is seized material that “belongs to” (now: “pertains to” / “relates to”) a person other than the one searched; and
• That absence of such material vitiates the jurisdiction to proceed under Section 153C.

The Gujarat High Court’s reasoning—that the MoU, which did not name the petitioners and was unrelated to them, could not be used to drag them into 153C proceedings—echoes this principle of jurisdictional limitation.

3. PCIT (Central-3) v. Abhisar Buildwell (P.) Ltd., (2023) 454 ITR 212 (SC)

In Abhisar Buildwell, the Supreme Court considered the scope of assessments under Section 153A (assessment in case of search) and held:

• For assessment years where assessments had already attained finality (so-called “unabated” years), additions under Section 153A can be made only on the basis of incriminating material found during the search;
• Section 153A does not permit a de novo reassessment of completed assessments in the absence of such incriminating material.

While Abhisar Buildwell was directly concerned with Section 153A, the principle that additions in search-related assessments must be founded on incriminating material found during the search has a natural parallel in Section 153C cases, where such material must further be connected to the “other person”.

The petitioners’ reliance on Abhisar Buildwell bolstered their argument that:

4. ITO v. Vikram Sujitkumar Bhatia, (2023) 453 ITR 417 (SC)

The Revenue relied on the Supreme Court’s decision in Vikram Sujitkumar Bhatia, which principally dealt with:

• The prospective application of the 2015 amendment to Section 153C; and
• Whether the amended expression “pertains to” / “relates to” applies to searches conducted prior to 01.06.2015 (the Supreme Court held that it does not).

The Gujarat High Court held that the Revenue’s reliance on this decision was misplaced because:

• In the present case, the search was conducted on 15.10.2019, well after the amendment, so the amended Section 153C clearly applies;
• The issue here is not temporal application of the amendment, but whether, even under the amended, ostensibly broader language, the preconditions of Section 153C are actually met.

Thus, Vikram Sujitkumar Bhatia did not assist the Revenue in justifying the AO’s action on the facts at hand.

B. Court’s Legal Reasoning

1. No Nexus between Seized MoU and the Petitioners

The Court repeatedly emphasised that:

• The MoU was:
  • Between Dilipbhai Patel (seller) and Dhirenbhai Bharvad (buyer);
  • Concerning Survey No. 329 for Rs. 39.32 crore with Rs. 1 crore cash payment;
  • Did not mention the petitioners’ names at all.
• As stated in para 12:
  “Indubitably, the name of the petitioners does not figure in the MoU. The same does not even remotely connect the petitioners to the MoU.”

Accordingly, the seized material did not “relate to” or “pertain to” the petitioners within the meaning of Section 153C, even under the broadened post-2015 language.

2. Impermissible Reliance on Post-search Enquiries and Public Domain Information

The AO’s satisfaction was critically based not on the seized material itself but on:

• Information gathered post-search from the broker (7/12 extracts and Form 6, which were not seized but handed over later); and
• Registered sale deed details obtained from the public domain, showing that the petitioners purchased the land for Rs. 12 crore.

The Court noted:

The Court held that Section 153C cannot be founded on such post-search material or on information drawn from the public domain. Those may be relevant in other contexts (such as regular assessments or reassessment under Section 147), but they cannot substitute for the statutory requirement that the seized material itself must relate to the “other person”.

3. “Live Link” and “Direct Nexus” Requirement

The judgment repeatedly uses expressions like:

• “no link which embroils the petitioners into the assessment proceedings” (para 12);
• “no incriminating material found during the search having a direct nexus with the petitioners” (para 13);
• “cannot be said to create a live link involving the petitioners” (para 13);
• “the satisfaction recorded by the AO … has no nexus with the petitioners” (para 14).

These expressions clarify that the Court is treating the nexus requirement as a jurisdictional threshold:

• First, the material must be seized during the search or requisition;
• Second, that seized material must have a live and proximate connection with the “other person”;
• Third, the AO must record a reasoned satisfaction on this basis alone.

Here, the only seized material (the MoU) did not have any such connection with the petitioners. The connection was manufactured later using public information, which is not permissible to justify a Section 153C invocation.

4. Presumption of On-money is Not “Incriminating Material”

The AO presumed that the seller, having once agreed to sell the land for Rs. 39.32 crore under the MoU, would not thereafter sell the same land to the petitioners for Rs. 12 crore without receiving unaccounted consideration in cash. This led to the conclusion of “undisclosed investment” of Rs. 27.32 crore.

The Court rejected this approach, implicitly treating it as:

• A mere suspicion or conjecture, not supported by any tangible material discovered in the search which connects the petitioners to any on-money payment;
• An attempt to convert a comparison of two separate transactions into “incriminating material” against the petitioners.

In line with the jurisprudence flowing from Abhisar Buildwell and earlier decisions, the Court treated this kind of inferential leap as insufficient to constitute “incriminating material”.

5. Writ Jurisdiction and Limited Judicial Review

The Revenue argued that the Court’s power of judicial review over the AO’s “satisfaction” is narrow and should be exercised sparingly. The Court accepted, in principle, that:

• Courts do not sit in appeal over the AO’s factual appreciation of material; and
• Interference is warranted only in cases of jurisdictional error, serious illegality, or patent irregularity.

However, the Court held that this is precisely such a case:

• The AO’s satisfaction lacked the foundational jurisdictional fact (i.e., seized material relating to the petitioners);
• Therefore, the AO’s assumption of jurisdiction under Section 153C was bereft of the statutory basis and constituted an illegality going to the root;
• Hence, the High Court was justified in exercising writ jurisdiction at the notice stage to prevent an unlawful assessment from proceeding further.

C. Interface with the Amended Section 153C

A crucial facet of this decision lies in how it reads the broadened language of Section 153C post-2015. The Revenue argued that:

• After the amendment, it is enough that the seized material “relates to” the other person, which, according to them, is a lower threshold than “belongs to”;
• Since the land referred to in the MoU is the same land later purchased by the petitioners, the MoU “relates to” them.

The Court rejected this broad-brush reading. Implicitly, it adopted the following interpretive stance:

• While “relates to” and “pertains to” expand the scope beyond strict ownership (“belongs to”), they still require:
  • A specific, demonstrable connection between the seized material and the other person; and
  • Not a tenuous or purely inferential link built through subsequent enquiries.
• If the seized MoU is an agreement between A and B, and the petitioners are C, the AO cannot argue that the MoU “relates to C” simply because C later dealt with the same land in a different transaction.

Thus, the case stands as a significant clarification that the amended Section 153C, despite its wider wording, still carries a “live link” requirement between the seized material and the person sought to be assessed.

D. AO Acting “de hors Section 153C”

In para 14, the Court states:

This is a strong censure. “De hors” in this context means:

• The AO’s action was outside or beyond the scope of the statutory provision;
• The AO effectively used the search as a springboard to carry out enquiries and derive a theory of undisclosed income without satisfying the statutory preconditions for invoking Section 153C.

This characterisation confirms that the Court regarded the defect not as a minor irregularity but as a jurisdictional failure.

VII. Simplifying Key Legal Concepts

1. Search under Section 132

A search under Section 132 is a coercive measure used by the tax department to:

• Enter premises of a person suspected of tax evasion;
• Seize books of account, documents, money, jewellery, etc.;
• Record statements and gather evidence.

The entire edifice of Sections 153A and 153C rests on the fruits of such a search.

2. Section 153C: Assessment of “Other Person”

While Section 153A deals with the person who is searched, Section 153C allows the Revenue to bring into assessment a different person (the “other person”) when:

• Incriminating books, documents, or assets seized in a search on X relate to Y (the other person);
• The AO of X records that satisfaction and hands over the material to the AO of Y;
• Y is then assessed/reassessed under Section 153C for the specified years.

In short: Section 153C is a special gateway through which a person who was not searched can still face search-linked assessments, but only if the seized material clearly connects to that person.

3. Incriminating Material

“Incriminating material” is not defined in the Act but generally refers to:

• Material found during a search that indicates undisclosed income or tax evasion;
• For example, documents showing unaccounted cash purchases, receipts of on-money, bogus entries, etc.

Mere speculation or inference based on public documents (like registered sale deeds) is not incriminating material in this search-related context.

4. Satisfaction Note

A “satisfaction note” is the written record by the AO explaining:

• What material was found during the search;
• Why the AO believes it belongs to / relates to the other person; and
• Why proceedings under Section 153C should be initiated against that person.

It is a jurisdictional document. If the satisfaction note does not properly link the seized material to the other person, the entire proceeding can be struck down, as in this case.

5. On-money

“On-money” is a colloquial term used in tax law to describe:

• Cash or unrecorded consideration paid in addition to the recorded (legal) consideration in a transaction, typically property;
• This amount is usually not reflected in the sale deed or in the books of account, and hence is “undisclosed income”.

In this case, the AO suspected that the petitioners had paid on-money because the land had earlier been agreed to be sold for Rs. 39.32 crore, but was later sold to the petitioners for only Rs. 12 crore. However, there was no material seized during the search showing that the petitioners had paid such extra cash.

VIII. Impact and Implications

1. For the Revenue (Tax Department)

• The judgment sends a clear message that Section 153C cannot be used as a general investigative tool against any person merely associated with an asset found during someone else’s search.
• Officers must ensure:
  • The seized material itself shows some link—direct or at least reasonably clear—between the material and the person to be proceeded against;
  • Post-search enquiries, statements, or information obtained from public sources may supplement understanding, but they cannot create jurisdiction where none exists in the seized material.
• Failure to carefully scrutinise the seized material and record a robust satisfaction note will result in writ courts quashing 153C notices at a preliminary stage, leading to significant wastage of departmental effort.

2. For Taxpayers

• Taxpayers who receive notices under Section 153C now have stronger support from this Gujarat High Court precedent to:
  • Demand and scrutinise the satisfaction note and seized material; and
  • Challenge the proceedings where their names or transactions do not feature in the seized documents.
• If:
  • The seized material does not mention the taxpayer; and
  • The link is constructed only using later enquiries or public documents,
  the taxpayer can argue, relying on this judgment, that:
  • Section 153C has been invoked without jurisdiction; and
  • The proper route for the department, if at all, is through other provisions (e.g., Section 147), subject to their own safeguards and limitations.

3. Broader Legal Significance

• The judgment is a significant contribution to the evolving jurisprudence on post-2015 Section 153C and clarifies that:
  • The extended language (“pertains to”, “relates to”) does not nullify the fundamental requirement of a real and proximate nexus with the other person;
  • Courts will not accept “nexus by hindsight” built through subsequent investigations when the seized material is silent about the person targeted.
• It harmonises with Abhisar Buildwell in underscoring that search-based assessments are evidence-driven and cannot be used as a pretext for roving enquiries into concluded assessments without clear incriminating material.
• As a Gujarat High Court decision, it is binding within the State of Gujarat and is likely to be persuasive before other High Courts dealing with similar issues under Section 153C.

IX. Conclusion

The Gujarat High Court in Sandhya Maulik Patel v. ACIT has firmly reiterated that Section 153C, even after its 2015 amendment, is not a carte blanche power.

The principal takeaway can be summarised as follows:

• For valid initiation of proceedings under Section 153C against an “other person”:
  • The material must be seized during the search or requisition on the searched person;
  • That seized material must relate to or pertain to the other person in a manner that provides a live and direct nexus with alleged undisclosed income;
  • Post-search enquiries or information from the public domain cannot compensate for the absence of such nexus in the seized material itself;
  • The satisfaction note must reflect this connection; otherwise, the proceedings are without jurisdiction.

By quashing the Section 153C notices, the Court has fortified the legal position that search-based assessments must be grounded in concrete evidence uncovered during the search and cannot rely solely on presumption, comparative valuation, or indirect inferences. The decision thereby strengthens procedural safeguards for taxpayers, while simultaneously guiding the tax administration to confine Section 153C within its rightful statutory limits.