Division Bench rules that search under Section 132 is person-centric, not premises-centric; proceedings against owners of searched premises can be initiated only under Section 153C, not 153A
In a landmark judgment delivered on April 24, 2026, the Karnataka High Court (Division Bench) in the case of Deputy Commissioner of Income Tax v. Sri C. R. Ram Mohan Raju has settled a contentious issue regarding the interpretation of the term "searched person" under the Income Tax Act, 1961. The court emphatically held that the authorization for search under Section 132 of the Income Tax Act is person-centric, not premises-centric. Consequently, proceedings under Section 153A apply strictly to the person against whom the search authorization is issued, while proceedings against other persons in whose premises search is conducted must be initiated under Section 153C, subject to statutory conditions.
The case arose from a search conducted on September 14, 2017, against Sri K. Narayan Raju, under Section 132, on the basis of recorded satisfaction that incriminating documents belonging to him were kept at the residential premises of the respondent, Sri C. R. Ram Mohan Raju. Although the premises of the respondent were searched and documents seized therefrom, the Assessing Officer initiated proceedings against the respondent under Section 153C, treating him as an "other person." The respondent challenged this, contending that since his premises were searched and documents seized, he should be treated as a "searched person," and proceedings should have been initiated under Section 153A.
The Single Judge initially accepted the respondent’s plea, relying on a 2024 Division Bench judgment in Sunil Kumar Sharma v. ACIT, and quashed the Section 153C notices. The Revenue appealed.
Upon hearing, the Division Bench meticulously analyzed the statutory provisions of Sections 132, 153A, and 153C of the Income Tax Act, as well as Rule 112 of the Income Tax Rules. The court noted that Section 132(1) requires the competent authority to record satisfaction ("reason to believe") specifically against a person under clauses (a) to (c), while separately identifying the premises to be searched based on a "reason to suspect" that materials belonging to that person are kept there. The warrant of authorization (Form No. 45) thus names the person against whom satisfaction is recorded and separately specifies the premises to be searched, which need not belong to that person.
The court held that the "searched person" is the individual against whom satisfaction is recorded under Section 132(1)(a)-(c), and not necessarily the owner or occupant of the premises searched under Section 132(1)(i). It rejected the respondent’s contention that premises ownership or signing of the search warrant makes him a "searched person."
The Division Bench distinguished the decision in Sunil Kumar Sharma, noting that it did not consider earlier binding precedents of this Court and other High Courts, and thus was rendered per incuriam (in ignorance of relevant law) and not binding. The court reaffirmed principles laid down in earlier Division Bench judgments, including C. Ramaiah Reddy v. CIT (2010) and PCIT v. Associated Mining Company (2019), and judgments of Delhi, Rajasthan, and Gujarat High Courts.
Further, the court upheld the validity of proceedings under Section 153C initiated against the respondent as the “other person,” since the Assessing Officer was satisfied that the seized documents belonged to the respondent and not the searched person. It clarified that a consolidated satisfaction note from the Assessing Officer is sufficient, and separate satisfaction notes for each assessment year are not required.
The court also observed that the writ petition challenging the notices was filed with an inordinate delay of over four years, which was not justified and liable to be dismissed on grounds of delay and laches.
In conclusion, the Karnataka High Court allowed the Revenue’s appeal, set aside the Single Judge’s order, and restored the notices issued under Section 153C against the respondent for assessment years 2011-12 to 2018-19. The court emphasized that the Income Tax Act’s provisions relating to search and seizure must be strictly construed, with clear demarcation between the "searched person" and other persons whose premises may be searched.
This judgment provides much-needed clarity on the procedural and substantive aspects of search and seizure under the Income Tax Act, ensuring that assessment proceedings are correctly initiated in accordance with statutory mandates.
Bottom line:-
Income Tax Act - "Searched person" under Section 132 of the Income-tax Act, is person-centric and not premises-centric - Proceedings under Section 153A apply only to such person, while proceedings against others (in whose premises search is conducted) fall under Section 153C.
Statutory provision(s): Income Tax Act, 1961 Sections 132, 153A, 153C; Income Tax Rules, 1962 Rule 112
