The Hon'ble High Court of Karnataka, in its judgment dated 24 April 2026 in the case of Sri C.R. Ram Mohan Raju [TS-596-HC-2026(KAR)], has held that only the person named in the search warrant under Section 132 qualifies as the “searched person” for the purposes of initiation of proceedings under Section 153A of the Income Tax Act, 1961. It also held that the occupant of searched premises who is not named in the warrant, is an “other person” and is subject to proceedings under Section 153C.

Background

Search and seizure proceedings under Section 132 of the Income Tax Act, 1961 were conducted on 14 September 2017 at the residential premises of the respondent, Sri C.R. Ram Mohan Raju, on the basis of a search warrant issued in the name of Sri K. Narayan Raju. The respondent's premises were searched because the competent authority had reason to suspect that material belonging to K. Narayan Raju was kept there. Following the search, the Assessing Officer of K. Narayan Raju recorded satisfaction that certain seized documents belonged to the respondent and handed them over to the respondent's Assessing Officer. Notices under Section 153C (Assessment of income of any other person) were then issued to the respondent for Assessment Years 2011-12 to 2018-19.

The respondent challenged these notices in a Writ Petition, arguing that he was a “searched person” because his premises were physically searched and therefore proceedings should have been initiated under Section 153A, not Section 153C. The learned Single Judge agreed, relying on the Division Bench ruling in DCIT v. Sunil Kumar Sharma [TS-5158-HC-2024(Karnataka)-O], and quashed the Section 153C notices. The Revenue preferred this Writ Appeal.

The Core Legal Issue

The core legal issue before the Division Bench was: "Who is the “searched person” under Section 132 of the Income Tax Act — the person named in the search warrant, or the person whose premises are physically searched?" The answer to this question directly determines whether Section 153A or Section 153C is the appropriate provision for initiating assessment proceedings.

The Court's Analysis

I. The Two Limbs of Section 132(1)

The Court undertook a meticulous analysis of Section 132(1), drawing a fundamental distinction between two distinct components:

1. Clauses (a) to (c): The Court held that these relate to the formation of 'reason to believe' — which is person-centric. Satisfaction must be recorded against a specific named individual.
2. Clauses (i) to (v): The Court held that these relate to 'reason to suspect' regarding the place of search — these are premises-centric and deal with the execution of the warrant.

The Court held that the two limbs operate independently: the warrant is issued against a person, while the premises to be searched need not belong to that person. The “searched person” is therefore determined by whose name appears in the warrant i.e., the person against whom clauses (a) to (c) satisfaction is recorded and not by who owns or occupies the premises searched.

II. The Panchnama — Column A is Determinative

The Court also analysed the Panchnama drawn at the respondent's premises and held that it itself bore out this distinction explicitly:

Column                Content

Column A — Person named in the warrant: Sri K. Narayan Raju (Party No. CRM-1)

Column B — Premises to be searched: Residence of Sri C.R. Ram Mohan Raju, No. 24, Lakshmi Niwas, 4th Cross Road, K.R. Layout, J.P. Nagar, 6th Phase, Bangalore

The person named in the warrant was held to be determinative of who is the “searched person.”

III. Section 153A is Person-Specific; Section 153C Applies to the Occupant

The Court held that Section 153A applies only where 'a search is initiated under Section 132 in the case of a person' ,  meaning the person named in the warrant. Since the warrant was in the name of K. Narayan Raju, Section 153A applied to him. Proceedings against the respondent as the occupant of the searched premises whose name did not appear in the warrant could only be initiated under Section 153C, subject to satisfaction of its statutory conditions.

IV. DCIT v. Sunil Kumar Sharma — Declared Per Incuriam

The Single Judge's order, and the previous Division Bench ruling in DCIT v. Sunil Kumar Sharma [TS-5158-HC-2024(Karnataka)-O], were found to be per incuriam on two grounds:

1.  The Division Bench in DCIT v. Sunil Kumar Sharma did not consider the earlier Division Bench precedents of the same Court,  C. Ramaiah Reddy v. CIT (2011) [TS-5658-HC-2010(Karnataka)-O] and CIT v. Associated Mining Company (2019), both of which had squarely addressed the same issue and reached the opposite conclusion.
2.  It also failed to consider consistent rulings from the Delhi, Rajasthan, and Gujarat High Courts, all predating the DCIT v. Sunil Kumar Sharma order.

The Court relied on the doctrine of per incuriam as clarified by the Supreme Court in Bilkis Yakub Rasool (2024) and MCD v. Gurnam Kaur (1988)  that a decision rendered in ignorance of a binding authority of a coordinate or higher court is not a binding precedent. The Court also rejected the respondent's argument that the Supreme Court's dismissal of the Revenue's SLP against DCIT v. Sunil Kumar Sharma constitutes an affirmation of that ruling. Relying on Kunhayammed v. State of Kerala (2000), the Court held that dismissal of an SLP without a speaking order does not amount to merger or endorsement of the High Court judgment.

V. One Consolidated Satisfaction Note Suffices

An additional argument by the respondent that a separate satisfaction note must be recorded for each assessment year was rejected. Relying on CIT v. Calcutta Knitwears (2014) [TS-170-SC-2014-O], Super Malls (P) Ltd. v. CIT (2020) [TS-5019-SC-2020-O], and High Court of Karnataka’s ruling in CIT v. IBC Knowledge Park Pvt. Ltd. (2016), the Court held that a single consolidated satisfaction note suffices. The statute does not mandate year-wise satisfaction notes. Where the Assessing Officer of the searched person and the other person is the same, one satisfaction note is sufficient.

VI. Laches — Independent Ground for Dismissal

The Court additionally found that the Writ Petition was filed after an inordinate and unexplained delay of over four and a half years from the date of the impugned notices (issued in 2019), as the petition was  filed barely a month before the assessment time limit expired in December 2024. Applying Mrinmoy Maity v. Chhanda Koley (2024), the Court held the petition was independently liable to be dismissed on grounds of laches.

While coming to these conclusions, the Court reiterated the observations of The Hon’ble Supreme Court in Calcutta Knitwears that a taxing statute must be construed strictly, having regard to the language employed therein. Nothing can be read into the provision, nor can anything be implied. At the same time, while interpreting machinery provisions, the Court must adopt a construction that effectuates the object of the statute and makes the provision workable. Based upon these conclusions, the Division Bench allowed the Writ Appeal, set aside the Single Judge's order dated 27 October 2025, dismissed the original Writ Petition No. 33057/2024, and restored all Section 153C notices (Annexures A1 to A8) for Assessment Years 2011-12 to 2018-19.

Significance and Road Ahead

This ruling deals with a significant interpretive dispute in India's search-and-seizure tax jurisprudence. Applying the principle of strict interpretation of taxing statutes, the Court has analysed the legal provisions in detail and has also discussed the Judicial pronouncements brought to its attention in detail.  But, in all probabilities,  the final word on this aspect will come from the Apex Court. The decision in Ram Mohan Raju is likely to travel to the Supreme Court, given the significance of the interpretive question and the existence of precedence in the form of decisions in the case of Sunil Kumar Sharma.  In this context, two decisions merit attention, one from the Kerala High Court and one from the Supreme Court itself, both of which bear on the question of who is the “searched person” and who is the “other person” in search assessment proceedings, but have not been brought to the attention of the Court in the present case.

I. V.H. Yahiya v. Deputy Commissioner of Income Tax — Kerala High Court

First decision is the Kerala High Court's ruling in V.H. Yahiya v. Deputy Commissioner of Income Tax  decided on 31 March 2014, in which the core legal issue was identical to that in the case of Ram Mohan Raju, but the facts were  diametrically opposite.

In that case, search and seizure proceedings  under Section 132 were conducted in the business premises of M/s. Harbour Syndicate on the basis of the search warrant  in the names of V.H.M. Rafeeq and V.H. Yahiya. The Assessing Officer issued notice under Section 158BC to Harbour Syndicate, holding it to be the “searched person,” and under Section 158BD to V.H. Yahiya, holding him to be the “other person.” V.H. Yahiya challenged this, arguing that since the search warrant was in his name, he should have been assessed under Section 158BC, not 158BD.

The CIT(A) decided in favour of the assessee after analysing the contents of the warrant and the Panchnama . He held that since the warrant was issued in the name of V.H. Yahiya, he was the “searched person” and M/s. Harbour Syndicate was the “other person.” The ITAT, however, did not decide the “searched person” question at all. It held, on a different and narrower ground, that an assessment cannot be held void ab initio merely because the Assessing Officer did not cite the relevant section correctly in the assessment order, and accordingly set aside the CIT(A)'s order on that point.

The question of the “searched person” and the “other person” thus came up before the Kerala High Court. The Court held decisively in favour of the Revenue: the business premises of Harbour Syndicate were admittedly searched; therefore, Harbour Syndicate  and not V.H. Yahiya  was the “person searched” within the meaning of Section 158BC. The reason for searching Harbour Syndicate may have been non-compliance by Rafeeq and Yahiya, but when the search is conducted in the business premises of Harbour Syndicate, they alone become the 'person' mentioned in Section 158BC. V.H. Yahiya, being the “other person,” was correctly assessed under Section 158BD.

Thus, the two decisions in the cases of V.H. Yahiya and Ram Mohan Raju reflect a genuine doctrinal tension in search assessment jurisprudence. In V.H. Yahiya, the Kerala High Court identified the searched person by reference to whose premises were physically searched, a premises-centric approach. In Ram Mohan Raju, the Karnataka Division Bench adopted the opposite, warrant-centric approach that the person named in the warrant is the searched person, not the occupant of the premises.

II. Tapan Kumar Dutta v. Commissioner of Income Tax — Supreme Court

An important decision bearing on this issue is the Supreme Court's ruling in Tapan Kumar Dutta v. Commissioner of Income Tax [2018].

Tapan Kumar Dutta was a partner in a firm, M/s. Nityakali Rice Mill. On 6 November 1998, a search was conducted at the firm's business premises under Section 132 and documents and books including Rs. 34 lakhs were seized. On 9 September 1999, the same Assessing Officer issued notices under Section 158BC to both the firm and to Tapan Kumar Dutta on the same day, treating Dutta as a searched person when he was in fact a partner, not the entity whose premises were searched. Subsequently, a fresh notice was issued to Tapan Kumar Dutta under Section 158BD. The assessee challenged it, contending that the earlier notice issued under Section 158BC was valid and no fresh proceedings could be initiated. The Supreme Court upheld the Revenue's action.

The following observations of the Court in Paragraph 11 are directly relevant to the issue of the “searched person” and the “other person”:

"11. A perusal of Section 158BD of the IT Act makes it clear that the Assessing Officer needs to satisfy himself that the undisclosed income belongs to any person other than the person with respect to whom the search was made under Section 132 or whose books of account or other documents or assets were requisitioned under Section 132A. The very object of Section 158BD is to give jurisdiction to the Assessing Officer to proceed against any person other than the person against whom a search warrant is issued."

These observations reinforce the warrant-centric identification of the “searched person” and the “other person.” The Supreme Court explicitly states that the object of Section 158BD which is analogous to Section 153C, is to empower the Assessing Officer to proceed against "any person other than the person against whom a search warrant is issued." The Bench in Ram Mohan Raju built its entire analysis upon precisely this foundation: the person whose name figures on the warrant is the “searched person,” and not the person whose premises may have been searched but whose name does not appear on the warrant. While Tapan Kumar Dutta was not cited in the Ram Mohan Raju judgment, its observations in Paragraph 11 provide strong Supreme Court-level support for the warrant-centric approach adopted by the Karnataka Division Bench. When the matter reaches the Supreme Court, this decision is likely to be a significant reference point.

Implications for Assessing Officers and Taxpayers