THE DCIT, CENTRAL CIRCLE-2(4), AHMEDABAD vs. M/S. MADHUSUDAN SPECIAL SELECTIONS PVT. LTD, AHMEDABADA

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ITSSA 198/AHD/2021Status: DisposedITAT Ahmedabad19 August 2026AY 2018-196 pages
AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the order of the CIT(A) and dismissed the Revenue's appeal. On the first issue, the Tribunal affirmed the settled legal proposition that recording of a satisfaction note is a prerequisite for initiating assessment proceedings under Section 153C. Citing the jurisdictional High Court's decision in Virat Alloys (P.) Ltd. vs. Officer of the Assistant Commissioner of Income-tax and the Supreme Court's ruling in CIT vs. Calcutta Knitwears, along with CBDT Circular No. 24/2015, the Tribunal found that no satisfaction note was recorded for AY 2018-19, rendering the initiation of proceedings under Section 153C invalid. On the second issue, the Tribunal found that the Revenue failed to controvert the CIT(A)'s findings on merits. The CIT(A) had noted that the jottings were mere estimates by the appellant's director of probable collections by the developer, and the AO had not brought forth any corroborative evidence to establish that these amounts represented cash payments to the appellant. The CIT(A) had also considered the director's statement under Section 132(4) and other factors, concluding that the addition was improper and illogical. The Tribunal found no fault with the CIT(A)'s decision on both the legal and merits aspects.

What were the facts?

The Revenue filed an appeal against the order of the CIT(A) for Assessment Year 2018-19, challenging the deletion of an addition of Rs. 5,47,66,500/- made by the Assessing Officer (AO) under Section 69A read with Section 115BBE of the Income-tax Act, 1961. The appeal also contested the CIT(A)'s finding that proceedings under Section 153C were not initiated in accordance with law due to a lack of a valid satisfaction note for the assessment year in question. The AO had initiated proceedings under Section 153C based on documents seized during a search on the SSS Group of Companies on March 6, 2018, which allegedly pertained to the assessee. The seized documents included a development agreement and loose papers containing jottings. The CIT(A) had deleted the addition and quashed the Section 153C proceedings, holding that the satisfaction note did not cover AY 2018-19.

What were the issues?

1. Whether the initiation of proceedings under Section 153C of the Income-tax Act, 1961, for Assessment Year 2018-19 was in accordance with law, considering the absence of a specific satisfaction note for that year. - Assessee's Contention: The assessment order passed under Section 153C is without jurisdiction as no satisfaction note was recorded by the AO for AY 2018-19. The satisfaction note on record pertains only to AY 2012-13 to 2017-18. - Revenue's Contention: Although a separate satisfaction note was not recorded for AY 2018-19, the details in the seized jottings are relevant for determining the total income for the present assessment year. The jottings mention cash amounts against each unit, indicating they are not 'dumb documents'. 2. Whether the addition of Rs. 5,47,66,500/- made by the AO under Section 69A read with Section 115BBE of the Act was justified on merits. - Assessee's Contention: The CIT(A) correctly held that the addition was not supported by corroborative evidence. The jottings were mere estimates by the director of probable collections by the developer, and the AO failed to establish that these amounts represented cash payments to the assessee. The AO disregarded the director's statement under Section 132(4) and other relevant facts.

Which sections of the Income-tax Act were involved?

Section 153C,Section 69A,Section 115BBE,Section 132(4)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI NARENDRA PRASAD SINHA & SHRI SANJAY KUMAR

For Appellant: Shri S N Soparkar, Sr. Advocate
For Respondent: Shri R.V.Aroon Prasaad, CIT-DR
Hearing: 04.08.2026Pronounced: 19.08.2026

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI NARENDRA PRASAD SINHA, ACCOUNTANT MEMBER AND SHRI SANJAY KUMAR, JUDICIAL MEMBER ITSSA 198/AHD/2021 (Assessment Year: 2018-19) The DCIT, M/s. Madhusudan Special Vs. Central Circle-2(4) Selections Pvt. Ltd Ahmedabad-380009 Survey No. 107, 108/P, Vill Lodariyal, Bavla Sanand Highway, Sanand Ahmedabad-382220, Gujarat [PAN : AABCM4772B] (Appellant) .. (Respondent) Assessee represented by : Shri S N Soparkar, Sr. Advocate Revenue represented by: Shri R.V.Aroon Prasaad, CIT-DR Date of Hearing 04.08.2026 Date of Pronouncement 19.08.2026

O R D E R PER SANJAY KUMAR, JUDICIAL MEMBER:- This appeal has been filed by the Revenue against the order dated 02.08.2021 passed by the Ld. Commissioner of Income Tax (Appeals), -12, Ahmedabad (hereinafter referred to as ‘Ld. CIT (A)’ in short), in the order under Section 153C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2018-19.

2.

The Revenue has raised following grounds of Appeal:- “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that the initiation of proceedings u/s. 153C of I.T. Act is not in accordance with the provisions of law and hence the addition made by the AO on the basis of no satisfaction note for year under consideration and also for the other reasons is untenable.

2.

On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of Rs.5,47,66,500/- made by the Assessing officer u/s. 69A r.w.s. 115BBE of the Act.

TSSA 198/AHD/2021 (Assessment Year: 2018-19) - 2– 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.

4.

It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”

3.

Brief facts of the case are that a search and seizure action was conducted on 06.03.2018 in the case of SSS Group of Companies. During the course of search action, certain documents/loose papers as per Annexure-1 (containing 11 pages) were seized which allegedly pertained to the present Assessee. During the assessment proceedings, the Assessee was provided a copy of the Satisfaction Note recorded in the case of the Assessee for initiation of proceedings u/s 153C of the Act. The said Satisfaction Note (placed at page No. 40 of the paper book) did not cover Assessment Year 2018-19, which is the subject matter of the present appeal. The Satisfaction Note pertained to Assessment Year 2012-13 to Assessment Year 2017-18. The Satisfaction Note contained a copy of the development agreement and jottings on 2 pages. The present Assessee has entered into a development agreement with Srushti Developers on 23.01.2014 for the development of the Assessee’s erstwhile factory land at Naroda. Pages 3 to 11 contained the said development agreement while pages 1 and 2 contained the jottings only, which admittedly do not bear the name of any party, name of project, or any date or signatures. The AO ultimately made an addition of Rs. 5,47,66,500/- u/s 69A of the Act.

4.

Aggrieved, the Assessee preferred an appeal before the Ld. CIT(A), who allowed the appeal of the Assessee both on the legal count that no Satisfaction Note was recorded for the present Assessment Year 2018-19 as well as on the merits of the addition.

5.

Before us, the ld. CIT-DR has supported the order passed by the AO. It is submitted that jottings mention the amount of cash against each unit of the scheme. Therefore, the seized documents even though undated cannot be termed as dumb documents. Although the Satisfaction Note was not

TSSA 198/AHD/2021 (Assessment Year: 2018-19) - 3– separately recorded for the present Assessment Year, the details mentioned in the jottings are relevant for the purpose of determination of total income for the present Assessment Year also.

6.

Ld. Senior Counsel appearing for the Assessee has submitted that the Assessment Order in this case is passed without jurisdiction. He submits that assessment in this case has been made u/s 153C of the Act; however, there is no satisfaction note recorded by the AO in respect of Assessee for Assessment Year 2018-19. The satisfaction note placed on record pertains to Assessment Year 2012-13 to 2017-18 only. In absence of the satisfaction note for the current year, the Assessment Order passed in this case is without jurisdiction. He also supported the view taken by the Ld. CIT(A) on the merits of the addition.

7.

We have heard the parties and perused the material. The observations made by the Ld. CIT(A) in the impugned order on the issue of satisfaction note are reproduced hereinbelow: “6.15 As such the satisfaction note, (i) has been prepared mechanically, (ii) does not bear date and (iii) does not cover the subject assessment year, i.e., Α.Υ. 2018-19. Hence, the satisfaction note is not valid and as such proceeding u/s. 153C for A.Y. 2018-19 is bad in law. Thus the initiation of proceedings u/s.153C of IT Act is not in accordance with the provisions of law and hence the addition made by the AO on the basis of no satisfaction note for the year under consideration and also for the other reasons is untenable and hence the same is deleted. The ground of appeal is allowed.” A copy of the satisfaction note has been brought on record in the paper- book filed by the Assessee. From the perusal of the same, the finding as given by the ld. CIT(A) is found to be correct.

7.1 On the issue of merits of additions, the Ld. CIT(A) held as under: “7.14 The director of the appellant Shri Karsanbhai Kanjibhai Raghvani has clarified that these papers at page No. 1 and 2 of Annexure A-1 are estimated figures he worked out of probable collections that the

TSSA 198/AHD/2021 (Assessment Year: 2018-19) - 4– developer might have collected. This explanation of the appellant's director Shri Karsanbhai Raghvani in his statement u/s. 132(4) of the Act has been accepted by the by the AO in his assessment u/s. 153A and no further inquiry has been made during post-search inquiry as well as during the course of assessment proceedings in his case and Assessment Order has been passed in his case without making any addition on this count. 7.15 The above factual and legal position does not support the assumption made by the Assessing Officer that the appellant was entitled for 50% of alleged payments received by Srushti Developers in cash from individual customers, without establishing that those amounts represent the cash payment to the appellant. The Assessing Officer has not brought out any corroborative evidence to support his contention. It is worth noting that the developer has failed to pay even payment as per the terms of the development agreement let alone such cash payments. The Assessing Officer has simply drawn conclusion on the basis of two papers which have no head or tail and are mere estimates prepared by the Director of the appellant with the intention to make collection from the developer. It is clear that the Assessing Officer has arrived at conclusion without referring to complete development agreement, the fact that the price fixed for the land @ 24,500 per sq. mtr., which is 3.2 times the amount of jantri rate, no other valuable assets or documents have been found during the search or post-search inquiry, the appellant's ITR filed showing capital gain already offered for taxation and disregarding the contents of statement of the director of the appellant u/s. 132(4) is improper, illogical and far from the facts and against the principles of natural justice. In view of the above, there is no case to make the addition in the case of the appellant on merits. Hence the same is deleted.” 8. The Revenue has been unable to controvert the findings as recorded by the ld. CIT(A) on the merits of the of the additions. As regards the legal issue, it is settled proposition of law that recording of satisfaction is sine qua non for initiation of assessment u/s 153C of the Act. The Hon’ble jurisdictional High Court in the case of Virat Alloys (P.) Ltd. vs. Officer of the Assistant Commissioner of Income-tax reported in [2026] 182 taxmann.com 105 (Gujarat) has reiterated the said position taking into account the judgment of Hon’ble Supreme Court in the case of CIT vs. Calcutta Knitwears reported in 362 ITR 673 (SC). The Hon’ble Court took note of Circular No. 24/2015 dated 31.12.2015 issued by the CBDT also. It is a matter of record that no satisfaction note in this case was recorded by the

TSSA 198/AHD/2021 (Assessment Year: 2018-19) - 5– AO and, in that view of the matter, the findings of Ld. CIT(A) referred hereinabove cannot be faulted with. Resultantly, the decision of the Ld. CIT(A) is upheld and the appeal of the Revenue is dismissed being devoid of any merit.

9.

In the result, the appeal filed by the Revenue is dismissed.

The order pronounced on 19.08.2026.

Sd/- Sd/- (NARENDRA PRASAD SINHA) (SANJAY KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 19.08.2026 DS, PS

TSSA 198/AHD/2021 (Assessment Year: 2018-19) - 6– आदेश की �ितिलिप अ�ेिषत / Copy of the Order forwarded to : 1. अपीलाथ�/ The Appellant 2. ��थ�/ The Respondent. 3. संबंिधतआयकरआयु�/ Concerned CIT 4. आयकरआयु�(अपील) /The CIT(A)- िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 5. गाड�फाईल /Guard file. 6. आदेशानुसार/ BY ORDER, True Copy सहायकपंजीकार (Dy./Asstt. Registrar) आयकरअपीलीयअिधकरण, अहमदाबाद / ITAT, Ahmedabad Date of dictation on .08.2026. 1. 2. Date on which the typed draft is placed before the Dictating Member 17 .08.2026 Other Member 17.08.2026 3. 4. Date on which the approved draft comes to the Sr.P.S./P.S 17.08.2026 5. Date on which the fair order is placed before the Dictating Member for pronouncement 17.08.2026 6. Date on which the fair order comes back to the Sr.P.S./P.S .2026 7. Date on which the file goes to the Bench Clerk .2026 Date on which the file goes to the Head Clerk .2026 8. 9. The date on which the file goes to the Assistant Registrar for signature on the order Date of Dispatch of the Order .2026 10.

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