DCIT., CENTRAL CIRCLE-1(3), HYDERABAD vs. LIGHT HOUSE MOVIE MAKERS LLP, HYDERABAD

आयकर अपीलीय अधिकरण, हैदराबाद पीठ
IN THE INCOME TAX APPELLATE TRIBUNAL
Hyderabad ‘A’ Bench, Hyderabad

BEFORE SHRI MANJUNATHA G, ACCOUNTANT MEMBER
AND SHRI RAVISH SOOD, JUDICIAL MEMBER

आ.अपी.सं /ITA No.297/Hyd/2024
(निर्धारण वर्ा/Assessment Year:2015-16)
PAN : ADOPK6018R
(Appellant)

(Respondent)

आ.अपी.सं /ITA Nos.318 & 319/Hyd/2024
(निर्धारण वर्ा/Assessment Years:2019-20 & 2020-21)

Dy. Commissioner of Income
Tax,
Central Circle 1(3),
Hyderabad.

Vs.
M/s. Light House Movie Makers
LLP, Hyderabad.
PAN : AAGFL8979H
(Appellant)

(Respondent)

निर्धाररती द्वधरध/Assessees by: Shri A. Srinivas, C.A.
रधजस् व द्वधरध/Revenue by: Smt. U Mini Chandran, CIT-DR

सुिवधई की तधरीख/Date of hearing: 18/11/2025
घोर्णध की तधरीख/Pronouncement: 24/12/2025

आदेश/ORDER
PER MANJUNATHA G, A.M. :

These appeals are filed by Revenue against the separate orders passed by the Learned Commissioner of Income Tax
(Appeals)-11,
Hyderabad, all dated
19.11.2024
for the ITA Nos.297, 318 & 319/Hyd/2024 2

Assessment Years 2015-16, 2019-20 and 2020-21 respectively.
Since these appeals are on identical grounds and facts, they are heard together and one consolidated order is being passed for the sake of convenience and brevity.
2. First, we take up the appeal of Shri Atchi Reddy Kovvuri and the grounds raised by the Revenue are as under :

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2015-16 u/s. 139 of the Income Tax Act, 1961 (the Act). A search and seizure operation u/s.132 of the Act was conducted on 28.01.2021 in the case of V V Bala Krishna Rao (HUF), Proprietor of Usha Pictures and Financiers. During the course of search proceedings, certain incriminating material i.e. loose sheets containing financial transactions pertaining to the assessee were found and seized. The Assessing Officer initiated proceedings u/s.153C of the Act after recording satisfaction as required u/s.153C of the Act and accordingly notice u/s.153C of the Act was issued on 30.06.2022 to the assessee. The assessee did not file Return of Income in response to the notice issued u/s.153C of the Act. Subsequently, notices u/s.142(1) of the Act dated
13.01.2023; 16.02.2023 and 03.03.2023 were issued to the assessee calling for information. However, the assessee neither appeared nor furnished any details called for by the Assessing
Officer. Therefore the Assessing
Officer concluded the assessment to the best of his knowledge as per the information available on record and passed ex parte best judgment assessment order u/s.153C r.w.s. 144 of the Act and determined the total income of the assessee at Rs.6,25,46,902/-, by making additions towards the estimation of 15% profit on total credits in the bank account of Rs.4,69,54,349/- and determined income at Rs.70,43,152/-. The Assessing Officer had also made addition of Rs.5,55,03,750/- towards repayment of loans taken in cash from ITA Nos.297, 318 & 319/Hyd/2024 4

M/s. Usha Pictures and Financiers on the basis of loose sheets
/ documents found and seized vide Annx/UPF/RP/EL-15, 25 & 31
on the ground that the assessee has failed to explain the source of cash for repayment of loans received from the above firm.
4. Aggrieved by the assessment order, the assessee preferred appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee filed written submissions on the issue which has been reproduced at para Nos.26 to 40 of the Ld. CIT(A) order. The sum and substance of the arguments are that, the assessment order passed by the Assessing Officer u/s.153C of the Act dated
30.06.2022 on the basis of satisfaction note recorded u/s.153C of the Act is invalid, bad in law and liable to be quashed because, the Assessing Officer has not arrived at satisfaction qua incriminating material found during the course of search for each assessment year indicating unaccounted income of the assessee has a bearing on the determination of the total income of the assessee for the relevant assessment years. The assessee had also challenged the additions made by the Assessing Officer towards repayment of cash loan taken from M/s. Usha Pictures and Financiers and argued that additions made by the Assessing
Officer is not based in any material found during the course of search but on the basis of material collected during the course of ITA Nos.297, 318 & 319/Hyd/2024 5

assessment proceedings in the case of searched person which does not show any light of undisclosed income of the assessee.
5. The Ld. CIT(A), after considering the relevant submissions and also taking note of certain judicial precedences and also the decision of Hon’ble Supreme Court in the case of ACIT & Another
Vs. Pepsi Foods Pvt.Ltd., SLP No.4659/2015, dated 04.12.2017
(supra) and also the decision of CIT Vs. Sinhgad Technical
Education Society (Civil Appeal No.11080 of 2017) 84
taxmann.com 290 (SC) quashed the assessment order passed by the Assessing Officer, holding that although the Assessing
Officer referred to certain seized material found during the course of search vide Annexure UPF/RP/EL-15 (pages 1 to 301),
UPF/RP/EL-25 ( pages 1 to 3) and UPF/RP/EL-31 (pages 84 to 91), but there is no discussion as to how these loose sheets translate into any information of undisclosed income in the hands of the assessee and to which assessment year such income pertains to. Further, although the Assessing Officer referred to the table in point no.6 with regard to loans given by Usha Pictures &
Financiers to the assessee, but failed to give any finding as to how that translate into income of the assessee. Therefore, the Ld. CIT(A) observed that mere receiving of loans from other party does not translate into income of the assessee. He observed that the Assessing Officer has simply mentioned that the loose

ITA Nos.297, 318 & 319/Hyd/2024 6

sheets have a bearing on the determination of income without referring to any particulars of income to which assessment year or any particular assessment year it pertains to and thus the satisfaction note recorded by the Assessing Officer dated
30.06.2022 as required u/s.153C of the Act failed to comply with the parameters of satisfaction u/s.153C(1) of the Act. Therefore, the Ld. CIT(A) quashed the assessment order passed by the Assessing Officer u/s.153C of the Act. The relevant findings of the Ld. CIT(A) in para 6 is as under :

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the course of search and satisfied that the material found during the course of search has bearing on the total income of the assessee for the A.Ys. 2015-16 to 2021-22. The Ld. DR further submitted that, the Ld. CIT(A) has erred in quashing the notice and consequent assessment order passed by the Assessing
Officer by placing reliance on the decision of Hon’ble Supreme
(supra), even though the decisions relied upon by the Ld. CIT(A) are distinguishable from the facts of the present case, without adjudicating the issue of additions made by the Assessing Officer based on the seized material. The Ld. DR further referring to the reports of the Assessing Officer dated 16.01.2025; 04.03.2025
and 23.10.2025 submitted that the Assessing Officer has made additions towards repayment of loans taken from Usha Pictures and Financiers on the basis of loose sheets found during the course of search which contain details of payments as recorded in the rough cash book maintained by Usha Pictures and Financiers. Further, the Assessing Officer had also considered a ITA Nos.297, 318 & 319/Hyd/2024 17

Pendrive containing appraisal report and soft copy of all the seized material (including handwritten cash books seized) pertaining to the respective movie producers, on 04.08.2022, which is evidenced by a letter dated 16.12.2022 of ACIT, Central
Circle-2, Rajahmundry and as per the hand written cash book, it is observed that the assessee has received loans in cash and also repayments were made in cash and the same has been tabled in the assessment order. The screen shots of the entries of cash loans repaid by the assessee to Usha Pictures & Financiers are also enclosed to the letter of the Assessing Officer. Further, the cash loans received by the assessee are evidenced by the collateral documents and acknowledged by the assessee himself which is evident from the documents seized during the course of search and therefore, the Assessing Officer made additions in the assessment towards cash loans repaid by the assessee as unexplained money u/s.69A of the Act. Therefore it is submitted by the Ld. DR that the Assessing Officer has considered relevant seized material seized during the course of search, while

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recording satisfaction note and arrived at a conclusion that the said material has a bearing on the total income of the assessee for the assessment year under consideration. However, by following certain judicial precedents and the decision of Hon’ble
Supreme Court in the case of ACIT & Another Vs. Pepsi Foods
Technical Education Society (supra), the Ld. CIT(A) quashed the assessment order on the ground that the satisfaction note recorded by the Assessing Officer dated 30.06.2022, is not satisfied the provisions of section 153C of the Act. The Ld. DR further referring to the decision of Hon'ble Delhi High court in the case of Indian National Congress Vs. DCIT (2024) 463 ITR 431
(Del) submitted that, satisfaction note merely forms foundation for initiation of action which would enable to evaluate whether an opinion has been validly formed and as long as it rests on incriminating material which pertains to assessment years in question, same would meet the requirement of section 153C of the Act. Therefore, the Ld. DR submitted that the Ld. CIT(A)

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without appreciating the relevant facts, simply quashed the assessment order passed by the Assessing Officer u/s.153C of the Act. The Ld. DR submitted that the order of Ld. CIT(A) should be set aside and additions made by the Assessing Officer should be upheld.
8. The learned counsel for the assessee Shri A Srinivas, CA, on the other hand, supporting the order of Ld. CIT(A) submitted that the satisfaction note recorded by the Assessing Officer on 27.03.2022 does not show any light on the undisclosed income of the assessee pertains to a specific assessment year under consideration, it is evident from Col.6 of the satisfaction note where the Assessing Officer refers to certain loose sheets found during the course of search and claimed that Usha Pictures &
Financiers has lent loan to the assessee and said information has bearing on the determination of the total income of the assessee for the A.Y. 2015-16 without even specifying as to how and why the said loose sheets pertains to A.Y. 2015-16 and has a bearing on the total income of the assessee. The learned counsel for the ITA Nos.297, 318 & 319/Hyd/2024 20

assessee further referring to the seized material considered by the Assessing Officer for the purpose of recording satisfaction and for the purpose of additions towards repayment of any loans submitted that, the seized material considered by the Assessing
Officer for the purpose of recording satisfaction are different and documents considered for the purpose of additions towards repayment of loans are different which is evident from the report of the Assessing Officer dated 04.03.2025, where the Assessing
Officer clearly admitted that the additions made was based on the seized material though not forming part of the seized material initially sent along with the satisfaction note by the Assessing
Officer of the searched person. From the above admission of the Assessing Officer, it is very clear that the loose sheets found during the course of search and considered by the Assessing
Officer for recording satisfaction is different and the documents considered by the Assessing Officer for the purpose of additions towards repayment of loans are different. Since, there is no correlation between the incriminating material found during the ITA Nos.297, 318 & 319/Hyd/2024 21

course of search for the purpose of satisfaction note u/s. 153C of the Act and the seized material considered by the Assessing
Officer for the purpose of assessment, the satisfaction note by the Assessing Officer before initiating the proceedings u/s.153C of the Act cannot be said to be a valid satisfaction as required to be recorded u/s.153C of the Act and consequently the Ld. CIT(A) has rightly quashed the notice issued u/s.153C of the Act and consequent assessment order passed by the A.O. Therefore, he submitted that the order of the Ld. CIT(A) should be upheld. In this regard, he relied upon the decisions of (a) ACIT & Another Vs.
Education Society (supra) and (c) ITAT decision in the case of Sudhakar Reddy Nalla Vs. DCIT (ITA No.1098/Hyd/2024 dated
01.04.2025)
9. We have heard both the parties, perused the materials on record and had gone gone through the orders of authorities below. We have also carefully considered the satisfaction note recorded by the Assessing Officer u/s. 153C of the Act dated

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note recorded by the A.O. shall specifically or explicitly state the particular loose sheet or document found during the course of search is having a bearing on the total income of a particular assessment year. In other words, when the A.O. had recorded a combined satisfaction note for more than one assessment year, then it is necessary for the A.O. to link a particular material found during the course of search qua each assessment year and arrive at a conclusion that information contained in the said material has a bearing on the determination of income of a particular assessment year, as held by the Hon’ble Delhi High Court in the case of Saksham Commodities Ltd. Vs. ITO (2024) 464 ITR 1 (Del), wherein it has been clearly held that the satisfaction notes would have to evidence a formation of opinion that the material is likely to be incriminating for more than a singular assessment year and warranting proceedings under section 153C for the assessment years in addition to those to which the material may be directly relatable. A similar view has been taken by Hon’ble Supreme
Court in the case of ACIT & Another Vs. Pepsi Foods Pvt.Ltd.

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(supra), where it has been clearly held that the satisfaction note must describe the reasons or basis for the conclusion that the Assessing Officer of the searched person is satisfied that the seized documents belong to a person other than the searched person and further has a bearing on the total income for a particular assessment year. Mere use or mention of the words
‘satisfaction’ or the words ‘I am satisfied’ in the order or the note would not meet the requirement of the concept of satisfaction as used in section 153C of the Act. The Hon’ble Supreme Court at another case of CIT Vs. Sinhgad Technical Education Society
(supra) also considered a similar issue and very clearly held that incriminating material which was seized had to be pertained to the assessment years in question and has a bearing on the total income of the assessee for a particular assessment year.
10. In the present case, going by the satisfaction note recorded by the A.O. u/s. 153C of the Act dated 27.06.2022, we find that although the satisfaction note mentions of certain loose sheets were found during the course of search in the case of Sri

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V. V. Bala Krishna Rao (HUF) and seized vide Annx/UPF/RP/EL-1
to 155, but there is no discussion as to how those loose sheets translate into an information of undisclosed income in the hands of the assessee for the assessment year under consideration.
Further, although the A.O. in para Nos.5 & 6 of the satisfaction note refers to loan transactions between Usha Pictures &
Financiers and the assessee, but failed to give any finding as to how those transactions translate into income of the assessee and more particularly for the assessment year 2015-16. There is no mention in the satisfaction of the A.O. of the searched person as to how the documents translate into income of the assessee.
Therefore, in our considered opinion, since there is no discussion of incriminating material or undisclosed income emanating from search material, the satisfaction note recorded by the A.O. u/s.
153C of the Act dated 27.06.2022 cannot be said to be a valid satisfaction note under the requirement of provisions of section 153C of the Act. The provisions of section 153C of the Act clearly brings out the onus on the A.O. to bring out the satisfaction that ITA Nos.297, 318 & 319/Hyd/2024 26

the seized documents have a bearing on the determination of total income of such other person than a searched person.
11. In the present case, as per the satisfaction note recorded by the A.O., there is no satisfaction as to how the documents found during the course of search translate into the unaccounted and undisclosed income of the assessee. This is further fortified by the report of A.O. dated 04.03.2025, where the Assessing
Officer clearly admitted that the additions made was based on the seized material though not forming part of the seized material sent initially along with the satisfaction note by the A.O. of the searched person. From the above admission of the A.O., it is very clear that the loose sheets found during the course of search and considered by the A.O. for recording satisfaction u/s.153C of the Act does not show any undisclosed income of the assessee for the assessment year 2015-16 which has a bearing on the determination of total income of the assessee. The A.O. further admitted that the additions made towards repayment of cash loan taken from Usha Pictures and Financiers is based on hand

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written cash book which has been sent by the ACIT, Central
Circle 2, Rajahmundry after recording satisfaction by the A.O. of the searched person for issuing notice u/s.153C of the Act. Since the satisfaction note recorded by the A.O. and material considered for the purpose of satisfaction is different from the material considered by the A.O. for the purpose of addition towards repayment of cash loan, in our considered view, the satisfaction note recorded by the A.O. before initiation of proceedings u/s. 153C of the Act is vague, general, without specifying as to the nature of documents found during the course of search and the assessment year to which the said documents relates to and has a bearing on the determination of total income of the assessee for the A.Y. 2015-16. Therefore, in our considered opinion, the satisfaction note recorded by the A.O. u/s.153C of the Act dated 27.06.2022 is not a valid satisfaction and consequently notice issued u/s. 153C of the Act on the basis of satisfaction note and consequent assessment order passed by the A.O. has been rightly quashed by the Ld. CIT(A).

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satisfaction by the A.O. which has a bearing on the total income of the assessee for the assessment year under consideration.
13. In this view of the matter and considering the facts and circumstances of the case and also by following the ratios laid down by various courts including in the case of ACIT & Another
Vs. Pepsi Foods Pvt.Ltd. (supra), we are of the considered view that the Ld. CIT(A) has rightly quashed initiation of proceedings u/s. 153C of the Act and issue of notice u/s.153C of the Act dated
30.06.2022 and consequent assessment order u/s. 153C r.w.s.
144 of the Act dated 14.03.2023. Thus, we are inclined to uphold the findings of Ld. CIT(A) and dismiss the appeal filed by the revenue.
14. In the result, the appeal filed by the revenue is dismissed.
ITA Nos.318 & 319/Hyd/2024 (M/s. Light House Movie Makers
LLP)
15. The facts involved in these two appeals filed by the revenue in M/s. Light House Movie Makers LLP for the A.Ys 2019-

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20 and 2020-21 are identical to the facts and issues which we had considered in ITA No.297/Hyd/2024, in the case of Shri Atchi
Reddy Kovvuri for the A.Y. 2015-16. The A.O. has made similar additions of repayments of cash loans to Usha Pictures and Financiers on the basis of loose sheets found during the course of search. The Ld. CIT(A) vide his orders both dated 19.11.2024
had quashed the notice issued u/s.153C of the Act and consequent assessment order passed u/s. 153C r.w.s. 144 of the Act, by holding that the initiation of proceedings on the basis of satisfaction note by the A.O. is invalid and consequent assessment proceedings are liable to be quashed. We have considered the identical issue in ITA No.297/Hyd/2024 in the case of Shri Atchi Reddy Kovvuri for the A.Y. 2015-16. The reasons given by us in para nos.9 to 13 shall apply mutatis mutandis to these appeals, as well. Therefore for similar reasons, we are inclined to uphold the findings of the Ld. CIT(A) and dismiss the appeals filed by the revenue for both the assessment years.

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BY ORDER,