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Facts
The assessee's assessment for AY 2015-16 was initiated under Section 153C of the Income Tax Act, 1961, following a search on a third party, M/s Jindal Bullion Ltd. The assessee challenged the jurisdiction, contending that the satisfaction note recorded by the Assessing Officer of the searched person and the assessee was invalid and procedurally flawed. Arguments included the satisfaction note being recorded much after the prescribed time limit, being a consolidated note for multiple years, and lacking a clear nexus between the seized documents and the assessee's income.
Held
The Tribunal, relying on Supreme Court and High Court precedents, held that a separate satisfaction note is mandatory for each assessment year under Section 153C, and a consolidated note vitiates the entire proceedings. It found that the Assessing Officer failed to establish the foundational precondition for jurisdiction under Section 153C, as there was no proper satisfaction recorded demonstrating how the seized material related to the assessee's undisclosed income. Consequently, the initiation of proceedings under Section 153C and the subsequent assessment were declared bad in law and without jurisdiction.
Key Issues
1. Whether the initiation of assessment proceedings under Section 153C was valid, particularly regarding the proper recording of a satisfaction note for each assessment year. 2. Whether a consolidated satisfaction note for multiple assessment years vitiates the entire assessment proceedings under Section 153C.
Sections Cited
153C, 153A, 153B, 132, 132(4), 292C, 143(3), 153, 153D
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
Order
: 30.12.2025 O R D E R
PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER :
This appeal is filed by the assessee against the order of ld. Commissioner of Income-tax (Appeals)-24, New Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 30.08.2022 for Assessment Year 2015-16.
At the outset, ld. AR of the assessee raised legal issue relating to assumption of jurisdiction under section 153C of the Income-tax Act, 1961 (for short ‘the Act’) by raising ground nos.1 & 2 which read as under :- “1. On the facts and circumstances of the case, the order passed by the Ld. AO and impugned order passed by the CIT (A) is bad both in the eye of law and on facts.
In absence of providing of satisfaction note, if any, recorded by the regular AO of the appellant (ITO, Ward-1, Hisar) initiation of proceedings u/s 153C, in the facts and circumstances of the case, are not valid and, therefore, the assessment basing on such invalid proceedings deserved to be cancelled and CIT (Appeals) has erred in upholding the validity of the proceedings u/s 153C.”
Ld. AR of the assessee brought to our notice the relevant facts relating to the aforesaid grounds, the satisfaction note dated 23.9.2020 recorded by the Deputy Commissioner of Income, Central Circle-7, New Delhi i.e. AO of the searched person, namely, M/s Jindal Bullion Ltd. is placed at page 3 of Paper Book and satisfaction note dated 23.10.2020 recorded by the Income Tax Officer, JAO, Ward-1, Hisar i.e. AO of the assessee is placed at pages 82-83 of JPB. He further submitted that qua issuance of notice u/s 153C of the Act is in contravention of CBDT circular issued by the CBDT No. 24/2015 dated 31.12.2015, placed at pages 86-87 of JPB and submitted the chronological sequence of dates as under: Sr.No. Events Date i) Search conducted u/s 132 of the Act 05.01.2017 ii) Date of completion of assessment 19.12.2019 u/s 153A of the Act in the case of M/s Jindal Bullion Ltd. iii) Satisfaction note recorded by AO of 23.9.2020 searched person (Designation of AO of (DCIT, CC-7, New Delhi. searched person) iv) Satisfaction note recorded by AO of other 23.10.2020 person (Designation of AO of other (learned Income Tax person) Officer, JAO, Ward-1, Hisar) v) Date of handing over of seized documents 23.9.2020 from AO of searched person to AO of other person vi) Notice issued u/s 153C Act 23.10.2020 vii) Limitation u/s 153B Act (Shall be 21 21 month from months from the end of financial year in 31.03.2017, which the search was conducted) which is 31.12.2018
He further submitted that notice issued u/s 153C of the Act is in contravention of provisions of section 132(4) of the Act and section 292C of the Act and the binding circular No. 24/2015 dated 31.12.2015 issued by the Central Board of Taxes (“CBDT”) which provides that in case of a person other than the searched person recording of satisfaction is a per-requisite and satisfaction note has to be prepared at the time of initiation of proceedings against searched person or in the course of assessment proceedings of the searched person or immediately after completion of assessment of searched person. He submitted that the impugned notice u/s 153C of the Act is issued much after the time limit for completion of assessment u/s 153A/153C of the Act as stated in clause (a) and (b) of section 153B of the Act i.e. twenty-one months from the end of the financial year in which the search was conducted. He further submitted that the satisfaction to initiate proceedings u/s 153C of 5. the Act is recorded at a gap of about 9 months in September. 2020 on 23.9.2020 which is in contravention to the circular issued by CBDT Circular No.24/2015 dated 13.12.2015 based on the judgment of Hon’ble Supreme Court in case of CIT v. Calcutta Knitwears reported in 362 ITR 673 and a copy of the circular is placed at pages 86-87 of JPB. The ld. AR of the assessee relied on the following judgments :- 6. (i) Anil Kumar Goptal Krishan Agarwal – 418 ITR 25 (Guj.); (ii) Bharat Bhushan Jain 370 ITR 695 (Del.); (iii) Radhey Shayam Bansal 337 ITR 217 (Del.);
With regard to the satisfaction recorded by the assessing officer of searched person do not satisfy the rigor of section 153C of the Act and is therefore illegal, invalid and without jurisdiction, he submitted that in respect of seized document made a basis to initiate impugned proceedings the learned Assessing Officer of searched person has recorded that seized Hazir Johri software revealed Ledger account(s) with code name(s) ‘Shaggun Jewellers & Vinod 8676)’. This Ledger account has been identified to pertain to M/s/Sh./Smt. Sh. Prashant Soni M/s Shagun Buillion based on number of criteria like of statements given by Shri Parul Ahluwalia, Kusharg Jindal Directors of JBL and also on the basis of banking transactions appearing in the Hajir Leger accounts, details filed during the course of the assessment proceedings field enquiries made by the Investigation Wing and names as actually recorded i.e. without codes. It is thus submitted that since the name of the assessee is allegedly coded as ‘Shagun Jewellers & Vinod 8676)’, the Assessing Officer has failed to specifically state as to on what basis (one or more basis out of as enumerated aforesaid) the said document is presumed to be belonging to assessee or on what basis it is being alleged that such printout which contains information relating to assessee. It is thus submitted that since no connection has been outlined between the impugned seized document and the assessee in the said satisfaction note the same is not only a mere formality but also lacks legal sanctity. Surmise and conjecture cannot take the place of "satisfaction".
8. He further submitted that in the aforesaid satisfaction note the AO of assessee has noted that on the impugned seized document various cash transactions made between JBL and appellant although in the said satisfaction note it has not been specifically stated as to how such document has bearing on total income of assessee, as to how the transaction reflecting in the said document are related to assessee much less relevant for the period under consideration having bearing on the total income of period under consideration. It is further submitted that Assessing Officer has further not recorded satisfaction as to what is the 'nature of transaction' reflecting in the impugned seized document which assessee may have been allegedly entered into with JBL, consequentially having bearing on the total income of assessee, the merely writing words that ‘information contained therein relates to it and have a bearing on the determination of the income’. It is further submitted that that neither the records of assessee are referred nor any enquiry conducted to verify that the information contained in seized material has bearing on total income of assessee has been referred. He submitted that the Assessing Officer has proceeded on a complete misconception of factual matrix of the appellant and statutory provisions of law and reliance is placed on the following judgments:
He further submitted that the plain reading of the satisfaction note would show that proceedings have been initiated to make fishing and roving enquiries and thus conduct fresh examination, which is not permissible in law and reliance is placed on the following decisions: i) dated 27.11.2013 ACIT vs. PSAL India (P) Ltd. ii) ITA No(s). Nos. 4307, 4308 & 4309/Del/2016 dated 09.02.2018 M/s. Prabhatam Developers Ltd 10. He further submitted that assessee is regularly assessed to tax and thus it is incumbent to state as to in what manner information contained in the seized material found from third party premises has bearing on total income of assessee, in fact as to how and in what manner such seized material reflect undisclosed income earned by appellant. It is therefore submitted that as the condition precedent as stated in section 153C of the Act has not been fulfilled, the notices issued under Section 153C are not in accordance with law. The assessee also seeks to place reliance on the decision of Kolkata Bench of Hon’ble Tribunal in the case of IQ City Foundation vs ACIT reported in 186 ITD 555.
He submitted that even the said papers do not support the observation and allegation in the satisfaction note that the printout extracted from the digital data kept in a dongal marked as Annexure A-25, in any manner contain information relating to the assessee much less establishes that there are unaccounted transactions between appellant and M/s Jindal Bullion Ltd. It is relevant to state here that decoding in absence of any material is patently untenable, as has been held by the following judicial pronouncements: i) 296 ITR 619 (Del) CIT vs. Girish Chowdhary ii) 297 ITR 135 (Mad) CIT vs. A.N. Dyaneswaram iii) 68 ITD 407 (Jab) at page 427 Agrawal Motors
In view of the above, he submitted that since the foundational precondition has not been satisfied, it is submitted that the Assessing Officer has erred both in law and on facts in assuming jurisdiction under section 153C of the Act. He further submitted that the proceedings initiated by invoking the provisions of section 153C of the Act is non-est in law and without jurisdiction and therefore the order passed u/s 153C read with section 143(3) of the Act deserves to be quashed as such and the appeal of the assessee be allowed.
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities and objected the submissions put forth by the ld. AR of the assessee.
Considered the rival submissions and material placed on record. The relevant facts of the case and the legal position has already been described in the above paragraphs and we observed that the legal grounds raised by the assessee are squarely covered in favour of the assessee. In this regard, we placed reliance on the decision of Hon’ble Apex Court in 165 taxmann.com 846 in DCIT vs. Sunil Kumar Sharma wherein it was held as under :- “Section 153C, read with sections 132, 153 and 153A, of the Income-tax Act, 1961 - Search and seizure - Assessment of any other persons (General principles) - Assessment years 2012-13 to 2018-19 - High Court held that satisfaction note is required to be recorded under section 153C for each assessment year and where a consolidated satisfaction note had been recorded for different assessment years, it would vitiate entire assessment proceedings - Whether SLP filed against impugned order of High Court was to be dismissed.”
Further we find force from the decision of coordinate Bench in the case of Brij Kumar vs. DCIT in dated 23.07.2025 wherein the coordinate Bench in paras 7 to 8 held as under: “7. Further, with regard to legal issue raised by the assessee, we observed that satisfaction note was issued for all the assessment years under consideration, however, as per the provisions of the Act, for initiation of proceedings u/s 153C of the Income-tax Act, 1961 (for short ‘the Act’) a separate satisfaction note is to be recorded for different assessment years instead of consolidated satisfaction note otherwise it would vitiate entire assessment proceedings as held in the case of DCIT v Sunil Kumar Sharma [2024] 165 taxmann.com 846 (SC),wherein it was held as under: “Section 153C, read with sections 132, 153 and 153A, of the Income tax Act, 1961 and seizure - Assessment of any other persons (General principles) - Assessment years 2012-13 to 2018-19 - High Court by impugned order held that satisfaction note is required to be recorded under section 153C for each assessment year - It further held that where a consolidated satisfaction note had been recorded for different assessment years, it would vitiate entire assessment proceedings – Whether special leave petition filed against said order of High Court was to be dismissed - Held, yes [Para 3] [In favour of assessee]”
Respectfully following the above decisions, we are inclined to decide the issue in favor of assessee holding that Assessing Officer has not recorded proper satisfaction for initiation of assessment proceedings as per the provisions of the Act and also heavily relied on the photocopy of agreement to sell on the basis of which consolidated satisfaction note has been recorded is not a valid document in the absence of original agreement. Therefore, initiation of proceedings u/s 153C and the consequential assessment proceedings is bad in law and are hereby quashed.”
Further we find that the coordinate Bench in the case of M/s Signature Global India Ltd. vs. DCIT in dated 03.07.2025 wherein the Tribunal held as under: “9.2 We note that as per the assessment order, Search & Seizure Operation u/s 132was conducted on 10/07/2018 in SMC Global Securities Ltd. Satisfaction note u/s153C is stated to be recorded in the case of the assessee on 10/06/2021. The proceedings-initiated u/s 153C is bad in law and without jurisdiction due to the fact that the satisfaction note recorded is a consolidated satisfaction note for 7 years; there is no description/analysis of seized material based on which satisfaction has been recorded; there is no year wise analysis of seized material; there is no year-wise satisfaction that seized material is having a bearing on the determination of income. However, the AO, should have recorded a separate satisfaction for each year falling in the block period of six years and for which he has to issue separate notice u/s 153C for each year falling in the block period of six years, after obtaining separate approval u/s. 153D for each year falling in the block period of six years. But in the instant case, the AO has recorded a consolidated satisfaction note for A.Y. 2013-14 to A.Y. 2019-20. Thus, the assessment proceeding-initiated u/s 153Cin this case is bad in law and without jurisdiction. That the powers of the Assessing Officer under Section 153C cannot be invoked in a light, whimsical and arbitrary manner and without complying with the basic pre-requisites specified under Section153C of the Act. The object underlying the provisions of Section 153C is not to give unbridled power to the Assessing Officer to proceed cogent material seized at the time of search. The satisfaction note is the foundation of assumption of jurisdiction u/s 153C. In the absence of valid satisfaction, jurisdiction u/s 153C of the Act cannot be assumed. The validity of the satisfaction note is required to be evaluated on the basis of the contents of such satisfaction note alone and it is not permissible to virtually expand the scope of the contents of the satisfaction note at a later stage by improving or supplementing the same. Our aforesaid contention, supports the decision 22.01.2024 of the Hon'ble Karnataka High Court in the case of DCIT vs. Sunil Kumar Sharma & Others (2024) (2) TMI 116 wherein, it has been held as under: … 9.3 We further note that the aforesaid decision of Hon’ble Karnataka High Court has been affirmed by the Apex Court in CIT Vs. Sunil Kumar Sharma & Others(2024)(8) TMI 1086- Supreme Court vide order dated 20.08.2024. The head note of Apex Court decision reads as under:- “Validity of proceedings u/s 153C - whether the assessee should be treated as a "Searched Person" or "Other Person"? - Whether 'Loose Sheets' and 'Diary' have any evidentiary value? - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court of Karnataka at Bengaluru in Writ Appeal [2024 (2) TMI 116 – KARNATAKAHIGH COURT] held notices issued u/s 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ appeals, as the same are void and illegal. As satisfaction note is required to be recorded u/s 153C for each Assessment Year and in the impugned proceedings, a consolidated satisfaction note has been recorded for different Assessment Years, which also vitiates the entire assessment proceedings. In view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the appellant / Revenue. As per the Panchanama provided herein, it is deemed appropriate to conclude that the notice provided u/s 153C is bad inlaw. Special Leave Petition is dismissed.” … 9.6 In the background of the aforesaid discussions and respectfully following the above-said binding precedents, we note that while exercising the power under section 153C of the Act, neither has the AO related the material found in the course of search with a particular AY while making a consolidated ‘satisfaction note’ for several years nor provided any requisite details of transaction to enable an independent person to ascertain and form any independent opinion on facts stated in Note that invocation of section 153C of the Act is indeed warranted in the facts of the case. Mere drawing of a perfunctory satisfaction without meeting basic ingredients of providing some tangible & descript information and application of mind thereon has no standing in law and would not confer drastic jurisdiction of assessment u/s 153C of the Act on a person other than searched person. The jurisdiction assumed based on such lackadaisical ‘satisfaction note’ beset with vital infirmities cannot be countenanced in law. The objections raised on behalf of the assessee towards lack of jurisdiction based on a cryptic and non- descript satisfaction thus deserves to be sustained. While recording a consolidated ‘satisfaction note’ is not a bar in law per se as rightly contended on behalf of the revenue, but however, in the same vain, the documents/assets searched need to be specified against each year covered in the satisfaction note to depict application of mind and initiation of action under section 153C of the Act qua such assessment years. The AO has apparently failed to do so in the present case. As a corollary, the notice issued under section 153C of the Act and consequent assessment order passed under section 153Cof the Act is vitiated in law and thus deserves to be quashed. In this view of the matter, the jurisdiction assumed under section 153C of the Act based on vague and non-descript ‘satisfaction note’ is vitiated at the threshold. The consequence assessment order passed under section 153C thus has no force of law. Therefore, the Ld. First Appellate’s Order are passed on non-est assessment order is thus set aside.
Respectfully following the above decisions, we are inclined to hold that initiation of proceedings u/s 153C and the consequential assessment proceedings is bad in law and are hereby quashed.
We are refrained from adjudicating the other grounds of appeal
and at this stage, we keep the other grounds of appeal open.
19. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on this 30th day of December, 2025.