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Facts
A search and seizure action was conducted in a related group, and documents pertaining to the assessee were found. The AO recorded satisfaction based on these documents and initiated proceedings u/s 153C. The assessee challenged the assumption of jurisdiction u/s 153C, arguing the AO's satisfaction note was vague and lacked specificity.
Held
The Tribunal held that the AO's satisfaction note recorded u/s 153C was vague and not in accordance with the provisions of the Act, as it failed to specify the incriminating material, the relevant assessment year, and the quantum involved. Therefore, the assumption of jurisdiction was bad in law.
Key Issues
Whether the AO's satisfaction note for assuming jurisdiction u/s 153C was specific, correlated to incriminating material, and pertinent to the assessment year under consideration.
Sections Cited
153C, 132, 133D, 68, 115BBE, 69C, 37, 234B, 234C, 153A
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRI S. RIFAUR RAHMAN & SHRI VIMAL KUMAR
Order : 26.09.2025 O R D E R PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER :
1. 1. These appeals preferred by the assessees are directed against the order of the Learned Commissioner of Income-tax (Appeals)-23, New Delhi [“Ld. CIT(A)”, for short] dated 26.04.2024, 30.04.2024 & 29.04.2024 for the Assessment Years 2016-17, 2017-18 & 2018-19.
2. Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take up the assessee’s appeal being for AY 2016-17 as lead to 2223/Del/2024 case to adjudicate the issues under consideration wherein the assessee has raised the following grounds of appeal :-
1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order u/s 153C and that too without assuming jurisdiction as per law and without recording mandatory 'satisfaction' in accordance with law and without complying/following with the other mandatory conditions/procedure as laid down us I53C in accordance with law.
2. That having regard to the facts and circumstances of the case, the assumption of jurisdiction us 153C, is illegal, bad in law and against the facts and circumstances of the case and the same is not sustainable on various legal and factual grounds.
3. That having regard to the facts and circumstances of the case, Ld. CIT(AN has erred in law and on facts in sustaining the action of Ld. AO in making addition of Rs.2.06.52.434/- by treating it as alleged income of assessee u/s 68 and taxing the same u/s 115BBE by recording incorrect facts and tidings and without following the principles of natural justice
4. That having regard to the facts and circumstances of the case, Ld. CITA) has erred in law and on facts in sustaining the action of ld. A0 in making addition of Rs.12,39,146/- on account of alleged commission paid by treating it as alleged undisclosed expenditure us 69C and taxing the same u/s 115BBE by recording incorrect facts and findings and without following the principles of natural justice.
5. That having regard to the facts and circumstances of the case, Ld. CITA) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.9,00,000/- and that too u/s 37 without any basis and without giving show cause notice in this regard and without following the principles of natural justice.
6. That in any case and without prejudice to the above grounds, addition made in the impugned assessment order is beyond jurisdiction and illegal, also for the reason that such order could not have been made since no incriminating material has been found as a result of search.
7. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld AO in framing the impugned assessment order without there being requisite approval in terms of section 133D and in any case approval, if any, is mechanical without application of mind and is no approval in the eyes of law.
8. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B and 234C of Income Tax Act, 196l.”
3. At the time of hearing, ld. AR of the assessee pressed Ground Nos.1, 2 and 6 relating to assumption of jurisdiction under section 153C of the Income-tax Act, 1961 (for short ‘the Act’). We also proceed to decide the issue first on the above issue raised by the assessee. The relevant facts are, a search and seizure action u/s 132 of the Act was conducted in the case of Dinesh Tyagi Group on 16.05.2018 and the premises of Ramavtar Aggarwal, S-92, Panchsheel Park, New Delhi also covered. During the course of search and seizure proceedings, certain alleged incriminating documents were found from Ramavtar Aggarwal which pertains to the assessee. After considering the above documents and information contained, satisfaction was recorded by the AO. For the sake of brevity, the same is reproduced below :-
4. After centralization of the case of the assessee, notice u/s 153C read with section 153A was issued to the assessee and subsequently completed the assessment order after considering the submissions of the assessee and made addition on profit earned by the assessee from the trade of scrip of Yamini Investments Company Limited u/s 68 of the Act and further added 6% commission on the accommodation entry for such bogus claim on the issue of profit earned by the assessee on trade of the scrip and further made the addition of dummy salary paid to Garima Singh and Meena Singh.
5. Aggrieved assessee preferred an appeal before the ld. CIT (A)-23, New Delhi and the assessee also raised the jurisdictional issue before the ld. CIT (A). However, ld. CIT (A) dismissed issue of the non-application of mind by the AO while recording the satisfaction.
6. Aggrieved, assessee is in appeal before us and raised the abovesaid issue before us.
At the time of hearing, ld. AR of the assessee submitted that the AO has recorded satisfaction. However, the same does not show as to how these documents belong to the assessee. The same does not show as to how these documents are incriminating material and the same does not have any seized material for the year under consideration. Further he submitted that there is no incriminating material found for AY 2016-17 in respect of shares of to 2223/Del/2024 Yamini Investments Company Ltd.. Further he submitted that satisfaction was recorded on 17.12.2021. Therefore, the relevant assessment year u/s 153C is AY 2022-23 and the assessment year under consideration is unabated assessment year and therefore, the addition could not be made dehors the incriminating material found as a result of search. He brought to our notice documents found during the search which are filed in the form of paper book and submitted that in the satisfaction note dated 17.12.2021, the seized material referred in the satisfaction note in which there is no document-wise or year-wise amount, correlation and satisfaction note does not specify which seized material relates to which year. Further he brought to our notice similar submission was made before the ld. CIT (A) which is placed on record at pages 369 & 370 of the paper book. In this regard, further he relied on coordinate Bench decision in the case of Olympus Realtors (P) Ltd. in dated 13.08.2015 wherein exactly similar issue was dealt. He further relied on the following decisions :- CIT vs. Sinhgad Technical Education Society (2017) 397 ITR 0344 (SC); CIT vs. Sinhgad Technical Education Society (2015) 378 ITR 0084; DCIT vs. Sunil Kumar Sharma 469 ITR 0271 (SC); Agni Vishnu Ventures P. Ltd. vs. DCIT 460 ITR 478 (Mad.) CIT vs. Jasjit Singh (2023) 458 ITR 437 (SC) DCIT vs. U.K. Paints (Overseas) Ltd. (2023) 454 ITR 441 (SC) PCIT vs. Abhisar Buildwell (P.) Ltd. (2023) 454 ITR 212 (SC). to 2223/Del/2024 8. Further he submitted that notice issued u/s 153C of the Act was dated 29.09.2021 was issued much before the recording of the satisfaction on 17.12.2021. He brought to our notice relevant notice which is placed at page 33 of the paper book and he also brought to our notice pages 367 & 368 of the paper book which is the written submissions submitted before the ld. CIT (A) and he prayed that the assumption of jurisdiction u/s 153C is bad in law.
On the other hand, ld. DR of the Revenue brought to our notice page 454 of the paper book which is the Bank book found during the search proceedings which gives details of the assessee. Further he submitted that the satisfaction note cannot be linked with the show-cause notice and on merit, he submitted that the scrip traded by the assessee is a penny stock, therefore, he supported the findings of the lower authorities.
Considered the rival submissions and material placed on record. At the time of hearing, ld. AR made the submission with record to assumption of jurisdiction u/s 153C only and we are restricting ourselves to the same at this stage. We observe that AO has recorded the satisfaction on 17.12.2021 wherein he had recorded as under :- “I have gone through the above mentioned seized documents and details carefully and after patently applying my mind on the same, I am satisfied that the documents seized belongs to M/s. Zenith Portfolio & Insurance Advisors Pvt. Ltd. Further, I am satisfied that the documents seized pertain to and the information contained therein relates to M/s. Zenith Portfolio & Insurance Advisors Pvt. Ltd. (PAN : AAACZ3752D). to 2223/Del/2024 Considering the above mentioned observations and after patently applying my mind on the same, I am satisfied that these seized documents have a bearing on the determination of the total income of M/s. Zenith Portfolio & Insurance Advisors Pvt. Ltd. (PAN : AAACZ3752D) for the relevant assessment years referred to in sub- section (1) section 153A of the Act and that it is a fit for initiating proceedings u/s 153A r.w.s. 153C of the Act.”
From the above, we observe that the AO has recorded satisfaction without indicating what are the incriminating documents found during search which belonged to the assessee and there is no reference to the assessment year under consideration and the quantum involved to initiate the proceedings for the year under consideration. He merely recorded the satisfaction in consolidated manner and there is no specific reference to the fact that satisfaction note is recorded with reference to specific incriminating material found for the year under consideration. There is no correlation of any seized document found year-wise relevant to the assessee nor it is quantified. We observe that exactly similar issue was considered by the coordinate Bench in the case of Olympus Realtors (P) Ltd. (supra) and the same is reproduced below :-
“5.1 As we appreciate this satisfaction note recorded u/s 153C of the Act by the ld.AO, we find that this ‘Satisfaction Note’ has been recorded for all the years from AY 2010-11 to 2016-17 in consolidated manner and there is no specific reference to the fact that the Satisfaction Note is incriminating material found for impugned AY 2014-15. Ld. Counsel has relied the decision in DCIT vs. Sunil Kumar Sharma 469 ITR 197 (Kar) (para 53) as approved by Hon’ble Supreme Court in DCIT vs. Sunil Kumar Sharma 469 ITR 271 (SC) and Blue to 2223/Del/2024 Ocean Travels P Ltd. Vs. DCIT ITA 3281/Del/2024 dt. 4.12.24 (Del)(Trib); Agni Vishnu Ventures P Ltd. Vs. DCIT 460 ITR 478 (Mad), to contend that it is necessary that the satisfaction note should be illustrative of the fact as to which AY, the alleged incriminating material belongs. Here we can observe that as settled proposition of law in CIT vs. Sinhgad Technical Education Society, (2017) 397 ITR 0344 (SC) Hon’ble Supreme Court has held that there should be document wise and year wise satisfaction note.
Very apparently the impugned ‘Satisfaction Note’ does not correlate any seized document year-wise to the assessee. The ‘Satisfaction Note’ does not mention as to how the vaguely referred seized documents give rise assumption of jurisdiction under section 153C of the Act, by showing that material seized during the search belongs or pertains to a assessee and is likely to have a bearing on assessee’s income. To be more precise as to how, in satisfaction note AO concluded “During the search operation undisclosed income to the tune of Rs. 33 crores has been detected in the case of M/s Olympus Realtors (P) Ltd. resulting into concealment of income.”
Respectfully following the above decision, we are inclined to come to a conclusion that satisfaction note recorded by the AO is vague and not as per the provisions of section 153C of the Act in order to assume the jurisdiction. Therefore, we are inclined to allow the grounds raised
by the assessee i.e. 1, 2 and 6.
13. With regard to other grounds of appeal, we are keeping the same open at this stage.
14. In the result, the appeal filed by the assessee being is partly allowed. to 2223/Del/2024 15. With regard to issues raised in AYs 2017-18 & 2018-19, since the facts are exactly similar to the issues raised in AY 2016-17 also the satisfaction note was prepared commonly for all three years, our above findings in AY 2016- 17 are applicable mutatis mutandis in Assessment Years 2017-18 & 2018-19. Accordingly, the appeals filed by the assessee for AYs 2017-18 & 2018-19 are partly allowed.
To sum up : all the appeals filed by the assessee are partly allowed. Order pronounced in the open court on this 26th day of September, 2025.