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Facts
The assessee's appeals were filed against the order of the CIT(A) for AYs 2019-20 to 2021-22. The AO alleged that the total sale consideration of a property was higher than declared and made an addition. This addition was based on an agreement to sell and a sale deed, with a difference allegedly received in cash.
Held
The Tribunal held that the assumption of jurisdiction under Section 153C of the Act was vitiated. The satisfaction note was found to be vague, generic, and lacking nexus with the seized material, rendering the assessment invalid. The Tribunal relied on previous decisions where similar additions were deleted.
Key Issues
Whether the assumption of jurisdiction under Section 153C of the Income Tax Act, 1961, was valid, given the nature of the 'satisfaction note' and the basis of the addition.
Sections Cited
153C, 143(3)
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Income Tax Appellate Tribunal, DELHI BENCH ‘B’: NEW DELHI
Before: SHRIS.RIFAUR RAHMAN & SHRI VIMAL KUMAR
(Assessment Year: 2020-21) (Assessment Year: 2021-22) Tarun Gupta, vs. ACIT, Central Circle 3, C/o Shri Pranshu Goel, CA Delhi. 5A/3A, Ansari Road, Daryaganj, New Delhi – 110 002. (PAN : AKDPG3409N) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Pranshu Goel, CA Shri Aditya Gupta, Advocate REVENUE BY : Shri Sanjeev Kaushal, CIT DR Date of Hearing : 20.08.2025 Date of Order : 27.08.2025 O R D E R PER S.RIFAUR RAHMAN,ACCOUNTANT MEMBER : 1. These appeals are filed by the assessees against the order of ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi-25 [“ld. CIT(A)”, for short] dated 10.01.2025 for AYs 2019- 20, 2020-21 & 2021-22. to 437/DEL/2025 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 AY 2019-20 as lead case to adjudicate the issues under consideration. At the outset, ld. AR of the assessee pressed Ground Nos.2 & 3 which are 3. reproached as under :- “2. That without prejudice considering the facts and circumstances of the case and in law, the Ld. CIT (A) grossly erred in not rendering the notice issued under section 153C and consequent assessment bad in law as the satisfaction note recorded by the Ld. AO is invalid, bad in law and void ab initio.
That on the facts and circumstances of the case and in law, Ld. CIT (A) grossly erred in sustaining the order of the Ld. AO whereby impugned addition amounting to Rs.1,50,17,400/-.”
Ld. AR for the assessee submitted that the AO alleged that the total sale consideration of the property bearing address 61, Vijay Block, Laxmi Nagar, Delhi is Rs.4,49,50,000/- instead of the amount of Rs.1,49,15,000/- at which the said property was actually sold by the assessee along with the other two co-owners. He submitted that assessee having 50% of the share in the same. He submitted that the AO alleged that the difference in the amount of consideration shown in the agreement to sell dated 06.08.2018 and the sale deed dated 04.09.2018 has been received by the assessee along with the other co-owners in cash amounting to Rs.3,00,35,000/-, and thus went ahead and, made addition to 437/DEL/2025 amounting to Rs.1,50,17,400/- in the hands of the assessee. He further brought to our notice that the case of the co-owners of the property came before the Tribunal and the Tribunal vide its order dated 25.11.2024, in the case of Renu Singh and Pradeep Singh ITA No.2810/Del/2024, deleted the addition. He submitted that the Tribunal deleted the addition on two-fold counts, first, on the jurisdictional defect in the assumption of powers under Section 153C of the Act, and second, on the merits of the addition based on the photocopy of an unsigned agreement. He submitted that on the issue of jurisdiction, the Tribunal held that the so-called 'satisfaction note' was vague, generic, and failed to establish any nexus between the seized material and the assessment year in question. It did not identify the specific documents, the assessment year to which they pertained, or demonstrate how they related to the assessee, and further the Tribunal held that mere mechanical reproduction of allegations without application of mind cannot confer valid jurisdiction under Section 153C. He submitted that relying on binding precedents, including those of the Hon'ble Delhi High Court, the Tribunal concluded that the satisfaction note was non-descript, cryptic, and legally untenable, thereby vitiating the very foundation of the assessment proceedings. He submitted that on merits, the Tribunal noted that the entire addition was based solely on an unsigned photocopy of an Agreement to Sale allegedly to 437/DEL/2025 found at a third-party premises and the Department did not conduct any independent inquiry, nor did it bring any corroborative material on record. On the contrary, the fair market value as determined by the DVO stood at 1.68 crores, which closely aligned with the declared sale value of 1.49 crores. Accordingly, the Tribunal held that the addition was wholly unsubstantiated and based on inconclusive evidence, and thus directed deletion of the same. Thus, the assessee, being a co-owner of the subject property, he prayed that the impugned addition in the case of the assessee be deleted on merits. Furthermore, it is submitted that the 'satisfaction note' recorded in the case of the assessee is verbatim identical to that recorded in the cases of Smt. Renu Singh and Shri Pradeep Singh. Finally, he prayed that in light of the findings of the Tribunal in those matters, the assumption of jurisdiction under Section 153C of the Act in the present case is equally vitiated and, therefore, liable to be quashed.
On the other hand, ld. DR of the Revenue relied on the orders of the authorities below.
Considered the rival submissions and material placed on record. We observe that this issue is squarely covered by the decision of ITAT in the case of Smt. Renu Singh and Shri Pradeep Sing order dated 25.11.2024 (supra) and the Tribunal has rightly held that the notice issued u/s 153C and consequent assessment order passed u/s 153C is vitiated in law and to 437/DEL/2025 requires to be quashed. The relevant findings of the aforesaid decision of the Tribunal are as under :- “22. The observation of the Hon'ble Delhi High Court noted above, clearly provides vehement support to the plea taken by the assessee on aspects of jurisdiction flowing from 'satisfaction note'. The 'satisfaction note' under scrutiny defies most of the parameters expected of him while drawing satisfaction. 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 A Y while making a consolidated 'satisfaction note' 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 & de script 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 objection raised on behalf of the assessee towards lack of jurisdiction based on 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 failed to do so. As a corollary, the notice issued under section 153C of the Act and consequent assessment order passed under section 153C of the Act is vitiated in law and requires to be quashed.”
Respectfully following the aforesaid decision of the coordinate Bench of the Tribunal, we hold that the assumption of jurisdiction under Section to 437/DEL/2025 153C of the Act in the present case is equally vitiated and, therefore, liable to be quashed. We hold and order accordingly.
Since we have quashed the assessment order on the legal issue, the other grounds raised
by the assessee were not adjudicated at this stage. These are kept open.
9. In the result, the appeal of the assessee for AY 2019-20 is allowed.
10. With regard to appeal filed by the assessee for AY 2020-21, since the facts are exactly similar to AY 2019-20 our above findings in Assessment Year 2019-20 are applicable mutatis mutandis in AY 2020-21. Accordingly, the appeal filed by the assessee for AY 2020-21 is allowed.
11. With regard to appeal for AY 2021-22, ld. AR of the assessee pressed Ground No.2 that, “On the facts and circumstances of the case and in law, ld. CIT (A) grossly erred in not rendering the initiation of assessment proceedings as bad in law as the same ought to be initiated under the provisions of section 153C of the Act and not under section 143 (3) of the Act.” In this regard, he brought to our notice that the assessment was completed u/s 143(3) of the Act considering the date of search in the case of searched person on 17.08.2020 whereas the satisfaction was recorded by the AO of the assessee on 10.01.2022. He submitted that since the satisfaction was recorded in the case of the assessee is only on 10.01.2022, the searched date for the purpose of to 437/DEL/2025 section 153C in the case of the assessee is AY 2022-23. He further submitted that based on the decision of Hon’ble Delhi High Court in the case of PCIT vs. OJAS Medicare Pvt. Ltd. (2024) 465 ITR 101 and CIT vs. Jasjit Singh ([2023] 155 taxmann.com 155 (SC), assessment should have been initiated u/s 153C of the Act instead of assessment order passed u/s 143(3) of the Act. Since the issue is squarely covered in favour of the assessee, he relied on the same.
On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.
Considered the rival submissions and material placed on record. We observe that a reading of the settled judicial principles as set out in the case of CIT vs. Jasjit Singh [2023] 155 taxmann.com 155 (SC), leads to a clear understanding that in the case of a Section 153C assessment, the starting point is ordained to be the handing over of books of account or documents or assets seized and that event constituting the point from which the preceding six AYs' or the "relevant assessment year" is to be computed. We observe that in the facts of the present case, the satisfaction note in the case of the assessee was recorded on, and thus 10.01.2022, could be stated to be date of handing over as per the provisions of section 153C of the Act. We observe that assuming the date 10.01.2022, to be the date of handing over it would construe FY 2021- 22 to 437/DEL/2025 as being the previous year of search for the purposes of the assessee and the relevant AY for the purpose of section 153C would become AY 2022- 23, thus AY 2022-23 would constitute the starting point for the purposes of identifying the six years under the provisions of Section 153C. We further observe that the AO himself has identified this and has drawn satisfaction note for AY 2021-22 as well. Thus, we observe that the conclusions that can be drawn from the aforesaid is that the six AYs' immediately preceding AY 2022-23 could have formed the basis for initiation of action under Section 153C. Consequently, and reckoned backward, the first relevant AY for calculation of six AY's would be AY 2021-22. The AY involved in the present facts is also AY 2021-22 and thus the action of the AO of initiating proceedings under section 143(2) is illegal and bad in law as the same should have been initiated under Section 153C of the Act. The aforesaid view is already been settled by Hon’ble Supreme Court decisions as aforesaid. Accordingly, we hold that invocation of provisions of section 143(3) is bad in law and assessment should have been made under section 153C of the Act and the assessment is quashed. Hence, the appeal filed by the assessee is allowed. to 437/DEL/2025 14. Since we have quashed the assessment order on the legal issue, the other grounds raised by the assessee were not adjudicated at this stage. These are kept open.
15. In the result, the appeal filed by the assessee for AY 2021-22 is allowed.
16. To sum up : all the appeals filed by the assessee are allowed. Order pronounced in the open court on this 27th day of August, 2025.