Section 153C jurisdiction fails without satisfaction note by the searched person's Assessing Officer; assessments quashed

Initiation of proceedings under section 153C was treated as invalid because the satisfaction note was not recorded by the Assessing Officer of the searched person, but by the Assessing Officer of the other person. Recording satisfaction by the Assessing Officer of the searched person is a mandatory jurisdictional prerequisite for valid assumption of power under section 153C. As that foundational requirement was missing, the notice lacked jurisdiction and the consequential assessments could not be sustained. The Tribunal also noted the settled position and the CBDT litigation-withdrawal direction in cases where such satisfaction was absent, leading to quashing of the assessments.

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Issues: Whether initiation of proceedings under section 153C of the Income-tax Act, 1961 was valid in the absence of a satisfaction note recorded by the Assessing Officer of the searched person, and whether the consequent assessments could be sustained.

Analysis: The satisfaction note had to be recorded by the Assessing Officer of the person searched before action could be taken against the other person under section 153C. The record showed that the note was recorded in the capacity of the Assessing Officer of the other person and not in the capacity of the Assessing Officer of the searched person. The Tribunal also relied on the settled position that recording of satisfaction is a prerequisite for valid assumption of jurisdiction under section 153C, and that the CBDT circular directed withdrawal of litigation where such satisfaction was absent. Since the jurisdictional foundation itself was missing, the consequential assessments could not stand.

Conclusion: The initiation of proceedings under section 153C was invalid and the assessments framed pursuant thereto were quashed in favour of the assessee.

Ratio Decidendi: Recording of satisfaction by the Assessing Officer of the searched person is a mandatory jurisdictional prerequisite for valid proceedings under section 153C, and in its absence the notice and all consequential assessments are void.

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