Satisfaction Note Under Section 153C Is Jurisdictional Precondition; Assessment Was Void Ab Initio Without It

Recording of satisfaction under section 153C is a jurisdictional precondition before notice can be issued against a person other than the searched person. Applying Calcutta Knitwears and CBDT Circular No. 24/2015, the ITAT Mumbai held that such satisfaction must be recorded even where the same officer handles both assessments. Because the Revenue failed to produce the satisfaction note despite direction, the assessment framed under section 143(3) read with section 153C was invalid and void ab initio. The additions made for computing book profit under section 115JB therefore became academic and infructuous.

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Issues: Whether the assessment made under section 143(3) read with section 153C of the Income-tax Act, 1961 was valid in the absence of the requisite satisfaction note and, if not, whether the additions made for the purpose of computing book profit under section 115JB survived.

Analysis: Section 153C requires the Assessing Officer of the searched person to be satisfied that the seized material belongs to or relates to a person other than the searched person, and the Assessing Officer of the other person must also record satisfaction before issuing notice. The Court applied the ratio of the Supreme Court in Calcutta Knitwears and the CBDT Circular No. 24/2015, and held that this satisfaction is a condition precedent, even where the same officer is common to both assessments. As the Revenue failed to produce the satisfaction note despite direction, the only permissible inference was that the mandatory satisfaction was not recorded.

Conclusion: The notice issued under section 153C and the assessment framed under section 143(3) read with section 153C were held invalid and void ab initio, in favour of the assessee. The merits-based additions to book profit under section 115JB were treated as academic and infructuous.

Ratio Decidendi: Recording of satisfaction under section 153C is a jurisdictional precondition; in its absence, the entire assessment is void ab initio.

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