2025 (12) TMI 1504 - AT - Income Tax

Seized material from another search and missing AO 'satisfaction' note u/s153C led to assessments being quashed.

Assessment under s.153C turned on whether the AO recorded the mandatory 'satisfaction' that seized material belonged to, and had a bearing on, the ... Assessment u/s 153C - Mandation of recording satisfaction before took cognizance of the relevant seized material found in yet another search - HELD THAT:- There is no material on record indicating the AO(s) in the assessee’s to have record any satisfaction before he took cognizance of the relevant seized material found in yet another search (supra) than that carried out in M/s. Kamla Pasand group of cases. It is thus an instance wherein the Assessing Officer had proceeded to disallow/add the assessee’s expenditure claims without recording any satisfaction regarding the relevant seized material as having any bearing in their respective cases. Both the learned lower authorities have erred in law and on facts in disallowing/adding the assessee’s travelling expenditure etc. without recording any satisfaction under section 153C of the Act which forms a condition precedent in light of Anand Kumar Jain HUF[2021 (9) TMI 1565 - SC ORDER], RRJ Securities Ltd. [2015 (11) TMI 19 - DELHI HIGH COURT], Ojjus Medicare (P) Ltd. [2024 (4) TMI 268 - DELHI HIGH COURT] and Jasjit Singh[2023 (10) TMI 572 - SUPREME COURT] - We thus quash all these impugned identical four assessments framed on 30th March, 2023 in very terms therefore. ISSUES PRESENTED AND CONSIDERED 1) Whether the assessments framed under section 153C read with section 143(3) were invalid for want of a legally required satisfaction when the additions/disallowances were based on seized material stated to have been found in a search other than the search of the 'searched person(s)' on the basis of which section 153C was invoked. ISSUE-WISE DETAILED ANALYSIS 1) Validity of section 153C assessments for absence of satisfaction vis-à-vis the seized material used for making additions Legal framework (as discussed by the Court): The Court treated recording of satisfaction under section 153C as a condition precedent to proceed and to sustain additions/disallowances in an assessment framed under section 153C. Interpretation and reasoning: The Court noted that section 153C action was initiated following a search in a particular group of cases, where the Assessing Officer of the searched person(s) recorded satisfaction and forwarded seized material to the assessees' Assessing Officer(s), who then recorded satisfaction to proceed under section 153C. However, on the record before the Court, the Assessing Officer thereafter sought to proceed and made the impugned disallowances/additions (including travelling expenditure) in light of alleged seized material stated to have been found in a different search conducted at other residential premises. The Court found no material on record to show that the assessees' Assessing Officer recorded any satisfaction before taking cognizance of that other seized material or that such material was duly linked through a satisfaction as having bearing on the assessees' cases for purposes of section 153C. Conclusions: Since satisfaction under section 153C was held to be a mandatory pre-condition, and since the additions/disallowances were made without recording satisfaction in relation to the seized material relied upon, the Court held the assessments to be legally unsustainable. The Court therefore quashed the impugned assessments. All remaining merits issues were held to be academic and not adjudicated.