2025 (12) TMI 1717 - HC - Income Tax

Tax reassessment notice u/s153C issued without timely satisfaction note; proceedings for AY 2015-16 quashed as invalid.

The dominant issue was the validity of a notice issued under s.153C of the IT Act in the absence of a duly recorded satisfaction note. The HC held that ... Validity of notice issued u/s 153C - mandation to record satisfaction note - HELD THAT:- In the instant case, it is established that the satisfaction note of the jurisdictional Assessing Officer of the petitioner-company does not bear any date and over and above the same, it is also established that it has been supplied to the petitioner on 31.05.2024 i.e. after passage of more than two years. Hence, on both the counts, the impugned notice dated 24.06.2022 issued u/s 153(C) of the IT Act for the A.Y. 2015-16 becomes vulnerable, hence the impugned notice along with all the consequential proceedings are hereby quashed and set aside. 1. ISSUES PRESENTED AND CONSIDERED (i) Whether a notice issued under Section 153C for the relevant assessment year is sustainable when the jurisdictional Assessing Officer's satisfaction note does not bear any date and is communicated to the assessee after more than two years from its stated recording, without any explanation for the delay. (ii) Whether, in light of the Court's application of the Supreme Court's satisfaction-note requirement and the departmental circular referred to in the judgment, non-compliance with the satisfaction-note requirements vitiates the Section 153C notice and consequential proceedings. 2. ISSUE-WISE DETAILED ANALYSIS Issue (i) & (ii): Validity of Section 153C notice in absence of a dated satisfaction note and belated communication Legal framework (as discussed by the Court): The Court treated the recording of a satisfaction note as a mandatory pre-condition for action against a person other than the searched person, and applied the requirement to proceedings under Section 153C as per the reasoning adopted in the judgment. The Court also relied on the departmental circular referred to in the judgment as accepting the applicability of the satisfaction-note guidelines to Section 153C proceedings. Interpretation and reasoning: The Court found certain dates to be undisputed: the search occurred on a specified date; a satisfaction note of the searched person was recorded on a later date; and the satisfaction note was supplied to the assessee after more than two years. The respondent's position that the jurisdictional Assessing Officer recorded a satisfaction note was examined against the record; the Court noted that the satisfaction note of the jurisdictional Assessing Officer of the assessee did not bear any date, and that this was admitted. The Court further held it was established and undisputed that the satisfaction note was communicated only after a two-year period, and that no explanation was provided for the intervening delay. On these established facts, the Court treated the notice issued under Section 153C as rendered 'vulnerable' on both counts-absence of a dated satisfaction note and unexplained, substantially belated supply of the satisfaction note to the assessee. Conclusions: The Court held that the Section 153C notice for the relevant assessment year could not be sustained because (a) the jurisdictional satisfaction note did not bear any date, and (b) it was supplied to the assessee after more than two years without explanation. Consequently, the Court quashed and set aside the impugned notice and all consequential proceedings.