2026 (3) TMI 1492 - AT - Income Tax

Section 153C jurisdiction requires a satisfaction note linking seized material to total income; absent that link, assessments fail.

For valid assumption of jurisdiction under section 153C, the satisfaction note must expressly record that the seized material has a bearing on ... Validity of assessment u/s 153C r.w.s. 143(3) - mandation of Satisfaction note to be recorded u/s 153C - Bearing of seized material on determination of total income HELD THAT: - The Tribunal held that, although satisfaction was recorded first by the Assessing Officer of the searched person and thereafter by the assessee's jurisdictional Assessing Officer, the statutory requirement was still not met because the recorded satisfaction did not state that the seized material sought to be used against the assessee had any bearing on determination of its total income. Applying Saksham Commodities Ltd. [2024 (4) TMI 461 - DELHI HIGH COURT] it held that such a recital is essential to sustain proceedings under section 153C. In the absence of this jurisdictional requirement, the assessments were non-est in law. [Paras 3] The section 153C assessments for all the three assessment years were quashed. Final Conclusion: The cross-objections were allowed and the Revenue's appeals were dismissed. The Tribunal held that the absence of a satisfaction that the seized material had any bearing on determination of the assessee's total income vitiated the section 153C assessments for assessment years 2017-18, 2018-19 and 2019-20. Issues: (i) Whether the section 153C assessments for the relevant assessment years were valid when the satisfaction note did not record that the seized material had a bearing on ination of the assessee's total income.Analysis: The search action was carried out under section 132 of the Income-tax Act, 1961, and the impugned proceedings were initiated after the recorded satisfaction of the searched party's Assessing Officer and the assessee's jurisdictional Assessing Officer. The decisive requirement was whether the satisfaction note clearly stated that the seized material had a bearing on determination of the assessee's total income. As that element was not recorded, the statutory basis for invoking section 153C was held to be deficient.Conclusion: The section 153C assessments were held to be invalid and non-est, and the assessee succeeded on this issue.Final Conclusion: The common order resulted in the assessee succeeding on the jurisdictional challenge to the assessments, with the Revenue's appeals dismissed and the cross objections allowed.Ratio Decidendi: For a valid assumption of jurisdiction under section 153C, the satisfaction note must expressly show that the seized material has a bearing on determination of the assessee's total income.