Section 153C proceedings fail where notice is time barred and satisfaction note lacks a live nexus to seized material.

Proceedings under section 153C were invalid because the notice was issued about 15 months after completion of the searched person's assessment and was not saved by the COVID-19 limitation relaxations; the Tribunal therefore held the notice time barred. The jurisdiction was also vitiated because the satisfaction note was not independent and the seized material lacked a live, year-wise nexus with the assessee's income: the relied-upon loose sheet was undated, unsigned and treated as a dumb document. On these jurisdictional defects, the assessments under section 153C were quashed.

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Issues: (i) Whether notice issued under section 153C was barred by limitation. (ii) Whether the proceedings under section 153C were vitiated by a defective satisfaction note, including borrowed satisfaction and reliance on an undated loose sheet lacking year-wise nexus to the assessee.

Issue (i): Whether notice issued under section 153C was barred by limitation.

Analysis: The notice under section 153C was issued long after completion of assessment in the searched person's case. The delay was about 15 months and was held not to be saved by the COVID-19 limitation relaxations. The Tribunal applied the binding jurisdictional precedent on contemporaneous initiation of third-party proceedings after completion of the searched person's assessment.

Conclusion: The notice under section 153C was held to be time barred and invalid.

Issue (ii): Whether the proceedings under section 153C were vitiated by a defective satisfaction note, including borrowed satisfaction and reliance on an undated loose sheet lacking year-wise nexus to the assessee.

Analysis: The Tribunal held that the satisfaction recorded for initiation of proceedings must be independent and must show a live link between the seized material and the assessee's income for the relevant year. The loose sheet relied upon was undated, unsigned and treated as a dumb document, and the record did not disclose how it had a bearing on the assessee's income for the assessment year in question. The Tribunal also held that the assessee's challenge to the satisfaction note could be examined as it went to the root of jurisdiction.

Conclusion: The satisfaction note and the resulting assumption of jurisdiction under section 153C were held to be invalid.

Final Conclusion: The assessments made under section 153C were quashed and both appeals were allowed.

Ratio Decidendi: Proceedings under section 153C require timely initiation after completion of the searched person's assessment and a valid, independent satisfaction note showing year-specific incriminating material with a clear nexus to the assessee's income; absent these jurisdictional prerequisites, the assessment is void.

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