Timely satisfaction note requirement under section 153C failed, making the assessment void and penalty orders unsustainable.

An assessment under section 153C was held invalid because the satisfaction note was not recorded at the statutorily permissible stage; the delay after completion of the searched person's assessment exceeded the timeframe recognised in binding precedent and CBDT instructions. The jurisdiction to proceed under section 153C therefore failed. Once the assessment was void, the penalty orders founded on that assessment could not survive independently and were also unsustainable.

---

---

Issues: Whether the assessment framed under section 153C of the Income-tax Act, 1961 was vitiated for want of a timely and valid satisfaction note, and whether the consequential penalty orders could survive once the assessment was held void.

Analysis: The assessment was founded on material found in the search of another person, and the record showed a substantial delay in recording the satisfaction note after completion of the searched person's assessment. The legal position governing section 158BD, as applied to section 153C, requires a satisfaction note to be recorded at the statutorily permissible stage, i.e. contemporaneous with the search assessment, during those proceedings, or immediately after their completion. On the facts, the delay exceeded the permissible timeframe recognised in binding precedent and CBDT instructions, so the jurisdiction assumed for the section 153C assessment was invalid. Once the assessment itself failed, the penalty orders based on that assessment could not be independently sustained.

Conclusion: The assessment under section 153C was invalid for want of a timely satisfaction note, and the consequential penalty orders were also unsustainable.

---