TaxTMI 
TaxTMI 
2025 (7) TMI 1043
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....of the case and in law, the notice u/s. 153C issued by the AO is illegal and without jurisdiction. The AO has not complied with the provisions of section 153C and other allied provisions for issuance of such notice. Accordingly, the notice u/s. 153C alongwith the assessment order on the foundation of such notice are liable to be quashed and CIT(A) erred in not holding so. 3. On the facts and circumstances of the case and in law, the satisfaction note(s) recorded u/s. 153C of the Act are bad in law and without jurisdiction and, accordingly, the assessment proceedings initiated on the foundation of such satisfaction note(s) and also the consequent assessment order passed are liable to be quashed." Assessment Year 2015-16 2. The brief facts of the case related to assessment year 2015-16 are that a search and seizure operation action u/s. 132 of the Act, was carried out on M/s SMC Global Securities Limited and its related entities (SMC Group) on 20.07.2018. During the assessment proceedings and on perusal of seized data / documents in the case of SMC Group, certain documents / information have been found which pertains to assessee. After analyzing the documents notice u/....
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.... 5.1 Accordingly, the notice u/s. 153C for AY 2015-16 could not have been issued by the AO and the same is barred by limitation. The issue is no longer res integra, as it is covered by Apex Court decision in the case of CIT vs. Jasjit Singh (2023). Accordingly, applying the ratio of aforesaid judgment to the assessee's case the initiation of proceedings u/s. 153C for AY 2015-16 is without jurisdiction and barred by limitation. Thus, the proceedings initiated, and assessment order passed u/s. 153C for the year under consideration is also liable to be quashed as null and void. We hold and direct accordingly. Resultantly, the appeal of the assessee pertaining to assessment year 2015-16 stands allowed. Assessment Year 2016-17 6. The brief facts related to assessment year 2016-17 are that a search and seizure operation action u/s. 132 of the Act, was carried out on M/s SMC Global Securities Limited and its related entities (SMC Group) on 20.07.2018. During course the assessment proceedings and on perusal of seized data / documents in the case of SMC Group, certain documents / information have been found which pertains to assessee. After analyzing the documents notice u/s. 153C ....
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.....e. after the date of search in the case of SMC Global Securities Ltd.) and no adverse inference was drawn in respect of loan given by them to the assessee company. 8.1 Ld. DR did not controvert the aforesaid proposition made by the Assessee's AR on the aforesaid legal ground. 9. We have heard both the parties and perused the records. We find that the challenge to the assumption of jurisdiction under s. 153C of the Act hinges the legal infirmities in recording the 'satisfaction note' by the AO which is claimed to be foundation for assumption of jurisdiction under s. 153C of the Act. 9.1 The 'satisfaction note' recorded by the AO of the assessee being germane to the determination of challenge to the assumption of jurisdiction, is reproduced hereunder:- "10.06.2021 Reasons for satisfaction required for initiating the proceedings u/s 153C of the Income Tax Act, 1961 in the case of M/s Signatureglobal India Pvt. Ltd. (PAN: AACCR3807M), having registered address located at 1308-1311, 13th Floor, 28, Dr. Gopal Das Bhawan, Barakhamba Road, New Delhi - 110002 (for the A. Ys. 2013-14 to 2018-19 & 2019-20) A search & seizure operation action u/s 132 of the Income T....
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....ed by the A.O. of searched person and from the satisfaction recorded by the A.O. of searched person i.e. M/s SMC Global Securities Limited and on the basis of incriminating material, I am satisfied that the above seized incriminating material (in the form of digital data) are pertaining to the assessee i.c. M/s Signatureglobal India Pvt. Ltd. (PAN: AACCR3807M) and these seized documents have bearing on determination of total income of the assessee for the relevant assessment years referred to in sub section (1) of the section 153A of the Act and that it is a fit case for initiating proceedings u/s 153C of the Act, in the case of M/s Signatureglobal India Pvt. Ltd. (PAN: AACCR3807M) for the A.Y. 2013-14 to 2018-19 & A.Y. 2019-20. Sd/- (K.R. Sharma) Assistant Commissioner of Income Tax, Central Circle-4, New Delhi" 9.2 We note that as per the assessment order, Search & Seizure Operation u/s 132 was conducted on 10/07/2018 in SMC Global Securities Ltd. Satisfaction note u/s 153C is stated to be recorded in the case of the assessee on 10/06/2021. The proceedings initiated u/s 153C is bad in law and without jurisdiction due to the fact that the satisfaction note recorded ....
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.... Karnataka High Court has been affirmed by the Apex Court in CIT Vs. Sunil Kumar Sharma & Others (2024)(8) TMI 1086- Supreme Court vide order dated 20.08.2024. The head note of Apex Court decision reads as under:- "Validity of proceedings u/s 153C - whether the assessee should be treated as a "Searched Person" or "Other Person"? - Whether 'Loose Sheets' and 'Diary' have any evidentiary value? - HELD THAT:- We are not inclined to interfere with the impugned judgment and order passed by the High Court of Karnataka at Bengaluru in Writ Appeal [2024 (2) TMI 116 - KARNATAKA HIGH COURT] held notices issued u/s 153C of the Act, based on the loose sheets/diaries are contrary to law, which require to be set aside in these writ appeals, as the same are void and illegal. As satisfaction note is required to be recorded u/s 153C for each Assessment Year and in the impugned proceedings, a consolidated satisfaction note has been recorded for different Assessment Years, which also vitiates the entire assessment proceedings. In view of all these findings, it is said that the appeals do not have any substance for seeking intervention as sought for by the appellant /....
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....e Limited 3. C-35/6, Industrial Area, Lawrence Road, Delhi Hard Disk Named image [Inventorized as Annexure-A-65 (Hard Disk2 Nos.)] Profit and Loss account for M/s. Super Bazaar Stores Private Limited showing a net profit of Rs. 1,80,83,810/- 4. C-35/6, Industrial Area, Lawrence Road, Delhi Hard Disk Named image [Inventorized as Annexure-A-65 (Hard Disk2 Nos.)] Various invoices, client statements raised by M/s. Super Bazaar Stoeres Private Limited. Stock details. The above said documents contain the information of income/investment/expenditure made by the assessee M/s. Super Bazar Stores Private Limited. After examining the documents, I am satisfied within the meaning of Section 153C r.w.s. 153A of the Act that these documents have bearing on the determination of the total income of M/s. Super Bazar Stores Pvt.Ltd. for the A.Ys 2010-11 to 2015-16." 10. Section 153C of the Act pertains to the assessment of income in the hands of person other than searched person, in cases where certain documents, assets or books of accounts etc. found to be pertained to or related to such third person (other than the person on whom search was conducted under ....
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.... [ii] the AO has thrown upon whole basket of six months without giving reference to any concrete incriminating material of a particular Assessment Year and without taking note of commencement of activities of assessee; [iii] the act of the AO making sweeping averment in the 'satisfaction note' that documents in the form of hard disks have bearing on determination of total income of Super Bazar Stores Pvt. Ltd. for AYs 2010-11 to 2015-16, is without legal foundation and without application of mind, as the AO has even failed to name the alleged documents and further failed to mention as to how it is related/pertained to a given AY covered in the 'satisfaction note'; [iv] the AO on receipt of material/documents from the AO of the searched person must necessarily apply his mind on the material received and ascertain precisely the specific year to which incriminating material relates. It is only when this determination/ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by the AO in the light of judgem....
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....gh Court went one step further to hold that where material discovered in the course of search has the potential of constituting incriminating material for more than one AYs, even in such a situation, it will be incumbent upon the AO to duly record reasons that material is likely to be incriminating for more than one AY and thus, warranting the action under section 153C of the Act for years in addition to those to which material may be directly relatable. Thus, a nuanced application of mind and recording of reasons for drawing satisfaction as contemplated under section 153C of the Act qua different AYs is paramount. The Hon'ble Delhi High Court noticeably held that issuance of a notice under section 153C of the Act is clearly not intended to be an inevitable consequence to the receipt of material by the Jurisdictional AO and that the initiation of action under section 153C of the Act will have to be founded on a formation of opinion by the Jurisdictional AO that the material handed over and received pursuant to a search is likely to influence the determination of total income and would be relevant for the purposes of assessment/re-assessment in terms of section 153C of the Act. ....
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....er s 153C thus has no force of law. The first appellate order passed on nonest assessment order is thus set aside and the AO is directed to restore the position claimed by the assessee and delete the additions made." 9.6 In the background of the aforesaid discussions and respectfully following the above-said binding precedents, we note that while exercising the power under section 153C of the Act, neither has the AO related the material found in the course of search with a particular AY while making a consolidated 'satisfaction note' for several years nor provided any requisite details of transaction to enable an independent person to ascertain and form any independent opinion on facts stated in Note that invocation of section 153C of the Act is indeed warranted in the facts of the case. Mere drawing of a perfunctory satisfaction without meeting basic ingredients of providing some tangible & descript information and application of mind thereon has no standing in law and would not confer drastic jurisdiction of assessment u/s 153C of the Act on a person other than searched person. The jurisdiction assumed based on such lackadaisical 'satisfaction note' beset with vital infirmitie....