TaxTMI 
TaxTMI 
2025 (12) TMI 528
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.... by the assessee are decided by a common order. ITA No.5971/Del/2024 [Assessment Year : 2018-19] 3. First we take up the appeal of assessee in ITA No. 5971/Del/2024 for Assessment Year 2018-19. 4. Brief facts of the case are that assessee company filed its original return of income on 31.10.2018, declaring income of INR 80,37,460/-. A search and seizure operation u/s 132 of the Act was carried out on 26.10.2020 in the cases of Sanjay Jain & Mehta Group at various residential and business premises. During the course of search two sets of books under tally software were found and seized from the office premises of Shri Sanjay Jain. On the basis of information available, a satisfaction note was prepared by the AO of person searched i.e. DCIT, Central Circle-30, New Delhi proposing for initiation of proceedings u/s 153C of the Act in the case of the assessee. Thereafter, notices u/s 153C was issued on 24.08.2022 by the AO of the assessee. After considering the submissions of the assessee and the documents seized during the course of search in the case of third person, the AO computed the income of the assessee company at INR 1,09,71,991/- vide assessment order dated 20.03.2023....
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....rary to the provisions of section 153D of the Income Tax Act, 1961 and CIT(A) erred in not holding so." 7. Ground of appeal Nos. 1 to 3 raised by the assessee are with respect to the initiation of proceedings u/s 153C without following the due procedure as prescribed under the Act and further without recording proper satisfaction by the AO of the assessee after due application of the mind on the material supplied by the AO of the person searched. 8. Before us, Ld. AR for the assessee submits that file of the assessee was inspected and it was time and again requested to supply the copy of "Satisfaction Note" recorded by the AO of the assessee before initiating the proceedings u/s 153C of the Act which was neither available in the assessment folder nor was ever supplied to the assessee. A search was carried out on 06.10.2020 and AO of the searched person has recorded his satisfaction note on 16.08.2022 that certain documents containing certain entries of income pertained to the assessee were found in the seized material. Ld. AR further submits that proceedings u/s 153C were initiated in the case of the assessee on the basis of satisfaction note of the person searched i.e. AO, C....
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....nt of INR 5,05,23,880/-. however, no year-wise satisfaction of income found recorded in the documents found/seized from the possession of third person, was recorded. Ld. AR, therefore, submits that consequent proceedings u/s 153C of the Act based on such mechanical satisfaction note of the AO of the assessee deserve to be hold bad in law. In this regard, ld.AR placed reliance on the following judicial precedents:- (i) Canyon Financial Services Ltd.vs ITO [399 ITR 202]; (ii) PCIT(Central)-3 vs Ridgeview Construction Pvt.Ltd. 2025 (2) TMI 869 (Delhi High Court); (iii) Saksham Commodities Ltd. [2024] 464 ITR 1 (Delhi High Court) 12. On the other hand, Ld.CIT DR submits that there is no prescribed format provided under Act for recording satisfaction by the AO of the assessee. Once the AO of the assessee has recorded his satisfaction upon receipt of the seized material and satisfaction note from the AO of the person searched and held the same as pertained to or belonged to the assessee and therefore, the procedure as prescribed for initiation of proceedings u/s 153C of the Act has duly been complied with. Ld. CIT DR thus prayed for the confirmation of the i....
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....ears immediately preceding the assessment year relevant to the previous year in which search is conducted or requisition is made and for the relevant assessment year or years as referred to in sub-section (1) of section 153A except in cases where any assessment or reassessment has abated. (2) Where books of account or documents or assets seized or requisitioned as referred to in sub-section (1) has or have been received by the Assessing Officer having jurisdiction over such other person after the due date for furnishing the return of income for the assessment year relevant to the previous year in which search is conducted under section 132 or requisition is made under section 132A and in respect of such assessment year- (a) no return of income has been furnished by such other person and no notice under sub-section (1) of section 142 has been issued to him, or (b) a return of income has been furnished by such other person but no notice under sub-section (2) of section 143 has been served and limitation of serving the notice under sub-section (2) of section 143 has expired, or (c) assessment or reassessment, if any, has been made, before the date o....
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....relevant observations are in para 51 are as under:- 51. "Ultimately Section 153C is concerned with books, documents or articles seized in the course of a search and which are found to have the potential to impact or have a bearing on an assessment which may be undergoing or which may have been completed. The words "have a bearing on the determination of the total income of such other person" as appearing in Section 153C won, necessarily have to be conferred preeminence. Therefore, and unless the AO is satisfied that the material gathered could potentially impact the determination of total income, it would be unjustified in mechanically reopening' or assessing all over again all the ten A Ys' that could possibly form part of the block of ten years." 17. Further, the Co-ordinate Bench of the Tribunal in the case of Rajiv Aggarwal vs ACIT, Central Circle-20, new Delhi in ITA No.2818/Del/2023 by following the aforesaid judgements of hon'ble Delhi high court, has held that where the satisfaction note of the AO of the person searched and the AO of the assessee are identically worded then there is no independent application of mind by the AO of the assessee. The releva....
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....tain' to a person other than the person searched and the AO of the assessee before us record the satisfaction that the documents pertain to an information contained in the said documents 'related to Shri Rajiv Agarwal, i.e., a person other than the person searched u/s 132 of the Income-tax Act, 1961. 12. In the case of Canyon Financial Services Ltd. Vs. ITO [399 ITR 202] the Hon'ble Delhi High Court has held that where satisfaction notes recorded by Assessing Officer of assessee and Assessing Officer of searched person were identically verdict carbon copy proceeding could not be initiated against assessee u/s 153C of the Act. While holding so the Hon'ble High Court held as under: "19. As a result, the Court holds that the satisfaction note prepared by the AO of the searched person does not fulfil the legal requirement spelled out in Section 153C(1) of the Act. The satisfaction note of the AO of the Assessee, being a carbon copy of the satisfaction note of the AO of the searched person also fails to fulfil the jurisdictional requirement. No reasons are recorded for the identical conclusion in either satisfaction note that the seized documents mentio....
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..... 1 to 3 of the assessee are allowed. 22. In the result, appeal of the assessee is allowed. ITA No.5973/Del/2024 [Assessment Year : 2020-21] 23. Now we take up the appeal of assessee in ITA No. 5973/Del/2024 for Assessment Year 2020-21. 24. Heard the contentions of both parties and perused the material available on record. In this appeal, facts are similar and identical to the facts of assessee's appeal in ITA No.5971/Del/2024 for Assessment Year 2018-19 where we have already held the proceedings initiated u/s 153C as bad in law in absence of proper satisfaction recorded by the AO of the assessee before issuance of notice u/s 153C of the Act. In this year also the facts are the same and the proceedings u/s 153C of the Act were initiated on the basis of common satisfaction note, thus, by respectfully following the observations made in assessee's appeal for AY 2018-19 herein above, which are applied Mutatis Mutandis to the facts of case under consideration, appeal filed by the assessee is allowed. Accordingly, legal grounds of appeal Nos. 1 to 3 of the assessee are allowed. 25. In the result, appeal of the assessee is allowed. 26. In the final result, all the appeal....