TaxTMI 
TaxTMI 
2026 (3) TMI 66
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....e captioned Appeals. 3. As the Appeals are filed by single Assessee, the captioned Appeals are heard together and decided in this common order. 4. Though the Assessee has raised several grounds of Appeals, we have heard only on Ground No. 2 of the Assessee's Appeals. The Ld. Assessee's Representative contended that initiation of assessment proceedings u/s 153C of the Act for Assessment Years 2016-17and 2019-20 by recording consolidated satisfaction note for Assessment Years i.e. 2014-15 to 2020-21 are bad in law and liable to be quashed being proceedings initiated u/s 153C of the Act are in violation of law laid down by Hon'ble Supreme Court, various Hon'ble High Courts and also the ratio laid down by the Tribunal. The Ld. Counsel has also relied on the following judicial precedents and sought for setting aside the respective Assessment Orders: Sr. No. Name of case Citation 1. Shaksham Commodities Ltd. Vs. ITO 464 ITR 01 (Del.) 2. Deputy Commissioner of Income Tax Vs. Sunil Kumar Sharma [2024] 168 taxmann.com 77 (S.C) 3. Deputy Commissioner of Income Tax Vs. Sunil Kumar Sharma [2024] 159 taxmann.com 179 (H.C-Karnataka) 4. ....
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....RS Panchratan Diamonds Pvt. Ltd. (supra), considered the Judgments of Hon'ble Karnataka High Court in the case of Sunil Kumar Sharma (supra) and also the Judgment of Hon'ble Delhi high court in the case of Shaksham Commodities (supra), decided the issue in favour of the Assessee holding that the consolidated satisfaction note is invalid, wherein the Co-ordinate Bench of the Tribunal has also distinguished the Judgment of the Hon'ble Jurisdictional High Court in case of Indian National Congress (supra). The relevant observations of Co-ordinate Bench in the case of SRS Panchratan Diamonds Pvt. Ltd. (supra) are reproduced as under: "6. From the above, it could be seen that the Learned AO of the assessee herein had recorded Consolidated satisfaction note for assessment years 2011-12 to 2017- in one go instead of recording independent and individual satisfaction note for each assessment year which is the requirement of the law. The moot question that arises for our consideration is as to whether recording of consolidated satisfaction note for various assessment years and assuming jurisdiction under section 153C of the Act would be fatal to the very assumption of jurisdiction un....
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....This too appears to suggest that while the notice could be composite and based on a common satisfaction note which encapsulates the incriminating material pertaining to the AYs' in question, it is only returns which must and mandatorily be filed separately. 25. Regard must be had to the indubitable fact that the Satisfaction Note merely forms the foundation for initiation of action and which would enable us to evaluate whether an opinion has been validly formed. As long as it rests on incriminating material which pertains to the AYs' in question, the same would qualify the requirement of Section 153C. We deem it apposite to observe that while it would be imperative for the Satisfaction Note to refer to the material pertaining to the AYs' which are sought to be reopened, a consolidated Satisfaction Note clearly does not appear to be an anathema provided it rests on material which pertains to the AYs' which are sought to be reopened. 26. We in this respect also bear in mind the lucid explanation of the procedure liable to be adopted under Sections 153A and 153C as came to be enunciated by the Court in CIT v. Kabul Chawla [2015] 61 taxmann.com 412/234....
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.... the basis of the findings of the search and any other material existing or brought on the record of the Assessing Officer. (vii) Completed assessments can be interfered with by the Assessing Officer while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment." By placing reliance on the aforesaid decision of Hon'ble Delhi High Court, the Learned DR argued that recording of consolidated satisfaction note for various assessment years put together would not be fatal to the assumption of jurisdiction and framing of assessment under section 153C of the Act. 9. But we find that the Hon'ble Jurisdictional High Court in the case of Saksham Commodities Ltd vs ITO reported in 464 ITR 1 (Del) dated 09-04- 2024 (judges of equal strength) had passed an order in favour of the assessee on the very same issue. The relevant operative portion of the said order is reproduced below:- "50. What we seek to emp....
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....wers the AO to do so. Unless the material gathered and recovered is found to have relevancy to the AY which is sought to be subjected to action under Section 153C, it would be legally impermissible for the respondents to invoke those provisions. Consequently, the AO would be bound to ascertain and identify the year to which the material recovered relates. The years which could be then subjected to action under Section 153C would have to necessarily be those in respect of which the assessment is likely to be influenced or impacted by the material discovered. Section 153C neither mandates nor envisages a mechanical or an en blanc exercise of power, or to put it differently, one which is uninformed by a consideration of the factors indicated above. 56. We also bear in mind the pertinent observations made in RRJ Securities when the Court held that merely because an article or thing may have been recovered in the course of a search would not mean that concluded assessments have to "necessarily" be reopened under Section 153C and that those assessments are not liable to be revised unless the material obtained have a bearing on the determination of the total income. This aspect w....
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....esaid understanding of Section 153C is clearly erroneous and unsustainable. As explained hereinabove, the discovery of material likely to implicate the assessee and impact the assessment of total income for a particular AY is not intended to set off a chain reaction or have a waterfall effect on all AYs' which could form part of the "relevant assessment year". This, more so since none of the Satisfaction Notes record any reasons of how that material is likely to materially influence the computation of income for those AYs'. 62. Hypothetically speaking, it may be possible for the material recovered in the course of a search having the potential or the probability of constituting incriminating material for more than one assessment year. However, even if such a situation were assumed to arise, it would be incumbent upon the AO to duly record reasons in support of such a conclusion. The Satisfaction Notes would thus have to evidence a formation of opinion that the material is likely to be incriminating for more than a singular assessment year and thus warranting the drawl of Section 153C proceedings for years in addition to those to which the material may be directly r....
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....evaluation and examination of their contents and an assessment of the potential impact that they may have on the total income for the six AYs' immediately preceding the AY pertaining to the year of search and the "relevant assessment year". It is only once the AO of the non-searched entity is satisfied that the material coming into its possession is likely to "have a bearing on the determination of the total income" that a notice under Section 153C would be issued. Abatement would thus be a necessary corollary of that notice. However, both the issuance of notice as well as abatement would have to necessarily be preceded by the satisfaction spoken of above being reached by the jurisdictional AO of the non-searched entity. 66. Therefore, and in our opinion, abatement of the six AYs' or the "relevant assessment year" would follow the formation of that opinion and satisfaction in that respect being reached. H. OPERATIVE DIRECTIONS 69. When tested in light of the aforesaid principles, we find that except for a few exceptions which were noticed in the introductory parts of this judgment, the writ petitions forming part of this batch, impugn the invocati....