TaxTMI 
TaxTMI 
2026 (3) TMI 547
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....,60,000/-. A search & seizure operation under section 132 of the Income Tax Act, 1961 is conducted in the case of M/s. Skill Promoters on 22/10/2019. During the course of assessment proceedings, in the case of the searched person, the A.O of the searched person, on analysis of seized material vide annexure No. A/SPPL/OFF/01 had satisfied that the information contained in the seized material pertains to the assessee and information contained therein, has a bearing on the determination of total income of the assessee for A.Ys from 2014-15 to 2020-21. Thereafter, the AO of the "other person" i.e., the assessee Mohammed Fayaz, has recorded Satisfaction Note for initiating proceedings u/s. 153C of the Income-tax Act, 1961 with reference to the seized material and issued notice under section 153C of the Act on 3/8/2022. In response, the assessee filed return of income on 3/09/2022. 4. The case of the assessee was selected for scrutiny and during the course of assessment proceedings, the A.O, on the basis of material found during the course of search observed that the assessee has purchased a property from M/s. Skill Promoters (P) Ltd and paid consideration in cash for Rs. 21,50,000/-,....
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....mitation period provided under the Act. In support of his contention, he relied on the decision of the Hon'ble Supreme Court in the case of CIT-III Vs. Calcutta Knitwears (2014) 362 ITR 673 (SC) and also the decision of Hon'ble Delhi High Court in the case of CIT Vs. Bharat Bhushan Jain (2015) 370 ITR 695 (Del). The learned counsel for the assessee referring to the decision of Hon'ble Supreme Court in the case of CIT-III Vs. Calcutta Knitwears (supra) submitted that the Hon'ble Supreme Court had clearly stated that for the purpose of section 158BD of the Act, a satisfaction note is sine qua non and must be prepared by the Assessing Officer before he transmits the records to the other Assessing Officer who has jurisdiction over such other person. The satisfaction note could be prepared at either of the following stages : (a) at the time of or along with the initiation of proceedings against the searched person u/s. 158BC of the Act; (b) along with the assessment proceedings u/s. 158BC of the Act; and (c) immediately after the assessment proceedings are completed u/s. 158BC of the Act of the searched person. 8. In the present case, search was....
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.... Promoters on 22/10/2019 and the assessment of the searched person was completed u/s. 153A of the Act on 26/09/2021 for the A.Y. 2017- 18. It is also an admitted fact that, the Assessing Officer of the assessee has recorded satisfaction as required u/s. 153C of the Act on 27/07/2022 and issued notice u/s. 153C of the Act on 03/08/2022. Thus, there is a gap of 10 months from the date of assessment by the Assessing Officer of the person searched and the date of issue of notice u/s. 153C of the Act to the assessee. The assessee contends that the satisfaction note could be prepared at any of the following stages, including at the time or along with the initiation of proceedings against the searched person under section 158BC/ 153A of the Act or in the course of the assessment proceedings u/s. 158BC/153A of the Act or immediately after the assessment proceedings are completed u/s. 158BC/ 153A of the Act of the searched person. This legal position has been explained by the Hon'ble Supreme Court in the case of CIT-III Vs. Calcutta Knitwears (supra) wherein the Hon'ble Supreme Court at para 44 of the order clearly held as under : "44. In the result, we hold that for the pu....
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....that the provisions of section 153C of the Act are substantially similar/pari-materia to the provisions of section 158BD of the Act and therefore, the above guidelines of the Hon'ble SC, apply to proceedings u/s 153C of the IT Act, for the purposes of assessment of income of other than the searched person. This view has been accepted by CBDT. 4. The guidelines of the Hon'ble Supreme Court as referred to in para 2 above, with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified that even if the AO of the searched person and the "other person" is one and the same, then also he is required to record his satisfaction as has been held by the Courts. 5. In view of the above, filing of appeals on the issue of recording of satisfaction note should also be decided in the light of the above judgement. Accordingly, the Board hereby directs that pending litigation with regard to recording of satisfaction note under section 158BD/153C should be withdrawn/not pressed if it does not meet the guidelines laid down by the Apex Court." 12. A similar view has been taken by Hon'ble Delhi High Court in t....
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....etion of assessment of the searched person, this court is of the opinion that a delay ranging between 10 months of one-and-half years cannot be considered contemporaneous to assessment proceedings. We are of the opinion that notices were not issued in conformity with the requirements of section 158BD, and were unduly delayed. The appeals of the Revenue, accordingly, fail and are dismissed." In the result, Tax Appeal is dismissed. 14. The ITAT, Pune Benches in the case of Kewal Kumar Jain Vs. ACIT (supra) also considered an identical issue of recording satisfaction and issue of notice u/s. 153C of the Act by the Assessing Officer of the searched person or the other person or the issue of notice u/s. 153C of the Act and after considering the relevant facts and also by following the decision of Hon'ble Supreme Court in the case of CIT-III Vs. Calcutta Knitwears (supra), in paras 10 to 14 held as under : "10. We have heard the rival contentions and perused the record. The assessee is aggrieved by initiation and completion of proceedings under section 153C of the Act, so we shall first make reference to said section. Under the pre-amended provisions of section 1....
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.... of proceedings under section 153C of the Act i.e. for the purpose of assessment of income of 'other person' other than searched person. The CBDT has issued circular to the effect that guidelines of the Hon'ble Supreme Court with regard to recording of satisfaction note, may be brought to the notice of all for strict compliance. It is further clarified by the CBDT that even if the Assessing Officer of searched person and the other person are one and the same, then also he was required to record his satisfaction as has been held by the Courts. 13. Applying the ratio laid down by the Hon'ble Supreme Court, satisfaction note has to be prepared by the Assessing Officer of searched person at the time of or along with the initiation of proceedings against searched person; or in the course of the assessment proceedings of searched person; or immediately after the assessment proceedings of the searched person. This view of the Hon'ble Supreme Court though in the context of proceedings under section 158BD of the Act has to be applied even for the proceedings to be initiated under section 153C of the Act. In other words, where any document is found or requisitioned or bo....
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.... In so far as the case law relied upon by the Ld. DR in the case of Indian National Congress Vs. DCIT (supra), in our considered opinion, the facts of the above case are entirely different and not related to the limitation provided for recording satisfaction u/s. 153C of the Act and issue of notice u/s. 153C of the Act and therefore above case is not applicable to the present case. In any case, even if the decision relied upon by the Ld. DR is applicable to the facts of the present case, but fact remains that since there are divergent views on the issue, in view of the decision of Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Ltd. (1973) 88 ITR 192 (SC), in our considered view, the view which is favourable to the assessee should be considered. Since the Hon'ble Supreme Court and majority of Hon'ble High Courts have taken a view that notice issued u/s. 153C of the Act after a period of 10 months to 1 ½ year is barred by limitation and in our considered view by applying the above case laws in the present case, notice issued u/s. 153C of the Act dated 03/08/2022 after a period of 10 months is not a valid notice and consequently, the assessment order pa....
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....ronounced in the Open Court on 25th February 2026. ============= Document 1 Sno. Grounds of Appeal 1. The Order of the Ld. CIT (A) u/s 250 of the Act dt. 08.08.2025 for the AY 2017-18 is erroneous both on facts and in law to the extent the order is prejudicial to the interests of the appellant. 2. The Ld. CIT(A) has erred in dismissing the appeal of the assessee without actually considering the submissions of the assessee and without appreciating the facts and circumstances of the case which is invalid and bad in law. 3. The Ld. CIT(A) ought to have considered that the common satisfaction note was recorded for the assessment years 2014-15 to 2020-21, which is bad in law and therefore, the notice u/s 153C for the AY 2017-18 is invalid and the assessment completed u/s 153C deserves to be annulled. 4. The Ld. CIT(A) ought to have appreciated that that there is no proper recording of satisfaction note in the appellant's case for invoking the provisions of section 153C of the Act and that consolidated satisfaction note recorded for different assessment years would vitiate entire assessment proceedings. 5. The Ld. CIT(A) ought to have considered that the notice u/s 15....