AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2026 (4) TMI 95
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....visions for complied with the provisions of section 153C and other notice. Accordingly, the notice u/s 153C along with the issuance of such assessment order passed 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 and CIT(A) erred in not holding so. 4. On the facts and circumstances of the case and in law, the addition of Rs. 2,86,98,205/- made by the assessing officer on account of disallowance of purchases u/s 37 of the Act, is beyond the scope/jurisdiction of provisions of section 153C read with section 153A of the Income Tax Act, 1961 and CIT(A) erred in not holding so. 5. On the facts and circumstances of the case and in law, the Id. CIT(A) erred in confirming the addition made by the assessing officer of Rs. 2,86,98,205/- on account of disallowance of purchases u/s 37 of the Act. ....
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.... satisfaction note recorded wherein the AO did not state in the satisfaction about the materials which were seized and treated as belonging to the assessee has bearing on the determination of the total income of assessee, the notice issued is bad in law. 6. Therefore, the Counsel for the assessee submitted that the facts are exactly identical, the satisfaction note recorded by the AO in the case of the assessee is identically worded word by word as that of the satisfaction note recorded in the case of M/s. Deepak Builders and Engineers India Pvt. Ltd. and therefore, decisions of the coordinate Bench squarely applies to the facts of the assessee's case. 7. On the other hand the Ld. DR strongly placing reliance on the satisfaction note recorded by the AO, submitted that the satisfaction note was properly recorded and it has clearly mentioned that the entries and the seized materials and the entries reflected in the satisfaction note were clearly unaccounted receipts and payments which has escaped assessment and therefore, the satisfaction note recorded by the AO cannot be said to be not properly recorded. 8. Heard rival contentions and perused the orders of the authorities b....
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....f the Act on the basis of material found and seized during the course of search on third person. It was the submission of Ld.AR that in the instant case, a search and seizure action was carried out on 26.10.2020 at the various premises of Sanjay Jain & Mehta Group and during the course of search, 02 sets of books of tally were found and seized. Based on the entries found noted in tally books, a satisfaction note is recorded that the documents pertained to the assessee and contained entries related to the assessee and proceedings u/s 153C were initiated in the case of the assessee and additions were made. Ld.AR claims that sole basis of the addition is so- called documents in the shape of books of tally which was found and seized from the possession of Shri Sanjay Jain containing certain entries which are appearing at page 4 of the assessment order. Ld.AR submits that as per the said documents, the entries written with "d" were treated as cash payment received by the assessee and addition was made on this account. Ld.AR submits that in the satisfaction note recorded, AO has not recorded the satisfaction that these documents contained the entries which "have bearing on the determinat....
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....d "have a bearing on the determination of the total income of such other person". We in this regard bear in mind the well settled distinction which the law recognizes between the existence of power and the exercise thereof. Section 153C enables and empowers the jurisdictional AO to assess or reassess the six AYs' or the "relevant assessment year". The Act thus sanctions and confers an authority upon the AO to exercise the power placed in its hands for up to a maximum of ten AYs'. Despite the conferral of that power, the question which would remain is whether the facts and circumstances of a particular case warrant or justify the invocation of that power. It is the aforesaid aspect which bids us to reiterate the distinction between the existence and exercise of power. 50. What we seek to emphasise is that merely because Section 153C confers jurisdiction upon the AO to commence an exercise of assessment or reassessment for the block of years which are mentioned in that provision, the same alone would not be sufficient to justify steps in that direction being taken, unless the incriminating material so found is likely to have an impact on the total income of a particu....
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.... would not sustain. It was this position in law as enunciated in that decision which came to be reiterated by our Court in Index Securities. 54. In any case, Abhisar Buildwell, in our considered opinion, is a decision which conclusively lays to rest any doubt that could have been possibly harboured. The Supreme Court in unequivocal terms held that absent incriminating material, the AO would not be justified in seeking to assess or reassess completed assessments. Though the aforesaid observations were rendered in the context of completed assessments, the same position would prevail when it comes to assessments which abate pursuant to the issuance of a notice under Section 153C. Here too, the AO would have to firstly identify the AYs' to which the material gathered in the course of the search may relate and consequently it would only be those assessments which would face the spectre of abatement. The additions here too would have to be based on material that may have been unearthed in the course of the search or on the basis of material requisitioned. The statute thus creates a persistent and enduring connect between the material discovered and the assessment that may be....
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....iable to be revised unless the material obtained have a bearing on the determination of the total income. This aspect was again emphasised in para 38 of RRJ Securities with the Court laying stress on the existence of material that may be reflective of undisclosed income being of vital importance. All the aforenoted judgments thus reinforce the requirement of incriminating material having an ineradicable link to the estimation of income for a particular AY. 57. It becomes pertinent to note that both Sections 153A and 153C require the assessee upon being placed on notice to furnish ROIs' for the six AYs' or the "relevant assessment year". All that the two provisions mandate is that notwithstanding the submission of those ROIs', the AO would frame one assessment order in respect of each of the years which were made subject matter of the notice and which would deal with both disclosed and undisclosed income. This too reinforces our view that Section 153C would apply only to such AYs' where the jurisdictional AO is satisfied and has incriminating material for those AYs' and which may be concerned with disclosed and undisclosed income. 58. The afores....
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.... would be AYs' 2010-11 to 2020-21. A similar note appears in W.P. (C)1117/2024. Here again, after referring to the material pertaining to FY 2009-10 [and thus relating to AY 2010-11], the AO proceeded to seek approval for initiating action under Section 153C in respect of AYs' 2010-11 up to 2020-21. 61. A reading of the aforesaid Satisfaction Notes would establish that jurisdictional AOs' appear to have proceeded on the premise that the moment incriminating material is unearthed in respect of a particular AY, they would have the jurisdiction and authority to invoke Section 153C in respect of all the assessment years which could otherwise form part of the "relevant assessment year" as defined in Section 153A. In our considered opinion, the aforesaid 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 a....
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....f whether additions are liable to be made based upon the material recovered is an aspect which would merit consideration in the course of the assessment proceedings, under Section 153C, the AO would have to be prima facie satisfied that the documents, data or asset recovered is likely to "have a bearing on the determination of the total income". It is only once an opinion in that regard is formed that the AO would be legally justified in issuing a notice under that provision and which in turn would culminate in the abatement of pending assessments or reassessments as the case maybe. 65. We would thus recognize the flow of events contemplated under Section 153C being firstly the receipt of books, accounts, documents or assets by the jurisdictional AO, an 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" tha....
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.... petitions forming part of this batch, impugn the invocation of Section 153C in respect of AYs' for which no incriminating material had been gathered or obtained. The Satisfaction Notes also fail to record any reasons as to how the material discovered and pertaining to a particular AY is likely to "have a bearing on the determination of the total income" for the year which is sought to be abated or reopened in terms of the impugned notices. The respondents have erroneously proceeded on the assumption that the moment any material is recovered in the course of a search or on the basis of a requisition made, they become empowered in law to assess or reassess all the six AYs' years immediately preceding the assessment correlatable to the search year or the "relevant assessment year" as defined in terms of Explanation 1 of Section 153A. The said approach is clearly unsustainable and contrary to the consistent line struck by the precedents noticed above. 6. The Hon'ble Jurisdictional Delhi High Court in the case of Saksham Commodities (supra) in clear terms held that for initiation of proceedings u/s 153C of the Act, the AO should satisfy that books of accounts or docume....
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....ficiaries have been found to have made huge investments in real estate properties in prime cities to the tune of crores of rupees. The personal staff/employees/associates of entry operators had been made dummy directors/partners of these shell entities and all bank accounts were managed and controlled by these entry operators. Statements of such entry operators, their dummy partners/employees, the cash handlers as well as the covered beneficiaries have also been recorded clearly validating the entire modus operandi. 3. Search and seizure operation u/s 133 of the Income Tax Act, 1961 dated 26.10.2020 by Unit- 5, Delhi lead to seizure of approx. Rs 62 Crores of cash from the premises of beneficiaries who have benefitted from entry operator. 4. Apart from issuance of bogus billing, Sanjay Jain is also involved in arranging cash against RTGS. These transactions would be different than previously discussed bogus transactions in following ways:- * No invoice would be raised by Sanjay Jain against these transactions * There would be no GST ITC received by the beneficiary in such transactions * Commission charged by Sanjay Jain on these transact....
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....ncluding entities in the above list) identified were confronted to Sanjay Jain in his statement dated 25/12/2020 1/3 132(4) of IT Act as well as on statement dated 11/06/2021 u/s 131 of IT act, 1961, in which he agreed to the quantum of entries as discussed. 6. Satisfaction: The above facts/information states that the assessee M/s. DEEPAK BUILDERS & ENGINEERS INDIA PVT. LTD. is involved in the above transactions of unaccounted receipts and payments with respect to of Rs. 9,79,66,801/-, which has escaped assessment, which nature and source of fund, genuineness are required to be verified. 7. The above seized documents/material give details of transactions in suspicious nature (as appear) undertaken by the assessee, which are recorded below as satisfaction & seized documents as discussed above at Para 5 of such transactions. 8. Genuineness of those transactions indicating their nature, sources of fund, their treatment in books of accounts and their effect with respect to taxability on the assessee are required to be examined in this case. 9. In view of the above, I have reasons to believe that the assessee may he issued notice u/s 153C of the IT Ac....
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....a), we hold that in the present case satisfaction recorded before initiating the proceedings u/s 153C of the Act is not a valid satisfaction. Accordingly, we allow Ground of appeal No.1 raised by the assessee and quashed the proceedings initiated u/s 153C based on such invalid satisfaction and the also quashed the consequent order passed u/s 153 of the Act. 12. We find that the satisfaction note recorded by the AO in the case of the assessee is identically worded word by word as that of the satisfaction note recorded in the case of M/s. Deepak Builders and Engineers India Pvt. Ltd. Vs. DCIT in ITA No. 875/Del/2025 and therefore, since facts are identical respectfully following the above said decisions of the coordinate Benches we hold that the satisfaction note recorded in the case of the assessee u/s.153C is bad in law and consequently the assessment framed u/s.153C r.w.s. 143(3) of the Act for the A.Y.2018-19 is hereby quashed. Ground Nos. 1 to 3 of grounds of appeal of the assessee for the A.Y. 2018-19 are allowed. 13. The facts in the appeals for the A.Y.s 2019-20, 2020-21 and 2021-22 are identical to the facts for the A.Y.2018-19 and the decision taken for the A.Y. 2018-....