2026 (5) TMI 88

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..... AO issued a notice u/s 153C for both the years [AYs 2017-18 & 2018-19], on 04.11.2022. It is also a fact that a notice u/s 148 of the Act was issued on 30.06.2021 for AY 2017-18 and 01.04.2022 for AY 2018-19. It has been brought on record that for quite some time proceedings u/s 153C & 147 of the Act were running parallel to each other. The Ld. AO has made several additional through the respective assessment orders. 2.1 The assessee has raised additional grounds of appeal for both the years vide their application dated 15.12.2025 as under: - "That while filing the above appeal the under noted ground of appeal could not be included in the ground of appeal as attached/accompanied to the Memorandum of Appeal, namely:- 01. That the Ld. AO has initiated proceedings u/s 148 of the Income Tax Act, 1961 for the instant assessment year and correspondingly initiated proceedings u/s 153C of the Income Tax Act, 1961 and the proceedings u/s 148 are not being dropped after issuance of notice u/s 153C renders the entire proceedings bad in law and the same deserves to be quashed. 02. That the satisfaction has been recorded after the elapse of 4 years from the date s....

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.... proceeding under section 148 of the Act It is submitted that the mere fact that proceedings under section 148 were initiated earlier does not render subsequent proceedings under section 153C invalid. The Assessing Officer is empowered under the Act to proceed under the appropriate statutory provision depending upon the material available on record. Courts have consistently held that procedural irregularities which do not prejudice the assessee do not invalidate the assessment proceedings. In this regard, reliance is placed on the decision of the Hon'ble Supreme Court in CIT vs. Sun Engineering Works (P) Ltd. (198 ITR 297), wherein it was held that reassessment proceedings cannot be challenged on technical grounds when the statutory purpose of assessment is otherwise fulfilled. 1.2 No prejudice caused to the assessee The assessee has failed to demonstrate how any prejudice has been caused merely because proceedings under section 148 were not formally dropped after issuance of notice under section 153C. The assessment proceedings were carried out in accordance with the provisions of the Act and the assessee was provided adequate opportunity of....

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.... itself has clarified that the satisfaction note is not restricted to a rigid time frame from the date of search, provided it is recorded in the course of proceedings arising from the search." "3. ADDITIONAL GROUND NO.03 RAISED BY THE ASSESSEE That there being no incriminating material found during search and the assessment proceedings are initiated purely on the basis of statement of some person render the entire proceedings bad in law and deserves to be quashed. Saksham Commodity (Delhi HC) Comments of the Assessing officer: 3.1 The contention of the assessee is factually incorrect and legally unsustainable for the following reasons: 3.1.1 Existence of incriminating material seized during the course of search The contention of the assessee that no incriminating material was found during the search is contrary to the facts on record. During the course of search proceedings conducted on 08.12.2018 at the premises of M/s Dengen Products India LLP, wherein Shri Prateek Chitkara is a partner, certain diaries marked as Annexure A-1 to A-10 were seized. These diaries contained detailed entries relating to cash committees being contro....

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....other way round. Thus, while if we had been dealing with a case of reopening u/s 147/148 of the Act then certainly those proceedings would have been quashed as soon as evidence of proceedings u/s 153C would have been brought to notice, but there is nothing to suggest that the other way round situation would be true also. Thus, we are unable to persuade ourselves to agree with the assessee on this ground. 3.1 Regarding the second additional ground of inordinate delay in recording satisfaction and issuing a notice u/s 153C of the Act, the judgment in the case of Parag Rameshbhai Gathani (supra) clinches the issue in favour of the assessee where the satisfaction has been recorded after a gap of nearly four years form the date of search. The following extracts from the said judgment are relevant: - "The Supreme Court in the case of CII v. Calcutta Knitwears [2014] 43 taxmann.com 446 (SC) while examining the provisions of section 158BC (now section 153A) has held that for the purpose of section 158HD, a satisfaction nota 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 ....