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TMI Blog2025 (1) TMI 693X X X X Extracts X X X X X X X X Extracts X X X X ..... on facts in upholding the assumption of jurisdiction u/s 153C of the Act and, framing of assessment u/s 153A/143(3) of the Act. 1.1. That both the notice issued u/s 153C of the Act and assessment framed u/s 153C of the Act were without satisfying the statutory preconditions contained in the Act and therefore without jurisdiction and therefore deserves to be quashed as such. 1.2. That while upholding the assumption of jurisdiction the learned Commissioner of Income Tax (Appeals) has failed to appreciate that since neither money, bullion, jewellery or other valuable article or thing belonging to the appellant and nor any books of accounts or documents pertaining to the appellant or any information contained therein relating to the appellant were seized as a result of search the assumption of jurisdiction u/s 153C of the Act was illegal, invalid and unsustainable. 1.3. That the learned Commissioner of Income Tax (Appeals) has further erred both in law and on facts in upholding the assumption of jurisdiction despite the fact that in absence of any valid satisfaction having been recorded both in the case of searched person and, the appellant action u/s 153C of the Act was in exces ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te is AY 2018-19 and therefore, six years preceding such AY to which documents for assets seized requisitioned ends in AY 2012-13. This being so, the AY 2011-12 in question falls outside the limitation period of six years and thus is barred by limitation at the threshold and hence cannot be subjected to preceding under s. 153C of the Act. The Ld. Counsel for the assessee further pointed out that in the identical set of facts in the same search, the Co-ordinate Bench of Tribunal has adjudicated the jurisdictional issue under s. 153C in favour of the assessee in the case of DCIT vs M/s. Manglam Multiplex Private Limited (ITA No.1093/Del/2024) order dated 30.09.2024. 3.2. The Ld. Counsel for the assessee thus, submitted that the AY 2011-12 in question is squarely covered in favour of the assessee by the decision of the DCIT vs M/s. Manglam Multiplex Private Limited (supra). The Ld. Counsel for the assessee next pointed out that the Co-ordinate Bench of the Tribunal also noted that the alleged undisclosed income must be found identifiable to the AY concerned while drawing the satisfaction note. The Ld. Counsel contends that the 'satisfaction note' is vague and do not meet the pre-requ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 153C of the Act being barred by limitation. The Co-ordinate Bench further found that the consolidated 'satisfaction note' drawn in respect of AYs 2011-12 to 2017-18 suffers from incorrigible legal infirmities and consequently found that the AO acted without valid jurisdiction under s. 153C of the Act. The relevant operative paras of the decision in DCIT vs M/s. Manglam Multiplex Private Limited (supra) are extracted hereunder:- 8. "We have considered the rival submissions and perused the material available on record. 9. The satisfaction note being germane to the subject matter of the controversy is reproduced hereunder: "Reasons/Satisfaction note for taking up the case of M/s. Manglam Multiplex Pvt. Ltd., under section 153C of the Income Tax Act, 1961 Name and address of the Assessee M/s. Manglam Multiplux Pvt. Ltd. Asst. Year 2011-12 to 2017-18 PAN AAECM 0481 G Status Company By virtue of the authorization of the Director of Income Tax (Investigation), Chandigarh, a Search & Seizure operation u/s 132 of the Income Tax Act, 1961 (hereinafter called 'the Act) was carried out on 21.07.2016 at the residential/business premises of the persons associated with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to present proceedings thus, is required to be quashed being barred by limitation. 11. In the result, the cross objection filed by the assessee is allowed. 12. We however also advert to the grievance raised in the Revenue's appeal. 12.1 Defending the first appellate order, the learned Counsel for the assessee pointed out that despite invocation of jurisdiction under Section 153C of the Act, the additions/disallowances made are in the nature of routine disallowances based on assumptions and presumptions and emanating from regular books of accounts. No incriminating material seized and remitted by the AO of the assessee has been referred to base such additions/disallowances which is paramount under Section 153C of the Act as held in Singhad Technical Education Society (supra). 12.2 The assessee also contends that the 'satisfaction note' recorded for the purposes of assumption of jurisdiction under Section 153C of the Act which is a genesis of assessment under Section 153C of the Act is clearly vague and non-descript. It is not known from the satisfaction note as to what is the quantum of undisclosed income qua A.Y. 2011-12 in question. The satisfaction note recorded is gene ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would squarely apply to all other AYs except on the point at bar of limitation. 11. The Ld. Counsel for the assessee further referred to the decision of the Co-ordinate Bench in the case of Renu Singh vs ACIT in ITA No.2806/Del/2024 order dated 25.11.2024 wherein also in similar facts, the Co-ordinate Bench held that the AO had proceeded under s. 153C based on unlawful satisfaction and the 'satisfaction note' recorded by the AO for the purposes of assessment was found to apparently suffer from the vice of being vague, non-descript and un-intelligible. The observations made in the decision rendered in the case of Renu Singh vs ACIT (supra) squarely applies to the facts of the present case. The Ld. Counsel for the assessee also pointed out that 'satisfaction note' recorded for different AYs in a consolidated manner would vitiate the entire assessment proceedings owing to lack of objectivity qua each assessment year as held in DCIT vs Sunil Kumar Sharma (2024) 159 taxmann.com 179 (Kar.). 11.1. The Ld. Counsel for the assessee also pointed out that apart from unlawful satisfaction recorded, the assessment orders passed under s. 153C of the Act also suffers from the vice of mechanical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t to re-assess the returned income in a concluded assessment. The assessee has contested the assumption of jurisdiction on the strength of alleged infirmities in the 'satisfaction note' prepared by the AO of the searched person as well as that of AO of the assessee to usurp jurisdiction under section 153C of the Act. 17. The 'satisfaction note' recorded by the AO of assessee (also AO of searched person) being germane to the determination of challenge to assumption of jurisdiction. It would be apt to reproduce the 'satisfaction note' recorded hereunder:- "A search was conducted in the case of Shri Pranjil Batra on 17/08/2020. During the proceedings of Search and Seizure action at premises of Shri Pranjil Batra, incriminating documents were found and seized. There are various documents/ information which suggests that Sh. Pranjil Batra has acquired huge wealth and has invested in various properties, deposited in bank accounts in the names of various persons and entities. Most of these persons are related to Sh. Pranjil Batra or his employees. Most of the entities are paper entities and are controlled and managed by Sh. Pranjil Batra. However, in sake of name Sh. Pranjil Batra has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the first step and a foundational document to determine the validity of the assessment process against a third parties whose documents or assets etc. are found in a search. Satisfaction note is critical because it serves as a safeguard against arbitrary proceedings and ensures that the powers of section 153C of the Act is exercise judiciously. It is a formal statutory requirement without which the proceedings against other person could be considered invalid. The 'satisfaction note' being so critical and powers under section 153C of the Act being contingent upon such Note, the information contained therein need to be actionable. This being so, the 'satisfaction note' is expected to identify the relevant material found in search and that it pertains to or relates to third person. Such material found should reliably indicate or suggest the bearing of such documents/assets etc. to the income in the hands of third person. The 'satisfaction note' should record such material to provide accountability of the AO and to justify the initiation of proceedings against other person. In summary, such Note should set the narrative in an objective manner, as far as possible, to enable judicial ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion note' also fails to unequivocally ascertain whether it is a sale transaction or a purchase transaction of the property. The AO has used both the expressions i.e. purchase and sale for the impugned transaction in the satisfaction note; [vi] the 'satisfaction note' do not even mention the details of co-seller or address of the property to which alleged documents belong to; [vii] the 'satisfaction note' has made an allegation of cash exchange of INR 90,00,000/- but the assessment order refers to an altogether different figure of INR 3,00,35,000/-; and [viii] the 'satisfaction note' is clearly very generic and devoid of any basic detail of the transaction in question. 21. We find potency in, the plea of assessee towards allegation of infirmities in the 'satisfaction note'. The Hon'ble Delhi High Court in the case of Sakham Commodities Ltd. Vs ITO 161 taxmann.com 485 (Delhi) deftly expounded the imperatives of a 'satisfaction note', and observed that unearthing of incriminating material in respect of particular AY will not automatically confer jurisdiction to invoke section 153C of the Act in respect of all the AYs mentioned therein. The Hon'ble Delhi High Court further obse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO that the material handed over and received pursuant to a search is likely to influence the determination of total income and would be relevant for the purposes of assessment/re-assessment in terms of section 153C of the Act. 22. The observation of the Hon'ble Delhi High Court noted above, clearly provides vehement support to the plea taken by the assessee on aspects of jurisdiction flowing from 'satisfaction note'. The 'satisfaction note' under scrutiny defies most of the parameters expected of him while drawing satisfaction. While exercising the power under section 153C of the Act, neither has the AO related the material found in the course of search with a particular AY while making a consolidated 'satisfaction note' nor provided any requisite details of transaction to enable an independent person to ascertain and form any independent opinion on facts stated in Note that invocation of section 153C of the Act is indeed warranted in the facts of the case. Mere drawing of a perfunctory satisfaction without meeting basic ingredients of providing some tangible & descript information and application of mind thereon has no standing in law and would not confer drastic jurisdiction o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee contends that the valuation report derived by the DVO after inquiry is quite close to the sale consideration declared by the assessee. The staggering difference as per the Agreement to Sale and Sale Deed is thus unconceivable and totally contrary to the estimated market value of the property. The Report of the DVO thus assumes significance for the cause of the assessee and cannot be brushed aside while weighing the factual position and giving overriding importance to a photocopy of unsigned Agreement to Sale found from the premises of searched person. Besides, the assessee has also placed an affidavit from the purchase, Shri Pranjil Batra wherein it is affirmed that the sale consideration noted in the Sale Deed is sacrosanct. In the light of the Sale Deed, the DVO report and in the absence of any inquiry by the Revenue on facts to support the amount mentioned in the photocopy of the Agreement to sale, the sale consideration declared by the assessee cannot be discredited out rightly and substituted by whopping amount unconnected to the grounds realities. We thus, find force in the plea raised on merits also. 24. Judged from any angle, the action of the AO does not appear just ..... X X X X Extracts X X X X X X X X Extracts X X X X
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