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TMI Blog2025 (4) TMI 1130X X X X Extracts X X X X X X X X Extracts X X X X ..... erson under s.153C of the Act. Based on the receipt of documents etc. from the AO of the searched person, the AO of the third person i.e. the assessee herein also proceeded to draw 'satisfaction note' dated 29.09.2017 alleging undisclosed income. 3. Pursuant to the 'satisfaction note' prepared under s. 153C of the Act, the proceedings under s. 153C were set in motion by issuance of notice dated 29.09.2017 under s. 153C. In consequence of s. 153C proceedings, an addition of INR 88,00,000/- were made towards unexplained cash credits under s. 68 of the Act. 4. Aggrieved by the additions made under s. 68 of the Act, the assessee preferred appeal before the CIT(A). The CIT(A) however, declined any relief on the additions made by the AO. 5. Further aggrieved, the assessee filed appeal before the Tribunal. 6. When the matter was called for hearing, the Ld. Counsel for the assessee adverted to grounds of appeal and additional grounds of appeal and made wide ranging submissions on lack of jurisdiction assumed under s. 153C as well as arguments canvassed towards untenability of additions on merits. 7. Since the assessee has raised challenge to the very jurisdiction assumed under s. 153C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. for the A.Ys 2010-11 to 2015-16." 10. Section 153C of the Act pertains to the assessment of income in the hands of person other than searched person, in cases where certain documents, assets or books of accounts etc. found to be pertained to or related to such third person (other than the person on whom search was conducted under s. 132 of the Act or requisitioned under s. 132A of the Act). This section allows the AO of other person to initiate proceedings against such other person/third person (not the searched person) if there are indications of undisclosed income. A key component of initiating search proceedings under s. 153C of the Act is the 'satisfaction note' to be recorded by the AO of the searched person as well as AO of the third person. The 'satisfaction note' is the first step and a foundational document to determine the validity of the assessment process against a third person whose documents or assets etc. are found in a search. 'Satisfaction note' is critical because it serves as a valuable safeguard against arbitrary proceedings and ensures that the powers under s. 153C of the Act are exercised judiciously. It is a formal statutory requirement without which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terial relates. It is only when this determination/ascertainment is complete that the flood gates of an assessment would open qua those particular years. The issuance of notice cannot be an automated function unconnected to this exercise of analysis and ascertainment by the AO in the light of judgement rendered in the case of Agni Vishnu Feature Pvt.Ltd. vs DCIT [2023] 157 taxmann.com 242 (Madras). In the instant case, non-application of mind on material supplied to AO is obvious as the company itself was not in existence for sizable period covered in proceedings under s. 153C of the Act; [v] the 'satisfaction note' is clearly very generic and devoid of any basic detail of the transaction in question. 12. We find ostensible potency in the plea of assessee towards allegation of legal 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 there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unded on a formation of opinion by the Jurisdictional 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. 13. 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' for several years 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. The AO has not even bothered to relate the so-called documents etc. with the AYs covered. The assessee company was non-existent in AY 2010-11; AY 2011-12; ..... X X X X Extracts X X X X X X X X Extracts X X X X
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